Industrial Marketing Management xxx (xxxx) xxx–xxx

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Industrial Marketing Management

journal homepage: www.elsevier.com/locate/indmarman

Research paper

Examining moderating effect of organizational culture on the relationship

between market pressure and corporate environmental strategy
⁎
Jing Daia, Hing Kai Chana, , Rachel W.Y. Yeeb
a
Nottingham University Business School China, University of Nottingham Ningbo China, Ningbo 315100, China
b
Institute of Textiles and Clothing, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

A R T I C LE I N FO A B S T R A C T

Keywords: This study investigates how market pressures (i.e., customer pressure and competitor pressure) motivate firms to
Corporate environmental proactivity develop a proactive environmental strategy and how such effects are moderated by a flexibility-control or-
Flexibility-control orientation ientation, which is one common representation of organizational culture. The results of a survey including 250
Customer pressure Chinese manufacturing firms suggest that customer and competitor pressures have direct effects on environ-
Competitor pressure
mental strategy proactivity. In addition, flexibility and control orientations play different roles in the relation-
ships between these two market pressures and firms' environmental strategy proactivity. Implications and
suggestions for future research are provided for environmental sustainability.

1. Introduction Yin, & Zhao, 2015).

1.1. Market pressures
Environmental management is one of the key research topics of the
last two decades (Johnson & Schaltegger, 2016). Perhaps this devel-
opment is because many companies are keen on pursuing environ-
mental management to maintain legitimacy and to establish competi-
tiveness. Chinese manufacturing companies, the setting for our study,
are the classic, very relevant example that requires an improvement in
environmental management (Geng, Afshin Mansouri, Aktas, & Yen,
2017). China is an important manufacturing hub globally and thus
often notoriously generates a large portion of environmental impacts
(Bai, Sarkis, & Dou, 2015). For example, China was “ranked 133rd
among 146 countries assessed for environmental sustainability in 2005”
(Liu, 2010); this claim was made based on the Environmental Sus-
tainability Index. This index later evolved into the Environmental
Performance Index. In 2016, China ranked 108 of 180 countries, which
was a decline from 2015 (Hsu et al., 2016). A proper environmental
management system and a proactive environmental strategy are
therefore expected to be put in place to improve the situation. For de-
veloping countries (such as China), government regulations are im-
portant drivers to encourage green innovation and hence firms' per-
formance (Chan, Yee, Dai, & Lim, 2016). Therefore, regulatory pressure
is pivotal in this regard. Thus, market-related pressures are equally
important. For example, an empirical study confirmed that market-
based regulations can reduce carbon dioxide emissions in China (Zhao,
In 2015, the Chinese Premier announced “Made in China 2025” as a
national initiative to transform the manufacturing industry from the
existing low-cost manufacturing towards high-valued manufacturing
activities. “Made in China 2025” includes five objectives, which are:
achieve green development, be innovation-driven, emphasize quality
over quantity, optimize the structure of Chinese industry, and nurture
human talent. The importance of achieving green development has
been highly recognized in China as it is considered a key strategic ob-
jective to achieve in the next two decades. This research is a timely
study as it particularly focuses on green or environmental development.
Another imperative emphasis in “Made in China 2025” is that the future
development in China should follow market-oriented, rather than
government-driven, principles. With such an emphasis, it is predicted
that market-related pressures being exerted on firms to adopt proactive
environmental strategy will dramatically increase.
In this study, we consider two types of market pressure, customer
and competitor pressures. Customer pressure is created by the requests
or requirements of a firm's immediate and direct business customers
(i.e., not end consumers) and is a “relevant antecedent of sustainable
process management” (Gualandris & Kalchschmidt, 2014). Competitor
pressure is the acts of a firm's competitors that lead to either compe-
titive advantages or that somehow disturb the competition in the in-
dustry (e.g., new innovation) (Nugroho, 2015). These acts could
eventually become an expectation from a firm's business customers.
Evidence has shown that firms are increasingly forced by their custo-
mers and competitors to implement environmental management (e.g.,

⁎
Corresponding author.
E-mail addresses: jing.dai@nottingham.edu.cn (J. Dai), hingkai.chan@nottingham.edu.cn (H.K. Chan), rachel.yee@polyu.edu.hk (R.W.Y. Yee).

https://doi.org/10.1016/j.indmarman.2018.05.003
Received 24 June 2017; Received in revised form 4 April 2018; Accepted 13 May 2018
0019-8501/ © 2018 Published by Elsevier Inc.

