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Strategic Management JournalStrat. Mgmt. J., 26: 197–218 (2005)

Published online 22 December 2004 in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.441

EVOLVING SUSTAINABLY: A LONGITUDINAL STUDYOF CORPORATE SUSTAINABLE DEVELOPMENT

PRATIMA BANSAL*Richard Ivey School of Business, University of Western Ontario, London, Ontario,Canada

This study operationalizes corporate sustainable development and examines its organizationaldeterminants. Data for this project pertain to Canadian firms in the oil and gas, mining,and forestry industries from 1986 to 1995. I find that both resource-based and institutionalfactors influence corporate sustainable development. By exploring time-related effects, I alsofind that media pressures were important in early periods and resource-based opportunitiesendured over time. This finding challenges the assumption that firms first adopt innovations inresponse to technical rewards which are later institutionalized. These counter-intuitive resultsmay be attributable to the unique characteristics of the dependent variable, corporate sustainabledevelopment. They raise important questions and directions for future research. Copyright 2004 John Wiley & Sons, Ltd.

In 1987, the World Commission on EconomicDevelopment (WCED) popularized the term ‘sus-tainable development’ in its well-cited report,Our Common Future (Diamond, 1996). Accord-ing to the WCED (1987: 43), sustainable devel-opment ‘is development that meets the needsof the present without compromising the abilityof future generations to meet their own needs.’The WCED asserted that sustainable developmentrequired the simultaneous adoption of environmen-tal, economic, and equity principles. This asser-tion was met with skepticism as it challengedthe deep-rooted assumption that environmentalintegrity and social equity were at odds witheconomic prosperity. A decade later, Rondinelliand Berry (2000) found that many large multi-nationals had accepted the argument that these

Keywords: sustainable development; institutional theory;resource-based view*Correspondence to: Pratima Bansal, Ivey School of Business,University of Western Ontario, London, ON N6A 3K7, Canada.E-mail: [email protected]

three principles of sustainable development wereinternally consistent. Over time, corporate com-mitment to sustainable development has changedconsiderably. This paper attempts to explain why.

Explanations stem primarily from two differ-ent logics: resource-based and institutional. Theresource-based view emphasizes internal firm pro-cesses. Firms accumulate valuable resources andcapabilities that lead to superior firm performance(Barney, 1991). Institutional arguments, on theother hand, argue that change is often motivated byfirms seeking social approval (Meyer and Rowan,1977). I apply both of these perspectives to under-stand why firms commit to sustainable develop-ment and why the reasons for this commitmentmay change over time.

In seeking to answer the research question,this paper makes three contributions. First, itdefines and operationalizes corporate sustainabledevelopment. Societal-level sustainable develop-ment is often analyzed and understood, but ourunderstanding of how sustainable development is

Copyright 2004 John Wiley & Sons, Ltd. Received 7 May 2003Final revision received 20 July 2004

198 P. Bansal

operationalized in firms is weak. An importantcontribution of this paper is its efforts to iden-tify how the principles of sustainable developmentapply to and are articulated by firms. Second, thisresearch provides new insights into the adoption ofadministrative innovations. Most studies examinebest practices that are well defined, impact onlythe firm, and in which the outcomes are antic-ipated. This study considers the response to anissue that is defined ambiguously, that has highexternalities, and for which the organizational out-comes are often unknown. Third, this paper con-tributes to research on organizations and the natu-ral environment by integrating resource-based andinstitutional arguments to identify the factors rel-evant in explaining a firm’s commitment to sus-tainable development. Most studies of the factorsthat influence corporate sustainable developmenthave taken exclusively either a resource-based ori-entation (Hart, 1995; Klassen and Whybark, 1999;Russo and Fouts, 1997) or an institutional orienta-tion (Hoffman and Ventresca, 1999, 2002; Jenningsand Zandbergen, 1995); few have integrated thetwo. The findings suggest that an integration of thetwo perspectives is relevant in explaining corporatesustainable development.

SUSTAINABLE DEVELOPMENT

The three principles of sustainabledevelopment

In its early years, the meaning of the term ‘sus-tainable development’ was ambiguous, leading toa proliferation of definitions. Only recently hasthe WCED definition emerged as the dominantone. Discussions have also coalesced around thethree principles that ground sustainable develop-ment: environmental integrity, economic prosper-ity, and social equity (Elkington, 1998; WCED,1987). Each of these principles represents a nec-essary, but not sufficient, condition; if any one ofthe principles is not supported, economic develop-ment will not be sustainable. These principles aredescribed below.

Environmental integrity

The environmental integrity principle ensures thathuman activities do not erode the earth’s land, air,and water resources. Ecosystems are assumed tohave limited regenerative capability and carrying

capacity (IISD, 1995). Population growth, com-bined with excessive consumption, escalating pol-lution, and depletion of natural resources, threat-ens environmental integrity (Pearce, Markandya,and Barbier, 1989; WCED, 1987). Human activ-ities can have a significant negative impact onthe natural environment including, but not lim-ited to, decreased biodiversity, ozone depletion,accumulation of greenhouse gases, waste man-agement, deforestation, and toxic spills (Doeringet al., 2002). If the natural environment is com-promised, then basic and necessary resources forhuman life, such as air, water, and food, will alsobe compromised.

