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International Journal of Production

Research
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The moderating effects of institutional pressures on
emergent green supply chain practices and
performance
Qinghua Zhu a; Joseph Sarkis b
a
Institute for Eco-planning and Development, Dalian University of Technology,
Dalian, Liaoning, Province (116024), P.R. of China
b
Graduate School of Management, Clark University, Worcester, MA 01610-1477,
USA
Online Publication Date: 01 September 2007

To cite this Article: Zhu, Qinghua and Sarkis, Joseph (2007) 'The moderating effects
of institutional pressures on emergent green supply chain practices and performance', International Journal of Production
Research, 45:18, 4333 - 4355
To link to this article: DOI: 10.1080/00207540701440345
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International Journal of Production Research,
Vol. 45, Nos. 18–19, 15 September–1 October 2007, 4333–4355
Downloaded By: [Clark University] At: 15:51 3 October 2007
The moderating effects of institutional pressures on emergent green

supply chain practices and performance
QINGHUA ZHU*y and JOSEPH SARKISz
yInstitute for Eco-planning and Development, Dalian University of Technology, Dalian, Liaoning
Province (116024), P.R. of China
zGraduate School of Management, Clark University, 950 Main Street, Worcester, MA
01610-1477, USA
(Revision received May 2007)
While building their reputation as a major manufacturing prowess, Chinese

industry has experienced increasing ecological pressures from a variety of institu-
tional players including market, governmental, and competitive sources. In
response to these pressures some organizations initiate emergent green supply
chain management (GSCM) practices. A moderated hierarchical regression analy-
sis of data provided by 341 Chinese manufacturer respondents was completed to
examine the relationships between GSCM practice, environmental and economic
performance, incorporating three moderating factors market, regulatory, and
competitive institutional pressures. The results reveal that: (1) Chinese manufac-
turers have experienced increasing environmental pressure to implement GSCM
practices; (2) the existence of market (normative) and regulatory (coercive) pre-
ssures influences organizations to have improved environmental performance,
especially when these pressures cause adoption of eco-design and green purchasing
practices; (3) manufacturers facing higher regulatory pressures tend to implement
green purchasing and investment recovery; (4) competitive (mimetic) pressure
existence significantly improves the economic benefits from adoption of a number
of GSCM practices with no deleterious influences on environmental performance;
(5) none of the institutional pressures contribute to or lessen possible ‘‘win-win’’
situations for organizations. Implications for operations strategists and organiza-
tional sustainability planners from these relationships are also discussed.
Keywords: Green supply chain management; Moderated hierarchical regression;

Institutional Theory; Empirical study
1. Introduction
China’s economic growth has led to a precarious ecological situation (Yardley 2005).
Much of this economic growth has come from Chinese manufacturers who have
correspondingly experienced increasing environmental pressures. With limited
resources and increasing environmental degradation, Chinese governments at all
levels, have responded by establishing and enforcing additional laws and regulations.
It is increasingly recognized that much of this growth has been spurred by an insatiable
*Corresponding author. Email: zhugh@dlut.edu.cn
International Journal of Production Research

ISSN 0020–7543 print/ISSN 1366–588X online ß 2007 Taylor & Francis
http://www.tandf.co.uk/journals
DOI: 10.1080/00207540701440345
4334 Q. Zhu and J. Sarkis
demand for products and goods from foreign, mostly developed country markets and
consumers. This increased growth can be attributed to China’s entry into the World
Trade Organization (WTO). International customers (especially image-conscious

multinational organizations) have also pressured many Chinese manufacturers to
improve their environmental image and performance (Christmann and Taylor 2001).
Economic performance has traditionally, and continues to be, the first priority
for manufacturers, especially manufacturers in developing countries such as China.
Yet, environmental performance has become increasingly important. Many Chinese
manufacturers have started considering and implementing organizational
approaches such as cleaner production and environmental management systems
along with green supply chain management (GSCM) for Chinese manufacturers to
improve both environmental and economic performance.
Studies of the relationships between corporate environmental and organizational
performance in developing countries have not been extensive. In previous works Zhu
et al. (2005) completed investigations of relationships among various dimensions of
environmental practice and performance issues. Whether these relationships may
have been moderated by various institutional pressures were not evaluated. These
issues have significant strategic and operational implications for domestic and
international production and manufacturing management. We argue that the
existence and response to various institutional pressures will cause the relationships
between adopting practices and performance to vary. Understanding these
environmental pressures and relationships are critical for production managers to
strategically manage their environmental, economic, and operational performance.
We utilize the institutional theory lens to help explain various GSCM practice
adoptions and their related influence on organizational performance. Institutional
theory has been identified for its potential value in operations and production
research; also such research is scarce and empirical work is nonexistent (Ketokivi and
Schroeder 2004). This study helps to fill this gap in the body of knowledge on
institutional theory and its implications for operations and manufacturing
management. We examine if Chinese manufacturers responding to different
isomorphic pressures – regulatory (coercive), market (normative) and competitive
(mimetic) – result in differing relationships between GSCM practice adoption, and
various economic and environmental performance characteristics.
To complete this investigation, we introduce the research framework and
hypotheses in section 2. The research methodology is described in section 3. Section 4
presents results followed by discussions in section 5. Section 6 concludes with
a summary of the paper and directions for future research.
2. Research framework and hypotheses
2.1 Research framework

