When in Rome, do as the Romans do: the effect of characteristics of capitalism on environmental performance

Abstract

PurposeThe purpose of this research is to investigate the effect of characteristics of capitalism on environmental performance.Design/methodology/approachThe authors analyzed a sample of 6,257 companies, based in 55 countries and 8 typologies of capitalism. The independent variables are the characteristics of capitalism, measured through five indicators: cooperation between employees and employers, index of economic freedom, local competition between industries, human development index (HDI) and quality of the governance environment. To measure environmental performance, the authors created an index composed of 20 indicators. Data were analyzed using panel data regression and dynamic panel of the generalized method of moments.FindingsThe results indicate that the characteristics of capitalism can shape the environmental behavior of companies. The authors find that in countries with better cooperation between employees and employers, more economic freedom, and competition between firms, in addition to better HDI and national governance, companies have higher environmental performance. When they are in more developed countries, companies have a greater environmental performance.Practical implicationsManagers must consider the country's characteristics of capitalism when making their environmental decisions and strategies. The findings invite governments to incorporate into their regulations mechanisms to protect other interest groups, not just shareholders.Originality/valueFew studies have examined environmental performance, which is less susceptible to greenwashing. The metric for environmental performance measures the company's concrete effort in relation to environmental issues and not just the disclosure of information. Additionally, the authors examine characteristics of capitalism supported by Varieties of Capitalism, an approach still little explored in the environmental management.