Social equity

The social equity principle ensures that all mem-bers of society have equal access to resources andopportunities. Central to the definition of sustain-able development is the recognition that ‘needs,’present and future, must be met (WCED, 1987).Human needs not only include basic needs suchas food, clothing, and shelter, but also include agood quality of life such as health care, education,and political freedom (IUCN, UNEP, and WWF,1996; UNCED, 1992; United Kingdom Secretariesof State for the Environment, 1994). The WCED(1987: 43) document states that sustainability is auniversal goal and that even the ‘narrow notion ofphysical sustainability implies a concern for socialequity between generations, a concern that mustlogically be extended to equity within each gener-ation.’ This implies that future generations, indige-nous peoples, and the disenfranchised are entitledto the same level of resources as more privilegedpeople in developed countries (Gladwin, Kennelly,and Krause, 1995).

Economic prosperity

Finally, the economic prosperity principle pro-motes a reasonable quality of life through theproductive capacity of organizations and individu-als in society (Holliday, Schmidheiny, and Watts,2002). Economic prosperity involves the creationand distribution of goods and services that willhelp to raise the standard of living around theworld. Open, competitive, international marketsthat encourage innovation, efficiency, and wealthcreation are fundamental aspects of sustainable

Copyright 2004 John Wiley & Sons, Ltd. Strat. Mgmt. J., 26: 197–218 (2005)

Evolving Sustainability 199

development (WBCSD, 2002). Economic prosper-ity is tied intrinsically to the principles of socialequity and environmental integrity (Schmidheiny,1992b; WCED, 1987). For example, people look-ing to meet basic needs such as food, clothing,and shelter will use natural resources to satisfythose immediate needs at the cost of the long-term health of the natural environment. Millionsof hectares of forests are destroyed every year toprovide fuel for cooking and heating, to providefertile land for agriculture, and to provide wood forhousing (WCED, 1987). A society that does notcreate economic prosperity will ultimately com-promise its own health and well-being (WBCSD,2002). Without equal access to income-related ben-efits, conflict between peoples will erupt in order toachieve some perceived sense of equity (WCED,1987).

Corporate sustainable development

Organizations must apply these principles to theirproducts, policies, and practices in order to expresssustainable development. Below, the three prin-ciples underpinning sustainable development areextended to the level of the firm. As with thesocietal notion of sustainable development, it isassumed that corporate sustainable development isachieved only at the intersection of the three princi-ples. As a result, all three of the principles definedbelow are necessary conditions for corporate sus-tainable development.

Environmental integrity through corporateenvironmental management

Corporate environmental management is an effortby firms to reduce the size of their ‘ecologi-cal footprint.’ Every firm has an environmentalimpact, whether it is merely by lighting officebuildings or, more significantly, through the wasteand emissions generated by production processes.A number of taxonomies have been developedto describe corporate environmental management,ranging from the more reactive to the more proac-tive (Aragon-Correa, 1998). Pollution control orcompliance refers to ‘end-of-pipe’ solutions, wherethe firm disposes its waste responsibly (Hart,1995). In most cases, this involves adding physicalequipment that filters toxins or contracting waste

removal services (Russo and Fouts, 1997). Pollu-tion prevention, on the other hand, reduces or elim-inates waste through innovative processes or tech-nologies applied throughout the production process(Klassen and Whybark, 1999). Through continuousimprovement, the firm identifies inefficiencies andimproves processes. In this way pollution preven-tion stimulates firms to develop superior resourcesand capabilities more so than pollution control pro-cesses (Russo and Fouts, 1997). Product steward-ship shifts the focus from the firm’s processes toits products, in an effort to reduce their ‘cradle-to-grave’ impact (Hart, 1995). Products are designedto use fewer materials, toxic or otherwise, and tobe disassembled for recycle or reuse at the end oftheir life. Sound corporate environmental manage-ment practices are likely to be related to strongcorporate environmental performance.

Social equity through corporate socialresponsibility

Corporate social responsibility requires that firmsembrace the economic, legal, ethical, and discre-tionary expectations of all stakeholders, not onlyfinancial shareholders (Carroll, 1979). Wood’sframework for socially responsible processes hasachieved the greatest traction in business research(Hillman and Keim, 2001; Swanson, 1995; Wad-dock and Graves, 1997). Corporate social respon-sibility involves three processes: environmentalassessment, stakeholder management, and socialissues management (Wood, 1991). Environmen-tal assessment or scanning enables firms to iden-tify social, economic, and environmental issuesand respond to them accordingly (Fahey andNarayanan, 1984). Through stakeholder manage-ment, firms respond to individuals, outside organi-zations, and even the natural environment (Starik,1995) that have a legitimate stake in the orga-nization (Freeman, 1984). An important aspectof stakeholder management, then, is buildingstrong stakeholder relationships through transpar-ent operations, representing stakeholder interests indecision-making, and distributing the value createdby firms equitably among all relevant stakehold-ers. Social issues management is the process ofaddressing social issues, such as the decision not toemploy child labor, not to produce socially unde-sirable products, and not to engage in relationshipswith unethical partners. While these practices mayuphold social causes, they may not be consistent


200 P. Bansal

with the views of all stakeholders (Hillman andKeim, 2001). But, by acting in societal interests,the firm is acting responsibly. A high standardin corporate social responsibility is often relatedto high corporate social performance (Frederick,1994).