Please cite this article as: Dai, J., Industrial Marketing Management (2018), https://doi.org/10.1016/j.indmarman.2018.05.003
J. Dai et al.
Dai, Montabon, & Cantor, 2014; Hofer, Cantor, & Dai, 2012; Zhu, Geng,
Sarkis, & Lai, 2011). Nevertheless, the relative impact of market-related
pressures on environmental management strategy remains largely un-
explored. This area is one to which this study contributes. To improve
the robustness of this study, we examine the role of market pressure on
the corporate environmental proactivity after controlling the environ-
mental regulatory pressure.
1.2. Flexibility-control orientation
Organizational culture is a unique set of shared characteristics, in-
cluding assumptions, beliefs, norms, and ideas, that reflect an organi-
zation's goals and practices (Khazanchi, Lewis, & Boyer, 2007; Liu, Ke,
Wei, Gu, & Chen, 2010). Thus, there are many models or approaches to
represent or measure organizational culture because it is a broad topic.
Section 2 will review some of these common models. In other words,
there is no universal model that can be applied to “measure” organi-
zational culture. Nevertheless, there is a need to select a suitable one in
the context of this study. In accordance with the recommendation from
Liu et al. (2010), we adopt a flexibility-control orientation as a frame-
work of organizational culture in the Chinese context. It is generally
believed that a firm's strategy adoption highly depends on its organi-
zational culture (Wong, Ng, & Shahidi, 2013). The underlying rationale
is that, when considering strategy adoption, different firms interpret
pressures by various means based on the unique set of their own or-
ganizational characteristics; subsequently, they would act and respond
differently subject to market pressures (Deshpandé, Farley, & Webster,
1993; Zammuto & O'Connor, 1992). Hence, it is interesting to explore
the interaction of organizational culture (in terms of the flexibility-
control orientation in this study) and market pressures on environ-
mental management strategy adoption. However, to the best of our
knowledge, no research to date has empirically examined the interac-
tion of market pressures and flexibility-control orientation on such a
relationship. Such a void leaves a significant gap between theoretical
and empirical research. This area is the second one where this study
intends to fill the gap.
This research examines the impacts of market-related pressures,
customer pressure and competitor pressure, on corporate environ-
mental proactivity. Based on the general belief that a firm's strategy
adoption highly depends on its organizational culture (Wong et al.,
2013), this study considers that the market-related pressures and the
flexibility-control orientation, which is one commonly used framework
of organizational culture, may work together and interact with each
other to affect the corporate environmental strategy. Thus, this research
also investigates the moderating effects of flexibility and control or-
ientations on the relationship of market-related pressures and corporate
environmental proactivity. Data were collected from manufacturing
companies in China to test the hypothesized relationships.
The remainder of this paper is organized as follows. Section 2 pre-
sents a theoretical lens and the development of hypotheses of our re-
search model. Section 3 describes the methodology conducted in this
research. Section 4 concludes this paper by discussing the implications
of the results on environmental management and sustainability.
2. Theoretical background and hypotheses development
2.1. Corporate environmental strategy
The impact of environmental regulation on firms' environmental
management has been widely discussed in the literature (e.g., Chan
et al., 2016; Zhu et al., 2011; Zhu & Sarkis, 2007). Institutional theory is
often employed to understand phenomena related to environmental
management (e.g., Fowler & Hope, 2007; Hofer et al., 2012). This
theory assumes that the economic, political, and social environments
that a firm confronts affect the decision, adoption and implementation
of its strategies (North, 1996). Based on this assumption and in the
2
Industrial Marketing Management xxx (xxxx) xxx–xxx
context of environmental management, the change of regulations will
influence firms' response towards environmental strategies. Institu-
tional theory also advocates the concept of mimetic isomorphism. In the
context of environmental management, the environmental performance
achieved by competitor firms that conform to environmental regulation
often exerts peer pressure on firms in the market. This kind of regula-
tion pressure drives firms to mimic their competitor firms to implement
environmental activities. Thus, institutional theory suggests that firms
conform to environmental regulation to achieve legitimacy, then firms
in the market become isomorphic.
However, we also observe that companies can choose different
strategies based on the managerial perceptions of environmental risks
and market opportunities. Researchers have classified corporate en-
vironmental strategy along a continuum that ranges from reactive en-
vironmental strategy to proactive environmental strategy (Aragón-
Correa & Sharma, 2003; González-Benito & González-Benito, 2005). At
one end of the spectrum, companies with a reactive environmental
strategy only implement the minimal compulsory changes to meet
written regulations and take a defensive posture to control the en-
vironmental protection investment. At the other end of the spectrum,
organizations with a proactive environmental strategy would extend
beyond environmental regulation requirements by voluntarily taking
measures to reduce their impact on the natural environment and re-
cognize the possible competitive advantage associated with the in-
vestment in environmental management. International regulations are
non-voluntary if companies have businesses in global regions covered
by such regulations. Zhu, Sarkis, and Lai (2017) discussed that, through
international regulations, which are non-voluntary for organizations
operating in China, those companies covered by the regulation can
affect those Chinese companies that they intend to do business with.
This finding demonstrates that a proactive approach towards environ-
mental strategy is highly required for Chinese companies with a global
perspective. In sum, we realize that regulation is a common basis for a
firm's environmental strategy; however, firms could make different
strategic choices towards environmental management. Thus, it is im-
portant for us to investigate which factors would drive firms to im-
plement a proactive environmental strategy which is beyond regulation
pressures.
2.2. Theoretical background
We now present the theoretical background for our focus model. To
examine how market pressures and a flexibility-control orientation drive
a firm to implement a proactive environmental strategy, our research
builds on insights from the stakeholder theory, the Schumpeterian view
of competition, and the organizational culture literature. In recent
years, stakeholder theory (Freeman, 1984) has emerged as a powerful
explanation to explain organizational decision-making and outcomes.
As posited by the stakeholder theory, a customer is a major group
whose pressure results in significant motivation for companies to im-
plement a proactive environmental strategy (Buysse & Verbeke, 2003;
Sarkis, Gonzalez-Torre, & Adenso-Diaz, 2010).
Our study also integrates the Schumpeterian view of competition as
an important theoretical lens. The Schumpeterian view has been pre-
viously adopted to explain how and why firms engage in competitive
moves and counter moves (Young, Smith, & Grimm, 1996). The rivals'
competitive actions trigger a focal firm's competitive responses
(Schumpeter, 1934, 1942). Although the Schumpeterian view of com-
petition is appropriate for explaining a firm's engagement with en-
vironmental management, our review of the literature indicates that
this view has garnered scant focus on in the environmental related lo-
gistics, operations, and supply chain management (LOSCM) literature
with few exceptions (Hofer et al., 2012; Dai et al., 2014, 2015). These
limited studies are restricted to non-Chinese firms. Combining stake-
holder theory with customer focus and the Schumpeterian view of
