Journal of Cleaner Production 66 (2014) 450e458

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

Environmental innovation practices and performance: moderating

effect of resource commitment
Yina Li*
South China University of Technology, School of Business Administration, No. 381, Wushan road, Guangzhou, Guangdong 510640, China

a r t i c l e i n f o a b s t r a c t

Article history: Based on institutional theory and resource based view, this study seeks to examine linkages among
Received 9 January 2013 institutional pressures, environmental innovation practices and performance. Specially, we test the
Received in revised form moderating effect of resource commitment on the consequences of environmental innovation practices.
17 July 2013
We collected data from 148 manufacturers in Pearl River Delta, China to test the theoretical model. The
Accepted 15 November 2013
statistical results reveal that institutional pressures coming from government’s command-and-control
Available online 4 December 2013
instrument, overseas customer pressure and competitive pressure exert significant positive impact on
environmental innovation practices, while government’s economic incentive instrument and domestic
Keywords:
Environmental innovation practices
customer pressure do not work. We also find environmental innovation practices have significant pos-
Institutional pressure itive impact on firms’ environmental performance, while the effect on financial performance should be
Resource commitment through the mediating role of environmental performance. The further analysis reveals that the rela-
Performance tionship between environmental innovation practices and financial performance is moderated by the
level of resource commitment. As resource commitment increases, the financial performance yielded
from environmental innovation practices will be better.
Ó 2013 Elsevier Ltd. All rights reserved.

1. Introduction environment by interacting and satisfying other players, and take

The global environmental crisis, such as global warming, oil
crisis, rapidly growing populations, is affecting everything from
food to fuel to forests, and making the earth dangerously unstable
(Friedman, 2008). Following the trend, many countries are positive
to advocate environmental. Under this situation, how should the
selfish individual firms respond to the environmental issue? If firms
do lessen the environmental impact, it may come at an additional
cost to their operations. If not, they may be quit out of the
competitive market. Since firms survive in the society, Evolutionary
game theory provides a theoretical framework to explain the
cooperative behaviors among selfish players (Perc and Szolnoki,
2010). Evolutionary processes are governed by group interactions,
the strategies of players engaging in evolutionary games evolve in
time, the favoring players with higher fitness (Perc and Szolnoki,
2010; Perc et al., 2013). During the coevoluationary process, the
behavior of individual player (e.g. the allocation of investments)
will be affected by other players (Perc et al., 2013). Therefore, to
survive in a competitive market, the individual firms should in-
crease their ability to grow and survive in a competitive
* Tel.: þ86 20 87112682.
E-mail address: bmliyina@scut.edu.cn.
environmental sustainability into another main organizational goal
in addition to profit making.
In view of this, how can firms be able to invest in the environ-
ment while still remaining sufficiently profitable has become more
and more important to organizations. Under this situation, envi-
ronmental innovation, which consists of new or modified pro-
cesses, techniques, systems and products to replace wasteful,
inefficient energy practices with a strategy for clean energy, energy
efficiency, and conservation, so as to avoid or reduce environmental
damage (Kemp et al., 2000), has been viewed as an effective way to
lead to a “winewin” situation characterized by both financial and
environmental benefits in a cost-effective way (Porter and Van der
Linde, 1995; Murphy, 2000; Frondel et al., 2010).
The research on the determinants of general innovation is vast,
such as technology pull and demand push. However, environ-
mental innovation is different from other innovation activities for it
also improves environmental quality. Previous studies have
addressed the importance of certain factors to spur environmental
innovation practices. However, the results are inconsistent, espe-
cially regarding the impact of government environmental regula-
tions (Porter and Van der Linde, 1995; Brunnermeier and Cohen,
2003; Frondel et al., 2008; Eiadat et al., 2008). Therefore, it seems
to be essential to analyze the variety of measures that may provide
sufficient incentives to spur environmental innovation practices.

