Financial Performance, Production Costs, Transaction Costs, Capabilities and the Adoption of Environmental Sustainability Practices

In the first essay, I examined which types of environmental sustainability practices (ESPs) are associated with varying degrees of financial gain. This paper assessed the economic relationship between two types of ESPs---lower- and higher-order---derived from Hart and Milstein's (2003) sustainability value framework using data as reported by 48 firms on the Dow Jones' Sustainability Indexes (DJSI). My results suggest that both types of ESPs are associated with firms' financial performance. However, the financial benefits associated with firms' higher order ESPs exceed the financial benefits related to firms' lower order ESPs. These findings offer an important initial piece of information to managers about the conditions in which it pays for firms to be green. Moreover, they represent some of the first empirical findings suggesting that the various ESPs specified by Hart and Milstein (2003) are related to firm financials in different ways.;In the second essay, I examined the relationship between production costs, transaction costs and ESP adoption using survey data from 65 U.S. manufacturing facilities. The data contain detailed information about the direct relationship between facilities' adoption of ESPs and the production costs and transaction costs they accrued along the way. To examine this relationship I used a negative binomial regression analysis. The results of my analysis reveal that production and transaction costs are associated with facilities' ESP adoption in that they follow a similar direction and trend. However, anticipated production costs are more closely associated with ESP adoption than higher anticipated transaction costs.;In the third essay, I examined the moderating effect of capabilities on the relationship between perceived economic cost savings and ESP adoption. These relationships were examined using bivariate probit analysis and survey data for 4,013 manufacturing facilities operating in Canada, France, Germany, Hungary, Japan, Norway and the U.S. The results of my analysis indicate that complementary capabilities moderate the relationship between perceived economic costs and facilities' ESP adoption even after controlling for self selection effects related to ESP adoption decisions.;This research informs management strategy by expanding on accepted views about the relationship between green strategy and business performance. It offers evidence about which different types of ESPs are more closely related to those payoffs. By exploring how production costs and transaction costs are related to business' green strategy, this study will offer a more in depth and nuanced view of how anticipated costs are related to business' implementation of ESPs. Additionally, this research offers evidence of the moderating effect of complementary capabilities on perceived economic cost savings, such that facilities may still choose to adopt ESPs even if doing so is costly. Combined, this research offers inferences for why businesses might forgo the adoption of green strategies, even though implementation of these strategies might benefit them financially. (Abstract shortened by UMI.)...