Previous literature has seen mixed results on the relationships between
environmental and economic performance and environmental practice adoption.
The ‘‘win-win’’ argument has been used to justify the implementation of
environmental practices and programs, yet win-win did not occur in all studies.
Several studies showed that GSCM practices can improve environmental
Effects of institutional pressures 4335
performance (Frosch 1994, Geffen and Rothenberg 2000). Even though the raison
d’etre of environmental practice adoption has improved environmental performance,
not all studies have shown this to be true (Levy 1995, Wagner et al. 2001). Whereas
some studies suggest a positive relationship between economic performance and
proactive environmental strategies (Sarkis and Cordeiro 2001), other investigations
have found negative relationships (Cordeiro and Sarkis 1997, Bowen et al. 2001).
The reasons for variation in these findings may be due to the heterogeneity of
environmental management practices adopted by the firm and industry (e.g. see
Elsayed and Paton 2005). This heterogeneity is also represented in the types of
pressures that organizations face and can be further explained by Institutional
Theory (Gonzalez-Benito and Gonzalez-Benito 2006). Institutional theory asserts
that firms adopt initiatives in order to gain legitimacy or acceptance within society.
Thus, adoption of certain organizational policies may increase a firm’s legitimacy to
operate by external actors and/or stakeholders. According to institutional theory,
environmental alignment may be influenced by three pressures: normative, coercive,
and mimetic (DiMaggio and Powell 1983).
First, normative pressures cause organizations to conform to be perceived as
more legitimate. Typically, this pressure is exerted by external stakeholders who have
a vested interest in the organization. Customer requirements form the core normative
pressure for Chinese manufacturers to implement GSCM. Specifically, exports and
sales to foreign customers are two main drivers that may convince Chinese
manufacturers to adopt environmental management and GSCM practices.
Second, conformity through coercive pressures occurs through influence exerted
by those in power. Government agencies are examples of powerful groups that may
influence the actions of an organization (Rivera 2004). In this paper, we define
environmental regulations as the coercive pressures driving Chinese manufacturing
managers to implement GSCM to improve their performance. With decreasing
resource and increasing environmental problems, both central and local governments
in China have established many environmental regulations. Manufacturers, as the
main polluters and resource consumers, have experienced higher pressures.
Third, mimetic pressures occur when an organization mimics the actions of
successful competitors in the industry. Firms may follow or ‘‘mimic’’ competitors
merely because of their success; in operations and manufacturing we define this as
benchmarking. The rationale is simply to follow actions of successful competitors,
and you will also be successful. Globalization has created opportunities for Chinese
manufacturers to learn from their foreign competitors, especially those operating in
China (Christmann and Taylor 2001).
All institutional pressures (normative, coercive, and mimetic) have the capacity to
influence an organization’s responsiveness to the adoption of GSCM initiatives.
Zhu and Sarkis (2004) concluded that GSCM practice has a positive relationship
with environmental performance, positive economic performance, and negative
economic performance. Positive economic performance is defined as benefits gained
through GSCM while negative economic performance is defined as increased
investment and costs (see details in table 1). In this paper, we examine the
moderating effects of pressures for the relationship between GSCM practice
adoption and performance. The model posits that Chinese manufacturers meeting
environmental pressure have implemented environmental practice to improve
environmental and/or economic performance, which is shown in figure 1.
Table 1. List of questionnaire items and their measure scale.
Factors GSCM practice survey items

Internal environmental 1. Commitment of GSCM from senior managers

management 2. Support for GSCM from mid-level managers
3. Cross-functional cooperation for environmental
improvements
4. Total quality environmental management
5. Environmental compliance and auditing programs
6. ISO 14001 certification
7. Environmental Management Systems exist
8. Eco-labeling of products
Green purchasing 9. Cooperation with suppliers for environmental objectives
10. Environmental audit for suppliers’ internal management
11. Suppliers’ ISO14000 certification
12. Second-tier supplier environmentally friendly
practice evaluation
Eco-design 13. Design of products for reduced consumption
of material/energy
14. Design of products for reuse, recycle, recovery of material,
component parts
15. Design of products to avoid or reduce use of hazardous of
products and/or their manufacturing process
Cooperation with 16. Cooperation with customer for eco-design
customers 17. Cooperation with customers for cleaner production
18. Cooperation with customers for green packaging
Investment recovery 19. Investment recovery (sale) of excess inventories/materials
20. Sale of scrap and used materials
21. Sale of excess capital equipment
A five-point scale: 1 ¼ not considering it, 2 ¼ planning to consider it, 3 ¼ considering
it currently, 4 ¼ carrying out to some degree, 5 ¼ carrying it out fully
Factors GSCM performance survey items
Environmental 1. Reduction of air emission
2. Reduction of waste water
3. Reduction of solid wastes
4. Decrease of consumption for hazardous/harmful/toxic materials
5. Decrease of frequency for environmental accidents
6. Improve an enterprise’s environmental situation
Positive economic 7. Decrease of cost for materials purchasing
8. Decrease of cost for energy consumption
9. Decrease of fee for waste treatment
10. Decrease of fee for waste discharge
11. Decrease of fine for environmental accidents
Negative economic 12. Increase of investment
13. Increase of operational cost
14. Increase of training cost
15. Increase of costs for purchasing
environmentally friendly materials
A five-point scale for performance change: 1 ¼ not at all, 2 ¼ a little bit, 3 ¼ to some degree,
4 ¼ relatively significant, 5 ¼ significant
Factors GSCM pressure survey items
Market 1. Export
2. Sales to foreign customers
Regulatory 3. Central governmental environmental regulations
4. Regional environmental regulations
Competition 5. Competitors’ green strategies
6. Industrial professional group activities
A five-point scale for performance change: 1 ¼ not at all important, 2 ¼ not important,
3 ¼ not thinking about it, 4 ¼ important, 5 ¼ extremely important
Moderators
Institutional Pressures
• Market
• Regulatory
• Competitive
GSCM practices
Organizational performance
• Internal environmental
management • Environmental
• Green purchasing • Economic
• Eco-design - Positive
• Cooperation with customers - Negative
• Investment recovery
Figure 1. Research framework for investigation of pressure moderating effects on relation-

ships between GSCM practices and Performance in Chinese manufacturers.
2.2 Moderating effects

