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CHAPTER III

CONCEPTUAL FRAMEWORK

3.1 INTRODUCTION

This chapter is introducing and elaborating the underlying theory, conceptual

framework, and development of hypotheses. The resource-based view (RBV) theory
and stakeholder theory are used in explaining the conceptual framework in this study.
Moreover, hypotheses developments are described in details elaborating the
conceptual framework.

3.2 UNDERLYING THEORY

3.2.1 Resource-Based View (RBV) Theory

Resource-based view (RBV) theory explains that a competitive advantage is achieved

by extension financial performance through intra-firm resources and capabilities
(Corbett & Claridge, 2002). RBV expects that valuable, rare, and inimitable resource
would affect the performance and the success of program (Ray et al., 2005; Sohel and
Schroeder, 2003). As we know that applying a proactive environmental strategy could
be the market differentiation for company to be winning of competition, because it is
used to improve the firm reputation for responsible management of company to the
customers (Barba-Sanchez and Atienza-Sahuquilllo, 2016). The environmental
proactivity is also recognized as a trick to achieve the unique advantages, such as
differentiation and first-mover advantage (Porter and Van Der Linde, 1995). These
results show that environmental proactivity is the category of the valuable, rare,
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inimitable resource because could achieve the unique advantage and differentiation
for the organization.

Moreover, capability is defined as the ability of the firm to use its resource to
affect a desired end (Amit & Schoemaker, 1993). According to Hart (1995) declares
that deal with natural environmental is a firm ability which could be developed into an
oranizational capability. These explanations respresent that corporate environmental
proactivity is able to be a capability of company because it is a strategy to manage
environmental practices to reduce environmental impacts (Pondeville et al., 2013;
Sharma, 2000; Aragon-Correa and Sharma, 2003; Benito and Benito, 2006; Delmas et
al., 2011; Sarkis, 2001; Shrivastava, 1995). Compare with those explanations, the
environmental proactivity could be a firms ability to use its natural resources to affect
a desired end, in this matter represented by reduction of environmental impacts.
Hereinafter, the environmental proactivity is the capability for stakeholder integration
and the capability of continuous innovation to improved organizational commitment
and learning then an increase in employee skills (Russo and Fouts, 1997; Sharma and
Vredenburg, 1998). Thus, those things approve that corporate environmental
proactivity is a capability of company.

Accordingly, RBV theory could explain the relationship between corporate

environmental proactivity and environmental performance. The examination of RBV
theory posits that competitive advantage could be achieved through resource and
capability. Based on the statements above, corporate environmental proactivity is a
capability of company and environmental performance is a competitive advantage.
Hence, the environmental performance also could be achieved through the corporate
environmental proactivity.

3.2.2 Stakeholder Theory

This theory explains about the relationship between organization and its stakeholders.
Freeman (1984) posits that stakeholder is any group or individual who can affect or be
affected by the achievement of the organizational objectives. This theory defines that
stakeholders have the right to be treated fairly by organization. Stakeholder theory
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relies to survive in the market, company should consider to manage its stakeholder
because organization is a part of the wider social system.

Stakeholders are divided by internal and external stakeholder (Sarkis et al.,

2010). Internal stakeholders refer to management and employee, and external
stakeholders are the customers (clients), government regulators, shareholders, lenders,
media, etc. Internal stakeholders are often the initiators, and recipients, of an
organizations proactive environmental activities (Daily and Huang, 2001; Hanna et
al., 2000). Sarkis et al., (2010) say that these stakeholders are decision makers to
adopt the new environmental programs and improve an organizational environmental
strategy over time. Because of this, workers as internal stakeholders are the central
role in the adopting of environmental operational practices.

In the same things, external stakeholders also hold the important role of
adopting these practices. For example, government as the regulator is the most
obvious external stakeholder when it comes to environmental issues and are typically
associated with coercive pressures (Zhu and Sarkis, 2007). In addition, the other
pressures from customers as the aim of a company is created. The organization would
try to build a great public image to create the relationship with its customers. Other
external stakeholders who are essential, they are non- government organizations,
communities, the media, etc. They take the vital role in the organizations because each
of these groups could mobilize public opinion to support or ignore a company (Benn
et al., 2009; Roome and Wijen, 2006).