0959-6526/$ e see front matter Ó 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.jclepro.2013.11.044
 Y. Li / Journal of Cleaner Production 66 (2014) 450e458
On the other hand, a growing literature examines the relation-
ship between environmental practices and firms’ performance by
both anecdotal cases and large-scale researches, however, the re-
sults are mixed (Porter and Van der Linde, 1995; Klassen and
McLaughlin, 1996; Melnyk et al., 2003; Eiadat et al., 2008). The
traditional economic view suggests that any environmental
improvement effort made by a firm transfers the cost previously
borne by society back to the firm, so there is a trade-off between
environmental responsibility and financial performance. Never-
theless, some researchers have also suggested that environmental
management actually lead to lower operations costs, lower waste,
and thus higher profit margins. It is clear that the debate on the
relationship between environmental practices and performance
continues.
This study intends to extend the discussion of antecedents and
consequences of environmental innovation practices, from the
perspective of institutional theory and resource-based view.
Following the “Institution e practice adoption e economic and
social result” framework, the large-scale survey research is per-
formed to explore the driving forces and the effects of environ-
mental innovation practices on performance e both financial and
environmental. Drawing on DiMaggio and Powell’s (1983) frame-
work, three dimensions of institutional pressure, namely, coercive
pressure, normative pressure and mimetic pressure, are examined
regarding their individual influence on environmental innovation
practices and performance. Moreover, response to the debate on
the relationship between environmental innovation practices and
performance, we introduce resource commitment based on
resource-based view as a moderator to test whether resource
commitment has moderating the effect on this relationship. Spe-
cifically, we wish to address the following research questions:
(1) What are the effects of institutional pressures on firms’
adoption of environmental innovation practices?
(2) Can environmental innovation practices really bring benefit
to firms?
(3) Would the relationship between environmental innovation
practices and performance be moderated by resource
commitment?
In answering these questions, we provide three principal con-
tributions to the current literature. First, we argue, and subse-
quently demonstrate by statistical analysis, that environmental
innovation practices can be conceptualized through an institutional
theory lens, thus provides new evidence and more comprehensive
understanding on the determinants of environmental innovation
practices. Second, though many studies have explored the value of
environmental innovation practices, mixed results have been re-
ported. Thus, the results of this study help to confirm the effects of
environmental innovation practices on performance. Specially, the
test of the moderating effect of resource commitment helps to
provide a more comprehensive understanding on the conse-
quences of environmental innovation practices. Third, this study
uses data collected from manufacturers in China. A study with the
Chinese data should validate the theoretical model developed
based on western literature, and offer valuable insights to re-
searchers and practitioners from both economic and cultural
perspectives.
The remainder of the paper is organized as follows. The extant
literature is reviewed and the hypotheses are developed in Section
2. The research methodology and data analyses are presented in
Section 3, followed by the results and discussions in Section 4.
Concluding remarks and suggestions for further research are pre-
sented in Section 5.
451
2. Hypotheses development
2.1. Drivers for environmental innovation practices
We explore the drivers for environmental innovation practices
using an institutional theoretical framework. As Aldrich has argued,
“The major factors that organizations must take into account are
other organizations”(1979, pg. 265). Many researchers have
recognized the importance of institutional theory in explaining
firm’s behaviors (e.g. Scott, 1995; Handelman and Arnold, 1999;
McFarland et al., 2008; Zhu and Geng, 2013). Institutional theory
proposes that how organizations can increase their ability to grow
and survive in a competitive environment by satisfying their
stakeholders. Here we refer to the three forms of institutional
pressures identified by DiMaggio and Powell (1983), named as
coercive pressure, normative pressure and mimetic pressure. Each
of these three pressures suggests testable hypotheses relevant to
examine the drivers of environmental innovation practices.
2.1.1. government regulations as coercive pressure
Previous literature interpreted government environmental
regulations as an important coercive pressure to firms’ environ-
mental initiatives (Zhu and Sarkis, 2007; Sarkis et al., 2010). Porter
and Van der Linde (1995) and Murphy and Gouldson (2000)
pointed out that innovation-friendly regulations provide suffi-
cient incentives to spur firms’ environmental innovation practices.
Some large-scale empirical proof, however, have found conflict
results. Frondel et al. (2008) and Zhu and Geng (2013) find that
regulatory pressures do not have a significant direct impact on
firm’s environmental behaviors. Eiadat et al. (2008) found signifi-
cant negative effect of government environmental regulation on
environmental innovation.
Another stream of research focus on the influences of different
government policies: command-and-control instrument vs. eco-
nomic incentive instrument, on environmental innovation prac-
tices. Some researchers viewed that economic incentive instrument
is more effective than command-and-control instrument for it
provides more flexibility for economic actors (Bernauer et al., 2006;
Jaffe et al., 2004). Frondel et al. (2004) found policy stringency is
more important than policy instrument choice. Others argued that
the role of each instrument depends on different context, and no
single best policy is suitable to all cases, thus should make the
combination for different policy instruments (Kemp, 1997). Similar
to Jaffe et al. (2004) study, we investigate the individual impact of
command-and-control instrument (environmental regulations,
emission standard, product bans) and economic incentive instru-