We now consider the major institutional pressures: market, regulatory, and
competitive pressures as three moderators in this study. Both non-market and
market pressures have moderated relationships between environmental practices
and their performance but in varying ways (Hoffman and Ventresca 1999).
For example, non-market pressures from regulators and activist groups typically
consider environmental issues as negative externalities, and often force manufac-
turers to improve their environmental performance through the legal system and the
mass media. Market-related actors deal with environmental issues primarily to
improve business performance and/or relationships. In the next few sections, we
describe some of the possible situations, pressures and responses.
2.2.1 Market pressure as a moderator. Market pressure is defined as pressure from

downstream customers and consumers. In this paper, we define it specifically using
two items: exports and sales to foreign customers. China’s exports have continuously
grown in the past five years, but during this time have experienced pressures from
green barriers when exporting their products. During the three years from 1997 to
1999, approximately 20 billion US dollars of commodities were rejected because of
green barriers (Xinhua News Agency 2001). Some countries, including Japan and the
USA have put forward different environmental requirements for fabrics and dyes of
clothes imported from China (MFTECO 2003). Globalization tends to increase
institutional and customer pressure on Chinese firms, typically surpassing local
requirements. For example, the European Community Directive on Waste Electrical
and Electronic Equipment (WEEE) will require Chinese manufacturers to take back
used products or pay premiums when they export electrical and electronic equipment
to Europe. This policy is a substantial economic market pressure since nearly
one-quarter of exported electronic/electrical appliances in China are sold to the
European Community. Chinese electronic manufacturers, especially those exporting
product to Europe, have paid increasing attention to GSCM-related practices such
as eco-design, investment recovery, and cooperation with customers. WEEE is
considered a market pressure since it does not directly influence the organization as a
coercive measure, but it is a requirement to do business in this geographical area with
industrial partners.
Due to the opening of its economic borders, China has received significant
foreign direct investment in the past few years. However, many foreign direct
investment manufacturers in China purchase key raw materials and components
mainly from their home countries, because Chinese manufacturers cannot provide
products that meet foreign manufacturers’ environmental standards (Zhu and Geng
2001). Customer pressures motivate organizations to incorporate environmental
practices and respond with in-kind performance improvements (Kagan et al. 2003).
If manufacturers do not feel pressure from customers, they may be reluctant to
implement innovative environmental practices which can bring better economic
benefits. That is, lack of market pressures may cause organizations to have weaker
environmental performance, lose additional customers and thus influence their
economic performance. Based on these arguments and the previous literature,
we posit the first two hypotheses.
Hypothesis 1: The positive relationship between GSCM practice and environmental
performance is stronger in Chinese manufacturers facing higher environmental pressure
from customers (market pressures) than in Chinese manufacturers facing lower
environmental pressure from customers.
Hypothesis 2: The positive relationship between GSCM practice and economic
performance is stronger in Chinese manufacturers facing higher environmental pressure
from customers (market pressures) than in Chinese manufacturers facing lower
environmental pressure from customers.
2.2.2 Regulatory pressures as a moderator. Jennings and Zandbergen (1995)

introduced institutional theory to help explain firms’ adoption of environmental
management practices. They argue that because coercive forces, through regulations
and regulatory enforcement, have been the main pressures for environmental
management practice adoption, firms within an industry have implemented similar
practices. There are also heterogeneous influences of coercive pressures exerted upon
different industries, which has led to organizational variations in environmental
strategies (Levy and Rothenberg 2002). Related to GSCM issues, Min and Galle
(1997) identified that both state and federal environmental regulations are two key
factors affecting a buying firms’ green purchasing practice.
In order to promote environmental protection, China has greatly expanded the
corpus of environmental laws since 1977. Environmental protection has gained
increasing attention by the Chinese government over the past several years, and a
series of laws and policies have been established such as the Cleaner Production
Promotion Law (State council 2003). These laws have caused or required Chinese
manufacturers to implement environmental systems such as cleaner production and
ISO 14001 certification if they cannot meet these regulated standards. Greater
environmental pressures force adoption of more environmental practices by China’s
manufacturing organizations, in turn causing improvements in their environmental
performance. Simultaneously, according to interviews with operations and general
managers, manufacturers facing greater environmentally focused regulatory
pressures tend to budget additional financial resources for these environmental

practices causing lessening of their economic performance. Thus, we posit our next
two hypotheses.
Hypothesis 3: The positive relationship between GSCM practice and environ-
mental performance is stronger in Chinese manufacturers facing higher environmental
regulation pressure than in Chinese manufacturers facing lower environmental
regulation pressure.
performance is weaker in Chinese manufacturers facing higher environmental
regulation pressure than in Chinese manufacturers facing lower environmental
regulation pressure.
2.2.3 Competition as a moderator. Some studies have shown that competitive

factors may play a more prevalent role for corporate environmental response (Kagan
et al. 2003). For example, Bergh (2002) found that firms were most strongly
influenced to learn and respond to natural environment issues by paying close
attention to other firms such as their competitors and not from their own
experiences, legal or regulatory coercive pressures. Competitors have also exerted
pressure for manufacturers to implement environmental purchasing (Carter and
Carter 1998).
With falling trade barriers and increasing foreign competition Chinese
manufacturers have been more compelled to improve their performance.
Organizations with long-term international experience, such as those in the electronic
industry, have felt higher pressures from competitors to improve their environmental
practices, and have more frequently promoted environmental practices with
commensurate economic benefits (Hui et al. 2003). With further globalization of
China’s markets and trade, especially after China’s entry into the WTO,
manufacturers in the automotive industry have experienced increasing pressures
from their international competitors to implement environmental management
(Harwit 2001). Unfortunately, they lack experience and technologies. As a result,
Chinese manufacturers in the automotive industry have allocated increasing
resources for their environmental practices while failing to gain significant economic
benefits.
Industrial professional groups have also played essential roles in promoting
environmental practices among Chinese manufacturers. In recent years, numerous
national and local level industrial professional associations have been established
in China (SEPA 2005). These activities by industrial professional groups have
motivated manufacturers to implement environmental management practice,
improving environmental performance. Unfortunately, direct and rapid economic
performance gains through environmental practice will probably take longer to
envision (Bowen et al. 2001). As a result, Chinese manufacturers may suffer
short-term economic losses when seeking to improve their environmental
performance. However, in the long term, we can argue better environmental
practices due to competitive pressure can bring better economic performance
(Zhu and Geng 2001).
Additional pressures from competition and support from industrial professional

groups, can both lead to adoption of environmental practices and achieve improved
environmental performance. Resultant economic losses are incurred when organiza-

tions face competitive pressures to adopt environmental practices, due to increased
investments and shifting resources. If the motivation for manufacturers to implement
environmental practices is primarily due to pressures from competitors, economic
gain and benefits will be relatively strategic implying long-term, rather than
short-term gains. Thus, we posit the last two hypotheses.
Hypothesis 5: The positive relationship between GSCM practice and environ-
mental performance is stronger in Chinese manufacturers facing higher environmental
competitive pressure than in Chinese manufacturers facing lower environmental
competitive pressure.
performance is stronger in Chinese manufacturers facing higher environmental
competitive pressure than in Chinese manufacturers facing lower environmental
competitive pressure.
2.3 Control variables

