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The role of strategic environmental Environmental

orientation in
orientation in environmental EDPs

design practices
Ma Ga (Mark) Yang 341
Department of Management, College of Business and Public Management,
West Chester University of Pennsylvania, West Chester, Pennsylvania, USA Received 11 July 2019
Revised 4 November 2019
James Jungbae Roh Accepted 6 December 2019

Department of Management and Entrepreneurship, Rohrer College of Business,

Rowan University, Glassboro, New Jersey, USA, and
Mingu Kang
School of Management, Zhejiang University, Hangzhou, China

Abstract
Purpose – The current study aims to investigate the role of strategic environmental orientation (SEO) in
implementing environmental design practices (EDPs).
Design/methodology/approach – On the basis of survey data collected from 212 US manufacturing firms,
structural equation modeling and regression analysis are used to test the proposed research model.
Findings – The findings of the present study suggest that SEO not only drives firms’ design of environmental
products but also moderates the relationship between EDPs and environmental performance. However, SEO
turns out not to moderate the relationship between EDPs and operational performance. This study also
highlights that firms’ EDPs play a critical role in enhancing environmental performance as well as operational
performance.
Originality/value – By examining the important role of SEO, this research unpacks the moderating role of
SEO between EDPs and firm performance, thus shedding light on how SEO promotes EDPs and the
effectiveness of EDPs.
Keywords Strategic environmental orientation, Environmental design practices, Environmental
performance, Operational performance, Manufacturing firm
Paper type Research paper

