Journal of Environmental Management 155 (2015) 184e192

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What drives successful implementation of pollution prevention and cleaner technology strategy? The role of innovative capability Kumar Verma Bhupendra*, Shirish Sangle* National Institute of Industrial Engineering (NITIE), Vihar Lake, Mumbai 400087, India

a r t i c l e i n f o

a b s t r a c t

Article history: Received 3 January 2015 Received in revised form 19 March 2015 Accepted 22 March 2015 Available online 30 March 2015

Firms that are dynamic and prepared to implement environmental strategies have a potential competitive advantage over their industry counterparts. Therefore, it is important to understand, what capabilities are required to implement proactive environmental strategies. The paper discusses the attributes of innovative capability required by firms in order to adopt pollution prevention and cleaner technology strategies. Empirical results show that process and behavioral innovativeness are required by firms to implement a pollution prevention strategy. In addition to process and behavioral innovativeness, firms need a top management with high risk-taking ability as well as market, product, and strategic innovativeness to implement a cleaner technology strategy. The paper proposes some important managerial implications on the basis of the above research findings. © 2015 Elsevier Ltd. All rights reserved.

Keywords: Pollution prevention strategy Cleaner technology strategy Innovative capability Dynamic capability Sustainability strategies Commonality

1. Introduction The resource-based view of firms states that a firm's ability to implement strategies successfully depends on its capacity to create and exploit resources better than competitors. Creating a competitive advantage requires a strategic fit between the firm's unique organizational capabilities and the changing external business circumstances (Andrews, 1971; Chandler, 1962; Penrose, 1959). Sustaining this advantage go beyond just acquisition and generation of tangible and intangible resources that are valuable, rare, and inimitable. Firms must possess the ability to integrate and deploy these resources in a manner derived from causally ambiguity, socially complexity, and inimitability (Amit and Schoemaker, 1993; Barney, 1991; Wernerfelt, 1984). Some researchers (e.g. Hart, 1997) and organizations (e.g. Millennium Ecosystem Assessment, 2005) view natural environment as a constraint to the global economy. Researchers (Christmann, 2000; Hart, 1995; Russo and Fouts, 1997) argued that firms can create a competitive advantage in this nature-constrained economy if they proactively develop the capability to manage the natural resources better than their competitors. But the question arises is that what are those capabilities.

* Corresponding authors. E-mail addresses: [email protected] (K.V. Bhupendra), sangle.shirish@ gmail.com (S. Sangle). http://dx.doi.org/10.1016/j.jenvman.2015.03.032 0301-4797/© 2015 Elsevier Ltd. All rights reserved.

Dynamic capability is defined as the “firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (Teece et al., 1997). Can dynamic capability help firms in implementing environmental strategies to gain a competitive advantage? 2. Research significance and objectives Hart (1995) in his seminal work proposed that while implementing short term strategies based on pollution prevention (P2) and product stewardship, and long term strategy based on sustainable development, it is essential for firms to develop resources like continuous improvement, stakeholder integration, and sustainable vision. These organizational resources are valuable, rare, and inimitable and thus have a potential to create a competitive advantage. These resources in combination with organizational capabilities resulting from are a history of development on a unique path, social intricacy, and compounded experiences enable a firm to implement a proactive strategy in gradual and systematic way. Sharma and Vredenburg (1998) identified capabilities as stakeholder integration, continuous higher-order learning, and continuous innovation in order to implement proactive environmental strategies. It is also suggested that organizational capabilities related with P2 strategy leads to cost advantages only if complementary capabilities of process innovation and execution are

K.V. Bhupendra, S. Sangle / Journal of Environmental Management 155 (2015) 184e192