Since large manufacturers typically face higher environmental pressures, and are
typically required to implement better environmental practices to improve
environmental performance, we choose firm size as a control variable. Size is
measured as the natural logarithmic transformation of the number of full-time
employees (Dean and Snell 1991).
3. Methodology
Instrument development, sample and data characteristics, as well as data reduction

through factor analysis are described in this section.
3.1 Instrument development

To test our hypotheses we developed a survey instrument with 21 items (questions)
for GSCM practice, 15 items for performance, and six items for pressure as shown in
table 1. The 21 GSCM practice items are based on input from industrial experts and
the literature (Walton et al. 1998, Zsidisin and Hendrick 1998, Carter et al. 2000).
The 15 questions about GSCM performance, developed by the authors, focused on
environmental and economic performance. Using the institutional theory categor-
izations described in our hypothesis development section, we test three groups of
pressure items. Objective measures of pressures would be the most effective forms
of determining institutional pressures (see Delmas and Toffel 2004), yet the use of
perceptual measures of stakeholder and institutional pressures has been more
prevalent in the corporate environmental management empirical research literature
(Henriques and Sadorsky 1996, Min and Galle 1997, Walton et al. 1998).
We replicate these perceptual item measures in our instrument.
A pretest was completed, further testing and refining the instrument using
officials from the Bureau of Environmental Protection in the Tianjin Economic and
Technological Area (TEDA) and Dalian Economic and Technological Development

Zone (DETDZ), the largest and the second largest industrial zone in China. Based
on suggestions from 25 officials and environmental managers, several changes in the
wording were made and clarified.
3.2 Data collection

To narrow the research targets, we focused on two types of manufacturers:
traditional heavy polluters and manufacturers exporting products or suppliers
of foreign manufacturers in China. Due to the difficulties in obtaining data as
well as the potential to misunderstand the survey items, convenience sampling was
used in the initial stages of data acquisition. Through site visits and training
workshops, we interviewed all respondents, explaining the questionnaire and
collecting it several days later. In this step, we received 213 unique and usable
questionnaires.
To avoid some of the biases of convenience sampling, we completed postal
random surveys followed by phone calls in Dalian. The targeted companies are from
the list of Dalian Manufacturers with a focus on the industries mentioned above.
Out of a total of 1000 questionnaires mailed, 128 usable manufacturing enterprise
responses were received. We completed a Chi-square test to compare organizational
characteristics of the two groups of respondent manufacturers, i.e. the convenience
samples including respondents from workshops and the mail survey samples.
The test results indicate that no difference, at a 5% level of significance, exists
between the two groups on ownership and firm size. We evaluated non-response
bias using t-tests to determine if there were significant differences in the mean
values of the five GSCM practice factors between the two groups (Armstrong and
Overton 1977). The results showed no differences between the groups at the P40.05
significance level for any of the factors, and thus integrating the databases was
deemed appropriate for our study.
Overall, a total of 341 unique and usable manufacturer responses were received
from all sources. Respondents were mainly from four industries: automobile
(109, 32.0%), power generating (70, 20.5%), chemical/petroleum (50, 14.7%), and
electrical and electronic (39, 11.4%). The other 73 respondents (21.4%) were from
textile, steel, food processing, pharmaceutical, etc. Enterprise sizes ranged from
under 500 to over 8000 employees with the majority of manufacturers falling into
the relatively large company classification of between 500 and 8000 employees.
The distribution had 29 manufacturers (8.5%) with over 8000 employees, 65
manufacturers (19.1%) with employees from 3000 to 8000, 104 manufacturers
(30.5%) with employees from 1000 to 3000, 82 manufacturers (24.0%) with
employees from 500 to 1000, and 61 manufacturers (17.9%) with employee levels
below 500.
3.3 Factor analysis

An exploratory factor analysis was conducted for data reduction purposes to derive
groupings of GSCM practice, performance and pressure from the survey data. Factors
were extracted using the maximum likelihood method followed by a varimax rotation.
The Kaiser criterion (eigenvalues41) was employed in conjunction with an evaluation
of scree plots. Both the scree test and initial eigenvalue test suggested the presence of
three meaningful factors for both performance and pressure. The initial eigenvalue test
suggested four factors for GSCM practice but only explained 65.4% of the inherent
variation. We then set the grouping to five factors which are consistent with our
supposition and explain a larger portion of the inherent variation (at 80.2%).
We labeled these five factors as internal environmental management, green
purchasing, eco-design, cooperation with customers, and investment recovery.
Further analysis confirms the reliability of these five factors with Cronbach’s alpha,
of 0.94, 0.87, 0.86, 0.83, and 0.88, respectively, for each group. The three factors on
performance can be labeled as environmental performance, positive economic
performance, and negative economic performance. The three GSCM performance
factors explain 76.5% of the inherent variation. Further analysis also confirms the
reliability of these three factors with levels of Cronbach’s alpha equal to 0.94, 0.90
and 0.87, respectively. Similarly, three factors of moderators explain 80.2% of the
inherent variation, and three Cronbach’s alpha equal to 0.77, 0.79, and 0.70,
respectively. All Cronbach alpha values are above the limit of 0.70 established by
Nunnally (1978) to ensure the constructs’ internal consistency and validity.
Descriptive data, including means, standard deviation and number for sample for
all factors are shown in table 2.
4. Results
Hypotheses 1 to 6 posit that three pressures: market, regulatory, and competition,

moderate the relationship between GSCM practice and performance. Hierarchical
moderated regression analysis is used to test these hypotheses. To understand the
various relationships between specific GSCM practice factors and performance we
complete 15 sets of hierarchical moderated regression analyses.
Table 2. Descriptive statistics for GSCM practice, performance and pressure.
Factors Mean Standard deviation N
Practice
Internal environmental management 3.58 0.979 310
Green purchasing 2.98 1.050 305
Eco-design 3.54 1.017 321
Cooperation with customers 2.89 1.107 317
Investment recovery 3.41 1.021 316
Performance improvement
Environmental 3.71 0.964 318
Positive economic 3.15 0.948 313
Negative economic 3.43 0.885 301
Pressure
Market 4.10 0.836 322
Regulatory 4.49 0.683 340
Competition 4.03 0.747 336
We follow variance partitioning procedures outlined by methodologists

