Stakeholders’ Environmental Orientation,Eco-innovation And Firm Performance:an Organizational Legitimacy Perspective

Since Chinese reform and opening up, industrialization has led to fast economic growth on the one side and appalling environmental pollution on the other side. Managers of modern enterprises face issue that how to balance environmental responsibility and making profit. Under this background, theorists coin a concept of eco-innovation, which means’new products and processes that provide customer and business value but significantly decrease environmental impacts’with purpose to pursuing both environmental and economic win-win situation. Porter provides argument that how eco-innovation achieves win-win situation. His core logic is that corporate environment pollution is the inefficient use of resources, well-design environmental regulation can help enterprise overcome organizational inertia and stimulate them to do eco-innovation, then win-win situation will occur, this is so-called "Porter hypothesis".Many researchers test Porter hypothesis and fall into three streams. The first stream focus on the relationship between environmental regulation and eco-innovation (antecedents of eco-innovation),the second stream concerns about the relationship between eco-innovation and firm performance (consequences of eco-innovation), and the last stream pays attention to the mediating effect of eco-innovation between environmental regulation and firm performance (antecedents and consequences of eco-innovation).With in-depth reading of extant literature, we find there are still several theoretical gaps of empirical studies of Porter hypothesis. Firstly, the first stream neglect the impact of non-regulatory policies(i.e. normative and mimic pressures) and it’s interaction with regulatory policies on eco-innovation and institutional agency role of top managers (i.e. CEO) on interpreting institutional pressure and decision making to response to institutional pressures. Secondly, the second stream pays more attention to substantive (i.e. cost saving) than symbolic (i.e. legitimacy) performance of eco-innovation, which will contribute to substantive performance. Thirdly, the last stream does not consider the different effect of different institution impact on different dimension of eco- innovation and firm performance.To fill above theoretical gap, this dissertation deeply analyzes the relationship among stakeholders’environmental orientation (SEO), which stands for institutional pressures, eco-innovation and firm performance from organizational legitimacy perspective. Four studies design deeply analyze these issues.Study I focus on antecedents of eco-innovation and identifies which stakeholder influence corporate eco-innovation behavior based single case analysis. Findings are as followings:Firstly, eco-innovation is influenced by two main factors—eternal SEO and internal top managers’environmental awareness (TMEA),the former can be further divided into governments’environmental orientation (GEO),clients’environmental orientation (CtEO) and rivals’environmental orientation (REO) and the later includes environmental risk awareness (ERA) and environmental benefit awareness (EBA). Furth more, eco-innovation includes ecological management innovation (EMI), ecological process innovation (ESI) and ecological product innovation (ETI),Eco-innovation Study II puts forward hypotheses deduced from findings of study I and tests the relationship between SEO and eco-innovation with mediating and moderating effect of MEA from legitimacy recognition perspective. Based a sample of144manufacturer and tangible service firms in Jiangsu, Zhejiang and Shanghai provinces of China, results of OLS regression analysis are as followings:Firstly, GEO has an inverse U-shape relationship with ESI, and the relationship is stronger when ERA is higher, meanwhile EAR is the meditator between GEO and ESI;GEO is positively correlated with ETI and this relationship is stronger when EBR is higher; although GEO has no direct relationship to EMI, the interaction of GEO and ERA is positively related to EMI. Secondly, CtEO is positively related to EMI, has an inverse U-shape with ETI and this relationship is weaker when EBA is higher. Thirdly, REO is positively correlated with EMI, ETI and ESI.EBA is a mediator between REO and ETI. Fourthly, the interaction of GEO and REO is negatively correlated with EMI while the interaction of GEO and CtEO is positively correlated with EMI. Fifthly, ERA is positively correlated with EMI and ETI while EBA is only positively associated with ETI. Study Ⅲ examines the effects of external resource acquisition (RA) in mediating the relationship between eco-innovation and firm performance. Study Ⅲ hypothesizes that previous mixed empirical findings of relationship between eco-innovation and firm performance may be because the researchers fail to account for the mediating effect of resource acquisition. Building on legitimacy theory, study Ⅲ argues that eco-innovation is positively correlated with resource acquisition and firm performance, and resource acquisition is positively correlated with firm performance. Furthermore, resource acquisition mediates the relationship between eco-innovation and firm performance. Data collected from101small and medium enterprises (SEM) in Zhejiang province of China supports above hypotheses.Study IV examines the effects of eco-innovation in mediating the relationship between SEO and firm performance (i.e. profitability, growth and RA).Using the same sample data of Study Ⅱ, results of study Ⅳ are as followings:Firstly, GEO is positively related to RA,Ⅳ CtEO is positively related to RA and growth, and REO is positively related to profitability and growth. Secondly, eco-innovation is positively correlated with RA, profitability and growth. Furthermore, both EMI and ETI is positively correlated with RA, profitability and growth, ESI is only positively associated with growth. Thirdly, eco-innovation is a partial mediator between GEO and RA, CtEO and RA; eco-innovation is a mediator between REO and profitability; and eco-innovation is mediator between CtEO and growth, REO and growth. Furthermore, both EMI and ETI are partial mediators between GEO and RA, and partial mediators between CtEO and growth; EMI is a mediator between REO and both profitability and growth, and ETI is a mediator between REO and growth.This dissertation makes significant theoretical contribution to eco-innovation research field. Firstly, the dissertation tests independent and interaction effect of different institutional pressures on eco-innovation and emphasizes the important of top managers’recognition of interpretation institutional pressures and eco-innovation strategies decision. Secondly, the dissertation underlines the important role of RA when eco-innovation is to achieve win-win situation in short-term. Thirdly, this dissertation expands Porter hypothesis by considering the different effect of institutional pressures on different eco-innovation dimensions and different firm performance measures.This dissertation also makes significant theoretical contribution to organizational legitimacy theory. Firstly, This dissertation finds normative and cognitive legitimacy pressure are more important to influence organizational behaviors in emerging markets, different dimensions of legitimacy pressure are both synergetic and conflict when influence organizational behavior, and top manager is the concrete organizational agency when translates the institutional pressure and makes decision to response. Secondly, RA is an important mediator mechanism that legitimacy contributes to firm performance. Thirdly, this dissertation emphasis eco-innovation is an important source of legitimacy, because eco-innovation has characteristics both of market (i.e. innovation) and nonmarket (i.e. CSR) behaviors, the former can acquire pragmatic legitimacy and the later can acquire moral legitimacy.