The Effect of Strategic Flexibility on Green Management in Achieving Company Competitiveness Regarding the Role of Organizational Legitimacy and Institutional Support

In the past few decades, environmental concerns about the industries’ activity have made green management popular among different companies and led these companies towards gaining a competitive advantage. In order to decrease costs and increase their distinctness, companies seek for valuable and unique green resources and capabilities which help them to achieve a higher performance and also create an environmental responsibility attitude. This research investigates the companies’ response to green management pressures by integrating dynamic capability approach and institutional theory. This research is an applied one conducted by descriptive survey method and using a questionnaire. The research population includes all the metallurgy industry companies attending the 14th international metallurgy exhibition in 2017. 140 companies were selected as the sample by random sampling. Data analysis was done based on variance-based structural equations modeling by using partial least squares in SPSS and PLS. The research reliability and validity were evaluated by Cronbach’s alpha, combined reliability, convergent and divergent validity. The results suggest that strategic flexibility has a positive effect on adoption of green management activities. Meanwhile, organizational legitimacy plays a mediating role in the relationship between adoption of green management practices and competitiveness.

Nowadays, companies try to perform green management practices in accordance with business ethics and Corporate Social Responsibility (CSR) (Luchs et al, 2010). On the other hand, international studies have mostly approved the positive effects of green management on competitiveness. Nevertheless, from classic economy viewpoint, companies avoid investing on environmental protection; because it provides no benefit for them and also prevents their future development by decreasing their strategic resources (Hart, 1995). Therefore, this issue should be investigated more carefully. Since business ethics are usually determined by cultural and institutional factors, green issues can be interpreted in the context of cultures or institutions in a different manner. However, most of the previous studies have investigated the effects of Green Management (GM) on developed economies (Tan and Wang, 2011). So, the factors facilitating or inhibiting the adoption of Green Management Practices (GMP) and their results in companies of developing economies such as Iran have not been recognized. This research seeks three goals. First, the effects of strategic flexibility on adoption of green management practices in the company are investigated by a dynamic capability approach. Second, a specific condition is considered in the framework of the moderating variable in order to determine the changed effect of strategic flexibility on adoption on green management practices under that condition. Also, it is investigated whether adoption of green management practices improves the company competitiveness by its mediating role or not. Furthermore, the ways in which green management affects the company competitiveness are also discussed.

This research is an applied one conducted by descriptive survey method. The research population includes all the metallurgy industry companies attending the 14th international metallurgy exhibition in December 2017. Based on Morgan table, 140 companies were selected by random sampling. Either the company’s managing director or the senior expert has been selected out of every company. The main data collection tool is a standard questionnaire measuring strategic flexibility based on six indicators included in the research performed by Sanchez (1995) and Zhou & Wu (2010). Institutional support was measured by seven indicators based on the studies conducted by Li and Atuahene-Gima (2001) and Lin and Ho (2011). Six indicators were used for measuring adoption of green management practices based on the studies performed by Marcus and Fremeth (2009) and Lin and Ho (2011). Organizational legitimacy was measured by seven indicators based on Elsbach’s study (1994). Company competitiveness was measured by five indicators based on the research conducted by Wu (2008) and Wu et al (2008). In this research, the hypotheses and the research model have been tested by variance-based structural equations by using partial least squares in SPSS and PLS.

It can be claimed that the findings have helped the completion of business ethics and green management literature in different ways and investigated more aspects of the relationship between strategic flexibility and green management. The results suggest that strategic flexibility has significant positive effects on adoption of green management practices in developing economies such as Iran. This finding is consistent with the results of the studies performed by Yung et al (2015), Dyer (2009), Ragman and Warbeck (1998). Furthermore, regarding the suggested positive effect of flexibility in business ethics and economy, the findings enrich the strategic flexibility literature. For a more effective confrontation with uncertainty of the result and minimizing the resource deficiency, strategic flexibility can help these companies in dynamic and quick response to changes in business environments caused by green issues. In other words, companies with higher strategic flexibility can easily match their use of resources with new applications and increase the use of green management practices in this way. Findings suggest that in spite of the approved positive moderating role of institutional support in studies conducted by Peng and Leo (2000), Wright et al (2005), and Yung et al (2015) who claim that institutional support is considered as a critical institutional factor affecting the corporate behavior, this research has not approved this moderating role and the results are consistent with the studies performed by Perry et al (1998). Furthermore, there is a positive relationship between adoption of green management practices and company competitiveness; this finding is consistent with the results of the research performed by Reteb et al (2009). The other issue is providing a deeper understanding of the role and nature of organizational legitimacy. The findings suggest that there is a more complex relationship between green management and company competitiveness that has been proposed organizational legitimacy as a strengthening mechanism. The obtained result is a reflection of the expectation of Mangousa et al (2010) about the strengthening role of legitimacy in the relationship between adoption of green management practices and economic outcomes.

Studies suggest that there are rare research works in the country investigating the role of green management and the effects of green management practices on competitiveness. Also, the studied population and the statistical techniques are considered as the innovations of this study. In this research, internal (dynamic capabilities) and external (institutional theory) approaches have been integrated respectively for explaining the factors affecting the changes in adoption of green management and the effects of green management practice on competitiveness. Particularly, based on mediating and moderating methods, some hypotheses were raised for explaining the reason for the difference between the extents of green management adoption in two companies with similar capabilities that achieve different extents of competitiveness improvement by adopting similar green strategies. The experimental results approve the business ethics approach suggesting that green management improves not only the company competitiveness, but also the corporate social responsibility. According to the results, strategic flexibility has had a positive effect on adoption of green management practices. Meanwhile, organizational legitimacy plays a mediating role in the relationship between adoption of green management practices and competitiveness.