Under the Tip of the Iceberg: Absorptive Capacity, Environmental Strategy, and Competitive Advantage

Abstract

While abundant literature evaluates how the adoption of proactive environmental strategies affects corporate performance, we have little understanding of the organizational mechanisms that link such strategies to competitive advantage. It is therefore unclear how environmental strategies relate to other management strategies that could lead to a competitive advantage. In this paper, we analyze the organizational capabilities that underlie a firm’s ability to generate competitive advantage from the adoption of proactive environmental strategies. We develop and test a model where absorptive capacity facilitates the development of proactive environmental strategies that result in competitive advantage. Results from a survey of 157 German chemical firms strongly support the model.

Keywords: Absorptive Capacity, Environmental Strategy, Competitive Advantage, Chemical Industry, Structural Equation Modeling

JEL Classification: L2, L65, M14