ment (preferable tax, tradeable permits, subsidy) on environmental
innovation practices, and propose that:
H1a. Government command-and-control environmental regulation
is positively associated with a firm’s environmental innovation
practices.
H1b. Government economic incentive instrument is positively asso-
ciated with a firm’s environmental innovation practices.
2.1.2. Market demand as normative pressure
Normative pressure stems from pressure of professionalization
(DiMaggio and Powell, 1983). Market demand can be a strong
driver for firms’ environmental initiatives (Bernauer et al., 2006)
and form a core normative pressure (Zhu and Sarkis, 2007). Bansal
and Roth (2000) found that the practices of corporate greening are
more based on the initiatives to respond to consumers’ “green
consumerism”. Hall (2000) also argues that many suppliers are
often under great pressures from their customers. Lewis and
452 Y. Li / Journal of Cleaner Production 66 (2014) 450e458
Harvey (2001) identifies two main reasons that organizations
concern to provide green products. The first is the end consumers’
increasing requirements on green products, the other is the
considerable pressures from the customers and retailers who want
to green their supply chain. If firms do not feel pressure from
customers, they may be reluctant to implement innovative envi-
ronmental practices (Zhu and Geng, 2013).
Zhu and Sarkis (2007) pointed out that Chinese enterprises
initiated implementation of environmental practices to meet the
demand of exports and sales to foreign customers, due to the
increasing degree of globalization and the shift from a sellers’ to a
buyers’ market. In this paper, we assume market pressure trig-
gering environmental innovation practices comes from two sour-
ces. The first one is from overseas customers’ green consumerism,
just like the argument of Zhu and Sarkis (2007). The second one is
from domestic customers’ green consumerism pressure. In nowa-
days low-carbon economic background, the domestic customers’
environmental consciousness and preference for environmentally
friendly products are becoming higher and higher, which
combining to trigger firm’s environmental innovation practices.
Hence, we get the following hypothesis.
H2a. Overseas customer’ green consumerism is positively associated
with a firm’s environmental innovation practices.
H2b. Domestic customer’ green consumerism is positively associated
with a firm’s environmental innovation practices.
2.1.3. Competitive pressure as mimetic pressure
Mimetic pressure is a firm’s standard responses to uncertainty
(DiMaggio and Powell, 1983). Environmental practice has become
an area where companies can get competitive advantage over
competitors, especially in these days more and more companies
have high-quality products, good customer service and other
competitive advantages (Stock, 1998). Lewis and Harvey (2001) also
emphasized that companies should pay more attention to the
changes in the competitors’ environmental strategies in green
competition. Firms begin to use environmental innovation as a
principal differentiation tool to enhance efficiency, product quality,
and more important, green image to gain more competitive
advantage in nowadays more and more increasing intense
competitive market (Bernauer et al., 2006). Narver and Slater
(1990) stated that basic problem of competitor orientation is to
understand the strengths, weaknesses, capabilities and strategies
of the key competitors and identify their technologies capable of
satisfying the target consumers’ demand. Globalization increases
multinational companies’ investments in China, Chinese firms are
faced with new entrants and foreign competition. For example,
automotive manufacturing companies are faced with increasing
pressures of their international competitors to implement envi-
ronmental protection practices. Hence, we argue that firms can
enhance reputations and gain competitive advantages through the
adoption of environmental innovation practices and providing
environmental friendly products, and thus hypothesize that:
H3. Competitive pressure is positively associated with a firm’s envi-
ronmental innovation practices.
2.2. Environmental innovation practices and performance
A growing literature examines the relationship between envi-
ronmental innovation practices and firms performance (Porter and
Van der Linde, 1995; Klassen and McLaughlin, 1996; Melnyk et al.,
2003; Eiadat et al., 2008) by both anecdotal cases and large-scale
research, however, the results are mixed. It is clear that the
debate on the relationship between environmental practices and
performance continues.
The traditional economic view suggested that any environ-
mental improvement effort is an external cost and additional
burden imposed by firms. Accordingly, the development of envi-
ronmental innovation practices could lead to higher costs from
using environmental technologies, and more mandatory environ-
mental compliance, which could have a negative impact on firms’
long-term financial performance (Ambec and Lanoie, 2008).
Porter Hypothesis, however, suggested that pollution is waste
that will diminish value and is symptomatic of problems in prod-
ucts and/or processes. Reducing or eliminating pollution/waste
would not weaken but strengthen corporate competitiveness
(Porter and Van der Linde, 1995). Environmental innovation prac-
tices aimed at reducing any environmental impact are expected to
significantly reduce the total quantity of harmful pollutants
released into the environment and disposed of Klassen and
Whybark (1999). Frondel et al. (2008) also viewed environmental
innovation as an avenue to comply with environmental goals in a
cost-effective way. Thus, environmental innovation practices can
lead to a “winewin” situation characterized by both financial and
environmental benefits (Frondel et al., 2010). Moreover, Ecological
modernization theory (EMT) pointed out that through the adoption
of environmental innovation strategy, both the environmental and
financial performances will be achieved and environmental
friendly society can be realized (Murphy and Gouldson, 2000).
From the perspective of EMT, there are immediate and long term
performances. The former include waste reduction and elimination,
resource recovery and reuse. The latter include resource conser-
vation and clean production to sustain economic growth. Thus, we
propose that:
H4. Environmental innovation practices are positively associated
