Business Strategy and Firm Reorganization: Role of Changing Environmental Standards, Sustainable Business Initiatives, and Global Market Conditions

Abstract

My study is framed against the backdrop of increasingly stringent environmental demands on the pulp and paper industry to reduce water and air pollution, and the changing global market conditions. I first present an observation-based analysis conducted by visiting selected paper mills in Finland, the U.S., Germany and Sweden. Interesting differences and similarities emerge. Some of the observed differences lie in their focus on achieving incremental efficiency gains from better management of production processes, inventories, supply-chain, product distribution, and timing of modernization investments such as Information Technology. In the second part of the paper I present evidence on firms’ productivity paths, the heterogeneity in productivity among relatively similar firms, and selected evidence of firms’ investments in specific areas and how these affected productivity. My findings have implications for organizational behavior and business strategies employed by firms to improve their performance and productivity under changing environmental standards and market conditions.

Keywords: environmental standards, cleaner production, Porter Hypothesis, organizational strategy, incremental innovation, productivity, competitive advantage.

JEL Classification: D21, D24, L10, L20, L60, M11, M21, Q20