competition, we provide a deeper understanding of the market-related
J. Dai et al.
environmental pressures posed on the firms in China.
Our study also utilizes the organizational culture literature, speci-
fically the competing values framework. An organization's culture is
built on shared values and ideas, which is a reflection of the organi-
zational goals and practices (Khazanchi et al., 2007; Liu et al., 2010).
Culture is a pervasive entity that influences the manner in which a firm
operates by countless means. The organizational culture literature has
noted that culture is a key factor for strategy consideration (Khazanchi
et al., 2007). Culture affects how a firm responds to external events and
makes strategic choices (Denison & Mishra, 1995; Deshpandé et al.,
1993; Zammuto & O'Connor, 1992). Based on this brief, organizational
culture is considered helpful to further explain the relationships of
customer pressure and competitor pressure on environmental strategy.
Thus, we argue that the effects of market pressures from the customer
and competitor on a proactive environmental strategy would be mod-
erated by organizational culture.
Although organizational culture is an important topic and has been
studied for a long time, there is a lack of a comprehensive framework
for defining and measuring organizational cultures (Detert, Schroeder,
& Mauriel, 2000), or there is no clear consensus on how organizational
culture can be defined (Jones, Jimmieson, & Griffiths, 2005). There are
many alternative approaches to “model” organizational culture. For
example, Flores, Zheng, Rau, and Thomas (2012) employed four di-
mensions, participative decision making, openness, learning orienta-
tion, and transformational leadership, to measure organizational cul-
ture to understand the effect of organizational culture on organizational
learning. Building on the well-known dimensions of national culture,
Hofstede, Neuijen, Ohayv, and Sanders (1990) identified six dimensions
of practices in relation to organizational culture, which are: (i) Process-
Oriented vs. Results-Oriented; (ii) Employee-Oriented vs. Job-Oriented;
(iii) Parochial vs. Professional; (iv) Open System vs. Closed System; (vi)
Loose Control vs. Tight Control; and (vi) Pragmatic vs. Normative.
Organizational culture is also considered a variable in certain mar-
keting literature. The early work of Harris and Ogbonna (1999) ad-
vocates market-oriented organizational culture. Certain researchers
utilized four types of culture, adhocracy, market, bureaucracy, and
clan, to study the effect of organizational culture on product market
strategy (e.g., Yarbrough, Morgan, & Vorhies, 2011) and a firm's pro-
duct capability provision to customers (e.g., Lukas, Whitwell, & Heide,
2013). These types of culture originated from the Competing Values
Model (CVM) proposed by Quinn and Rohrbaugh (1983) that will be
discussed later.
Despite the diversity of its definition, it is commonly believed that
organizational culture links to organizational performance tightly and
can generate sustainable competitive advantage (Klimas, 2016;
Ogbonna & Harris, 2002). The organizational culture literature has
provided useful insight into the dimensions and variations of culture
within the firm. As noted above, scholars have proposed several alter-
native means to categorize organizational culture, such as a relation-
and transaction-oriented culture (e.g., McAfee, Glassman, & Honeycutt,
2002) and a flexibility-control orientation (e.g., Khazanchi et al., 2007;
Liu et al., 2010). In this China-based study, in accordance with Liu et al.
(2010)'s suggestion, we adopted the framework of a flexibility-control
orientation in the CVM (Quinn & Rohrbaugh, 1983). The flex-
ibility–control orientation emphasizes independent desire with a spe-
cific focus on change or stability. A flexibility orientation reflects flex-
ibility and spontaneity, whereas a control orientation reflects stability,
control, and order.
It is appropriate to use CVM to study organizational culture for
research conducted in China, such as this study. An important as-
sumption underlying the CVM framework is that an organization is
likely to exhibit a combination of different cultural orientations, al-
though one type may be more dominant than the others. Chinese
manufacturing companies are in an evolutionary stage of their business
development. As such, thee companies simultaneously embrace com-
peting and conflicting values to cope with a highly volatile environment
3
Industrial Marketing Management xxx (xxxx) xxx–xxx
(Ralston, Terpstra-Tong, Terpstra, Wang, & Egri, 2006). In such a cir-
cumstance, various cultural orientations may simultaneously exist in
the firm. Therefore, a flexibility-control orientation is particularly re-
levant to studying organizational culture in the context of developing
economies with great evolutionary dynamics (Liu et al., 2010).
Our theoretical framework is based on the proposition that market
green pressures from the customer and the competitor affect the cor-
porate environmental strategy, and the flexibility-control orientation
moderated these relationships. This framework is particularly novel, as
the use of the Schumpeterian view of competition and organizational
culture in the environmental-related LOSCM literature is extremely
scarce. Exploring the moderating effect of a flexibility-control orienta-
tion is insightful and provides more implications on environmental
sustainability.
2.3. Market pressures on environmental strategy
The first important relationship that we examine in our model is the
effect of environmental pressure from the customer on a proactive en-
vironmental strategy development. Stakeholder pressure is frequently
proposed as an imperative external driver of environmental manage-
ment implementation (e.g., Dai, Cantor, & Montabon, 2015; Delmas,
2001; Delmas & Toffel, 2008; Sarkis et al., 2010). Since resource in-
terdependence is a foundation of stakeholder theory (Pfeffer & Salancik,
1978), and resource interdependence exists between the focal firm and
its customer, researchers have noted that a customer can influence an
organization's decision-making using various strategies (Frooman,
1999). Indeed, companies understand the importance of responding to
customer pressure (Freeman, 1984) to help improve their competitive
posture. Given that the customer is one of the key stakeholder groups,
the customer, the owner of the power source, can decide whether, when
and how to use its power to influence the focal firm. The power and
urgency of customers also explain why customer pressure has been
identified repeatedly as an important driver for implementing en-
vironmental management (Carter & Carter, 1998; Carter & Dresner,
2001; Carter & Jennings, 2004; Lee & Klassen, 2008; Zhu & Sarkis,
2004). Thus, we propose the following:
Hypothesis 1. A firm's perceived customer pressures towards
environmental management are positively related to its proactive
environmental strategy.
The second important relationship in our model is the effect of
environmental pressure from competitors on proactive environmental
strategy development. We utilize the Schumpeterian view of competi-
tion to examine how firms compete in the environmental management
domain. A company's market orientation includes continuous and close
observation of its competitors' activities and strategies, which are cen-
tral elements of the market environment (Narver & Slater, 1990). Once
a firm observes that its key competitor has obtained benefits or success
from implementing environmental management, the firm would follow
its competitor's practice and react accordingly. This occurrence is
common because successful cases are widely reported; hence, they
become the target for reaction (Grimm, Lee, & Smith, 2005). Recent
empirical research in the US has also examined the extent to which
focal firms implement environmental management in response to their
competitors' environmental management efforts (e.g., Hofer et al.,
2012; Dai et al., 2014, 2015).
The above perspective can be illustrated by the development of the
International Standard such as the ISO certification system (ISO 9000
and later ISO 14000 for environmental management). For suppliers,
ISO 14000 is not only an approach for them to accord confidence to
their customers but also a guideline for them to improve firm perfor-
mance. King, Lenox, and Terlaak (2005) found that, if suppliers are