with a firm’s environmental performance.
H5. Environmental innovation practices are positively associated
with a firm’s financial performance.
In addition, some empirical results revealed that environmental
performance and financial performance are positively linked
(Klassen and McLaughlin, 1996; Jacobs et al., 2010). They argued
that better environmental performance can lead to better financial
performance on two sides. On the revenue side, it helps to improve
firms’ market share and achieve higher marginal profit through
enhanced environmental reputation and offering differentiated
products. On the cost side, it helps to reduce costs for raw materials
and disposal of waste by encouraging the efficient use of raw ma-
terials, and the firm’s compliance and liability costs by cut emis-
sions well below required levels. This leads to the development of
the following hypothesis:
H6. A firm’s environmental performance is positively associated with
a firm’s financial performance.
2.3. Moderating effect of resource commitment
Recall that the anecdotal cases and large-scale research found
mixed results between environmental innovation practices and
performance. Some found a positive correlation between the two
(Porter and Van der Linde, 1995; Frondel et al., 2010). Others,
however, argued that environmental practices generate unrecov-
erable cost, divert resources from other productive investments,
and are therefore unsustainable (Walley and Whitehead, 1994;
Ambec and Lanoie, 2008). The mixed results introduce a question
for us: is there any factor that moderating this relationship?
Resource commitment refers to the allocation of “tangible and
intangible entities available to the firm that enable it to produce
 Y. Li / Journal of Cleaner Production 66 (2014) 450e458
efficiently and/or effectively a market offering that has value for
some market segment(s)” (Hunt, 2000, p.85). That is, resource
commitment is related to the allocation of valuable resources to do
the most good (Richey et al., 2005). Resource-based view proposes
that the effective application and allocation of resources is the key
to the transformation of a short-run competitive advantage into a
sustained competitive advantage (Barney, 1991). In other words, a
firm that can match and commit resources to specific programs can
result in superior performance (Daugherty et al., 2005).
Resource advantage theory argues that, as a firm seek to use
resources to achieve advantage, it is likely to lead to innovation
(Hunt and Morgan, 1996). Richey et al. (2005) found that the firms
that can commit greater resources into environmental practices
enjoy superior performance. Lack of sufficient financial and
personnel resources has been proven to be a significant barrier of
successful environmental practices (Rogers and Tibben-Lembke,
1999). Firm’s resource commitment, such as knowledge re-
sources, financial resources, may limit the performance outcomes
of environmental innovation practices (Simpson, 2012). Differences
in firms’ strategic resources are causally related to differences in
performance (Richey et al., 2005). Thus, we argue that allocation of
sufficient resources is critical to a firm’s success to environmental
innovation practices, and have the following hypotheses.
H7. The greater resource commitment, the positive relationship be-
tween environmental innovation practices and environmental per-
formance will be stronger.
H8. The greater resource commitment, the positive relationship be-
tween environmental innovation practices and financial performance
will be stronger.
Fig. 1 shows the conceptual framework of this study.
3. Research methodology
3.1. Measurements
Nine latent variables are measured in this study: command-
and-control instrument, economic incentive instrument, overseas
customer pressure, domestic customer pressure, competitive
pressure, environmental innovation practices, resource
Fig. 1. The conceptual model for the relationships among institutional pressures, environmental innovation practices, resource commitment and performance.
453
commitment, environmental performance and financial perfor-
mance. The validity and reliability of the survey instrument were
supported by comprehensive literature review and pilot tests using
in-depth managerial interviews in manufacturing firms in Guang-
dong, China. A little bit wordings for some items based on feedback
and insights from the managerial interviews were modified to
tailor them to Chinese management practices. A seven-point scale
was utilized.
First, institutional pressures were measured by eleven items
adapted from Carter and Ellram (1998), Drumwright (1994), Jaffe
et al. (2004), Zhu and Sarkis (2004). Environmental innovation
practices were measured by six items from Eiadat et al. (2008), Rao
(2002), Zhu and Sarkis (2004). Items for resource commitment are
adapted from Barney (1991) and Daugherty et al. (2005). Finally,
four items are selected to measure environmental performance,
and four items are used to measure financial performance
(Daugherty et al., 2001; Richey et al., 2005; Zhu and Sarkis, 2004).
3.2. Data collection
Data were collected from manufacturing firms in Guangdong
Province, China. We used the EMBA/MBA/IE graduates lists in one
of premier business schools of Guangdong Province to select the
samples randomly. We phoned the randomly selected graduates
who were at least middle managers that work in manufacturing
firms to explain the objective of the project and invite them to join
the survey. If these graduates happened not to be the most
appropriate informants to complete the survey, we asked them to
help to pass the questionnaires to the most appropriate informants
in their firms, or introduce them to us, to finish the survey. The
questionnaires were mailed with a cover letter highlighting the
study’s background and objectives. Follow-up calls were made to
improve the response rate. By doing this, we sent out 638 ques-
tionnaires and received 211 responses, 63 of which contained
incomplete information. A total of 148 questionnaires were useful,
representing an effective response rate of 23.20%. Descriptive sta-
tistics for the respondents are given in Table 1. The responding
companies represent a number of industries. More than 70% are
older than 5 years and large companies based on their sales, fixed
assets and number of employees. Thus, the samples are relatively
454 Y. Li / Journal of Cleaner Production 66 (2014) 450e458