present (Christmann, 2000). Similarly, the capability of developing and deploying natural environment friendly manufacturing technology can improve firm's performance (Klassen and Whybark, 1999). Most of the existing research on P2 strategy and cleaner technology (CT) implementation involves firms based in developed countries (Aragon-Correa, 1998; Berry and Rondinelli, 1998; Christmann, 2000; Ramus and Steger, 2000; Sharma and Vredenburg, 1998). Aragon-Correa (1998) surveyed firms in Spain and realized that the firms with the most proactive business strategies employed both corrective as well as preventive natural environmental approaches. Berry and Rondinelli (1998) identified elements of successful environmental strategy as support of top management, clearly stated environmental policy, declared and measureable goals, participatory decision making by employee engagement, and stricter monitoring, auditing, reporting and assessment system. Christmann (2000) studied American firms to establish that capabilities related to process innovation and execution are complementary assets that helps in determining environmental performance leading to cost advantages. Ramus and Steger (2000) studied European firms to understand the important environmental policy factors and management support behavior leading to employee's eco-initiatives. Sharma and Vredenburg (1998) found out that Canadian firms having capabilities for stakeholder integration, higher order learning, and continuous innovation were proactive in implementing environmental strategies. Scholars have also analyzed the influence of characteristics of the business environment like uncertainty, complexity, and munificence in moderating the relationship between proactive
nenvironmental strategy and competitive advantages (Arago Correa and Sharma, 2003). Organizational capabilities involved in other proactive environmental strategies like industrial ecology have also been discussed (Sangle, 2010). However, very little attention has been paid to understand the dynamic capability or common characteristics of dynamic capability of firms to implement proactive sustainability strategies. The paper attempts to present detail understanding on essential common characteristics of dynamic capability to implement P2 and CT strategies. Innovative capability has been considered as one of the components or commonalities or common characteristics of dynamic capability and is said to consist of process, behavioral, market, product and strategic innovativeness (Wang and Ahmed, 2007, 2004). The literature suggests that P2 capability can be built in the short term when employee involvement is higher and the firm can continuously improve (Hart, 1995), which is a reflection of its continuous innovative capability (Sharma and Vredenburg, 1998). Similarly, it is also reported that to implement sustainable development in the long term, firms should have the ability to create disruptive innovative technologies that do not exist today (Hart and Milstein, 2003). We analyzed survey data (based on questionnaires) on P2 strategy, CT strategy, and innovative capability of Indian firms from various industry sectors to explore further that which dimensions of innovative capability help firms in implementing both P2 and CT strategies. 3. Linking innovative capability attributes with pollution prevention and cleaner technology strategies 3.1. Innovative capability attributes and pollution prevention strategy Extant literature suggests that innovative capability covers a range of innovative activities such as design and developing new products or services, new methods of production, discovering new markets, exploring new sources of supply and constructing new

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organizational forms (Betz, 1993; Schumpeter, 1934; Weerawardena, 2003). Innovation has been defined as the mechanism by which firms create the new set of products, processes and systems to adapt with evolving markets, technologies, and competition (Daft, 1982; D'Aveni, 1994; Utterback, 1994). Recently, Wang and Ahmed (2004) identified five factors that contribute to a firm's overall innovativeness: product, process, strategic, market, and behavioral innovativeness. Innovations have also been classified on the basis of their degree into radical and incremental (Afuah, 1998; Wan et al., 2005). A radical innovation is generally said to mark a distinct and risky departure from existing practices and competences (Dosi, 1982), whereas an incremental change builds on the existing skill set (Afuah, 1998; Myers and Marquis, 1969). The problems of extensive material consumption, enormous waste, and continuously increasing pollution linked with industrialization present an opportunity to lower cost of product and delink risk of any type with a strategy to enhance pollution prevention and eco-efficiency (DeSimone and Popoff, 1997). Effective P2 requires substantial employee engagement and empowerment along with capabilities in continuous improvement and total quality management (Hart, 1995). P2 strategy defines the transparent and easiest way to increase bottom line for firms hence increasing overall shareholder value. It is evident from literature that firms managed to reduce cost of production and witnessed better profitability due to P2 and waste management strategies with appropriate skills in employee engagement and continuous improvement (Christmann, 2000; Sharma and Vredenburg, 1998). P2 is defined as “the use of materials, processes, or practices that reduce or eliminate the creation of pollutants or wastes at the source” (Freeman et al., 1992). It can be achieved through production processes redesign, input raw materials substitution of raw material, and recycle and reuse of by products from production processes and incremental technological improvements in processes (Hart, 1995; Porter and van der Linde, 1995). Process innovativeness as an attribute of innovative capability is defined as introduction of new production methods, new management approaches, and new technology that can be used to improve production and management processes (Wang and Ahmed, 2004). As this is a comprehensive definition to include all type of process changes-technological as well as non-technological-this has been renamed as ‘Business Process Innovativeness’ (BPI) in this study. The adoption of cleaner production methods as well as technological advancements to enhance eco-efficiency of processes, introduction of new management approaches to overhaul production methods, and efforts to reduce carbon footprint, wastes, emissions and pollutants can be linked to BPI (Christmann, 2000). Firm's willingness to innovate can be considered as the first predictor of the firm's innovative behavior (Montalvo, 2003). Firm's willingness to engage in innovative activities which is proxy to innovative behavior can be explained and predicted in terms of its individual employee, managers and team's attitude towards innovation. The ‘Behavioral Innovativeness’ (BVI) can be present at different levels of organization as individual, teams and management. Willingness to change as a person (Hurt et al., 1977), team's ability to absorb and adapt to new requirements and expectations of organization (Lovelace et al., 2001) and management's willingness, commitment and support to new ways of doing the things across all activities (Rainey, 1999) collectively demonstrates BVI of a firm. Team interaction, knowledge sharing and effective communication among team members have a positive effect on efficiency of process innovations (Brown and Eisenhardt, 1995). BVI, a component of innovative capability, is required to engage organizational members willingly in creating marginal improvements required for P2 (Ramus, 2002).