located in foreign countries (such as China), there is a tendency for the
suppliers to want to be accredited by ISO 14000. Therefore, suppliers
are likely to establish the foundation of an environmental management
J. Dai et al.
system, which would improve their environmental and firm perfor-
mance (King et al., 2005; Melnyk, Sroufe, & Calantone, 2003). In ad-
dition to the influence on suppliers, ISO 14000 makes an impact on
exerting pressure among competitors in the market. When a firm that is
not yet certified with an ISO 14000 certificate identifies that its major
competitor has gained benefits from investment in ISO 14000 certifi-
cation, the firm is likely to follow its competitor's environmental
practice to attain ISO 14000 certification. The underlying belief is that
the firm intends to acquire the benefits that its competitor has reaped
from ISO 14000 certification. Thus, we propose the following:
Hypothesis 2. A firm's perceived competitor pressures towards
environmental management are positively related to its proactive
environmental strategy.
2.4. Moderation role of flexibility-control orientation
Flexibility orientation and control orientation facilitate the under-
standing of the appearance of conflicting or different organization
cultures in firms. The flexibility versus control orientation is concerned
with a firm's structure from an emphasis on flexibility to an emphasis on
stability. We expect that flexibility orientation and control orientation
have differential effects on the relationship between market pressure
and corporate environmental proactivity.
Flexibility orientation emphasizes change, creativity, risk taking,
and spontaneity (Khazanchi et al., 2007; Liu et al., 2010; McDermott &
Stock, 1999). Accordingly, highly flexible-oriented firms are unlikely to
adopt and follow one practice over time when implementing environ-
mental management practices. Instead, the firms tend to develop a
unique practice that can fulfil individual customers' expectation in re-
sponse to market pressures. Customer pressures are induced by het-
erogeneous needs and expectations across individual customers for
environmental management practice. Hence, companies are expected to
utilize various practices to suit diverse needs of customers. In com-
parison with not-so-flexible companies, those companies with a high
level of flexibility orientation have the highest tendency to customize a
unique practice that is suitable to a particular customer. Therefore,
flexibility orientation may weaken the effect of customer pressure on
environmental management to corporate environmental proactivity.
Hypothesis 3a. A firm's flexibility orientation negatively moderates the
relationship of perceived customer pressure towards environmental
management on proactive environmental strategy; the stronger the
firm's flexibility orientation, the weaker the relationship.
Pressures generated by competitors imply that firms find it rela-
tively difficult to outperform their competitors or gain first-mover
competitive advantage when managing environmental activities. This
finding leads to difficulties in the firms differentiating themselves in the
market. Comparing firms with a low level of flexibility orientation,
those firms with a high level of flexibility orientation are unlikely to
generate favourable response towards competitor pressures they per-
ceive in the market as they prefer unique practices that can differentiate
them from their competitors in the market (Liu et al., 2010). This
finding limits the effect of competitive pressure on corporate environ-
mental proactivity. Thus, we posit that an organization's flexibility or-
ientation may weaken the influence of competitor pressure on en-
vironmental management to corporate environmental proactivity.
Hypothesis 3b. A firm's flexibility orientation negatively moderates the
relationship of perceived competitor pressure towards environmental
management on proactive environmental strategy; the stronger the
firm's flexibility orientation, the weaker the relationship.
Given the emphasis on order, stability, predictability and efficiency
in control orientation (Khazanchi et al., 2007; Liu et al., 2010;
McDermott & Stock, 1999), highly control-oriented companies are
likely to conform to their own practice to cope with customer pressures
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Industrial Marketing Management xxx (xxxx) xxx–xxx
to maintain their status of stability. Compared with a low level of
control orientation, when highly control-oriented companies perceive
customer pressure, they are more prone to conform to operations re-
quired for environmental management. Therefore, it is suggested that
control orientation may strengthen the effect of customer pressure on
environmental management to corporate environmental proactivity.
We argue the following:
Hypothesis 4a. A firm's control orientation positively moderates the
relationship of perceived customer pressure towards environmental
management on proactive environmental strategy; the stronger the
control orientation, the stronger the relationship.
Control-oriented firms are likely to conform to their practice by
following their competitors because they focus on the stability and
predictability embedded in control orientation. Competitor pressure
acts as a signal that conveys information about environmental activities
implemented in the market to market participants. In such a situation,
compared to firms with a low level of flexibility orientation, those firms
with a high degree of control orientation that perceive this kind of
signal are more prone to follow the trend of competitor actions in the
market. As such, these firms are likely to be proactive in the im-
plementation of environmental strategy upon the competitor actions in
the market. Hence, it is considered that an organization's control or-
ientation may strengthen the influence of competitor pressure of en-
vironmental management on corporate environmental proactivity. We
argue the following:
Hypothesis 4b. A firm's control orientation positively moderates the
relationship of perceived competitor pressure towards environmental
management on proactive environmental strategy; the stronger the
control orientation, the stronger the relationship.
The above completes the theoretical development of the hypotheses
and hence the research model, which is depicted in Fig. 1.
3. Methodology
3.1. Survey development and sample
To test our research questions, we developed a survey instrument in
accordance with the procedures and guidelines recommended by
Churchill (1979), Gerbing and Anderson (1988), and Dillman (2000).
The design process for the questionnaire consisted of two stages. In the
first stage, we conducted an extensive literature review, which assists
with identifying the constructs in the model. We then directly adopted
or slightly modified the items associated with each of the constructs. As
our questionnaires were administered in China, we had two scholars
translate our initial English questionnaire into Chinese. The Chinese
version was then back-translated into English by two other scholars.
The two English versions were checked for discrepancies to ensure
consistency. We ultimately used the Chinese questionnaire. In the
second stage, we had three academics and two PhD students with re-
levant working experience in China review the draft questionnaire and
identify any awkward or inapplicable items. Based on these individuals'
feedback, we made further revisions and refinements to ensure that the
questionnaire would be highly understandable and relevant to practices
in China.
An internet survey was administered by a consulting company based
in China and targeted at manufacturing industries located in China. The
questionnaires were e-mailed to the operations manager or equivalent
in each manufacturing firm together with a cover letter that explained
the purpose of the survey and that provided an assurance of con-
fidentiality. We sent out 1042 invitations via email. A total of 250
usable responses were received, representing a response rate of ap-
proximately 24%. A majority of the respondents held managerial titles
(81%) and worked for their respective firms for at least five years
(60%). The presented statistics (Table 1) suggest that the respondents
J. Dai et al. Industrial Marketing Management xxx (xxxx) xxx–xxx