(Jaccard et al. 1990) and employed in prior empirical operations management
research (Dean and Snell 1991, Tatikonda and Rosenthal 2000). The analysis is
conducted in four steps (see table 3). Initially the control variable, firm size, is
entered into the regression. Then one GSCM practice variable, for example internal
environmental management, is entered into the regression. Third, the three
moderators are entered as a block. Finally, the three interaction terms of internal
environmental management and with each of the moderators are entered as a block.
Evidence of moderation exists when interaction terms account for significant
incremental (step) variances in a dependent variable, either individually, signified
by the values of the betas, or collectively, signified by the values of the incremental
F-statistic (Dean and Snell 1991). If the interaction accounts for a significant amount
of incremental variance in the dependent variable, then there is evidence to support
the hypothesis that there is a significant moderating effect of three pressures on the
given GSCM practice method.
Multicollinearity can be a serious problem in moderated regression analysis.
One factor tends to have high correlations with other factors and aspects, leading to
inflated standard errors and misinterpretation of the statistical significance of the
regression results (Jaccard et al. 1990). To mitigate any potential multicollinearity,
we employed ‘‘centering’’ (Jaccard et al. 1990, Tatikonda and Rosenthal 2000).
Acceptable variance inflation factors, those close to 1.00, were found in all of the
individual GSCM practice regressions.
Table 3 presents the results for the interaction effects between the three
moderating pressures and internal environmental management. The incremental
F for the step introduction of the block of interaction terms is not significant for all
performance factors. The interaction term of internal environmental management
and competition has a significant (at the 0.05 level) positive beta for positive
economic performance. Thus, hypothesis 6 is supported. Other hypotheses are not
supported for this particular GSCM practice.
Table 4 presents the results for the effects of the interaction between the three
moderating pressures and green purchasing. The incremental F for the block of
interaction terms is significant for environmental performance and also slightly
significant for positive economic performance. The interaction terms between green
purchasing and market as well as regulatory pressures have slightly significant
positive beta for environmental performance. Thus, hypothesis 1 and 3 are slightly
supported. Hypothesis 6 is supported with a significant positive beta for the
interaction term between green purchasing and competition for positive economic
performance. Other hypotheses are not supported for this particular GSCM practice.
Table 5 presents the results for the effects of the interaction of the three
moderating pressures and eco-design practices. The incremental F for the block of
interaction terms is not significant for any of the performance factors. The
interaction term of eco-design and marketing has a significant positive beta for
environmental performance. Thus, hypothesis 1 is supported. Hypothesis 2 is
not supported, with a significant positive beta of the interaction term between
eco-design and marketing for negative economic performance. Thus, hypothesis 2 is
opposite of the results. Other hypotheses are not supported by this particular GSCM
practice.
4344
Table 3. Hierarchical regression with internal environmental management/pressure.
Dependent variable
Environmental Positive economic Negative economic

performance (N ¼ 184) performance (N ¼ 178) performance (N ¼ 171)
Variable entered Step 1 Step 2 Step 3 Step 4 Step 1 Step 2 Step 3 Step 4 Step 1 Step 2 Step 3 Step 4
Firm size 160* 0.086 0.076 0.074 0.086 0.036 0.035 0.031 0.162* 0.117þ 0.130þ 0.128þ
Internal 0.572 0.557 0.559 0.348*** 0.352*** 0.358*** 0.385*** 0.391*** 0.392***
environmental
support
Market 0.061 0.065 0.025 0.006 0.018 0.018
Regulatory 0.085 0.080 0.044 0.038 .006 0.000
Competition 0.031 0.029 0.042 0.053 .084 0.080
Internal 0.011 0.040 0.014
environmental
support Market
Internal environmental 0.050 0.093 0.038
Q. Zhu and J. Sarkis
support Regulatory
Internal environmental 0.054 0.165* 0.061
support
Competition
F for the step 4.940* 92.096*** 1.128 0.271 1.370 13.364*** 0.215 1.677 4.732* 30.927*** 0.539 0.279
F for the regression 4.940* 49.715*** 20.603*** 12.825*** 1.370 25.179*** 5.406*** 4.046*** 4.732* 18.226*** 7.556*** 4.768***
Adjusted R2 0.020 0.340 0.342 0.334 0.002 0.117 0.105 0.115 0.021 0.163 0.156 0.146
þ
P5.10; *P50.05; **P5.01; ***P50.001.
Table 4. Hierarchical regression with green purchasing/pressure.
Dependent variable

Firm size 0.132þ 0.095 0.081 0.092 0.101 0.069 0.061 0.068 0.171* 0.150þ 0.159* 0.164*
Green purchasing 0.385*** 0.377*** 0.354*** 0.301*** 0.300*** 0.309*** 0.289*** 0.295*** 0.293***
þ
Market 0.138 0.157* 0.017 0.072 0.027 0.057
Regulatory 0.087 0.099 0.026 0.073 0.002 0.019
Competition 0.046 0.043 0.041 0.063 0.095 0.091
Green purchasing 0.132þ 0.113 0.096
Market
Green purchasing 0.118þ 0.104 0.039
Regulatory
Green purchasing 0.004 0.159* 0.005
Effects of institutional pressures
Competition
F for the step 3.212þ 31.906*** 2.152þ 2.784* 1.878 10.038*** 0.150 2.966þ 5.201* 15.961*** 0.517 0.502
F for the regression 3.212þ 17.832*** 8.560*** 6.555*** 1.878 18.024*** 4.049** 3.727*** 5.201* 10.974*** 4.596*** 3.035**
Adjusted R2 0.011 0.155 0.171 0.195 0.005 0.090 0.077 0.107 0.024 0.102 0.094 0.086
þ
P50.10; *P50.05; **P50.01; ***P50.001.
4345
4346
Table 5. Hierarchical regression with Eco-design/pressure.
Dependent variable