1. Introduction
In light of the global pursuit of sustainability, environmental design practices (EDPs) have
been recognized as a means to stay competitive with regard to environmental issues. Major
organizations have made their strategic commitment to serious environmental efforts
through redesigning their products or processes to reduce negative environmental footprints.
For example, in 2012 Nike introduced a new manufacturing design process using FlyKnit
Technology to reduce footwear waste by 60 percent compared to the traditional shoes
(Moorhouse and Moorhouse, 2017). In 2017, Nike is further committed to environmental
sustainability by launching Flyleather, which uses at least 50 percent recycled materials into
existing products (Nike.com, 2019). As a continuous strategic vision for sustainability,
Adidas came out to make shoes out of 100 percent recycled ocean plastics and is expected to
produce 11 million pairs in 2019 (Alveraz, 2019). Food companies as well as automotive and
major household appliance manufacturers are also increasingly seeking to have eco-friendly
product labeling as a way to achieve competitive advantage over consumers (S€orqvist et al., Management Decision
2015; D’Souza and Yiridoe, 2019). Such EDPs have now become necessary for firms to stay Vol. 59 No. 2, 2021
pp. 341-357
competitive in the market, as other firms have also joined in the endeavor to pursue © Emerald Publishing Limited
0025-1747
environmentally friendly and sustainable operations. DOI 10.1108/MD-07-2019-0865
MD The research community has recognized the crucial role that design plays in both
59,2 production and sourcing decisions. Spangenberg et al. (2010) acknowledge that the
absence of design for sustainability will inhibit production and consumption from
reaching their full potential. Researchers have investigated the role of customer demands,
regulations, marketing opportunities, information systems, innovation, improvement of
product quality and new market opportunities in facilitating firms’ design for
environment (Hsu et al., 2012, Keivanpour and Ait Kadi, 2018; Zheng et al., 2019). These
342 studies provide useful insights into the ways that firms generate eco-friendly products
and as a result enhance firm performance. Mounting pressure on companies to be more
environmentally oriented has generated a stream of literature exploring how such
strategic orientation affects the implementation of green management and thus brings
competitiveness to the firm. The environmental orientation of the firm is considered as an
important link that connects firms’ perception of environmental issues with firm
performance (Roh et al., 2009; Leonidou et al., 2016; Yu and Huo, 2019). Scholars suggest
that the more important the firms perceive their environmental orientation to be, the
higher is the chance that they will respond strategically to environmental issues and thus
enhance firm performance.
Despite growing attention paid to this topic, there are few research projects that have
empirically examined how firms conceive environmental issues strategically and thus
effectively implement proactive EDPs that boost firms’ competitive advantage. In particular,
it is unclear what contextual factors help EDPs to generate better performance outcomes,
limiting our understanding of how to enhance the effectiveness of EDPs. According to our
literature review of environmental product design, previous studies have ignored the
contextual characteristics that are found to moderate the relationship between EDPs and
performance. Leonidou et al. (2016) studied the moderating role of organizational resources
and organizational capabilities on the relationship between eco-friendly orientation and
financial performance, but strategic environmental orientation (SEO) itself has not been
conceptualized as a moderator although it seems plausible that it does exert an influence. The
present study suggests that a firm’s commitment to environmental management may affect
the effectiveness of EDPs in generating competitive benefits in the form of environmental and
operational performance. As is well known in the literature, product design is a highly
important area of operations and supply chain management, as it bears the potential to
decrease waste and increase efficiencies throughout the manufacturing – supply chain
operations. As the impact of green product design proliferates through the web suppliers,
manufacturers, distributors and consumers, the degree of commitment to environmental
product design can moderate the magnitude of environmental impact. As such, it is intriguing
to explore environmental orientation as a moderator in the relations between EDPs and
performance.
To address these research needs, this study aims to develop a contingency model that
tests the moderating role of SEO on the relative effectiveness of environmental product
design on environmental and operational performance. Specifically, this study raises the
following research questions and attempts to contribute to the environmental management