Table 1 Table 2
Company profiles (N ¼ 148). Measurement items and Cronbach’s alpha for latent variables.

Information Characteristics Samples Percent Measurement items Cronbach’s

alpha
Founded 5 years 27 18.24%
time 6e10 years 43 29.05% Command and control instrument (CCI) 0.821
11e25 years 56 37.84% CCI1: Our products should meet the requirements
>25 years 16 10.81% of national environmental regulations
No specify 6 4.05% CCI2: Our products should meet the requirements
Employee <100 14 9.46% of international environmental regulations
100e499 22 14.86% CCI3: Our production processes should meet the
500e999 22 14.86% requirements of international environmental regulations
1000e4999 52 35.14% Economic incentive instrument (EII) 0.828
5000 36 24.32% EII1: The government provides preferential subsidy
No specify 2 1.35% on environmental innovation
Fixed asset Less than RMB 5 million 12 8.11% EII2: The government provides preferential tax policy
RMB 5 million to less than RMB 10 6.76% on environmental innovation
50 million EII3: The government’s propagations on environmental
RMB 50 million to less than RMB 32 21.62% protection
100 million Overseas customer pressure (OC) 0.901
RMB 100 million to less than RMB 23 15.54% OC1: Our overseas customers require our products
300 million meet the requirements of environmental regulations
RMB 300 million or more 71 47.97% OC2: Our overseas customers pay great attention to
Sales Less than RMB 5 million 6 4.0% the green concept contained in products
RMB 5 million to less than RMB 20 13.5% Domestic customer pressure (DC) 0.900
50 million DC1: Our domestic customers require our products
RMB 50 million to less than RMB 13 8.8% meet the requirements of environmental regulations
100 million DC2: Our domestic customers pay great attention to
RMB 100 million to less than RMB 15 10.1% the green concept contained in products
300 million Competitive pressure (CP) 0.917
RMB 300 million or more 93 62.8% CP1: We establish a company’s environmental image
No specify 1 0.7% comparing to competitors through green concept
Industry Food, Beverage, alcohol and cigars 8 5.4% CP2: We increase a company’s market share through
Electronics & Appliances 49 33.1% green concept
Non-ferrous metal 5 3.4% CP3: We improve a company’s competitive advantage
Textiles & Apparels 5 3.4% over competitors through green concept
Furniture, Wood and Concrete products 3 1.4% Environmental innovation practices (EI) 0.870
Transportation equipments 15 10.1% EI1: Total environmental quality management
Fabricated metal product & Machinery 18 12.2% EI2: ISO14000 certification
Rubber & Plastics 1 0.7% EI3: Cross-functional cooperation for environmental
Chemicals and petrochemicals 20 13.5% improvements
Publishing and printing 2 1.4% EI4: Design of products for reduced consumption
Pharmaceutical and medical 5 3.4% of material/energy
Jewelry 1 0.7% EI5: Design of products for reuse, recycle, recovery
Others 16 10.8% of material, component parts
EI6: Avoidance of the discharge of hazardous/
harmful/toxic substances
mature and have enough capability to implement environmental Resource commitment (RC) 0.917
RC1: We have sufficient financial resource to invest
innovation practices.
on environmental innovation practices
RC2: We have sufficient management resource to
3.3. Common method variance assessment invest on environmental innovation practices
RC3: We have sufficient investment on software
establishment (e.g. introduction of technology,
Since we used a single informant from each of the
human resource training) for environmental
manufacturing firms to complete the survey, concerns of common innovation practices
method variance (CMV) should be addressed (Podsakoff and Organ, RC4: We have sufficient investment on hardware
1986). In this study, CMV is examined by Harmon’s single factor establishment (e.g. equipment and green material
test, one of the most widely used methods to assess the possibility purchasing) for environmental innovation practices
Environmental performance (EP) 0.958
of CMV. If CMV exists, a single factor will emerge from the factor EP1: Reduction of air emission, waste water, solid wastes
analysis of all survey items (Podsakoff and Organ, 1986). We used EP2: Decrease of consumption for hazardous/
all survey items from the 148 effective questionnaires to conduct harmful/toxic materials
exploratory factor analysis, and the un-rotated factor analysis result EP3: Decrease of frequency for environmental accidents
EP4: Improve our company’s environmental image
shows that no single factor accounts for most of the variance and
Financial performance (FP) 0.844
the first factor captures only 44.79% of the variance, which suggests FP1: Improved capacity utilization
absence of the CMV problem. FP2: Decrease of fee for waste treatment
FP3: Increase profit through the sale of scrap and
used materials and equipments
3.4. Psychometric properties FP4: Decrease of penalty costs for environmental accident