Fig. 1. The research model.

Table 1 agreement on each of the statements (1 = strongly disagree;

Sample demographic (n = 250). 7 = strongly agree). The items for the Flexibility-control orientation
N Percentage
came from Khazanchi et al. (2007) and Liu et al. (2010). The re-
spondents are requested to answer the questions like “To what extent
Top 3 Industry does your firm value empowerment? (1= low emphasis; 7=high em-
Electrical and Electronic industry 68 27% phasis)”. The items for the awareness of environmental regulations/
Manufacturing – consumer products 50 21%
policies are derived from Zhu et al. (2011). Respondents were requested
Manufacturing – high technology 48 19%
Subtotal 166 67% to rate the level of perceived pressure of each of the regulations/policies
Others 84 33% using a seven-point response format (1 = very low; 7 = very extensive).
Respondents
Gender
Male 140 56% 3.3. Exploratory factor analysis results
Female 110 44%
Age Principal component analysis with VARIMAX rotation was em-
20–30 75 30% ployed to identify the key dimensions for green pressures and organi-
31–40 142 57%
41–40 23 9%
zational culture.
51 or more 10 4% The results of factor analysis for these dimensions are indicated in
Position Tables 2 and 3. According to Hair, Black, Babin, and Anderson (2010),
Top management 40 16% when factor loadings are 0.50 or greater, they are considered practi-
Middle management 83 33%
cally significant. The larger the absolute size of the factor loading, the
Supervisory Manager 80 32%
Professional 47 19% more important the loading is in interpreting the factor matrix. In
Working Experience (years) Table 2, the exploratory factor analysis yielded a three-factor solution
<5 100 40% on green pressures, which explained 70.11% of the variance. In Table 3,
5–10 91 37% the exploratory factor analysis yielded a two-factor solution on orga-
11–20 43 17%
21–30 13 5%
nizational culture, which explained 73.93% of the variance.
> 31 3 1%
3.4. Measurement instrument validation

are qualified to complete the questionnaires on behalf of their firms.
In addition, we evaluated survey nonresponse bias by comparing
early and late responses across firm demographic variables (Armstrong
& Overton, 1977; Lambert & Harrington, 1990). Our t-test results show
that there are no statistically significant differences between late and
early respondents in regard to demographic variables.
3.2. Constructs in the model
The variables used in this study are shown in Appendix A. The de-
pendant variable, i.e., firm's environmental strategy, is adapted from
Bowen, Cousins, Lamming, and Faruk (2001). The two key independent
variables, perceived environmental management pressure from custo-
mers and competitors, are developed based on Liu et al. (2010) and Zhu
and Sarkis (2007). The respondents are requested to indicate level of
We now examine the reliability and validity of our constructs.
Convergent validity exists if a group of indicators are measuring one
common factor. Composite reliability and average variance extracted
were calculated using the procedures suggested by Fornell and Larcker
(1981). Composite reliability (CR) for each construct is at least 0.860,
and average variance extracted is at least 0.651. The individual item
loading varied from 0.764 to 0.906, and Cronbach's alpha values of all
factors are well above 0.70. Tables 4 and 5 provide all these values and
suggest sufficient convergent validity and reliability.
Furthermore, we tested discriminant validity by comparing the re-
lationship between the shared variances among constructs and the va-
lues of AVEs as Hair et al. (2010) suggested. As shown in Table 5, none
of the squares of correlations between constructs was higher than the
value of the related AVE, which supported the discriminant validity.
Additionally, the overall measurement model (χ2 = 653.801,

5
J. Dai et al. Industrial Marketing Management xxx (xxxx) xxx–xxx

Table 2
Exploratory factor analysis of green pressures.
Survey items Factors

1 2 3

National environmental regulations (such as waste emission and cleaner production) 0.692 0.275 0.245
National resource saving and conservation regulations 0.801 0.102 0.212
Regional environmental regulations (such as waste emissions and cleaner production) 0.812 0.179 0.121
Regional resource saving and conservation regulations 0.836 −0.012 0.139
Developed countries' environmental regulations 0.727 0.366 −0.059
Products potentially conflict with laws (such as circular economy, EPR, and EHS) 0.743 0.305 0.139
Our main customers believe that we should implement environmental management. 0.310 0.577 0.360
Environmental management has been widely implemented by our customers. 0.223 0.763 0.206
We may not retain our important customers without environmental management 0.215 0.846 0.268
Environmental management has been widely implemented by our competitors. 0.150 0.555 0.636
Our main competitors that have implemented environmental management benefited greatly. 0.202 0.561 0.604
Our main competitors that have implemented environmental management are perceived favourably by customers. 0.154 0.250 0.817
Our main competitors that have implemented environmental management are more competitive. 0.177 136 0.850

Notes: Extraction method – Principal Component Analysis.

Rotation method – Varimax with Kaiser normalization.
Rotation converged in 4 iterations.