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A firm equipped with innovative capability traits like BPI and BVI can move in direction to employ best practices to achieve ecoefficiency with the help of motivated employees who are empowered to understand their roles, responsibilities and rewards of their action. On the basis of this understanding, we propose the following hypothesis: Hypothesis 1. Organizations demonstrating behavior and process innovativeness perform significantly better in implementing pollution prevention strategy. 3.2. Innovative capability attributes and cleaner technology strategy CT solutions involve radical innovations that leapfrog standard routines and knowledge (Fussler, 1996; Vergragt and van Grootveld, 1994; Von Weizsacker et al., 1997). A step towards design, development and execution of cleaner technologies may help a firm in developing the traits of sustainable competency required for repositioning and exploitation of future markets. But, at the same time, the risks associated with investments in CT solutions are quiet high than risk mitigation efforts in P2 strategy because success of radical solutions cannot be guaranteed. Also, it may take significantly longer time to receive suitable returns on such risky and relatively higher investments. Firms looking to take advantages in future markets through CT solutions tend to prepare for longer terms and create necessary organizational structure and environment to catalyze radical innovation (Shrivastava and Hart, 1995). Such firms introduce gradual changes in process while simultaneously preparing for a drastic change in the use of technology to develop products that are ecologically justifiable. A breakthrough in product innovation is required to eliminate use of scarce and non-renewable resources as well as wastes and emissions within and outside the organizational boundary to realize unprecedented levels of efficiencies. This requires a paradigm shift from current technology to cleaner technologies. ‘Product Innovativeness’ (PDI) is defined as the “novelty and meaningfulness of new products introduced into the market” (Wang and Ahmed, 2004). Thus, the development of CT or new products can be termed as product innovation (PDI). Technological innovation alone cannot reduce the ecological footprint; it needs to be supported by non-technical changes (Hudson, 2005). This requires a drastic deviation from existing practices and may include the introduction of new management approaches to develop the skill sets needed to exploit future markets through destructive technology development or destructive technology uses. New approaches may help in delivering long-term firm performance supported by regularized stream of new product, service, and processes for effective repositioning (Rush et al., 2007). The introduction of new management approaches and practices fall in the category of BPI. Given that design and development of cleaner technological solution have inherent risks, firms must understand the market forces to compete rigorously so that they can extract suitable rewards of their investments. ‘Market Innovativeness’ (MI) refers to new approaches to explore new markets and exploit existing markets (Ali et al., 1995) and new ways to conduct market research, advertising and promotion (Andrews and Smith, 1996). On the strength of CT and new products, firms will be able to reposition themselves effectively by identifying a new customer base or creating a new market, which is linked to the MI trait of innovative capability. With this trait, firms must be capable to carve out an effective go-to market plan with the help of a robust SWOT (strengtheweaknesseopportunity-threat) analysis. A firm's movement towards exploration of new set of products

and markets is the result of ambitious organizational objectives. The top management's foresight to deviate from regular business and its intent to garner the resources and capability required to reposition in future markets can be regarded as outcomes of a longterm innovative strategy. ‘Strategic Innovativeness’ (SI) is about “a fundamental reconceptualization of what the business is all about that, in turn, leads to a dramatically different way of playing the game in an existing business” (Markides, 1998). Considering, longterm commitment required for CT solution, firms must be prepared for strategic partnership with its value chain partners to deliver suitable basket of products and services to its customers. Firms demonstrating SI shall be in position to simulate future market circumstances and prepare the trajectory of its technologies, products and services. Top management's commitment and their strategic innovativeness percolates down to individuals, teams, management, and processes. The availability of resources and transformed system which rewards innovative behavior develops a willingness to change and strengthen the ability to innovate. Such BVI can foster an organization-wide culture to innovate and prepare for the future positioning of the firm. On the basis of above mentioned linkages between innovative capability attributes and CT strategy, we propose following hypothesis: Hypothesis 2. Organizations demonstrating innovative capability perform significantly better in implementing cleaner technology strategy. 4. Research method 4.1. Measurement instrument Innovative capability was measured on a standard scale derived from literature (Wang and Ahmed, 2004; p. 307). However, the scale lacked items to capture comprehensive aspects of MI (Andrews and Smith, 1996; Ali et al., 1995), BVI (Rainey, 1999), and SI (Markides, 1998). As a result, the scale was updated to include these dimensions and definitions. Consequently, items (5, 8, 10, 11, 12, 13, 15, 16, 17, 18, 19; Table 2) were developed and items (3, 4, 6, 7, 14, and 20) were modified. Measurement scale of P2 strategy was designed in line with the factors identified in the available literature (Berry and Rondinelli, 1998; Christmann, 2000; Freeman et al., 1992; Hart, 1997, 1995; Hart and Milstein, 2003; Ramus and Steger, 2000). Measurement scale of CT strategy was designed with the factors identified in pertaining literature (Aragon-Correa, 1998; Baumgartner and Zielowski, 2007; Berry and Rondinelli, 1998; Bringezu, 2009; Delai and Takahashi, 2013; Hart, 1997, 1995; Hart and Milstein, 2003; Ko et al., 2013; Luken et al., 2008; Luken and Rompaey, 2008; Mont et al., 2014; Montalvo, 2008, 2003; Tsai, 2012; Zhao et al., 2014). The content analysis of measurement scales covered suggestions from 25 numbers of industry professional and subject experts in respective domain. The test of face validity was carried out with 117 respondents during the pilot phase. During pilot phase, a total of 19 variables for P2 strategy (Table 3) and 15 variables for CT strategy (Table 4) were sorted out after factorial analysis. Finalized measurement scales were used to gather data. Respondents were asked to indicate their answers on a Likert scale of seven-points (1strongly disagree to 7-strongly agree). 4.2. Data collection and sampling This research attempts to link attributes of innovative capability