Economic prosperity through value creation

Firms create value through the goods and ser-vices that they produce (Bowman and Ambrosini,2000). Firms increase the value created by improv-ing the effectiveness of those goods and servicesefficiently. Value is created, then, by producingnew and different products that are desired byconsumers, by lowering the costs of inputs, orby realizing production efficiencies (Conner, 1991;Porter, 1985). Firms may choose to sell their goodsand services in the marketplace or trade them inkind. When the firm sells the goods or services fora price that at least exceeds the cost of those goodsand services, the firm captures the value it createsand enhances its financial performance (Bowmanand Ambrosini, 2000). But, high value creationis not always related to high financial perfor-mance. Market conditions or regulations throughintense competition, for example, may erode thefirm’s ability to capture value (Makadok, 2001).For example, Napster was not able to capture thevalue it had created through its web site portal thatallowed users to share music. Cooperatives createvalue for their members, but do not capture thatvalue directly through revenues. When a firm doescreate and capture value, it distributes this valueto consumers through its goods and services, toshareholders through dividends and equity, and toemployees through salaries.

EXPLAINING THE CORPORATESUSTAINABLE DEVELOPMENT

In what follows, I develop resource-based andinstitutional explanations for corporate sustainabledevelopment. To select the most relevant explana-tions, I analyzed interviews of key informants. Adescription of these interviews and their analysisis provided in the methods section of this paper.

Resource-based explanations

The resource-based view argues that effective cor-porate strategies build rent-earning resources and

capabilities. Firm resources can include tangibleassets, such as the firm’s financial reserves, phys-ical plant and equipment, and its raw materi-als; and intangible assets, such as the firm’s rep-utation, culture, and intellectual capital (Grant,1991). Capabilities are the skills that firms developto reproduce and manage these resources (Bar-ney, 1995). The rent-earning potential of a firm’sresources and capabilities are determined by theirscarcity, uniqueness, durability, inimitability, andnon-substitutability, which ultimately determinethe firm’s competitive advantage (Barney, 1995;Dierickx and Cool, 1989; Peteraf, 1993). Theseresources and capabilities are acquired in imperfectfactor markets, and over time they develop furtherby the growth and resource acquisition paths takenby the firm (Barney, 1986; Teece, Pisano, andShuen, 1997). As a result, the firm’s resources andcapabilities are shaped by previous paths taken.

Resource-based rationales apply well to cor-porate sustainable development for several rea-sons: (1) corporate sustainable development hasbeen shown to influence firm performance (Hartand Ahuja, 1996; Waddock and Graves, 1997);(2) corporate sustainable development requiresinvestments of financial and/or human resources(Sharma and Vredenburg, 1998); and (3) newresource-based opportunities from corporate sus-tainable development are created through changesin technology, legislation, and market forces(Porter and van der Linde, 1995). In what fol-lows, I identify three resource-based variables thatmay influence corporate sustainable development.These variables received the greatest support ininterviews with organizational representatives (seeMethods section).

International experience

International experience is developed by operatingin, and depending upon, foreign markets. Throughthis experience, firms acquire knowledge frommultiple jurisdictions, as well as develop capabil-ities in coordinating distant parts of the organiza-tion (Roth, 1995). Sustainable development prac-tices vary within and among foreign jurisdictionsbecause of differences in local regulations, com-munity preferences, and even technologies. Firmswith international experience can leverage knowl-edge acquired in different jurisdictions and developa set of best practices based on their collectivelearning. For example, an interviewee spoke about



the need to have third-party audits in Australia andthe opportunity to use that experience in Canada.Firms with international experience are often moreadept than domestic firms at developing organi-zational structures and systems that allow coordi-nation across different jurisdictions with differentregulatory structures. For example, many multi-national firms will have one person responsiblefor all environmental, health, and safety issuesacross all its international subsidiaries. Capabilitiesin systems integration are useful for sustainabledevelopment practices because of the wide rangeof functional areas to which sustainable develop-ment applies (Russo and Fouts, 1997). Finally,firms with international experience recognize thevalue of achieving high environmental and socialstandards in order to facilitate their license to oper-ate in local countries (Bansal and Roth, 2000).For example, an interviewee from a mining com-pany indicated that his experiences with the abo-riginal people in Papua New Guinea made himmore responsive to aboriginal issues in Canada.For these reasons, I propose:

Hypothesis 1: International experience will bepositively associated with corporate sustainabledevelopment.