Firm size 0.156* 0.114þ 0.096 0.087 0.088 0.060 0.058 0.058 0.157* 0.131þ 0.139þ 0.130þ
Eco-design 0.414*** 0.390*** 0.397*** 0.278*** 0.288*** 0.308*** 0.254** 0.254*** 0.263***
Marketing 0.075 0.081 0.030 0.021 0.006 0.001
Regulatory 0.086 0.091 0.049 0.035 0.001 0.004
Competition 0.001 0.011 0.057 0.048 0.051 0.051
Eco-design Market 0.196* 0.134 0.175*
Eco-design Regulatory 0.040 0.072 0.041

Eco-design Competition 0.076 0.048 0.036
F for the step 4.236* 34.963*** 1.283 1.968 1.484 15.721*** .301 1.101 4.582* 12.635*** .178 1.525
F for the regression 4.722* 22.772*** 9.920*** 7.034*** 1.484 8.660*** 3.606** 2.670** 4.582* 8.755*** 3.561** 2.817**
Adjusted R2 0.019 0.186 0.189 0.202 0.003 0.075 0.064 0.066 0.019 0.079 0.066 0.074
þ
P50.10; *P50.05; **P50.01; ***P50.001.
moderating pressures and the cooperation with customers GSCM practice.
The incremental F for the block of interaction terms is not significant for any of
the performance factors. None of the interaction terms have any significant positive
betas. Thus, with these results none of the hypotheses is supported by this particular
GSCM practice.
moderating pressures and the investment recovery GSCM practice. The incremental
F for the block of interaction terms is only significant for economic performance.
The interaction term of investment recovery and competition has a significant
positive beta for the positive economic performance dependent variable. Thus,
hypothesis 6 is supported for this GSCM practice. The interaction term between
investment recovery and regulation has a negative beta for positive economic
performance. Thus, Hypothesis 4 is opposite the hypothesized relationship. Other
hypotheses are not supported by this particular GSCM practice.
A summary of the comparison between hypotheses and results are shown in
table 8. Overall, we see that Hypothesis 6 has the strongest support, followed by
Hypotheses 1 and 3. Hypothesis 5 has no support, and Hypotheses 2 and 4 have
results that are opposite to the hypothesized relationships. In our discussion we will
attempt to illuminate the possible reasons for these occurrences.
5. Discussion of results
Overall, Hall (2001) concluded that external (to the organization) pressure is one of
the main factors affecting implementation of GSCM. The results presented above
indicate that all three pressures: market, regulatory, and competitive have some
moderating effects for certain GSCM practices and specific types of performance
measures. In the discussion of our results, we will focus on the reasons why certain
significant characteristics exist.
We see that if market pressures cause organizations to adopt eco-design and
green purchasing practices, the environmental performance of these organizations is
better. Yet, when market pressures cause implementation of eco-design practices, the
economic performance tends to deteriorate. Drezner (2000) contended that lower
barriers to trade and foreign investment encourage firms to transfer environmental
technologies and management systems from countries with stricter environmental
standards to developing countries, which lack access to environmental technologies
and capabilities. To export products or become suppliers of foreign customers in
China, Chinese manufacturers have initiated eco-design, which also results in a better
environmental image and performance. However, eco-design practice adoption
has decreased the organizational economic benefits when market pressures exist.
This result may be due to short-term investments from transfer of this technology
from more developed country customers and partners to Chinese manufacturers.
In the long run, such innovative practice may increase economic benefits.
Manufacturing and design managers would need to plan for an initial downturn
of economic benefits, but be aware of potential strategic benefits, which are difficult
to quantify from eco-design practice adoption.
4348
Table 6. Hierarchical regression with cooperation with customers/pressure.
Dependent variable

Firm size 0.152* 0.123þ 0.101 0.115 0.110 0.082 0.080 0.079 0.165* 0.147þ 0.150* 0.149*
Cooperation with 0.323*** 0.318*** 0.315*** 0.263*** 0.261*** 0.259*** 0.278*** 0.287*** 0.284***
customers
Market 0.112 0.117 0.005 0.009 0.047 0.051
Regulatory 0.128þ 0.130þ 0.008 0.001 0.044 0.042
Competition 0.035 0.033 0.017 0.026 0.094 0.101
Cooperation with 0.026 0.003 0.032
customers
Market
customers
Regulatory
customers
Competition
F for the step 4.401* 21.989*** 2.416þ 0.929 2.278 13.682*** 0.019 0.362 4.874* 14.923*** 0.604 0.665
F for the regression 4.401* 13.442*** 6.949*** 4.687*** 2.163 8.058*** 3.183** 2.104* 4.874* 10.092*** 4.372*** 2.966**
Adjusted R2 0.018 0.117 0.137 0.136 0.007 0.070 0.053 0.039 0.022 0.094 0.087 0.082
þ
P50.10; *P50.05; **P50.01; ***P50.001.
Table 7. Hierarchical regression with investment recovery/pressure.
Dependent variable

Firm size 0.169* 0.053 0.031 0.030 0.097 0.020 0.018 0.019 0.164* 0.125þ 0.132þ 0.135þ
Investment 0.434*** 0.416*** 0.427*** 0.289*** 0.291*** 0.327*** 0.166* 0.166* 0.149þ
recovery
Market 0.088 0.090 0.014 0.006 0.001 0.014
Regulatory 0.109 0.114 0.028 0.013 0.009 0.013
Competition 0.013 0.007 0.043 0.027 0.054 0.058
Investment 0.007 0.006 0.089
recovery
Market
Investment 0.071 0.197* 0.112
recovery
Regulatory
Effects of institutional pressures
Investment 0.016 0.236* 0.028

recovery
Competition
F for the step 5.496* 41.109*** 1.844 0.451 1.743 15.674*** 0.122 2.798* 4.942* 4.860þ 0.167 0.889
F for the regression 5.496* 23.888*** 10.791*** 6.853*** 1.743 8.778*** 3.534** 3.324*** 4.942* 4.955** 2.054þ 1.615
Adjusted R2 0.023 0.195 0.206 0.199 0.006 0.078 0.062 0.076 0.022 0.042 0.022 0.027
þ
P50.10; *P50.05; **P50.01; ***P50.001.
4349
Table 8. Hypotheses and results summary.a
GSCM practice factors H1 H2 H3 H4 H5 H6