literature by answering them. First, what is the role of SEO in enabling EDPs and
moderating the relationships between EDPs and performance outcomes? Second, what are
the effects of EDP on a firm’s competitive advantage, including environmental
performance and operational performance? In the next section we provide theoretical
background on the research framework as well as a literature review of the relevant
variables. In the following section we discuss the research design and provide analysis and
results. Finally, the theoretical and managerial implications and the conclusions are
presented, with a summary of the limitations of the study and guidance on future research
directions.
2. Conceptual development Environmental
2.1 Theoretical bases and research framework orientation in
In this study, strategic choice theory (SCT) and the natural-resource-based view serve as the
theoretical bases to explain our research model. SCT lays an emphasis on the significant role
EDPs
that managerial discretion, interpretation and perspective play in strategic decision making
during the course of sharing organizational actions. SCT explicates why firms take proactive
and committed steps toward environmental initiatives. In the face of external environmental
challenges, managers see them not as constraints but as an opportunity to bring innovation 343
and change to their organizations (Child, 1997). Instead of feeling constrained, “organizations
are continuously constructed, sustained, and changed by actors’ definitions of the situation –
the subjective meanings and interpretations that actors impute to their words as they
negotiate and enact their organizational surroundings” (Astley and Ven, 1983, p. 249). Key to
SCT is translating managerial foresight into sustained strategic commitment and orientation
to addressing obvious and emerging stakeholders’ pressures. Proactive responses to
customers’ demands for eco-friendliness allow firms to meet emerging market opportunities
and, in turn, ensure the implementing of environmentally friendly practices aimed at
pursuing competitive advantage in the long run (Sharma, 2000).
Another theoretical underpinning of this study stems from the natural-resource-based
view of the firm (N-RBV). To account for the inability to explain the dynamic nature of
competitive capabilities in terms of the rarity, inimitability, values and non-substitutability
advocated by the RBV, the N-RBV underscores the absolute necessity to cope flexibly with
changing environments (Hart, 1995). The N-RBV has been used to support the notion that a
firm’s proactive stance and its implementation of environmental practices generate the
competitiveness of the firm, offsetting the cost of environmental management and thus
improving the firm’s bottom line performance (Lee and Klassen, 2008; Sarkis et al., 2011;
Miemczyk, 2016). In the context of environmental product design, substantial costs are
imposed on firms due to the nature of eco-design tools and techniques. Firms that see the
criticality of flexibly responding to the natural environment will justify considerable
investment in EDPs and regard them as integral components of the operations of production
and delivery of products to customers. Commitment to EDPs, in turn, encourages internal
stakeholders to be more cognizant of institutional pressures such as regulatory and
stakeholders’ demands (Hart and Ahuja, 1996). Further, devotion to environmental issues
helps to enable firms to seize important signals from the environment and introduce changes
and transformations into operations in accordance with environmental demand. Developing
EDPs offers opportunities for firms to value different perspectives and communicate them to
the diverse stakeholders and increase intra-disciplinary collaboration in firms, harnessing
their environmental capabilities for competitive advantage in the marketplace.
Our research framework, shown in Figure 1, considers a firm’s environmental product
design from strategy to performance: (1) strategic orientation toward environmental product
design (Strategy), (2) operational practice geared to environmental product design (Practice),
and (3) the effects of environmental product design on environmental and operational
performance (Performance). The perspective of SCT examines how a firm creates a proactive
stance that influences its orientation toward adopting environmental initiatives. SEO is a
vital organization-wide orientation that allows a firm to invest firm-specific resources in order
to implement EDPs. The logic of the N-RBV elaborates how firms’ environmental capabilities,
such as EDPs, can give competitive advantage to them.

2.2 Strategic environmental orientation (SEO)

Strategic orientation is a firm’s overall direction and objectives with regard to an external
business environment as driven by top management (Venkatraman, 1989). It is “how an
MD Strategy Practice Performance
59,2

Environ.
H4 Perf.

344 H2
Strategic Environ.
Environ. H1 Design
Orientation Practices

H3

H5 Operational
Perf.