Capital management capabilities

Capital management capabilities are developed bymanaging physical assets and technologies. Thesecapabilities are developed through a number ofmeans. First, capital-intensive projects, such asthose found in oil and gas firms, are likely to gen-erate more pollution and have a more significantimpact on the local community than the labor-intensive projects undertaken by service firms.Hence, firms with capital management capabilitiesare more likely to be aware of sustainable develop-ment issues. Second, pollution control and preven-tion activities require add-ons that filter toxins orthe redesign of processes to reduce wastes (Russoand Fouts, 1997). Pollution prevention, in partic-ular, requires employee involvement and empow-erment, which is consistent with the social equityprinciple because it incorporates more stakehold-ers in decision-making. It also involves continu-ous improvement, which is consistent with envi-ronmental management systems. Third, avoidingindustrial accidents which reduce the health haz-ards for employees and the local community often

require investments in new technology (Klassenand Whybark, 1999). These factors, then, leadto the accumulation in the firm of capabilitiesassociated with continuous improvement and pro-cess innovations, shown to be related to corpo-rate sustainable development (Christmann, 2000;Klassen and Whybark, 1999). Some intervieweesin the forestry industry illustrated this mindset withthe examples of new saws, new mills, and newprocesses that use dioxin-free chlorines. Finally,firms with good capital management capabilitieswill attempt to adopt best practices and superiortechnologies in order to avoid expensive capi-tal refits associated with changing environmen-tal and social regulations. As a result, I pro-pose:

Hypothesis 2: Capital management capabilitieswill be positively associated with corporate sus-tainable development.

Organizational slack

Organizational slack is ‘that cushion of actualor potential resources which allows an organiza-tion to adapt successfully to internal pressures foradjustment or to external pressures for change’(Bourgeois, 1981: 30). It allows firms to makeinvestments in resources and capabilities that maynot have an immediate pay-off (Levinthal andMarch, 1981). Slack can help the firm develop theresources and capabilities necessary for improv-ing the speed and degree to which it can adaptto its external environment (Cheng and Kesner,1997). Interviewees frequently spoke about thetime and money required to invest in sustainabledevelopment practices. Investments were requiredin new technologies, in conducting environmen-tal and social audits, in implementing new health,safety, and environmental programs, and in theremediation of exploited land. Many respondentsnoted that large firms, firms with extra financialresources, or large environmental health and safetydepartments were more likely to implement newpractices. The financial benefits that accrue fromsustainable development can often be long termand diffuse, for example, through improved cor-porate reputation or social capital. In these cir-cumstances, organizational slack permits firms thelatitude to seek new solutions to corporate sustain-able development creatively.


202 P. Bansal

Hypothesis 3: Organizational slack will be pos-itively associated with corporate sustainabledevelopment.

Institutional explanations

Institutional theory emphasizes the social contextwithin which firms operate. Although firms havediscretion to operate within institutional con-straints, failure to conform to critical, institutional-ized norms of acceptability can threaten the firm’slegitimacy, resources and, ultimately, its survival(DiMaggio and Powell, 1983; Oliver, 1991; Scott,1987). Institutional norms can penetrate the socialcontext and become so intractable and taken forgranted that firms are not always conscious ofconforming to them (Meyer and Rowan, 1977).Firms may also respond strategically to institu-tional norms, recognizing that conforming willresult in improved access to resources (Oliver,1991; Suchman, 1995). Institutions can includethe government, professional associations, publicopinion, or the media.

Institutional theory is relevant to corporate sus-tainable development because: (1) individual valueand belief systems judge a firm’s commitment tosustainable development, affecting perceptions ofthe firm’s acceptability and legitimacy (Bansal andRoth, 2000); (2) actors with differences of opin-ion on issues of corporate sustainable developmentwill dialogue and debate to establish norms andcommon beliefs (Hoffman, 1999; Wade-Benzoniet al., 2002); and (3) elements of sustainable devel-opment are becoming institutionalized throughregulations and international agreements (Frank,Hironaka, and Schofer, 2000). Meyer and Rowanassert that: ‘as the issues of safety and environmen-tal pollution arise, and as relevant professions andprograms become institutionalized in laws, unionideologies and public opinion, organizations incor-porate these programs and professions’ (Meyerand Rowan, 1977: 345). Jennings and Zandbergen(1995) argue that the type of institutional pressure,be it coercive, mimetic, or normative, influencesthe rate at which sustainable development prac-tices diffuse among firms. These three pressuresare described below.

Fines and penalties

Institutional processes can work through coercivepressures imposed by institutions that directly

influence firms (DiMaggio and Powell, 1983).Failing to comply to these pressures, particularlythose imposed by urgent and powerful stakehold-ers, can result in loss of earnings, a damagedreputation, or even loss of the license to operate(Oliver, 1991; Pfeffer and Salancik, 1978). Everyperson interviewed spoke to the role of govern-ment in influencing corporate sustainable develop-ment. Firms that have previously incurred fines arescrutinized closely by the government and specialinterest groups for further indiscretions because oftheir loss of legitimacy (Meyer and Rowan, 1991).In an effort to deflect this scrutiny, these firms willsubscribe to a higher standard of corporate sustain-able development. Firms that have been subject tofines and penalties will also become more sensi-tive to acceptable sustainable development prac-tices and be more informed of what they need todo to avoid further infractions. Based on this logic,I argue that:

Hypothesis 4: Fines and penalties will be pos-itively associated with corporate sustainabledevelopment.