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with P2 and CT strategy. Innovative capability has been considered as one of the commonalities of dynamic capability and the vagueness related to dynamic capability domain has been attributed to the fact that existing research findings provide characteristics of a firm or industry specific processes, and no existing studies generalize the dynamic capabilities across firms and industries (Wang and Ahmed, 2007). Considering that the common characteristics of dynamic capability or commonalities which can be recognized and measured (Eisenhardt and Martin, 2000), an attempt shall be made to measure them across the firms and industries so that it can strengthen the concepts of dynamic capability. Also, various industry sectors are considered to be responsible for deteriorating condition of natural environment and necessary initiative have been taken by firms across the industry sectors to implement pollution prevent and CT strategy. With these views, for data collection, firms were selected from automobile, textile, steel, petroleum and gas, chemicals, telecommunication, fast moving consumer goods (FMCG), cement, and paints industries. The unit of analysis was a ‘manager’ or ‘employee’ of these firms. For data collection, the questionnaires were e-mailed to 1500 managers from over 150 firms in India. The cover letter that was sent along with questionnaires explained the definition and examples of various terms used in questionnaires of P2 and CT along with explanation on attributes of innovative capability to develop common understanding among the respondents. The responses were gathered from 724 (48% of total e-mailed) managers from sixty firms spread across industries. The filled questionnaires complete in all aspects were 689; which are about 45.9% of total e-mailed questionnaires. The responses rate of managers in this activity was quiet higher than the regular response rate of 35.7% reported in literature (Baruch and Holtom, 2008). The effective sample size finally considered was 689. The respondents were mainly male (88%), aged between 32 and 56 years and were the firms' authorized spokesperson on R&D activities, environmental issues, financial matters, production and marketing function. Respondents were experienced industry professionals. About thirteen percentage of them laid claim of having more than 20 years of experience, thirty three percentage possessed more than 15 years of experience and the remaining fifty four percentage had about 8 years of experience. The general description of respondents' designations is presented in Table 1. 4.3. Data analysis techniques Data analyses were carried out in two stages. In first stage, data were analyzed to find out the factors constituting the measurement scales of P2 and CT strategies and innovative capability. The purpose of this stage was to establish the appropriateness of measurement scales. In second stage, data were analyzed to test the hypotheses. Statistical software SPSS version 16.0 was used to do data analysis. The Kaisar Meyer Olkin (KMO) measure of sampling adequacy and Bartlett's test of sphericity was conducted to examine the appropriateness of factor analysis to test construct of

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measurement scales. These tests backed the use of factor analysis. The data obtained from measurement scales were taken for factor analysis with principal component analysis (PCA) using the varimax rotation method with Kaiser normalization. Only components with eigenvalues greater than unity were considered for factors. To assess the goodness of the measurement instruments, we tested the construct validity (convergent and discriminant) of the questionnaire. Attributes loaded more than 0.5 with the pertinent factor, confirming convergent validity. Discriminant validity was ensured by checking that the variables loaded heavily on associated factor. Cronbach alpha coefficients as the indicator of reliability (or internal consistency) were checked that they were greater than or equal to 0.7 for measurement scales (George and Mallery, 2003). The Cronbach alpha values were found to be 0.975, 0.969, and 0.971 for P2 strategy, CT strategy, and innovative capability measurement scales respectively. To test the hypotheses, two statistical approaches were used. First, the binary logistic regression method was applied to predict the group membership of firms (i.e. when a firm has implemented a strategy then, does it belongs to a group of firms demonstrating innovative capability). Logistic regression is a method for fitting a regression curve, y ¼ f(x), when y consists of binary coded (failure, success) data. When the response is a binary (dichotomous) variable and x is numerical, logistic regression fits a logistic curve to the relationship between x and y. Logistic regression estimates the probability of occurrence of an event by fitting data to a logistic curve. Binary logistic regression is typically used when the dependent variable is dichotomous and the independent variables are either continuous or categorical. A simple logistic function is defined by the following formula. SPSS actually calculates value of the ln (odds).