SCT N-RBV
Figure 1.
Conceptual research
framework
Note(s): SCT: Strategic choice theory; N-RBV: A natural-resource-based view of
the firm

organization uses strategy to adapt or change aspects of its environment for a more favorable
alignment” (Manu and Sriram, 1996, p. 79). Organizational effectiveness refers to the right
strategic orientation that a firm envisions and dedicates itself to. Adapting the definition of
Pagell and Gobeli (2009), we define SEO as the extent to which an organization is proactive
and committed to environmental priorities in its decision making.
Since the seminal study by Banerjee and his colleagues in 2003, environmental orientation
has received much attention from the research community as environmental and sustainable
management practices have emerged as an important principle in business. A number of
studies have investigated environmental orientation in various contexts. Some studies have
posited it as a dependent variable influenced by regulatory pressures and public concern
(Banerjee, 2003), firm size (Elsayed, 2006), owner-manager’s attitude toward natural
resources (Roxas and Coetzer, 2012), environmental objectives (Mondejar-Jimenez et al.,
2013) and product and process orientations (Mondejar-Jimenez et al., 2015). Some other
studies have put forward environmental orientation as a predictor of firm performance
(Menguc and Ozanne, 2005), product design, supply chain practices (Roh et al., 2009; Chan
et al., 2012; Li et al., 2016) and network size and frequency (Dickel et al., 2018). One study
classified firms according to four types of environmental strategies and investigated their
financial implications (First and Khetriwal, 2010). An interesting study uncovered the size
and age of firms as important contextual variables related to SEO (Elsayed, 2006). Firms that
are sizable and newer than their counterparts are likely to have high environmental
orientation. A positive moderating role of organizational resources and capabilities was
discovered by Leonidou et al. (2016) in the context of 161 small light manufacturing firms in
Cyprus. Two studies captured mediators between SEO and outcome variables. Chan et al.
(2012) studied the relationship between SEO and corporate performance and report that
green supply chain management practices meditate the relationship. On another note, Roxas
and Coetzer (2012) report attitudes toward the natural environment as the mediator between
regulatory, cognitive, normative environments and SEO. These studies sketch the
nomological web of the construct as the background of the current research.
 This study of the impact of environmental orientation on EDPs focuses on the association Environmental
between environmental orientation and its impact on product design and supply chain orientation in
practices. Some studies have empirically demonstrated the significant and positive impact of
environmental orientation on integrated product design (Roh et al., 2009; Li et al., 2016),
EDPs
whereas a number of studies have found a positive association between SEO and firm
performance (Menguc and Ozanne, 2005; Chan et al., 2012; Leonidou et al., 2016). However, the
literature review on SEO shows that there is a lack of research examining its moderating
effects on the relationship between EDPs and performance. Our study tackles a void in this 345
area of research, exploring environmental orientation as a moderator in this relationship.

2.3 Environmental design practices

Previous studies conceptualize the environmental design as eco-design, design for the
environment (DfE) or more recently, design for sustainability (DfS). Environmental product
design is a useful approach that helps an organization reduce the negative environmental
impact associated with a product system by introducing environmental considerations early
on in the product design (Cerdan et al., 2009). While traditional design spans the production
and use of the product, eco-design takes a broader approach and includes raw material
extraction (pre-manufacturing stage), reverse logistics and end of life impact in the design
stage. Eco-design practice aims to minimize the adverse environmental impact of products
across the entire product life cycle. A firm’s design for the environment covers a wide range of
categories: waste reduction, material selection and energy use. Adopting EDPs creates new
opportunities to address environmental issues and offers new ways to add value to core
business programs. The examples of EDPs include but are not limited to the use of life cycle
analysis (LCA) for product design; the reduction, reuse and recycling of components and
parts; modular design (e.g. easy disassembly), and eco-packaging and eco-labeling practices
(Sarkis et al., 2010; Delmas and Grant, 2014).
Prior research on EDPs has been descriptive, anecdotal or case study–based. For example,
Lenox et al. (2000) studied how four leading electronics firms (IBM, Xerox, AT&T and Digital)
adopt DfE practices differently across their product development teams. Noori and Chen
(2003) presented a scenario-driven method for developing innovative products with
environmental attributes. Knight and Jenkins (2009) identified eco-design tools and
techniques using a small-scale research project in the context of Smiths Detection–
Watford Ltd, which is located in London, UK, and showed how eco-design techniques
could be determined as being compatible with the new product development process.
K€uç€uksayraç (2015) conducted a comprehensive literature review of the much larger field of
design for sustainability. A few studies used a large-scale survey method to test various
relationships in the context of green supply chain or environmental management in general
(Zhu and Sarkis, 2004; Sarkis et al., 2010). They considered EDPs to be part of either green
supply chain practices or environmental management practices. The samples came from
Chinese manufacturing and processing industries (186 samples of firm-level data were used)
or the Spanish automotive industry (157 samples of firm-level data were used). Hsu et al.
(2012) obtained samples from 569 ISO 14001–certified Malaysian manufacturing firms and
developed a research model that considered eco-design as an internal proactive
environmental strategy with two external institutional drivers (regulation and incentive,
customer pressure) and environmental performance as a final outcome variable. Recently, Dai
et al. (2017) developed a theoretical model of green process design and tested empirically the
way in which green collaboration with suppliers and green process innovation enables a firm
to improve operational performance. They collected data from 229 publicly traded companies
from Hoovers. Green process design is defined as any adaptation to the manufacturing
process that reduces negative environmental impact, and it is measured with three items.
MD In our study, EDPs are defined as a firm’s systematic integration of environmental
59,2 considerations into product and process design. This study is particularly interested in
examining how firms’ SEO moderates the relationship between their EDPs and firm
performance and enables the firm’s adoption of EDPs and, in turn, improves subsequent
performance outcomes.