Mimicry

Firms will actively attempt to reduce the levelof uncertainty in their organizational environmentby imitating the structures and activities of sim-ilar firms (DiMaggio and Powell, 1983). Sustain-able development is marked by considerable uncer-tainty because of changing expectations, the com-plexity of the problem, and the difficulty of itsresolution. Through imitation, firms may capital-ize on the successes of their peers. Firms willlikely mimic the visible and well-defined activitiesof others, such as environmental audits and cer-tified environmental management systems, espe-cially when these activities have been reportedto outsiders. Firms that mimic their peers areless likely to suffer public or financial sanctionsbecause of the legitimacy that is often conferredwhen many players are engaged in the same prac-tice. Interviewees often said that their industryassociation and the development of codes of con-duct were important factors in influencing changeand there was a common sentiment that effortstowards sustainable development had to be under-taken collectively.



Hypothesis 5: Mimicry will be positively associ-ated with corporate sustainable development.

Media attention

The media can play an important role in mobiliz-ing social movements such as environmental inter-est groups. It can also assign importance to someissues and expose gaps in others. In doing so, itbecomes part of the institution-building process,shaping the norms of acceptable and legitimatesustainable development practices. According toSimon (1992), the media is the main source ofenvironmental information. The media not onlyplays a passive role in shaping institutional norms,but also a more active one by choosing the storiesworth reporting and framing them to reflect edito-rial values. Empirical studies have shown that themedia has been particularly influential on corpo-rate environmental responses (Bansal and Clelland,2004; Bansal and Roth, 2000; Bowen, 2000; Hen-riques and Sadorsky, 1996). The total amount ofmedia coverage raises the firm’s visibility, invitingfurther public attention and scrutiny. The threatof negative media publicity can apply coercivepressure to firms to commit to sustainable devel-opment by eroding the legitimacy of a firm ifthe media finds some practices unacceptable. Inaddition, negative coverage can also incite envi-ronmental interest groups and other stakeholdersto lobby organizations and government to changebusiness practices. Many interviewees spoke to theimportance of the media in influencing the opin-ions of special interest groups. Several interview-ees also indicated that while they did not reactto media exposure, they avoided bringing eitherpositive or negative attention to the firm.

Hypothesis 6: Media attention will be positivelyassociated with corporate sustainable develop-ment.

EXPLAINING TIME-RELATEDEFFECTS

The resource-based view and institutional the-ory each provide distinct insights into the orga-nizational determinants of corporate sustainabledevelopment. The intersection and interaction ofthese two logics can further illuminate our under-standing of a firm’s commitment to sustainable

development, particularly over time. In what fol-lows, hypotheses are developed that explain whenand why firms commit to sustainable develop-ment.

Institutional pressures are likely to be instru-mental in the early stages of corporate sustain-able development because of the ambiguity andsignificant externalities associated with sustainabledevelopment. Externalities can lead to high-profileevents, such as the release of the first picturesof the ozone hole, the Exxon Valdez oil spill, theUnion Carbide gas leak, and the decommissioningof Shell’s Brent Spar. These events raise publicinterest in environmental concerns and are likelyto elicit public and regulatory pressures. Hoffman(1999) and Richards and Gladwin (1999) showthat regulations and the media are important coer-cive pressures that move firms towards sustainabledevelopment when the issue is first recognized. Itis important for the firm to protect organizationalperformance by showing commitment to sustain-able development and developing appropriate insti-tutional relationships in the early years when insti-tutional pressures are high (Oliver, 1997a).

In early years, some firms may also see theopportunity to generate rents from resources andcapabilities because of imperfectly competitivestrategic factor markets (Barney, 1986; Teeceet al., 1997) created by the ambiguity of the mean-ing and impact of sustainable development. If thethree principles of sustainable development arecongruent with the firm’s existing cultural normsand values, firms will likely be open to sustainabledevelopment. However, not all firms will agree onthe full value of the innovation, so not all firmswill commit to it. Some firms will aggressivelyinnovate and capitalize on the rewards of sustain-able development. Others will wait until there isless uncertainty, even if they have the requisiteresources and capabilities on which to build. Andthere will be other organizations that lack the orga-nizational slack to commit to sustainable develop-ment practices.

Over time, firms will imitate other firms, facili-tating the institutionalization of sustainable devel-opment. Organizational and societal fields willbecome interconnected and their boundaries blur-red through advances in technology, globaliza-tion and professionalization (Jennings and Zand-bergen, 1995; Scott and Meyer, 1991). As orga-nizational and societal fields become more inter-connected, normative and mimetic pressures help


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to diffuse norms and integrate corporate prac-tices. Firms will mimic each other in order toreduce uncertainty and to capture the economicrents created by their competitors (Jennings andZandbergen, 1995). The ambiguity of the meaning,measurement, and impact of sustainable develop-ment is reduced as the concept gains greater objec-tivity and exteriority through the discourse andbehaviors of social actors. With objectivity andexteriority comes a taken-for-grantedness whichfurther enhances institutional processes (Tolbertand Zucker, 1996).