LogitðyÞ ¼ lnðoddsÞ ¼ ln

p ¼ a þ bx 1p

where p is the probability of interested outcome, a is the intercept parameter, b is a regression coefficient, and x is a predictor. Following procedure was used to carry out binary logistic regression under this study with SPSS. For Hypothesis 1, firms were assigned to groups based on their score on the P2 strategy (dependent and grouping variable). Binary logistic regression requires that dependent variable must be dichotomous so two groups were formed (‘1’ for implementer and ‘0’ for non-implementer). Performance of a firm in direction of implementing P2 strategy was adjudged based on responses received on its measurement scale. ‘Mode’ value of the responses (on Likert scale of 1e7) for all the items on the P2 strategy scale for a particular respondent was used to assign group membership. Firms with a mode value greater than or equal to 4 were considered to have implemented the P2 strategy. If the mode value was less than 4, then we assumed that the firm had not implemented the P2 strategy. The independent variable (innovative capability) was considered as the ‘sum’ value of responses for items pertaining to BPI and BVI on the innovative capability scale for a particular respondent. Binary logistics

Table 1 Generic designations of the respondents. Title

Numbers

%

Sustainability/Clean Development Mechanism/Health, Safety & Environment Department Mangers Company Secretary Marketing Department Managers Research & Development Managers Production Department Managers

449

65

34 48 69 89

5 7 10 13

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Table 2 Final structure of innovative capability questionnaire. Factor

Description of variable

Factor loading

% of variance explained

Eigen value

Product innovativeness

1. My organization's new products and services are often perceived as very novel by customers 2. In comparison to competitors, my organization has introduced more innovative products/services during the past five years 3. In comparison to competitors, my organization's products/services are generally more successful 4. My organization's recent new products/services are significantly different from our previous products and services 5. My organization has focus on smart business processes up gradation 6. My organization has flexible production methods which can be changed efficiently 7. In last few years, my organization has developed new management approaches suitable to us 8. My organization has suitable offering in market place to expand its customer base for existing products/services 9. New products and services in my organization often take us up against new competition 10. My organization explores new approaches to conduct market research 11. My organization's marketing & advertising campaigns are considered effective 12. My organization has structured process to approve new ideas for implementation 13. In my organization, while recruitment, ability to innovate is critically evaluated 14. In my organization, employees enjoy freedom to excel based on their capabilities, skills, experiences 15. In my organization, Innovative behaviors are rewarded during performance evaluation 16. My organization has good range of products/services to suit the choices of customers 17. In my organization, senior management has strong abilities to simulate future market 18. In my organization, top management proactively seek strategic alliances for competitiveness 19. My organization has required infrastructure to experiment with new ideas 20. In my organization, top management is ready to undertake ‘high risk-high reward’ opportunities

0.744

12.30

1.855

12

1.542

17.30

6.871

14.30

2.378

Business process innovativeness

Market innovativeness

Behavioral innovativeness

Strategic innovativeness

Risk innovativeness

regression was run in SPSS to generate model summary of analysis. A similar procedure was followed to test Hypothesis 2. Firms were assigned group memberships based on their score on the CT strategy (dependent and grouping variable). The independent variable was considered as the ‘sum’ value of responses for all items on the innovative capability (independent variable) scale for a particular respondent. In model summary, the HosmereLemeshow (HeL) test, Nagelkerke's R2 and classification table were used to assess the results of analysis. In logistic regression analysis, it is essential to form two mutually exclusive groups on the basis of the grouping variable and predict group membership on the basis of the independent variable. However, for firms in transition who had implemented some attributes of either strategy (either P2 or CT), it seemed inappropriate to classify them as either an implementer or nonimplementer of the strategies. In such cases, it was better to link the status of the implementation of strategies to the firm's transition on innovativeness attributes to find the relation between the two. Hence, a second statistical method-Spearman's rank correlation-was used to check the relation between the ‘sum’ value on a strategy scale for a particular respondent with the ‘sum’ value on innovative characteristics (BPI and BVI to test Hypothesis 1 and overall innovativeness to test Hypothesis 2) for the same respondent.