Internal environmental No No No No No Yes

management
Green purchasing Slight Yes No Slight Yes No No Yes
Eco-design Yes Opposite Yes No No No No
Customer cooperation No No No No No No
including environmental
requirements
Investment recovery No No No Opposite Yes No Yes
a
‘‘Yes’’ means that a hypothesis has been supported; ‘‘No’’ means that there is no support for that
hypothesis; ‘‘Oppositely Yes’’ means that the resulting significance is opposite to the hypothesized
relationship.
Green purchasing does not typically have the same investment requirements as
eco-design. Green purchasing requires less time for additional worker training and
less need for supporting technologies as needed to support eco-design initiatives,
especially in response to customer pressures. The customer market pressures felt by
Chinese organizations mean that worries do exist throughout organizational supply
chains. This result is further evidenced by the practice of manufacturers in developed
countries who consider environmentally friendly practice evaluation on second-tier
suppliers as a very important factor (Carter et al. 2000). Customers, especially those
foreign customers, encourage or even force Chinese suppliers to implement green
purchasing such as evaluating Chinese suppliers’ suppliers with environmental
concerns or even choosing suppliers put forward by customers (Zhu and Geng 2001).
These pressures seem to work in affecting environmental performance, but not to the
detriment of economic performance. Thus manufacturing and supply chain
managers, if under pressures from the market (supply chain) would not necessarily
have to worry about taking an ‘‘economic hit’’ for adopting green purchasing. There
is more upside to adopting this practice with the existence of market pressures.
Regulatory pressure existence seems to only influence green purchasing which
results in improved environmental performance but it indicates no moderating
effects on economic performance for green purchasing practices. Even though the
result is only slightly significant, it does exist. Thus, if managers implement green
purchasing as a result of regulatory pressures, environmental performance tends to
be greater than those organizations that do not feel this pressure strongly. This result
also has policy implications. Making green purchasing as part of regulatory policy,
as the Chinese government has in introducing ISO 14001 certification, will improve
environmental performance, without making a difference in terms of its impact on
economic performance. However, results in table 7 show that investment recovery
caused by regulation does not bring significant environmental improvement while it
does increase costs. In developed countries such as the USA and Germany,
investment recovery has been considered as one of the most important practices to
improve environmental performance (Zsidisin and Hendrick 1998). With decreasing
resource and increasing environmental burdens, the Chinese government has
initiated environmental regulations related to investment recovery. For example,
the Temporary Regulation on Packaging Take-back and Reuse/Recycling act has
been in effect since January 1, 1999. This may not be a prudent regulatory move since
the existence of this regulatory policy may not work, especially for the industries and
companies investigated in this study. This type of regulation may not actually
improve environmental performance, while hurting economic performance. The
investment recovery practice itself has proven beneficial from an economic
perspective in previous studies, yet, adopting it because of regulations turns this
benefit on its head and actually becomes a cost. Part of the explanation is that
Chinese manufacturers are still at the early stage for the implementation of
investment recovery, lacking experience and technology and infrastructure, which
require significant investment that for which regulatory practices may not provide
leeway. From an operational perspective, the response to regulatory pressures to
implement investment recovery, may make management feel that it is a necessary evil
and not plan, prepare for or expect benefits from this approach.
The existence of competitive pressures does not cause manufacturers who
implement GSCM practices to improve environmental performance. Yet, when these
competitive, mimetic pressures do exist, through implementing green purchasing,
internal environmental management and investment recovery, it is more likely to
have positive economic performance. An explanation for this result is that
competition has allowed these Chinese manufacturers to learn how to implement
these environmental practices in a cost-effective way. It seems that other green
strategies from domestic and foreign competitors plus learning from industrial
associations can be quite effective in making economic gains with the introduction of
these practices. Alone these practices have direct environmental results, no matter
what pressures exist; if they are also implemented through learning (pressures) from
competitors and industry associations, the economic benefits are greater.
Encouraging benchmarking and participation in industry associations will provide
greater ‘‘win-win’’ opportunities, especially with these practices. For example,
China’s Electronic Components Association has provided information and consult-
ing on WEEE, and their efforts have helped Chinese electronic manufacturers to
meet challenges and also gain economic benefits by maintaining or even enlarging
international market (CECA 2006).
All but one of the GSCM practices and performances relationships were
moderated by at least one of the institutional pressures. It seems the cooperation
with customers (external downstream) on environmental issues and its relationships
to performance was not influenced in any way. It would seem that at least market
pressures from customers would cause a difference in the results for this GSCM
practice and its relationship to performance, yet this was not the case. In some ways,
this could be considered the most consistent or resilient for the GSCM practices
where external pressures will not determine its effectiveness. Maybe this practice’s
external (to the organization, but not necessarily to the supply chain) characteristics
add to this consistency. Whereas, the other ‘‘external’’ to the supply chain GSCM
practice (green purchasing) requires significant internal control and management
decisions (e.g. which vendor with whom to partner), the customer collaboration
decision is more of a true partnership with the customer having a significant
managerial decision influence. This issue clearly needs further investigation to
determine why these pressures, and presumably other differences may exist in the
environmental management of vendor-organization (in-bound) relationships, when
compared to the organization-customer (out-bound) relationships.
6. Conclusions and future research