Movement towards the shared understanding ofsustainable development will reveal competitiveopportunities (Hoffman, 1999). The opportunity todifferentiate products based on valued dimensionsand to build corporate reputations will becomemore evident as stakeholders improve their under-standing of sustainable development. As nationstates impose tighter and more complex regula-tions, particularly with the depletion of their nat-ural resources, a firm’s international experiencewill become helpful in seeking sustainable devel-opment. Natural resources will become scarcer insupply, which may lead to higher prices for goodssuch as energy, paper, metals, and other commodi-ties. As prices increase, firms with slack resourceswill be able to develop resources and capabil-ities that are unique and imitable, because notall firms will have slack resources. Rent-earningresources and capabilities and escalating institu-tional concerns are self-reinforcing and interre-lated. By responding to both the resource-basedand institutional environments and by building therelationships that are stimulated through sustain-able development, firms may see the opportunity toenhance their organizational performance (Oliver,1997a). Based on these arguments, I predict thefollowing:

Hypothesis 7a: Fines and penalties and mediaattention will be of declining importance inexplaining a corporate sustainable developmentover time.

Hypothesis 7b: Mimicry will be of increasingimportance in explaining corporate sustainabledevelopment over time.

Hypothesis 7c: Resource-based variables willexplain corporate sustainable development inboth early and later time periods.

METHODS

Sample

The sample was drawn from Canada’s forestry,mining, and oil and gas industries for two reasons.First, I selected industries in which corporate sus-tainable development was relatively high in orderto generate a non-zero dependent variable. Priorresearch indicates that firms in visibly pollutingsectors such as the primary producing industriesare responsive to environmental issues (Bansal andRoth, 2000; Bowen, 2000). Second, the clusterof industries needed to be limited because prac-tices associated with sustainable development areoften context-specific; yet there needed to be alarge enough number of industries from which todraw a sufficiently large sample and allow variancein the dependent variable. The industries includedhere were considered relatively similar to eachother by Natural Resources Canada (1996) becauseof their orientation to primary goods extraction,heavy operating costs, the risks their activities poseto the natural environment, and their level of mediascrutiny.

Restricting the sample to these three indus-tries may limit the generalizability of the findings.Firms in the primary goods-producing industriesare older, more capital-intensive, and more vis-ible than firms in the manufacturing or servicessectors. As a result, they are more likely to experi-ence institutional pressures and find resource-basedopportunities in sustainable development practices.The restricted sample limits the generalizabilityof the findings in a number of ways. First, theoperationalization of the dependent variable wasinduced through the sample, so conceptions ofsustainable development may differ in other indus-tries. Second, the independent variables may dif-fer based on the industry sampled. For exam-ple, capital management capabilities will likelybe of less importance in industries that are lesscapital-intensive. The dependent variable, model,and findings should not be generalized withoutdue consideration of these limitations. However, arestricted sample does add more power to the find-ings, because uncovering findings in a sample inwhich the variance in the independent variables isrestricted is more difficult than when the varianceis large.

Following the lead of Tolbert and Zucker (1983),4 years of panel data (in this case: 1986, 1989,



1992, 1995) were included to assess changes incorporate sustainable development. The earliestyear was chosen because it preceded the year thatsustainable development was popularized by thefirst UNCED conference and the Montreal Proto-col. Early discussions with forestry officials indi-cated that there was little awareness of sustainabledevelopment prior to 1987, and the search of arti-cles in Proquest and the Globe and Mail revealedonly one mention of sustainable development priorto 1986. The final year of analysis, 1995, was thelast year for which all companies completed anannual report during the data collection period.

Only publicly traded firms were sampledbecause annual reports were used as a data source.The final sample was formed by the number ofcompanies for which a full set of annual reportsexisted from 1986, 1989, 1992, and 1995 in thethree sectors. There were 45 companies in total.The average firm age in 1995 was 39 years. Theoldest firm was in the forestry industry and hadbeen operating for 52 years. The youngest firm inthe sample was in the oil and gas industry, operat-ing for 29 years. The average firm size in 1995 wasCanadian $1.5 billion assets, the largest of whichwas an oil and gas firm with Canadian $2.3 billionin assets.

Dependent variable

Corporate sustainable development

To operationalize corporate sustainable develop-ment, a set of items that described the variablewas required. The items needed to be groundedin theory and relevant to the firms in the sampleduring the research period. A three-step processwas developed to achieve these objectives. In thefirst step, sustainable development was defined,as shown in the first full section of this paper,based on a review of academic and practitioner-oriented literature in the area (cf. Gladwin et al.,1995; Hart, 1995; IISD, 1992; Pearce et al., 1989;Schmidheiny, 1992a; WCED, 1987).

In the second step, a comprehensive list of itemsthat characterize corporate sustainable develop-ment was developed by interviewing practitionersand by reviewing the annual reports of compa-nies in the sample. Open-ended, semi-structuredinterviews were conducted in 1995 and 1996 withthe Chief Foresters of eight of the nine largestforestry companies in Canada and representa-tives of three forestry industry organizations in

British Columbia. Directors and Vice Presidentsof the environmental, health and safety depart-ments of two mining companies and two oil andgas companies were later interviewed to general-ize the items to the entire sample. Respondentswere asked to define sustainable development,describe how sustainable development had affectedtheir company and industry, and provide reasonsfor why their organization committed to sustain-able development. The interviews were not audiorecorded because the topic may have been sensi-tive to interviewees; however, detailed notes weretaken during the interview and transcribed immedi-ately afterwards. Over 100 pages of single-spaced,typed notes were accumulated. Almost all inter-views exceeded the allotted 1.5 hours. The inter-view transcripts were then coded independently bythe author and by a researcher unfamiliar withthe hypotheses, as recommended by Niskala andPretes (1995), to develop a list of items that defineand explain corporate sustainable development.

