Competition for Limited Critical Resources and the Adoption of Environmentally Sustainable Strategies

35 Pages Posted: 8 Dec 2015

See all articles by Hsiao-Hui Lee

Hsiao-Hui Lee

National Chengchi University (NCCU) - Department of Management Information Systems

Manuel Nunez

University of Connecticut - Department of Operations & Information Management

Jose Cruz

University of Connecticut - Department of Operations & Information Management

Date Written: December 8, 2015

Abstract

We develop a game-theoretical methodology that incorporates competition for limited resources to explicitly model a firm’s valuation and, hence, its decision to either adopt environmentally sustainable strategies (e.g., recycling programs to replace limited natural resources, alternative technologies) or not. Even if switching to environmentally sustainable alternatives proves too expensive for individual firms or resource costs are expected to remain low, we show that competition for resources would still push firms to incur switching costs as they become more environmentally sustainable. Using a sample of firm-level data from the KLD database that includes firms' sustainability policies, we find empirical support that competition for resources is positively correlated with a firm's adoption of environmental strategies. Tests that use the Chinese government's 2010 rare-earth supply suspension as an exogenous shock to competition for limited resources suggest a causal interpretation for our finding.

Suggested Citation

Lee, Hsiao-Hui and Nunez, Manuel and Cruz, Jose, Competition for Limited Critical Resources and the Adoption of Environmentally Sustainable Strategies (December 8, 2015). Available at SSRN: https://ssrn.com/abstract=2700538 or http://dx.doi.org/10.2139/ssrn.2700538

Hsiao-Hui Lee (Contact Author)

National Chengchi University (NCCU) - Department of Management Information Systems ( email )

No. 64, Section 2, Zhǐnán Rd
Wenshan District
Taipei City
Taiwan

Manuel Nunez

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Jose Cruz

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

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