Table 3 Dof = 284, p = .00, CFI = 0.918, TLI = 0.906, and RMSEA = 0.072)
Exploratory factor analysis of organizational culture. provides a good fit to the data.
Survey items Factors As shown in Table 5, one inter-construct correlation was higher than
the benchmark of 0.70. We conducted a multicollinearity test. The
1 2 commonly accepted rule of thumb to judge the existence of multi-
collinearity is that Variance Inflation Factors (VIFs) are > 10 or that the
Empowerment 0.220 0.860
Growth 0.418 0.709
tolerance value is < 0.10 (Kutner, Neter, Nachtsheim, & Wasserman,
Change 0.518 0.686 2004). The results showed that the highest VIF was 3.189, and the
Creativity 0.580 0.635 lowest tolerance value was 1.461. Thus, multicollinearity did not ap-
Flexibility 0.405 0.752 pear to be a significant problem in our dataset.
Stability 0.788 0.315
Efficiency 0.824 0.344
Predictability 0.792 0.337
3.5. Endogeneity
Control ,791 0.307

Notes: Extraction method – Principal Component Analysis. Endogeneity offers a variety of threats to the findings in empirical
Rotation method – Varimax with Kaiser normalization. studies by questioning the sources of the variance of exogenous vari-
Rotation converged in 3 iterations. ables (Guide & Ketokivi, 2015). While concerns over endogeneity can
likely never be entirely eliminated from an empirical analysis (Ketokivi
Table 4 & Schroeder, 2004; Murray, 2006), this study did carefully address
Convergent validity and reliability. these concerns from the theory and statistical analysis perspectives.
Construct Standardized Cronbach's Composite
Simultaneity (reverse causality) was addressed theoretically using lit-
loading Alpha reliability erature and logic supporting the notion that external contexts (en-
vironmental regulatory and market pressures) can shape the embedded
1. Awareness of 0.782 0.892 0.918 firms' strategy but not the opposite (Scott, 2001). Next, Common
environmental 0.826
regulations/policies 0.838
Method Bias (CMB) can threaten empirical findings when measures for
0.807 independent and dependent variables are collected from the same
0.774 rating source (Antonakis, Bendahan, Jacquart, & Lalive, 2010). We
0.811 performed Harman's single factor test (χ2 = 1693.167, Dof = 299,
2. Customer Environment 0.836 0.755 0.860
p = .00, CFI = 0.692, TLI = 0.665 and RMSEA = 0.137). The Harman's
Pressure 0.827
0.795 single factor test results are considerably worse than those of the
3. Competitor 0.821 0.874 0.914 measurement model (χ2 = 653.801, Dof = 284, p = .00, CFI = 0.918,
Environment Pressure 0.868 TLI = 0.906, and RMSEA = 0.072). Additionally, as suggested by
0.874 Lindell and Whitney (2001), we also employ the lowest bi-variate
0.844
4. Flexibility Orientation 0.849 0.898 0.929
correlation among the manifest variables as the marker variable to
0.886 check for the impact of method variance. The adjusted correlation
0.887 matrix was computed and was tested with the significance of the ad-
0.880 justed correlations. It was found that, after adjustment, all correlations
5. Control Orientation 0.764 0.888 0.918
remain significant. Thus, we are confident in concluding that common
0.808
0.874 method bias is not a serious problem in this study.
0.879
0.828
6. Proactive 0.845 0.873 0.913 3.6. Hypothesis testing
Environmental 0.857
Strategy 0.906 We used hierarchical regression analysis (HRA) and examined two
0.797
models separately (Kutner et al., 2004). HRA is considered a more
appropriate method in this study because of the reasons below:

6
J. Dai et al. Industrial Marketing Management xxx (xxxx) xxx–xxx

Table 5
Means, standard deviations and discriminant validity test.
Mean Std. 1 2 3 4 5 6

1. Awareness of Environmental Regulations/Policies 4.405 1.102 0.651 0.259 0.229 0.237 0.171 0.244
2. Customer Environment Pressure 4.456 1.175 0.509a 0.672 0.581 0.352 0.286 0.372
3. Competitor Environment Pressure 4.611 1.185 0.479a 0.762a 0.726 0.434 0.318 0.434
4. Flexibility Orientation 4.682 1.173 0.487a 0.593a 0.659a 0.767 0.383 0.472
5. Control Orientation 4.687 1.209 0.414a 0.535a 0.564a 0.627a 0.692 0.421
6. Proactive Environmental Strategy 4.493 1.164 0.494a 0.610a 0.659a 0.687a 0.649a 0.726

Note: Diagonal entries (in bold) are average variances extracted; entries below the diagonal are correlations, and the entries above the diagonal represent the squared
correlations.
a
Significant at the 0.01 level.

- HRA allows researchers to enter blocks of variables into the model
in a purposeful sequence leading to an unequivocal partitioning of
the variance in the dependent variable (Cohen, Cohen, West, &
Aiken, 2003). That is, HRA can analyse the effects (direct and in-
teraction) step by step. This method is used widely in management
literature.
- The Multi-group Structural Equation Modelling (SEM) method is an
alternative, although it is seldom used in research. One main reason
is because multi-group SEM is suitable to test moderation by a
classification variable (e.g., male/female; country-of-origin); how-
ever, the moderators studied in this paper do not belong to that type.
Moreover, in our data of moderators, two ‘unclear’ peaks and only
one peak exist; thus, it further shows us that the multigroup SEM
method is improper in our samples (Hair et al., p773).
Conversely, the results revealed that the negative moderating effect
of the flexibility orientation on the relationship between competitor
pressures and firms' proactive environmental strategy was significant
(b = −0.366, p < .01), which provided support for Hypothesis 3b.
The results indicated no significant moderating effect of the flexibility
orientation on the relationship between customer pressures and firms'
proactive environmental strategy. As such, Hypothesis 3a was not
supported. The results also showed that the positive moderating effects
of a control orientation on the relationship between competitor pres-
sures and firms' proactive environmental strategy (b = 0.247, p < .05)
was significant and thus supported Hypothesis 4b. In addition, the re-
sults indicated no significant moderating effect of a control orientation
on the relationship between customer pressures and firms' proactive
environmental strategy. As such, Hypothesis 4a was not supported.