To further add to the list of items that oper-ationalize corporate sustainable development, theauthor and an independent researcher not famil-iar with the hypotheses generated a list of itemsinductively from a sample of the annual reports.Each researcher independently analyzed 24 annualreports: two reports in each sector for each of thefour panels. In this analysis, the researcher lookedfor examples of organizational practices that wereconsistent with corporate sustainable development.Any activity identified by either coder that wasconsistent with the three principles of sustainabledevelopment was included in the list. Activitiesthat fell within the definition of one principle ofsustainable development, but seemingly inconsis-tent with either of the other two, were excluded.For example, value creation activities could notcome with an obvious environmental or social cost.Given that the two lists were generated indepen-dently, many of the items used different words torefer to the same items. It was important, then,to develop a single list of items that representedcorporate sustainable development.

Following the lead of O’Reilly, Chatman, andCaldwell (1991) in their development of a listof organizational values, the list of items iden-tified by the two coders was pared down basedon the four following criteria: (1) generality—theitem needed to apply to most firms indepen-dent of the product, industry, size, or country;(2) discriminability—the item was unique and fit


206 P. Bansal

more clearly into one category than the others;(3) readability—the item was easy to understand;(4) non-redundancy—the item could not be sub-stituted with another item. Seven doctoral studentswith experience in general management researchwere provided with the definition of sustainabledevelopment and its three principles and askedto screen the list according to these four crite-ria. The students suggested that some items bedeleted if they overlapped with other items, rec-ommended edits to some items that were not easyto understand, and flagged items that covered morethan one sustainable development principle. Basedon their suggestions, several of the items werechanged.

In the third step, the degree to which the itemsreliably reflected the three principles for sustain-able development was tested. To do so, the assis-tance of six researchers in the area of corpo-rate sustainable development was solicited. Theseresearchers were provided with the definition ofsustainable development developed in step oneand the randomized list of items developed instep two. Each researcher was asked to completethe following task: ‘Please read the three-page

definition of sustainable development that is beingused for this research project. For each item inthe Table, please assign an EI, EP, or SE toreflect environmental integrity; economic prosper-ity, or social equity respectively. Each item can beassigned only one code. If you believe there areany missing items, please write them in.’ For all ofthe items, at least four judges agreed on the code.I used Anderson and Gerbing’s (1991) measure ofsubstantive validity to test whether the items weretheoretically connected to the construct. All itemsmet the condition. The list of the final items usedto define corporate sustainable development andtheir associated criteria are provided in Table 1.

To calculate the score for sustainable develop-ment, the following calculation was used. Since allthree principles represented necessary conditionsfor sustainable development, for a firm to have acorporate sustainable development score of greaterthan zero at least one item in each of three princi-ples had to be identified in the company’s annualreport. The total number of items mentioned inthe annual report was summed in each category.Given that the final number of items within eachcategory could be considered arbitrary, the number

Table 1. Codes describing the principles of sustainable development

Environmental integrity1. Mined/manufactured products that have a less environmentally harmful impact than in previous years or than

its competitors2. Mined/manufactured products with less environmentally damaging inputs than in previous years or than its

competitors3. Chose inputs from sources that are remediated or replenished4. Reduced environmental impacts of production processes or eliminated environmentally damaging processes5. Eliminated or reduced operations in environmentally sensitive locations6. Attempted to reduce likelihood of environmental accidents through process improvements7. Reduced waste by streamlining processes8. Used waste as inputs for own processes9. Disposed waste responsibly

10. Handled or stored toxic waste responsibly

Economic prosperity1. Worked with government officials to protect the company’s interests2. Reduced costs of inputs for same level of outputs3. Reduced costs for waste management for same level of outputs4. Differentiated the process or product based on the marketing efforts of the process/product’s environmental

performance5. Sold waste product for revenue6. Created spin-off technologies that could be profitably applied to other areas of the business

Social equity1. Considered interests of stakeholders in investment decisions by creating a formal dialogue2. Communicated the firm’s environmental impacts and risks to the general public3. Improved employee or community health and safety4. Protected claims and rights of aboriginal peoples or local community5. Showed concern for the visual aspects of the firm’s facilities and operations6. Recognized and acted on the need to fund local community initiatives



of reported items for each principle was divided bythe total number of possible items for that princi-ple. For example, if a firm satisfied five of the tenitems for environmental integrity, one of the sixitems for economic prosperity and two of the sixitems for social equity, its corporate sustainabledevelopment score would be (5/10 + 1/6 + 1/6).

Data were extracted from the annual reportsof each company in the target year. All reportswere coded by a single rater. To test for relia-bility, a random selection of 24 annual reportswas coded by an independent researcher. Bothresearchers were familiar with the definition of sus-tainable development because it would improvethe integrity of the coding process and help toalign perceptions, but were not familiar with thehypotheses to avoid coding bias. Each factor wascoded as ‘0’ or ‘1,’ where ‘0’ represents noindication of the item and ‘1’ represents somepresence. The codes were compared and inter-rater reliability was satisfactory based on Cohen’skappa (0.79), so only the codes from the pri-mary coder were used to retain consistency incodes.

