THE ROLE OF INDUSTRY AND UNCERTAINTY IN REGULATORY PRESSURE AND ENVIRONMENTAL STRATEGY.

Abstract

The effects of regulatory pressure on environmental strategy have long been investigated in the context of environmental policy and effects of innovation and technological change. However, there is far less understanding of the role of regulatory uncertainty resulting from environmental policy. Furthermore, industry-specific effects are only little understood. Most studies focus on one industry only or analyze companies from multiple industries without explicitly analyzing industry effects. Drawing from the literature on environmental uncertainty, institutional theory, and the resource-based view of the firm, we propose that first, the level of perceived state uncertainty, and second, the impact of regulatory pressure on environmental strategies are industry-specific. We further propose that a high impact from regulatory pressure on environmental strategy is associated with a high level of perceived state uncertainty. We test our hypotheses on a sample of 85 companies affected by the European Emission Trading Scheme. Furthermore, our study shows the usefulness of combining institutional theory with the resource-based view as the two theories complement each other from an internal and external perspective of an organization.

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