As suggested by Aiken and West (1991), we mean-centred the in- 4. Discussion and implications
dependent variables and moderator variables to minimize the possibi-
lity for multicollinearity although it was not a serious concern in this The purpose of this article is to examine the extent to which a
study, as shown previously. The first model (Model 1) included en- Chinese manufacturing firm develops a proactive environmental
vironmental regulation and market pressures variables. The explained strategy as a means to respond to green pressures from its key customer
variance of Model 1 was significant; R2 was 0.489 (F change = 78.550, and competitor. We theorize that a firm's strategic response to the
p < .01). The second model (Model 2) was a full model with all vari- perceived market pressures of environmental management is greatly
ables and hypothesized interaction effects as independent variables. dependent upon its flexibility-control orientation. Thus, we build upon
The explained variance of Model 2 was significant with an R2 of 0.605 and extend a burgeoning amount of research in the area of environ-
(F change = 11.748, p < .01). mental management and organizational culture. The study of multiple
The regression analysis results are shown in Table 6. For the hy- theoretical perspectives furthers the understanding of how theories
potheses on the effects of pressures, we found support for Hypotheses 1 from the environmental management, strategic management and or-
and 2, which proposed that customer (b = 0.189, p < .05) and com- ganizational culture literature can be employed and used together to
petitor pressures (b = 0.421, p < .01) were positively related to firms' illustrate how the firm responds to competitive green pressures. Given
proactive environmental strategy, respectively (Model 1). that there are increasing environmental concerns in China, our research
not only studies a timely topic but also has important managerial and
public policy implications for Chinese companies.
Table 6
Results for hierarchical regression analysis.
4.1. Theoretical contribution
Model 1 Model 2 Hypotheses
(b) (b)
The Schumpeterian view of competition and stakeholder theory are
Awareness of environmental regulations / 0.196b 0.121a leveraged in this study to recognize that Chinese firms perceive not only
policies customer demand for environmental management but also the pressure
Customer Environment Pressure (CUS) 0.189a 0.108 H1 Supported
from rivals that derive sources of competitive advantage from the im-
Competitor Environment Pressure (COM) 0.421b 0.280b H2 Supported
Flexibility Orientation (FO) 0.265b plementation of green practices. The findings in this study reveal that
Control Orientation (CO) 0.198b both green pressures from key customers and competitors, after con-
CUS × FO 0.170 H3a trolling environmental regulation, have significant and direct positive
Not Supported effects on firms' proactive environmental strategy development, thus
COM × FO −0.366b H3b
providing support for Hypotheses 1 and 2. We offered strong evidence
Supported
CUS × CO −0.160 H4a for the influence of exogenous determinants on a firm's environmental
Not Supported strategy. Thus, a firm's engagement proactively in environmental
COM × CO 0.247a H4b Supported management can be observed to be heavily driven by market pressures.
R Square 0.489 0.605
This finding provides support to the importance of external factors that
Adjusted R Square 0.483 0.590
F change 78.550b 11.748b
can foster environmental behaviour (Zhu & Sarkis, 2004). Moreover,
the Schumpeterian view of competition and stakeholder theory also
a
Significant at the 0.05 level. supplements prior works (e.g., Schoenherr, Modi, Talluri, & Hult, 2014)
b
Significant at the 0.01 level. that used institutional theory to explain how social legitimacy

