Abstract
Growing concern about the sustainability of the natural environment is rapidly transforming the competitive landscape and forcing companies to explore the costs and benefits of “greening” their marketing mix. We develop and test a theoretical model that predicts (1) the role of green marketing programs in influencing firm performance, (2) the impact of slack resources and top management risk aversion on the deployment of such programs, and (3) the conditioning effects that underpin these relationships. Our analyses show that green marketing programs are being implemented by firms, and we find evidence of significant performance payoffs. Specifically the results indicate that green product and distribution programs positively affect firms’ product-market performance, while green pricing and promotion practices are directly positively related to firms’ return on assets. In addition, industry-level environmental reputation moderates the links between green marketing program components and firms’ product-market and financial performance. Finally, we find that slack resources and top management risk aversion are independently conducive to the adoption of green marketing programs—but operate as substitutes for each other.
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Notes
We adopt the general and widely used term “environmentally friendly” to refer to any activity that is relatively less harmful or is even beneficial to the natural environment.
Managers may be expected to perceive greening efforts as risky for various reasons including: (1) they can involve the adoption of new technologies that may increase production complexity and unpredictability (Russo and Fouts 1997); (2) they can have a boomerang effect if stakeholders perceive them as exploitative, opportunistic, or deceptive (Menon and Menon 1997); (3) while consumers express interest in green issues, the available evidence suggests a limited role of these issues in purchase behavior (Öberseder et al. 2011); and (4) as an emerging market area, the risks of market pioneering apply (Menon and Menon 1997). Perceptions of associated risks can lead managers to view such actions as threats to their jobs or company operations and to seek to eliminate such losses rather than maximize gains (Sharma 2000). However, our focus on stakeholder theory leads us to hypothesize a positive, as opposed to a negative, link between top management risk aversion and green marketing practices. We therefore treat the potential for a negative relationship as an empirical question.
As past research has shown a direct product-market performance–ROA link, we include this as a control path in our model but do not offer a formal hypothesis as this link is not the focus of our investigation.
We also asked respondents whether the choice of their firms’ target product market(s) was always influenced by environmental concerns. The mean rating of this item in the sample was relatively low (M = 2.87, SD = 1.48), indicating that our sample was not particularly influenced by environmentally specialized firms.
Several post hoc tests (e.g., Harman’s single-factor test, marker variable approach) suggested by Podsakoff et al. (2003) also failed to reveal any evidence of common method bias in our data and results.
As a robustness check, we estimated a rival model in which we also included additional internal (i.e., top management commitment) and external (i.e., public environmental concern, regulatory forces) drivers of green marketing suggested in the extant literature. The direct effects we report here are robust in this alternative model. However, to maintain acceptable parameter-to-observation ratios that allow us to test all our hypotheses simultaneously, we do not include these additional controls in our final hypothesis testing model.
This may also be attributed to the emergence of “green washing,” i.e., false, exaggerated, or misleading environmental claims highlighted in the popular media that may lead customers to be sceptical of green promotional efforts and view them indifferently. We thank an anonymous reviewer for identifying this possibility.
We also tested for industry effects using dummy two-digit SIC variables in regression analyses and found no evidence of any effect on product-market or financial performance.
These were based on (1) industry pollution levels (Cole et al. 2005), (2) intensity of environmental regulations, reflected in total 1999–2006 environmental protection expenditure (DEFRA 2008), (3) the eco-reputation of each industry reported in the literature (e.g., Banerjee et al. 2003; Hoffman 1999), and (4) discussions with industry experts, policy makers, senior company executives, and consumers. In addition, seven academic researchers who served as expert judges verified the face validity of this classification.
This factor structure was verified in an exploratory factor analysis using maximum likelihood extraction and varimax rotation that revealed a four-factor solution corresponding to the individual marketing mix components, with all items loading highly on the relevant factor (loadings > .54) and no major cross-loadings. We also compared our original measurement model with one that treated green marketing programs as a second-order construct. A chi-square difference test revealed that our separate components model is significantly better (Δχ2 (26) > 54.05, p < .001).
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Leonidou, C.N., Katsikeas, C.S. & Morgan, N.A. “Greening” the marketing mix: do firms do it and does it pay off?. J. of the Acad. Mark. Sci. 41, 151–170 (2013). https://doi.org/10.1007/s11747-012-0317-2
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DOI: https://doi.org/10.1007/s11747-012-0317-2