All measurement items and the values of Cronbach’s alpha are

reported in Table 2.Content validity for the survey instrument is
supported by the literature, in-depth managerial interviews and a
pilot test. A Confirmation Factor Analysis (CFA) model using AMOS
17.0 is estimated to assess the construct validity. In the model, each
item is linked to its corresponding construct with freely estimated
covariance. The model fit indices are c2 ¼ 738.93, df ¼ 397,
CFI ¼ 0.91, IFI ¼ 0.92, TLI ¼ 0.90, RMSEA ¼ 0.077, which suggests
that the measurement model is acceptable (Hu et al., 1992).
All factor loadings are greater than 0.5 and the p-values are sig-
nificant at 0.01 level (Table 3), and convergent validity is ensured
 Y. Li / Journal of Cleaner Production 66 (2014) 450e458 455

Table 3 hypotheses are significant. The goodness of fit indices were,

Measurement model of latent variables. c2 ¼ 578.93, df ¼ 305, CFI ¼ 0.92, IFI ¼ 0.92, TLI ¼ 0.90,
Completely standardized p Composite AVE RMSEA ¼ 0.078, which are better than the threshold values sug-
loading (standard error) reliability gested by Hu et al. (1992). Therefore, the model is acceptable. The
Command and control instrument (CCI) 0.843 0.653 structural equation model and the standardized coefficients of each
CCI1 0.552 (————) path are presented in Fig. 2. The statistical results lend support for
CCI2 0.946 (0.247) *** H1a, H2a, H3, H4 and H6, while H1b, H2b and H5 are not supported.
CCI3 0.871 (0.240) ***
In addition, we use hierarchical regression to examine the
Economic incentive instrument (EII) 0.846 0.653
EII1 0.924 (0.090) *** moderating effect of resource commitment on the relationship
EII2 0.859 (————) between environmental innovation practices and performance. The
EII3 0.606 (0.080) *** results are shown in Table 5 and Fig. 3. H7 is not supported, while
Overseas customer pressure (OC) 0.902 0.823
H8 is supported.
OC1 0.947 (0.098) ***
OC2 0.865 (————)
Domestic customer pressure (DC) 0.906 0.829 4. Results and discussions
DC1 0.838 (————)
DC2 0.978 (0.098) ***
Competitive pressure (CP) 0.921 0.794 4.1. Institutional pressures and environmental innovation practices
CP1 0.866 (————)
CP2 0.900 (0.082) *** Interestingly, we find command-and-control instrument for
CP3 0.907 (0.083) ***
government pressure exerts significant positive impacts on the
Environment innovation practices (EI) 0.878 0.549
EI1 0.786 (0.113) *** adoption of environmental innovation practices (p < 0.01), while
EI2 0.519 (0.138) *** economic incentive instrument does not work (p > 0.1). The global
EI3 0.789 (0.120) *** environmental crisis has pushed forward the countries all over the
EI4 0.772 (0.101) *** world began to pay close attention to the problem of environmental
EI5 0.763 (————)
EI6 0.779 (0.102) ***
protection for sustainable development. Many governmental
Resource commitment (RC) 0.899 0.694 agencies have continued to implement standards and regulations
RC1 0.679 (————) that encourage energy saving through environmental innovation
RC2 0.725 (0.068) *** practices. These regulations placed restrictions on products,
RC3 0.946 (0.126) ***
manufacturing processes, and waste and by-product disposal pro-
RC4 0.945 (0.132) ***
Environmental performance (EP) 0.959 0.853 cedures. If firms do not comply with these command-and-control
EP1 0.952 (————) regulations, they will be quit out of the market. However, the
EP2 0.943 (0.040) *** economic incentive instrument, on the other hand, is not well
EP3 0.924 (0.041) *** established, thus did not provide enough temptation to attract
EP4 0.873 (0.051) ***
firms to implement environmental innovation practices. Especially
Financial performance (FP) 0.854 0.598
FP1 0.833 (————) in China, the enforcement of the incentive instrument remains
FP2 0.912 (0.089) *** weak (Zhu and Geng, 2013; Ye et al., 2013). Similarly, Shi et al.
FP3 0.658 (0.091) *** (2008) and Geng et al. (2010) also found that lack of economic
FP4 0.659 (0.096) ***
incentive policies and ineffective enforcement of relevant regula-
tions are barriers for Chinese manufacturers to implement envi-
ronmental practices.
(Fornell and Larcker, 1981). In addition, the composite reliability of Moreover, we find significant positive impact of overseas
all the constructs is greater than 0.7, indicating acceptable reli- customer pressure on firm’s environmental innovation practices
ability (Nunnally and Bernstein, 1994). And the square root of (p < 0.05), while we do not find a significant relationship between
average variance extracted (AVE) for each construct is greater than domestic customer pressure and environmental innovation prac-
0.5. The correlations between constructs are shown in Table 4. tices (p > 0.1). This indicates that in some extent that Chinese firms
put more emphasis on overseas customers’ green consumerism.
3.5. Statistical analysis and results Especially with the economic globalization and China’s entering
WTO, more and more Chinese products are sold to overseas market,
We use structural equation model to test all relationships if Chinese firms do not implement environmental innovation
between latent variables and observed variables, and the re- practices, their products will be encountered with trade barriers.
lationships among multiple latent variables simultaneously. On the other hand, as multi-national companies establishing
Maximum likelihood estimation revealed that all but three of the manufacturing bases in China, they will exert pressures on Chinese