346 2.4 Hypotheses development

2.4.1 Relationships between SEO, EDP, and performance. SCT helps to explain why firms take
proactive and committed action toward crucial issues such as environmental product design
initiatives. SCT suggests that organizations have freedom of choice when formulating and
implementing organizational strategies in response to environmental challenges to ensure
effective outcomes. SCT implies that the proactive response of the company results in a high
level of commitment to environmental initiatives over time and that different managerial
attitudes/perspectives with regard to similar environmental challenges will result in different
courses of action. Since firms with a higher level of SEO are likely to exhibit a higher level of
managerial recognition of the significant impact on the environment that firms can make,
they are also likely to adopt proactive environmental practices to lessen negative
consequences for the environment. The literature confirms that SEO can serve as one of
the important antecedents to firms’ strategic-level practices such as EDPs (Chan et al., 2012).
In sum, firms with higher SEO will implement EDPs, with the aims of meeting environmental
priorities. Thus, we hypothesize that:
H1. A higher level of SEO is positively related to firms’ adoption of EDPs.
The literature supports the proposition that there is a positive relationship between proactive
environmental management practices and firm performance (Zhu and Sarkis, 2004; Yang
et al., 2011). Adopting EDPs provides a firm with a better chance of improving its
environmental performance, which is one of the important priorities of SEO. By employing
EDPs, firms can design products and processes in such a way that polluting emissions and
waste are minimized. First of all, EDPs allow an organization to design products and
processes to be eco-friendly, thereby reducing their impact on the environment and
improving environmental performance (Knight and Jenkins, 2009). Such activities as the
reuse, recycling and remanufacture of materials and components can facilitate firms’
environmental friendliness (Sarkis et al., 2010; Ckmar et al., 2003), as evidenced by Wal-
Mart’s, 3M’s and Starbucks’ practices related to environmental design.
Taking environmental effects into consideration through employing the LCA technique in
product design also helps firms to decide how to design a product to minimize its
environmental impact over its useable life and beyond, hence positioning them to improve
their environmental performance. Firms’ eco-labeling practice also can potentially result in
environmental performance improvement. According to ISO (the International Organization
for Standardization), the objective of eco-labeling is “through communication of verifiable
and accurate information on environmental aspects of products and services, to encourage
the demand for and supply of those products and services that cause less stress on the
environment, thereby stimulating the potential for market-driven continuous environmental
improvement." Taken together, the positive linkage between firms’ EDPs and environmental
performance is expected. Thus, we hypothesize that:
H2. Firms having a higher level of adoption of EDPs exhibit an enhanced level of
environmental performance improvement.
The N-RBV supports the notion that firms with proactive environmental management
practices such as EDPs can improve firm performance. For example, a firm can achieve
higher resource efficiency by reduced energy consumption, reduced use of harmful materials Environmental
and effective use of materials and component parts through reuse, recycling and recovery orientation in
(Pagell and Gobeli, 2009). Drawing from the N-RBV, it is expected that the adoption of EDPs
can generate several benefits in a firm’s operational performance, in areas such as costs,
EDPs
quality, flexibility and delivery. Fundamentally, EDPs involve redesigning the production
process to make it environmentally friendly (i.e. using and producing fewer harmful
materials). This could result in improving operations quality and reducing production costs,
either through increasing production process efficiency or through reducing input and waste 347
disposal costs (Hart, 1995; Hart and Ahuja, 1996). EDPs also can reduce the wasting of natural
resources during production through eco-friendly packaging, in which biodegradable and
recycled materials are used. This can speed up delivery since materials can be re-used or re-
purposed, which can lessen the time spent on packaging. Such practices will help to reduce
logistics costs. In addition, the literature suggests that proactive environmental practices can
improve a company’s operational performance, promoting cost reduction, quality
improvement and flexibility in product mix (Pagell and Gobeli, 2009; Dai et al., 2017; Yang
et al., 2010). Thus, we hypothesize that:
H3. Firms with a higher level of adoption of EDPs exhibit enhanced improvement in
operational performance.
2.4.2 Moderating effects of SEO. SEO governs the commitment of the workplace to EDPs (Li
et al., 2016; Roh et al., 2009). In the absence of SEO, a firm’s green practices may stay on the
surface level, as in meeting the environmental standards and regulations. Employees and
design teams might implement the design specifications and requirements, but they might
not really pay close attention to revamping the products to make them more environment-
friendly than before. Their levels of commitment may remain in the vicinity of simply
conforming to the mandates. However, firms with high commitment to SEO perceive green
design and practices as giving them a strategic edge over their competitors and possibly as
opportunities to address customers’ unmet needs and wants. The design teams and
employees on the floor motivated by a high awareness of the strategic nature of being green
go above and beyond the requirements and strive to imbue greenness in all the diverse facets
of their production and operations. Such commitment will result in high levels of
environmental performance.
Firms with strong SEO are committed to long-term cooperation and are willing to make
investments in environmentally sound products and processes, knowledge-sharing routines,
complementary resources and capabilities and trust-based governance. Strong SEO fosters
cooperation, such that partnering firms are willing to make relationship-specific investments
and harmonious adjustments to create synergies. All this results in the accumulation of
environment-specific knowledge over time, increasing a firm’s capacity to exploit the
knowledge that it accesses in the course of implementing environmental practices and
promoting an exchange of information that cannot be accessed from markets. As such, firms
with high SEO advocate cooperation and mutual learning, the sharing of information, and the
integration of environment-specific knowledge and assets, which should enable these firms to
leverage their process alignment capability more effectively for competitive benefits.
High levels of SEO will also positively affect the effect of EDPs on operational
performance. Firms’ stance in taking environmental practices as a strategic priority signals
extraordinary engagement and responsibility that go beyond the required level of operational
performance. The communication of ecological priorities, the endeavors to achieve pollution
control, the examination and reevaluation of operational decisions to scrutinize their
environmental implications are all significant initiatives that demand attention to details and
encourage excellence in operations. Firms with strong SEO rethink all aspects of their
operations and take proactive approaches, from the design of products to the process of
MD reengineering, in order to streamline production activities following lean and green
59,2 principles. A corollary of such commitment to EDPs is that employees vigorously work to
meet and exceed the required operational standards in specifications, costs, quality and
volume. Employees with environment-specific knowledge and expertise are willing to take
ownership of the production process and to integrate processes in order to enhance
environmental performance while improving operational performance such as volume
flexibility and product mix and delivery speed. Taken together, we predict that the presence
348 of high SEO may enhance the effectiveness of EDPs in enhancing a firm’s environmental
performance as well as operational performance. Thus, we hypothesize that:
H4. The impact of EDPs on environmental performance is moderated by SEO, such that
the relationship becomes stronger in the presence of high SEO.
H5. The impact of EDPs on operational performance is moderated by SEO, such that the
relationship becomes stronger in the presence of high SEO.