5. Results 5.1. Factor analysis The results obtained for innovative capability measurement

0.827 0.744 0.550 0.901 0.689 0.876 0.857 0.863 0.796 0.936 0.720 0.822 0.873 0.668 0.874

9

1.143

0.744 0.503 0.880 0.875

10.40

1.296

with factor analysis using PCA are presented in Table 2. Six components accounted for about 75.4% of the total variance. Components 1, 2, 3, 4, 5 and 6 accounted for approximately 17.3%, 14.3%, 12.3%, 12%, 10.4%, and 9.0% of the total variance respectively. Five components accounted for about 74% of the total variance for P2 strategy measurement with factor analysis using PCA (Table 3). Components 1, 2, 3, 4 and 5 accounted for approximately 19%, 15.3%, 14.5%, 13.4% and 11.9% of the total variance respectively. Similarly, five components accounted for about 66.6% of the total variance for CT strategy measurement (Table 4). Components 1, 2, 3, 4 and 5 accounted for approximately 18.3%, 13%, 13%, 12.4% and 9.9% of the total variance respectively.

5.2. Testing of Hypothesis 1 Results of the logistic regression analysis to test Hypothesis 1 were as following. HeL test statistics: c2 ¼ 10.546, significance ¼ 0.229; Nagelkerke's R2: 0.604, and predicted group membership percentage value was 90.1%. HeL statistics shows significance value greater than 0.05 that means there is no significant difference between observed and model-predicted values, so it is a well-fitting model. Nagelkerke's R2 value shows that there is a moderately good relationship of 60.4% between the prediction and grouping. Also, 90.1% proportion of cases are classified correctly. These results prove that firms grouped as implementers of P2 strategy are the same as those demonstrating the BPI and BVI traits of innovative capability. Spearman's rank correlation analysis yielded a coefficient value of 0.655, which indicates that the correlation is significant at the 0.01 level (2-tail). This again proves that the implementation of the

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Table 3 Final structure of pollution prevention strategy questionnaire. Factor

Description of Variable

Factor loading

% of Variance explained

Eigen Value

Pollution prevention policy & its theme

1. In my organization, there is wide spread understanding on pollution prevention policy 2. My organization has implemented best housekeeping practices to reduce in-house pollution 3. In my organization, production processes are redesigned to match pollution prevention goals 4. In my organization, production technologies are modified to match pollution prevention goals 5. My organization has expertise to evaluate potential impacts of its operation on natural environment 6. My organization has standard methods to set pollution prevention goals 7. In my organization, costebenefit analysis are carried out to set objective of pollution prevention 8. Meeting pollution prevention target is a priority across my organization 9. My organization specifically trains employee to achieve pollution prevention goals 10. In my organization, teams are formed at all levels to implement pollution prevention policy 11. In my organization, employees are empowered to identify opportunities to reduce pollution 12. In my organization, employees are rewarded for their contribution to pollution prevention goals 13. In my organization, departments wise resources are allocated to support pollution prevention activities 14. My organization is targeting minimization of waste generation due to operations 15. My organization has structured approach to waste segregation, recycle, reuse, treatment and disposal 16. In my organization, pollution prevention activities are monitored effectively 17. In my organization, top management is committed to reduce pollution in all aspects of operations 18. My organization is proactive to comply environmental regulations 19. In my organization, effective environmental audit is conducted to measure performance of pollution prevention activities

0.884

19

7.769

15.30

2.48

14.50

1.537

13.40

1.175

11.90

1.117

Expertise, methods & financial goals setting

Employee readiness, empowerment & motivation

Structured waste management priority & monitoring

Compliance adherence focus

P2 strategy is linked with the BPI and BVI characteristics of a firm's innovative capability. Overall, these findings suggest that firms demonstrating partial traits of innovative capability (i.e., BPI and BVI) are the implementers of the P2 strategy (Hypothesis 1). 5.3. Testing of Hypothesis 2 Results of the logistic regression analysis to test Hypothesis 2 were as following. HeL test statistics: c2 ¼ 17.929, significance ¼ 0.022; Nagelkerke's R2: 0.727, and predicted group membership percentage value was 93.2%. In this case, HeL statistics shows significance value lesser than 0.05 that means this model shall not be used for fitting observed and model-predicted values. However, “the classification table is most appropriate when classification is a stated goal of the analysis; otherwise it should only supplement more rigorous methods of assessment of fit” (Hosmer and Lemeshow, 2000; p. 160). This study aims to classify firms in two groups-one group as implementer of the particular environmental strategy (i.e. P2 and CT) and having traits of innovative capability and, another group as non-implementer of strategy (i.e. P2 and CT); and not having traits of innovative capability. Hence, classification tables shall provide answer to question whether implementer of environmental strategy belongs to group