Table 4
Results of Correlations between latent variables.

Mean SD CCI EII OC DC CP EI RC EP FP

CCI 6.05 0.91 1

EII 4.62 1.50 0.36*** 1
OC 5.91 1.23 0.50*** 0.11 1
DC 5.23 1.24 0.39*** 0.45*** 0.35*** 1
CP 5.07 1.41 0.45*** 0.49*** 0.27*** 0.58*** 1
EI 5.39 1.18 0.60*** 0.45*** 0.41*** 0.50*** . 65*** 1
RC 4.67 1.36 0.44*** 0.42*** 0.23*** 0.30*** 0.53*** 0.68*** 1
EP 5.67 1.21 0.62*** 0.48*** 0.45*** 0.49*** 0.66*** 0.77*** 0.59*** 1
FP 5.10 1.22 0.33*** 0.47*** 0.19** 0.40*** 0.59*** 0.56*** 0.57*** 0.66*** 1

**p < 0.05, ***p < 0.01.

456 Y. Li / Journal of Cleaner Production 66 (2014) 450e458

Fig. 2. The structural equation model result for the conceptual model.

suppliers to self-regulate their environmental performance. The
non-significant result for the domestic customer pressure is also
consistent with the real life in China. As customers in a developing
country, Chinese customers’ income levels and living standards are
relative low comparing to that of developed countries, their green
consuming awareness are not as strong as that of customers in
developed countries, and they may not accept the high price for
green products (Ye et al., 2013).
In addition, the empirical result found that competitive pressure
also exerts significant positive impact on environmental innovation
practices (p < 0.01). This indicates that provide green products
through environmental innovation has become an important
strategic for companies to establish green image, increase market
share and get sustainable development in this increasing intense
competitive environment.
4.2. Environmental innovation practices and performance
We find significant positive impact of environmental innovation
practices on environmental performance (p < 0.01). Conversely, we
do not find significant impact of environmental innovation prac-
tices on financial performance (p > 0.1). Environmental innovation
practices only has significant positive impact on financial perfor-
mance through the mediation role of environmental performance
(p < 0.05).
Recall that environmental innovation practices is related to the
adoption of new or modified processes, techniques, systems and
products to avoid or reduce environmental damage (Kemp et al.,
2000), hence, it is very institutive that the implementations of
environmental innovation practices can help to reduce air emis-
sion, waste water, solid wastes, decrease frequency for environ-
mental accidents, and improve firms’ environmental image, thus
lead to better environmental performance. However, the imple-
mentations of environmental innovation need high initial capital,
while the payback period is relative long, hence, there may be some
lag effect on financial performance. This is why we did not find
significant positive effect on financial performance.
In addition, we found the relationship between environmental
innovation practices and financial performance will be moderated
by resource commitment. The greater resource commitment, the
positive relationship between environmental innovation practices
and financial performance will be stronger (p < 0.05). This result
helps to answer the debate on the relationship between envi-
ronmental innovation practices and financial performance in a
certain way. There exists risk for environmental innovation prac-
tices, only if sufficient resource commitment is involved in envi-
ronmental innovation practices, superior financial performance
can be achieved. This result provides a more comprehensive un-
derstanding on the consequences of environmental innovation
practices.