3. Methodology
3.1 Sample
In order to test the proposed hypotheses introduced in the research framework, we collected
survey data from manufacturing companies operating in the USA lists of companies with
two-digit SIC codes 30 and from 34 to 38 were obtained from the Society of Manufacturing
Engineers (SME), then random selection was used to choose from among them. A total of
5,000 phone lists from SME were selected after the careful screening of SCI codes, job function
and job title. Since federal and local regulations did not allow SME to send email directly to an
individual person, SEM leased the phone lists of the potential respondents to a selected
telemarketing company. Two rounds of the calling efforts from the telemarketing company
produced general information such as a respondent name, job title, company name and
address, phone number and email address of 600 informants who agreed to participate in the
survey. Personalized email messages linked to the online survey were sent immediately
within 24 h after the phone call. Out of the 600 candidates, 69 informants were dropped due to
incorrect email addresses or ineligible job positions, leaving 531 useable email addresses.
After emailing survey questionnaires to the identified informants, we collected a total of 255
responses, giving an overall response rate of 48 percent. In all, 43 unusable responses were
removed from the data set due to incomplete answers, yielding 212 useable responses, giving
an effective response rate of 39.9 percent. A brief description of informant company profiles is
presented in Table I.

3.2 Measures
To develop the measures for each construct, we relied primarily on the previous literature,
using the scales found in the literature, and adapted them, if necessary, to our specific context.
To further ensure content validity, items generated from the literature review were pretested
using structured interviews with several academicians and practitioners to check the
relevance and clarity of each construct’s definition. Then, we asked the academicians to sort
the survey items into corresponding constructs to preassess the convergent and discriminant
validity of the scales. The basic procedure is to show practitioners the conceptual model and
definitions of each construct and to see whether the model and construct make sense to them.
Then, practitioners act as judges and sort the items into separate constructs. Items are
subjected to two sorting rounds using two independent judges per round. The survey items
used in the research model are detailed in Appendix.
The construct SEO refers to the extent to which a firm is proactive and committed to
positive ecological or green priorities in its decision making. Four items for SEO were
Classification N %
Environmental
orientation in
Number of employees (Firm size) <100 83 39.15 EDPs
101–250 54 25.47
251–500 37 17.45
501–1,000 12 5.66
>1,000 26 12.26
Annual revenues (in million dollars) <$10 34 16.0 349
$10–50 94 44.3
$51–100 32 15.1
$101–500 29 13.7
>$500 23 10.8
Primary business (SIC) SIC 30: Rubber and Miscellaneous Plastic Products 11 5.9
SIC 34: Fabricated Metal Products 75 40.3
SIC 35: Industrial Machinery and Equipment 53 28.5
SIC 36: Electronic and Other Electric Equipment 22 11.8
SIC 37: Transportation Equipment 16 8.6
SIC 38: Instruments and Related Products 9 4.8
Job function Corporate Executive 51 25.2
Manufacturing Engineering 40 19.8
Quality Assurance/Control 6 3.0
Product Design/R&D 20 9.9
Purchasing 9 4.5
Manufacturing Production 58 28.7
Sales/Marketing 15 7.4
Finance/Accounting 1 0.5 Table I.
Transportation/Logistics/Distribution 1 0.5 Informant company
Retail/Warehouse 1 0.5 profiles

developed by reviewing the relevant strategic orientation literature and associated

operations management literature (Kroes and Ghosh, 2010; Pagell and Zhaohui, 2009;
Klassen and Whybark, 1999; Venkatraman, 1989). EDPs are defined as the extent to which a
firm systematically integrates environmental issues into product and process design. Five
items were utilized for measuring corporate EDPs according to the works of Zhu and Sarkis
(2004), Cerdan et al. (2009), Knight and Jenkins (2009), and Sarkis et al. (2010). Environmental
performance refers to an organization’s achievement of performance outcomes related to
pollution control. Five items for environmental performance were adapted from the studies of
Zhu and Sarkis (2004) and Jacobs et al. (2010). Operational performance refers to the extent to
which firms improve outcomes in cost, quality, delivery and flexibility. For operational
performance, five items were adopted from Rosenzweig et al. (2004) and Kristal et al. (2010). A
1–5 point Likert scale was used for all constructs and all measurement items are presented in
Appendix.

3.3 Measurement model

In order to analyze the data, structural equation modeling (SEM) is employed. The data used
in our research consist primarily of perceptual measures, and our hypotheses represent a
series of simultaneous relationships which include exogenous and endogenous variables.
SEM is an appropriate technique to analyze such data and relationships (Hair et al., 1998). In
the first step, we test the measurement model using confirmatory factor analysis. This is to
establish the validity and reliability of the scales used in our analysis. In the second step, we
test the structural relationships. These are discussed in Section 4.
Construct validity was assessed by applying the approach suggested by Brahma (2009).
First, the content validity of each item was established through personal interviews with
MD several academic researchers and practitioners. We checked whether the items clearly and
59,2 fully capture the definition of each construct by asking interviewees to sort the survey items
into corresponding subconstructs. Second, we assessed construct unidimensionality and
reliability. The results of exploratory factor analysis indicated that all items have stronger
loadings on their respective constructs and lower loadings on other constructs, which
ensured unidimensionality. Then, the Cronbach’s alpha values of each construct were
calculated, ranging from 0.804 to 0.923, as shown in Table II. The results indicate that the
350 constructs have high internal consistency. Finally, convergent and discriminant validity
were assessed. To test convergent validity, we conducted confirmatory factor analysis (CFA).
In the CFA model, the resulting model fit indices were the following: χ 2/df 5 1.667,
RMSEA 5 0.056, CFI 5 0.947, TLI 5 0.939, IFI 5 0.948, GFI 5 0.881, and NFI 5 0.879,
indicating a good model fit. In addition, all factor loadings were greater than 0.50 (they ranged
from 0.595 to 0.847), providing evidence of convergent validity. Further, it was found that the
average variance extracted (AVE) values (see Table II) for four constructs were higher than
0.5 and the value for the operational performance (OP) construct was 0.456, indicating less
than the ideal threshold of 0.50 but still larger than an acceptable level of 0.40 (O’Rourke and
Hatcher, 2013; Handley and Benton, 2009; Menor et al., 2011). Thus, we conclude that the
research constructs have strong convergent validity. After this, we tested discriminant
validity by using AVE values. The results (Table II) show that all of the square roots of the
AVE value for each construct are greater than the corresponding correlation values,
providing evidence of discriminant validity.