GSCM has become an emerging environmental practice for manufacturers to

improve environmental image and gain economic profit. Chinese manufacturers
have initiated GSCM practice. Though the adoption level is still relatively immature,
the positive relationships to environmental and economic performance are
significant (Zhu and Sarkis 2004). From this study, we can summarize:
1. Chinese manufacturers have experienced increasing environmental pressure
to implement GSCM practices. Production managers need to be aware of
these additional pressures.
2. The existence of market (normative) and regulatory (coercive) pressures will
influence organizations to have better environmental performance, especially
when these pressures cause adoption of eco-design and green purchasing
practices. However, eco-design will require additional investments, and
weaken the overall economic performance of eco-design practices when
higher market pressures exist. The implications are pretty clear here; there are
situations for certain GSCM practices where it might be prudent for
production managers and strategists to champion certain practices down their
supply chain (market pressures) to improve environmental performance,
but consequences of doing so, such as additional expenses, will occur for
eco-design practices and these supply chain members may require some form
of economic support or economic encouragement to adopt these practices.
Managers in manufacturing and design should be prepared for these
occurrences.
3. Manufacturers facing higher regulatory pressures tend to better implement
green purchasing and investment recovery. Existence of regulatory pressures
causes Chinese manufacturers to improve environmental improvements from
green purchasing. However, at the same time, regulatory pressure also causes
worse economic performance for investment recovery. The implication of this
result is that regulatory policy-makers should push green purchasing, while
providing help for companies to practice investment recovery through
benchmarking learning and establishing or improving systems (as evidenced
by our next observation). Production managers in situations with significant
regulatory pressure should be made aware of the need to implement GSCM
practices.
4. Competitive (mimetic) pressure existence strongly improved the economic
benefits for a number of GSCM practices with no deleterious influences on
environmental practices. The implication of this result is that having trade
association and benchmarking activities (sharing of ideas) will provide better
economic returns to organizations seeking to implement a variety of GSCM
practices. Organizations should be encouraged to share their learning
experiences and formation of industrial ‘‘environmental clubs’’ can prove
quite economically beneficial to practices that will have positive environ-
mental influences, whether or not these pressures exist.
5. None of the institutional pressures provided a ‘‘win-win’’ situation which
improved both environmental and economic performance of organizations
when these pressures existed and when GSCM practices were implemented.
This paper examines whether specific institutional pressures can moderate

specific GSCM practice and performance improvement relationships. We advanced
the theory here by furthering the evidence of the existence of heterogeneity of

pressures and their influences. Not all isomorphic institutional pressures influence
environmental practices in the same way and that careful consideration of the
operational practices and industrial contextual environment will be important for
managers in these various situations. Thus, we further exemplify the importance of
institutional theory in understanding how the relationship between managerial
decisions and organizational performance will be influenced by the existence and
type of external institutional pressures, especially within the manufacturing industry.
There are some limitations to our study – we do not fully evaluate why and how
many of these isomorphic institutional pressures exist. Also, firm size may affect
most relationships of main effects between GSCM practice and performance as well
as the moderating effects of three pressures. That is, different pressures may
influence organizations of differing sizes – whereas regulatory and market pressures
may influence larger organizations, smaller organizations may be more influenced by
competitive pressures. Future research can group manufacturers based on firm size
to determine if the moderating effects differ. Similar to firm size, industry may be an
important control variable. Further investigation for this relationship is further
warranted but will require additional data acquisition and theoretical justification.
In addition, this paper focuses on more perceptual, operational level environmental
and economic performance measures. Future research can focus on actual and
preferably more objective data on environmental performance such as reduction of
air emission, waste water and solid waste as well as economic performance such as
share price, market share, return on assets, etc. We have also identified that some
GSCM practices/performance relationships are greatly influenced by the existence of
these pressures, while others see no influence. Further investigation of this
phenomenon is a direction for potentially insightful contribution to the corporate
and production sustainability literature.
Acknowledgments
This work is supported by the National Natural Science Foundation of China

Project (70202006), the Natural Science Foundation of Liaoning Province
(20052180), the Ninth Huo-yingdong Young Faculty Foundation (91082), and the
Tenth Huo-yingdong Young Faculty Foundation (104001).
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International Journal of Production

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The moderating effects of institutional pressures on emergent green

QINGHUA ZHU*y and JOSEPH SARKISz

(Revision received May 2007)

While building their reputation as a major manufacturing prowess, Chinese

Keywords: Green supply chain management; Moderated hierarchical regression;

*Corresponding author. Email: zhugh@dlut.edu.cn

International Journal of Production Research

Trade Organization (WTO). International customers (especially image-conscious

2. Research framework and hypotheses

2.1 Research framework

Table 1. List of questionnaire items and their measure scale.

Factors GSCM practice survey items

Internal environmental 1. Commitment of GSCM from senior managers

Figure 1. Research framework for investigation of pressure moderating effects on relation-

2.2 Moderating effects

2.2.1 Market pressure as a moderator. Market pressure is defined as pressure from

2.2.2 Regulatory pressures as a moderator. Jennings and Zandbergen (1995)

pressures tend to budget additional financial resources for these environmental

2.2.3 Competition as a moderator. Some studies have shown that competitive

Additional pressures from competition and support from industrial professional

environmental performance. Resultant economic losses are incurred when organiza-

2.3 Control variables

Instrument development, sample and data characteristics, as well as data reduction

3.1 Instrument development

Technological Area (TEDA) and Dalian Economic and Technological Development

3.2 Data collection

3.3 Factor analysis

Hypotheses 1 to 6 posit that three pressures: market, regulatory, and competition,

Table 2. Descriptive statistics for GSCM practice, performance and pressure.

Factors Mean Standard deviation N

We follow variance partitioning procedures outlined by methodologists

Table 3. Hierarchical regression with internal environmental management/pressure.

Environmental Positive economic Negative economic

Table 4. Hierarchical regression with green purchasing/pressure.

Environmental Positive economic Negative economic

Table 5. Hierarchical regression with Eco-design/pressure.

Environmental Positive economic Negative economic

Eco-design Regulatory 0.040 0.072 0.041

Table 6. Hierarchical regression with cooperation with customers/pressure.

Environmental Positive economic Negative economic

Table 7. Hierarchical regression with investment recovery/pressure.

Environmental Positive economic Negative economic

Investment 0.016 0.236* 0.028

Table 8. Hypotheses and results summary.a

GSCM practice factors H1 H2 H3 H4 H5 H6

Internal environmental No No No No No Yes

6. Conclusions and future research

GSCM has become an emerging environmental practice for manufacturers to

This paper examines whether specific institutional pressures can moderate

the theory here by furthering the evidence of the existence of heterogeneity of

This work is supported by the National Natural Science Foundation of China

Carter, R.C. and Carter, J.R., Interorganizational determinants of environmental

Ministry of Foreign Trade and Economic Cooperation of PRC (MFTECO), Foreign

Nunnally, J.C., Psychometric Theory, 1978 (McGraw-Hill: New York).

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