7
J. Dai et al.
influences managerial decisions within the context of environmental
management.
In this study, we noted that, among the relative effects of market
pressures on corporate environmental proactivity, the significance level
of competitor pressure is higher than customer pressure. Thus, Chinese
manufacturing firms are more likely to develop a proactive environ-
mental strategy when they perceive competitor pressure. One possible
reason to explain this observation is that competitors are “closer” to the
focal firm than to the customer in terms of supply chain “position”. It is
easier for the focal firm to recognize the competitors' actions. In addi-
tion, the focus of the focal firm (manufacturers in this case) is very
likely different from the focus of its customers. Technically, the focal
firm shares a similar mind-set with competitors. Therefore, it is easier
for the focal firm to understand the competitors' actions than the cus-
tomers. Indirectly, the focal firm attempts to avoid a competitive dis-
advantage should the competitors move beyond the status quo. This
finding will also help explain the next observation.
This study also contributes to revealing how organizational culture
(flexibility-control orientation in this study) interacts with market-re-
lated green pressures to influence proactive environmental strategy.
Our results show that flexibility and control orientations have different
levels of moderating effects on the relationships between competitor
pressures and corporate environmental strategy. Hence, this study
elucidates the role of organizational culture in affecting a firm's adop-
tion of environmental strategy. Specifically, the current study provides
a preliminary understanding concerning organizational culture and
environment strategy; in other words, it opens a new avenue for re-
search exploring how the effects of organizational culture may differ in
different green contexts and how it may interact with factors at other
levels.
In particular, our results indicate that flexibility orientation
weakens the relationship between green pressure from a key competitor
to a firm's proactive environmental strategy; however, control or-
ientation strengthens it, thus supporting Hypotheses 3b and 4b. The
findings provide support that a firm with a flexibility orientation prefers
to invest its resources in developing unique practices to differentiate
itself from other players in the field. Specifically, the prevalence and
success of environmental management observed among rivals implies
that it is unlikely for a firm to gain first-mover competitive advantage or
differentiate itself from its competitors via adopting an environmental
strategy. Thus, a firm with a high flexibility orientation does not re-
spond as favourably to competitor green pressures. Conversely, with an
emphasis on order, stability, and predictability, a firm with a control
orientation would regard mimicking the competitor's successful actions
as an opportunity to maintain stability. In particular, when a firm
perceives a high level of competitor pressures for environmental man-
agement, it interprets this as a signal that developing environmental
management is the trend to follow.
Surprisingly, regarding the relationship of green pressure from a key
customer to a firm's proactive environmental strategy, our results pro-
vide no significant moderation effects from a flexibility-control or-
ientation; thus, they do not support H3a and H4a. This result can be
explained by a similar reason regarding H1 and H2. The customer and
the focal firm have different concerns given their supply chain position.
Therefore, the perceived customer pressure is rooted at the focal firm's
value (i.e., organizational culture). Therefore, the flexibility-control
orientation does not have the expected moderating effect. In addition,
most Chinese manufacturers remain contract manufacturers.
Consequently, these manufacturers tend to follow customers rather
than interpreting what the firm itself should do. Therefore, customer
pressure on the proactivity of environment strategy is relatively in-
dependent from the focal firm's organizational culture.
4.2. Managerial implications
Since the samples of this study are derived from Chinese
8
Industrial Marketing Management xxx (xxxx) xxx–xxx
manufacturing firms, the findings of this study offer Chinese practi-
tioners policy guidelines to adopt and implement a proactive environ-
mental strategy. As is known, the manufacturing industry in China
continues to not be rated as a frontrunner. This finding implies that
there is much room for improvement in terms of strategy choice and
sustainable development. The findings of the higher significance level
of the effect of competition pressure on environmental strategy proac-
tivity in our results suggests that firms are more likely to be influenced
by the pressure from a competitor's green actions and success. Thus,
Chinese manufacturers are more desperate to “learn” from their com-
petitors than from their customers. Although currently most manu-
facturers in China continue to follow what the customers instruct them
to do, the Chinese market continues to grow; hence, many opportunities
remain for “imitating” competitors' successful practices. This finding is
also partly related to the fast pace of development in the last few years.
The return from high level environmental management is very un-
certain; thus, following industrial best-practices appears to be a safe
option, given that the regulatory pressure in this study is a control
variable.
As noted in the introduction, “Made in China 2025” promotes a
market-orientation in the next two decades. Our findings echo with this
direction of the development in China. Specifically, the findings urge
Chinese manufacturers to develop an environmental strategy derived
from the market players. The policy makers can remain involved in the
process rather than directly driving the development of environmental
strategy. The policy makers can introduce improvement in the market
competition, make it healthier, and attempt to promote industrial best
practices, such as disseminating such best practices via learned society
(e.g., forums and industrial competitions). The ultimate objective is
indeed to leverage the innovation of Chinese manufacturers until the
manufacturing industry will become one of the key market leaders in
the world.
Additionally, our results show that firms valuing control will react
actively to competitor pressures; however, flexibility-oriented firms are
less affected by competitor pressures. Therefore, practitioners and
government are recommended to be selective on measures when at-
tempting to influence different types of firms to develop a proactive
environmental strategy. Since this study does not target a specific in-
dustry, it is worth clustering the Chinese manufacturing industries in
another study such that the corresponding orientation can be enforced
correctly in different clusters.
While our research has made an important contribution to the lit-
erature, there are several opportunities for future research beyond those
discussed above. First, this study focuses on organizational culture as an
important contingency factor in the environmental strategy develop-
ment. Given the complexity of organization, more contingency factors,
such as leadership style and human capital, are needed for investigation
to further understand how environmental management can be effec-
tively implemented in firms. Second, the model could be extended by
including consumer pressure to investigate the role of consumer pres-
sure on corporate environmental proactivity and the moderation effect
of consumer cultures or characteristics on this relationship. Third, as an
emerging market, the development of environmental management in
China may have an imbalance between large companies and SMEs, or
between foreland and inland regions, or between state-owned, foreign
companies and private owned firms. Thus, further investigations for
differentiating firm size, firm ownership and firm region are needed.
Another differentiation that can be studied is the effect of the types of
customers, e.g., the most stringent customer relative to the others and
the customer market segments. This finding is because a focal firm may
only adopt the environmental practices of the most dominating cus-
tomer or customer segment for all activities and overlook the others.
Fourth, we collected samples from the Chinese manufacturing industry.
The single country or industry limitations point to the need to test
whether other countries or other industries have the same experience. A
comparative analysis may be conducted among data from various
J. Dai et al. Industrial Marketing Management xxx (xxxx) xxx–xxx

countries and industries. Such further work helps to generalize the re-
sults of this study. Finally, another extension of this study is to better
understand the specific reasons why organizational culture in terms of
flexibility-control orientation leads to the reported results in China. To
our knowledge, this study is the first to apply the measures and to test
such relationships in China. In-depth case studies (such as interviews
and focus groups) can be designed to discuss the findings with in-
dustrial practitioners. This situation can provide better managerial
implications, which is the common limitation of many theoretical re-
search studies. Specifically, insights from different types of firms (e.g.,
general firms against value-added firms) will be worth studying and
analysing to better generalize the results.
Acknowledgement
The research is supported by the National Natural Science
Foundation of China (NSFC) project “Exploring green supply chain
management: strategy-structure-capability-performance perspective”
(71602096).

Appendix A. Construct items

Construct Items Sources

1. Awareness of environmental National environmental regulations (such as waste emission and cleaner Zhu et al., 2011.
regulations/policies production)
National resource saving and conservation regulations
Regional environmental regulations (such as waste emissions and cleaner
production)
Regional resource saving and conservation regulations
Developed countries' environmental regulations
Products potentially conflict with laws (such as circular economy, EPR, and EHS)
2. Customer Environment Pressure Our main customers believe that we should implement environmental Liu et al., 2010; Zhu &
management. Sarkis, 2007.
Environmental management has been widely implemented by our customers.
We may not retain our important customers without environmental management
3. Competitor Environment Environmental management has been widely implemented by our competitors. Liu et al., 2010;
Pressure Our main competitors that have implemented environmental management Zhu & Sarkis, 2007.
benefited greatly.
Our main competitors that have implemented environmental management are
perceived favourably by customers.
Our main competitors that have implemented environmental management are
more competitive.
4. Flexibility Orientation Empowerment Khazanchi et al., 2007;
Growth Liu et al., 2010.
Change
Creativity
Flexibility
5. Control Orientation Stability Khazanchi et al., 2007;
Efficiency Liu et al., 2010.
Predictability
Control
6. Corporate Environmental We always attempt to go beyond basic compliance with laws and regulations on Bowen et al., 2001.
Proactivity environmental issues.
Our corporate management gives a high priority to environmental issues.
The top managers in our company give environmental issues a high priority.
We effectively manage the environmental risks that affect our business.

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