4. Tests of hypotheses and results

A SEM method with the maximum likelihood estimation tests and assesses the proposed
research model. The model fit indices of the structural model are robust (χ 2/df 5 1.737,
RMSEA 5 0.059, CFI 5 0.941, GFI 5 0.876, NFI 5 0.873, TL 5 0.933, and IFI 5 0.942),
indicative of the model being a good fit to the data. The results for the structural model are
presented in Figure 2.

4.1 Direct effect results

H1 predicts a positive relationship between SEO and EDP, and this was confirmed in the
structural model as the path coefficient turns out to be positive and significant (β 5 0.555,
p < 0.001). Similarly, H2 and H3 are confirmed (β 5 0.463, p < 0.001 for H2 and β 5 0.413,
p < 0.001 for H3). Both coefficients are positive and high, signaling strong support for H3.

4.2 Moderation effect results

H4 and H5 posit SEO as a moderator for the links between EDP and EP and between EDP and
OP. The positive relationship between EDP and EP will be stronger when the level of EDP is
high. The empirical results find SEO interacting with the relationship between EDP and EP.

Mean SD 1 2 3 4 Cronbach’s α AVE

1.Firm size 2.264 1.355

2.SEO 3.540 0.777 0.050 0.852 0.596
Table II. 3.EDP 2.467 1.020 0.022 0.464** 0.869 0.532
Descriptive statistics 4.EP 3.427 0.580 0.080 0.401** 0.385** 0.909 0.670
and correlation 5.OP 3.737 0.599 0.045 0.305** 0.334** 0.353** 0.804 0.456
coefficients Note(s): n 5 212; **p < 0.01
 Environmental
orientation in
EDPs

351

Figure 2.
SEM results

The coefficient for the interaction of SEO and EDP is positive and significant (β 5 0.096,
p < 0.05 in model 2 of Table III. Further, we conducted simple slopes analysis by using
Dawson and Richter’s (2006) method to visualize the moderating effects. As shown in
Figure 3, simple slopes analysis discloses that EDP has a strong positive impact on EP when
the level of SEO is high (β 5 0.220, p 5 0.001) in comparison to a low level of SEO (β 5 0.124,
p 5 0.006). Thus, the results support H4. H5, however, collects no empirical support because
the coefficient is statistically insignificant (β 5 0.003, p > 0.1 in model 4 of Table III).

5. Discussions and conclusion

5.1 Theoretical implications
By examining the crucial role of SEO with EDPs-performance, this study sheds light on how
SEO facilitates a firm’s EPDs and serves as a complement to EPDs in promoting its
environmental performance. Firms with the higher levels of SEO present the higher levels of
EDPs, which resembles the results of previous studies that emphasize the positive role of SEO
in promoting green supply chain management practices such as green purchase, customer
cooperation and investment recovery (Chan et al., 2012), environmental product quality and
employees’ environmental involvement (Chen et al., 2015) and green supply chain
management practices and capabilities (Li et al., 2016; Kirchoff Jon, 2016). Drawing from
the perspective of SCT, this study confirms that SEO helps firms advance their specific
environmental practices (i.e. EDPs) by leading them to take proactive environmental

EP OP
Model 1 Model 2 Model 3 Model 4

Constant 2.260 2.190 2.904 2.906

Firm size 0.031 0.027 0.022 0.022
SEO 0.208*** 0.236*** 0.150** 0.149*
EDP 0.147*** 0.124** 0.142** 0.143**
EDP 3 SEO 0.096* 0.003
2
R 0.217 0.234 0.142 0.420 Table III.
Adjusted R2 0.205 0.220 0.130 0.126 Hierarchical regression
F 19.173*** 15.852*** 11.510*** 8.592*** analysis (Moderating
Note(s): n 5 212, ***p < 0.001; **p < 0.01; *p < 0.05 effect of SEO)
MD 2.9
59,2
2.7

2.5 Low SEO

High SEO
2.3
352 EP 2.1
Figure 3.
Interaction plot for H4 1.9
(Moderating effect of
SEO on the 1.7
relationship between
EDP and EP) 1.5
Low EDP High EDP