Accordingly, this research uses the stakeholder theory to explain the

relationship among corporate environmental proactivity, environmental performance,
and stakeholder pressure. It is caused this theory states that stakeholder pressure has
influence the organizations proactive environmental activities (Daily and Huang,
2001; Hanna et al., 2000). Moreover, Schaltegger & Synnestvedt (2002) translate that
a company would face less internal or external conflicts by environmental
management implementation, which lead to an ability to increase its performance.
Therefore, the stakeholder theory is expected to explain that stakeholder pressure
could influence the environmental proactivity in the firm then it would lead on the
environmental performance.
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3.3 CONCEPTUAL FRAMEWORK

Literature review in previous chapter has discussed about the relationship between
corporate environmental proactivity, environmental performance and stakeholder
pressure. This section intends to integrate such determinants into a conceptual model
for better understanding on each relationship among every variable. The conceptual
framework would be depicted below in Figure 1.

3.4 HYPOTHESES DEVELOPMENTS

The independent variable in this research is environmental performance, and it would

be related with corporate environmental proactivity as dependent variable. Then,
stakeholder pressure is the moderating variable in this study to strengthen the
relationship between corporate environmental proactivity and environmental
performance.

3.4.1. Corporate Environmental Proactivity and Environmental Performance

The term of corporate environmental proactivity has been defined as environmental

strategy of organization by voluntary implementing environmental management
practices to reduce environmental impacts. Whereupon environmental performance is
the measure of company in reducing and minimizing the environmental impacts.
Thus, the company has succeeded reducing or minimizing its environmental impacts,
it means that has good environmental performance. Then, the aim of corporate
environmental proactivity is achieving the good environmental performance as criteria
for the success of programs.

The result from Aragon-Correa (2008); Rasi (2014); and Melnyk (2003) find
that the environmental proactivity positively impacts the environmental performance.
Differently with Naveh and Link (2006) and Barba-Sanchez and Atienza-Sahuquillo
(2016) result that the relationship between them is not clear. Then Walley and
Whitehead (1994) talk about negatively impact of both variables.
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Although there are some mix results about corporate environmental proactivity
and environmental performance, however the resource-based view (RBV) theory
explains the linkage of those variables. Based on that theory and some previous
studies, this research posits the hypothesis:

Hypothesis 1: There is a positive relationship between corporate environmental

proactivity and environmental performance.

3.4.2. Corporate Environmental Proactivity, Environmental Performance, and,

Stakeholder Pressure

The purpose of adopting various environmental strategy is to meet the stakeholders

demands. According to Delmas and Toffel (2008) asserts that the firm implements a
certain environmental management practice is caused facing pressures from various
stakeholders (e.g. customers, suppliers and competitors). Then, Verma et al (2001) say
that stakeholders interested is the premise to measure corporate environmental
perforamnce. Based on these statements, this research concludes that stakeholders
pressure could push corporate to adopt environmental proactivity and in the end
would deliver the company to achieve its environmental performance.

According to Henri and Journeault (2010) find that stakeholder pressure could
not moderate the achievement of environmental performance. In other hands, the
researches of Ramanathan et al. (2014), Rasi et al. (2014), Kassinis and Vafeas (2006)
show that stakeholders pressure could be the moderating variable to achieve
environmental performance. There are some mix conclusions to prove this moderating
variable could strengthen to achieve the environmental performance. However, the
support from stakeholder theory, this research builds the hypothesis:

Hypothesis 2: Stakeholder pressure has positive impact to strengthen the relationship

between corporate environmental proactivity and environmental
performance.
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Figure 1: Conceptual Framework

Corporate H1
Environmental Environmental
Proactivity Performance

H2

Stakeholder
Pressure