0.682

0.742

0.898

0.726

0.795 0.857

0.645 0.593 0.885 0.78 0.842 0.681 0.758 0.705 0.723 0.631 0.86 0.781

possessing innovative capability. As 93.2% proportion of cases are classified correctly, we can say that firms grouped as implementers of the CT strategy are the same as those demonstrating innovative capability. Also, Nagelkerke's R2 value shows that there is a very good relationship of 72.7% between the prediction and grouping. Spearman's rank correlation analysis yielded a coefficient value of 0.771, which indicates that the correlation is significant at the 0.01 level (2-tail). This again strengthens the claim that the implementation of the CT strategy is associated with the innovative capability of a firm. These findings confirm that firms demonstrating innovative capability are implementers of the CT strategy (Hypothesis 2). 6. Discussion and managerial implications The primary aim of this study was to understand the role of innovative capability in shaping firm's P2 and CT strategies. Accordingly, two hypotheses linking P2 and CT strategies with attributes of innovative capability were derived. Based on statistical analysis, it can be said that innovative capability have a role in implementation of P2 and CT strategies. For P2 strategy implementation BPI and BVI traits are sufficient but CT strategy implementation requires complete innovative capability of a firm.

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Table 4 Final structure of cleaner technology strategy questionnaire. Factor

Description of Variable

Factor loading

Vision & risk taking ability

1. In my organization, top management has a clear vision of future technologies to be adopted in industry 2. In my organization, top management is ready to take risk in adopting/developing new technologies 3. My organization perceive that environmental risk from its operations must be eliminated 4. My organization perceive regulatory pressure to develop/adopt clean technology/processes 5. My organization is redesigning its product to minimize waste 6. My organization perceive that community will be demanding eco-friendly products/services 7. My organization is planning to introduce eco-friendly products 8. Development of clean technology/processes, products demonstrate high competitiveness in market for my organization 9. My organization believe that dependency on natural resources must be minimized 10. My organization is proactive in getting regulatory support for new technology development/adoption 11. My organization is proactive in protecting its intellectual property rights 12. My organization is planning to develop/adopt clean technology 13. My organization is planning to adopt cleaner production processes 14. Employees have updated skill set to innovate clean technology/process in my organization 15. My organization has strong focus on up gradation of employee skill set required for future technologies

0.896

Risk perception & safeguard measures

Eco-friendly products & market advantages

Design for environment, regulations & IPR

Technology development & in-house capability

Innovative capability as a component of dynamic capability essentially helps a firm in reconfiguring internal and external competences to overcome barriers identified by researcher as managerial and strategic aptitude (Gonzalez-Benito and GonzalezBenito, 2006; Gunningham et al., 2003). BPI and BVI traits are internal competencies as they rely mainly up on organizational factors. But PDI, MI and SI have features of external competencies as well as they have complex interaction with business environment and market forces. A firm can achieve more control in enhancing BPI and BVI. Thus it shall be relatively easier to grasp goals of P2 strategy by effective and marginal processes improvements with active involvement of employees. That's why goals of P2 strategy are considered as ‘low hanging fruits’ (Hart, 1995). But, early advantages of P2 may diminish due to increased competition and stakeholder's pressure if a firm doesn't take a proactive approach to start implementing CT strategy. To deliver radical sustainable solutions in form of cleaner technology, eco-friendly products/services and new business models, a firm must transform to develop traits of PDI, MI and SI. PDI may require technological capabilities ((Luken et al., 2008; Montalvo, 2008; Zhang et al., 2013); MI demands inputs from value chain partners and requires effective communication among various functions (Kohli and Jaworski, 1990), and SI represents vision of future markets (Hart and Milstein, 2003). CT strategy aims beyond removing negative impacts on society and natural environmental due to production and consumption by a drastic shift from eco-efficiency measures to eco-effective solutions (Dyllick and Hockerts, 2002). These solutions are not about marginal improvements over pollution prevention or control measure but a disruptive and significant departure from existing processes, knowledge and innovation (Holton et al., 2010). Today's firm shall initiate the change process in their working in gradual way and prepare simultaneously for drastic change in use of technology to develop products, services and processes which are not only economically viable but also ecologically and socially justifiable (Dunphy et al., 2003). Development of sustainable solutions is not just about radical changes in a way a firm conduct its business