initiatives and make environmental-friendly adoptions in regard to both product and process
design.
In addition, our results suggest that EDPs have positive effects on both EP and OP. Since
EP ascertains a firm’s proactive orientation toward environmental needs and regulations,
EDPs can facilitate EP by making products eco-friendly, adopting higher technologies,
practicing green sourcing and purchasing and minimizing energy waste and pollution (Li
et al., 2016; Chen et al., 2015). Given the powerful implications of EDPs’ emphasis on the
development of green products and processes, EDPs lead the quality of products and
processes to push to a higher level and considerably reduce the cost in manufacturing and
purchasing related to waste, materials, emissions and energy (Inman and Green, 2018),
leading to a firm’s better operational performance in quality, cost, delivery and flexibility.
Such results extend our understanding on how EPDs can affect firms’ competitive
performance.
Interestingly, our study validates the moderating effect of SEO on the relationship
between EDP and EP only. SCT suggests that strategic orientation encourages firms to
explore and develop competencies and products for their intended performance (Cheng and
Huizingh, 2014; Song et al., 2007). Firms’ proactive pursuit of an environmental orientation
leads them to make extensive efforts to develop technology and corresponding design
changes. Such endeavors encourage employees to dedicate their resources to EDPs and to
overcome risks in performing EDPs. When such organizational ventures are orchestrated in a
harmonious manner, firms can effectively achieve their environmental goals drawn from EP.
The findings from this study confirm that SEO plays a very important role in strengthening
the positive impact of EDP on EP. However, SEO is more likely to drive firms to focus on
environmental issues, not on operational issues, and thus the interaction of SEO and EDPs
may be limited to environmental issues and may not influence the relationship between EDPs
and OP.

5.2 Practical implications

Managers should heed the value of SEO in achieving environmental performance.
Environmental strategy not only directly influences the quality and effectiveness of
environmental product design but also strengthens the effect of environmental product
design on EP. Therefore, in order to enhance the effectiveness of EDPs and achieve more
efficient environmental performance, it is essential to adopt the right strategic orientation and
align environmental orientation with EDPs. Second, the implementation of EDPs
significantly improves firms’ competitiveness and creates marketing opportunities for
them through superior EP and OP. Given that improving EDPs is an effective means to Environmental
increase EP and OP, the benefits of EDPs are clear and significant. Therefore, green orientation in
manufacturing processes and green product design capabilities are highly desirable in the
effort to attain competitive advantage. Managers should also pay attention to environmental
EDPs
product design as it has multiplier effects throughout operations and supply chains.
Firms should make efforts to communicate and coordinate with their suppliers with regard
to EDPs.
353
5.3 Limitations and future research opportunities
Despite the contributions that this study brings to the scholarly and practitioner
communities, this study carries some limitations, which open up future directions for
research. First, while our framework recognized the moderating effect of SEO on the
relationship between EDPs and firm performance, future research should strive to achieve a
comprehensive understanding of how other moderating variables such as institutional
pressures or top management culture can alter the relationship. Second, this study focuses on
the role of SEO in affecting EDPs. However, many manufacturers pursue an operations-
oriented strategy to maintain their competitiveness. For such firms, strategic operations
orientation may negatively influence their environmental practices, including EDPs, due to
problems in resource allocation. Therefore, there may be tension between SEO and strategic
operational orientation in the manufacturers’ EDPs, which requires further research on how
to balance strategic orientation with environmental practice. Third, our research uses data
from a single respondent. Despite the robustness of the data, the study is not free from a
potential for method bias. Research design for multiple respondents and multiple methods
will be ideal to confirm the findings.

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Appendix Environmental
orientation in
EDPs
Please click on the appropriate bubble to indicate the extent to which you agree or disagree with each statement
as applicable to your firm (1: strongly disagree, to 5: strongly agree)
Strategic Environmental Orientation (SEO)
SEO1 Our firm’s mission statement communicates the importance of environmental performance
SEO2 Our firm is committed to pollution control
357
SEO3 Our firm’s ecological priorities are communicated to all employees
SEO4 Our firm evaluates the environmental impact of operational decisions
Please indicate the extent to which your firm implements the following practice (1: Not at all, 2: To a small
extent, 3: To a moderate extent, 4: To a considerable extent, and 5: To a great extent)
Environmental Design Practices (EDP)
EDP1 Life Cycle Analysis (LCA) is employed for product design
EDP2 Our products are designed for reduced consumption of energy
EDP3 Our products are designed for reuse, recycling, recovery of material/component parts
EDP4 Our products are designed to reduce the use of hazardous materials in their manufacturing process
EDP5 Our firm designs eco-friendly packaging
EDP6 Our firm designs eco-friendly labeling for products and processes
Please click on the bubble that best indicates the amount of change in your firm’s environmental performance
dimensions over the last three years (1: Significant decrease, to 5: Significant increase)
Environmental Performance (EP)
EP1 Air emission
EP2 Waste water
EP3 Solid waste
EP4 Consumption for toxic materials
EP5 Frequency of environmental accidents
Please click on the appropriate bubble that best indicates the amount of change in your firm’s financial
performance outcomes over the last three years (1: Strongly deteriorated, to 5: strongly improved)
Operational Performance (OP)
OP1 Conformance quality
OP2 Production costs
OP3 Delivery speed
OP4 Ability to rapidly change production volumes Table AI.
OP5 Ability to rapidly change product mix Survey instrument

Corresponding author
Mingu Kang can be contacted at: jiangmq@zju.edu.cn

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