Table 5 5. Conclusions
Hierarchical regression with environmental innovation practices and resource
commitment. This study investigates the antecedents and outcomes of envi-
Variable Dependent variable ronmental innovation practices through a large-scale study. We
entered applied institutional theory to investigate how three distinct insti-
Environmental performance Financial performance
tutional pressures could contribute to the adoption of environmental
Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
innovation practices. Based on the literature, a theoretical model was
Firm size 0.176** 0.049 0.048 0.129 0.061 0.066 developed to test and verify the relationships among institutional
EI 0.695*** 0.682*** 0.302*** 0.287***
pressures, environmental innovation practices, and environmental
RC 0.132* 0.134* 0.417*** 0.496***
EI  RC 0.023 0.148** and financial performance. Moreover, resource commitment is
R2 0.031 0.605 0.605 0.017 0.416 0.433 introduced as a moderator to impact the relationship between
Adjusted R2 0.024 0.596 0.594 0.010 0.404 0.417 environmental innovation practices and performance.
DR2 0.031** 0.574*** 0.000 0.017 0.399*** 0.017** This study seeks to advance our understanding in this area by
*p < 0.1, **p < 0.05, ***p < 0.01. proposing a novel research framework. It goes beyond the existing
 Y. Li / Journal of Cleaner Production 66 (2014) 450e458
Fig. 3. The moderating effect of resource commitment on the relationships between environmental innovation practices and performances.
literature with regard to two aspects. First, other than measuring
government pressure and market pressure in general in previous
studies, we divided government pressure into command-and-
control instrument and economic incentive instrument, divided
market pressure into overseas customer pressure and domestic
customer pressure, and examined the individual impact on the
adoption of environmental innovation practices. This approach
proved to be rewarding, as the distinct effect of individual ele-
ments would not be recognized otherwise. Interestingly, the
empirical results suggest that institutional pressures coming from
government’s command-and-control instrument and overseas
customer pressure exert significant positive impact on environ-
mental innovation practices, while government’s economic
incentive instrument and domestic customer pressure do not
work. Second, we responded to the debate on the relationship
between environmental practice and performance in literature
and practices, and incorporated resource commitment as a
moderator to moderate the relationship. The further analysis re-
veals that the relationship between environmental innovation
practices and financial performance is moderated by the effect of
resource commitment. The greater resource commitment, the
positive relationship between environmental innovation practices
and financial performance will be stronger. Thus provides a more
comprehensive understanding on the consequences of environ-
mental innovation practices.
In addition, this study provides interesting implications for both
practitioners and policy-makers in the context of climate change
adaptation. On the one hand, as our findings show that, the
adopting of environmental innovation practices is conducive to
enhance a firm’s environmental performance, and then enhance
financial performance indirectly. In addition, as a firm invest more
on environmental innovation practices, the financial performance
will be better. These findings indicate that the practitioners should
change their mind-set firstly, recognize that any effort on envi-
ronmental improvement as an economic and competitive oppor-
tunity, not as an additional cost on their operations. Well-managed
environmental innovation practices are conductive to achieve the
double bottom line of environmental and financial performance.
Many companies have successfully integrated environmental
innovation practices into their strategic agenda and invested
necessary resources on them, thus reap greatest benefits. For
example, the Japanese automobile manufacturers developed ligh-
ter and more fuel-efficient cars as a response to new fuel con-
sumption standards through innovation in 1970s, thus gained
higher market share than the U.S. automobile manufacturers.
Through providing environmental-friendly products, services and
solutions, Siemens helped customers in rich areas to use energy
efficiently and improve competitiveness, thus achieved three bot-
tom line of social, customer and itself (http://siemens.com.cn/).
Practitioners should borrow these successful best practices on their
457
implementation of environmental innovation practices. On the
other hand, as a macro-controller, the government plays a critical
role on moving forward environmental innovation practices. Recall
that the successful environmental innovation practices needs huge
additional investments, while the payback period is relatively long,
thus, if there is no external pressure, firms might not willing to
invest on environmental innovation practices. Thus, policy-makers
should provide environmental-friendly regulations, combining
with command-and-control environmental regulations and eco-
nomic incentive instruments, to encourage environmental inno-
vation practices. The more important thing is, the government
agencies at national and local levels should strengthen the
enforcement of these environmental-friendly regulations.
The main limitation of our study is that we collected data solely
from the Pearl River Delta, China. Thus, the findings are context-
specific and may not be applicable in a wider context. The gener-
alization of conclusions to other regions in China, as well as other
countries, could be the subject of further research. In addition, to
advance the theory of environmental innovation, we suggest future
studies investigate the effect of national culture on the proposed
model. Another limitation is the use of cross-sectional data. A
longitudinal study would enable us to draw causative implications
as to the effect of institutional elements on environmental inno-
vation practices and performance improvement. The third limita-
tion of our study is that we measured environmental innovation in
general. The investigation on the impacts of different environ-
mental innovation patterns on performance, such as product
environmental innovation vs. process environmental innovation,
radical environmental innovation vs. incremental environmental
innovation, end-of-pipe environmental innovation vs. prevention
environmental innovation, would be an area of fruitful research.
Acknowledgments
The authors greatly appreciate the anonymous referees for the
valuable and helpful suggestions to improve the paper. The research
is supported by Natural Science Foundation of China (71001041,
71172075, 71371006), Innovation Team Project of Social Science for
University in Guangdong Province (08JDTDXM63002), and Funda-
mental Research Funds for the Central Universities, SCUT
(2013ZZ0093, x2gsD2133310).
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