% of Variance explained 9.9

Eigen Value 1.061

0.734 0.838

12.4

1.2

13

1.341

13

1.647

18.3

6.082

0.882 0.525 0.614 0.62 0.752 0.579 0.736 0.67 0.702 0.703 0.761 0.719

but also about a preparation for firm wide changes, and top management's pro-activeness make it smoother (Baumgartner and Zielowski, 2007; Lozano, 2012). This pro-activeness shall be an outcome of SI. Top management must bridge the gap between the traditional approach towards business and sustainable enterprise (Ramus and Steger, 2000). A fundamental shift in managerial interpretations, attitudes, and perceptions is required to incorporate environmental considerations in all areas of decision making
n-Correa and Sharma, 2003; Berry and Rondinelli, 1998; (Arago Sharma, 2000). Top management's vision of future market and risk taking ability may play a critical role in design, development of radical solutions, and subsequent market positioning (Hall and Vredenburg, 2003; Robert et al., 2012). Management shall focus on skill set up-gradation to design ecofriendly products (Tukker et al., 2000), and to develop sector specific state of the art technologies (Huhtala, 2003; Koefoed and Buckley, 2008) to deliver a stream of radical sustainable solutions. In-house technological capabilities represented by PDI may determine the fate of effective adoption of CT (Montalvo, 2008; Zhang et al., 2013). Effectively realizing the goals of P2 and CT strategy require voluntary participation and commitment of the employees. Importance of building teams (Green teams) comprising crossfunctional members in assessing the impact of company's operation on the natural environment has been stressed by contemporary research (Ramus and Steger, 2000; Shrivastava and Hart, 1995). The firm with the most proactive and advanced environmental management is the same firm which uses green teams more intensely. Green teams are especially necessary for implementing more technical environmental management practices (Jabbour et al., 2013). Green teams must be recognized and rewarded for outstanding environmental achievements to realize the benefits of P2 and CT strategy (Ramus and Steger, 2000; Shrivastava and Hart, 1995; Sharma and Vredenburg, 1998). When employee efforts are acknowledged by their superiors during performance evaluation and reward distribution, a firm can expect to inculcate the features of BVI.

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MI comprises intelligence generation about market forces (Kohli and Jaworski, 1990; Porter, 1980) like competitors and customers (De Luca and Atuahene-Gima, 2007; Marinova, 2004). Given the sustainability challenges, firms must look for opportunities to collaborate with broader set of stakeholder to find acceptable solutions to sustainability challenges (Hart and Sharma, 2004; King, 2007) and to discover new business models in favor of public interest (Bendell et al., 2010). New approaches to conduct business shall prevent firm wide rigidity to deal with all relevant stakeholders and thus may help in reshaping firm's competencies (Leonard-Barton, 1995; Teece, 2007) to effectively reposition in future markets. 7. Conclusion This empirical study is a leap in direction of interpreting innovative capability as one of the component factors of dynamic capability and its role in implementing P2 and CT strategies. This work suggests that only process and behavioral innovativeness are required to implement a P2 strategy whereas all traits of innovative capability are required to implement a CT strategy. Accordingly, it guides firms to develop the necessary organizational capabilities to implement any of these strategies in the future. Risk perception due to natural environment's impact on business and perception of stricter future regulatory drives firms to develop or implement cleaner production processes and technology and, design for environment activities (Battisti, 2008; Clayton et al., 1999; Luken and Rompaey, 2008; Sangle, 2010). Direct regulation can have a strong and significant effect on performance of firms on integration of pollution prevention and control approaches (Testa et al, 2014). With above mentioned understanding, there can be firms which may have separated the units of operation considered to be harmful to improve corporate identity and to avoid any litigation issues due to current and future regulations. When firms take such decisions, they look for turnkey solutions and seek advice of external experts to improve the processes of separated units. In our understanding, in such cases we don't see the role of inherent characteristics of innovative capability of firms as PDI, BPI and BVI. Still, aspects like MI and SI may play a significant role to carry out the job. Does MI and SI really play a role of determinants for firms to establish themselves as corporate citizens in such cases? Whether regulations weigh higher than MI and SI in such cases? It will be interesting to understand the innovative capability of such firms. Innovative capability as one of the commonalities of dynamic capability (Wang and Ahmed, 2007) have certain common characteristics across firms which can be recognized and measured (Eisenhardt and Martin, 2000). So, in current study firms were selected from different industry sectors primarily responsible for deterioration of natural environment. However, future studies can be conducted to understand industry specific characteristic. References Afuah, A., 1998. Innovation Management: Strategies, Implementation, and Profits. Oxford University Press, New York. Ali, A., Krapfel Jr., R., Labahn, D., 1995. Product innovativeness and entry strategy: impact on cycle time and break-even time. J. Prod. Innov. Manag. 12 (1), 54e70. Amit, R., Schoemaker, P.J.H., 1993. Strategic assets and organizational rent. Strateg. Manag. J. 14, 33e46. Andrews, J., Smith, D.C., 1996. In search of marketing imagination: factors affecting the creativity of marketing programs for mature products. J. Mark. Res. 33 (May), 17e37. Andrews, K., 1971. The Concept of Corporate Strategy. Dow Jones Irwin, Homewood, IL. Aragon-Correa, J.A., 1998. Strategic proactivity and firm approach to the natural environment. Acad. Manag. J. 41, 556e567.
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