The use of annual report data to assess thepresence of an issue has been criticized on twogrounds: annual reports reflect impression man-agement rather than accurate disclosure (McGuire,Sundgren, and Scheneeweis, 1988; Salancik andMeindl, 1984; Wiseman, 1982), and there may beinconsistencies in the disclosure (Ingram and Fra-zier, 1980). In spite of these weaknesses, annualreports provided the most reliable data source forthis study for several reasons. First, assessmentsof social responsibility from annual reports havebeen shown to be consistent with the evalua-tions by third-party agencies (Guthrie and Parker,1989; Meek, Roberts, and Gray, 1995; Niskala andPretes, 1995). Second, annual reports are unob-trusive, so that firms cannot engage in research-specific posturing as they can with interviews orsurveys. Finally, annual reports provide an oppor-tunity to collect historical, time-sensitive data thatare only otherwise available through employeerecall, which is considered unreliable when evalu-ating the timing of an adoption decision (Dobbinet al., 1988; Van de Ven and Huber, 1990). AsMiller and Friesen (1980) write, ‘The only way toperform longitudinal research on many organiza-tions is through detailed, published reports con-taining continuous history.’

Independent variables

To identify the key independent variables, Iapplied grounded theory, which accommodatesprimary data and extant theory (Glaser and Strauss,1967; Strauss and Corbin, 1990). After reviewingrelevant research in sustainable development, Ianalyzed the comments made in the interviewsdescribed above and reconciled those commentswith what was reported in existing research. Aresearcher not familiar with the resource-basedview and institutional theory coded the interviewnotes for potential explanatory factors. She alsocounted the occurrences that each of those factorswas mentioned in the interviews, and retained theseven most frequently mentioned factors. Then, Ireviewed the interview notes and reworked thesefactors and relabeled them so that they wereconsistent with the existing theory. This two-stepprocess helped to ensure that theoretical biaseswere not introduced into the data analysis, butachieved consistency with received theory. Table 2illustrates how these variables were articulated byinterviewees.

International experience

Two measures were used for international expe-rience for each panel: the number of countriesin which the firm operates and percentage offoreign sales relative to total sales. The Cana-dian Institute of Chartered Accountants Handbookrequires that firms report all significant interna-tional sales by geographic segments based on thesimilarity of factors relevant to their business.The data were right censored at 10 countries,because the reliability of the data for larger num-bers was questionable. For foreign sales, the per-centage of sales outside of Canada was dividedby the total sales as reported in the segment dataof the financial statements. Following the leadof Sanders and Carpenter (1998), each variablewas normalized to a value between zero and oneand summed to derive a single variable for inter-national experience with a theoretical maximumvalue of two.

Capital management capabilities

Capital intensity was used to proxy capital man-agement capabilities. Capital intensity was mea-sured by the value of property plant and equipment


208 P. Bansal

Table 2. Illustrative comments supporting independent variables

International experienceIn Australia we are really trying to figure out how to do third-party environmental audits. It is difficult to manage

each of our mines differently, so we are trying to reach some sort of common standard.We have a VP of community development at our site in Peru and we learned from that experience that we have

to be involved with the community. We have a community consultation group on this project in Peru and it hashelped us to develop better practices here.

We use the same process internationally as in Canada.We must meet standards from the United States and here.

Capital management capabilitiesThere have been radical changes in timber harvesting due to our capital and technology investments.From a capital investment perspective, we have had to make investments that are not necessarily wise, but they

are what the public demands.A small machine from Scandinavia is more sensitive to the environment and more productive, so we have tried to

move to this.We have pressure put on us to maintain jobs but we need technology to move towards sustainable development.

Organizational slackPeople just react because we are so busy, but the ground work comes from the firms that know what is going on

and champion a project.The firm is asked to pay for benefits reaped by the public.In the long term, sustainable policies provide a competitive advantage, but with good practices there may be

losses in the short term.Environmental policies and practices take up a lot of time.

Fines and penaltiesThe threat of prosecution is an incentive to be conscious of the environment.The government has imposed new legislation rather than worked with industry.Regulation is the basic main driver (not the case for all companies, especially small companies).Legislation is the biggest driver.

MimicryThe Forest Resource Commission (FRC) recognized the problems and issues facing the forest industry and in

1991 composed a report that represented all firms.We are the same as everyone else, we basically just to do it, not because we understand what we are doing or

because it is beneficial to us.Petrocan is now following us with respect to working with environmental groups.For the global mining initiative, a number of CEOs got together and said that as an industry they saw a push

towards becoming sustainable.

Media attentionOne bad move can develop enough negative publicity that can really hurt you.The media has had a large impact because the main story is conflict.We are very aware of the media and don’t always get the play that we would like out of things.There has also been a huge increase in public knowledge and perception of what is going on in the forests.

after depreciation divided by sales. This mirrorsthe choice of capital intensity measures used bySharma and Kesner (1996), Lubatkin and Chatter-jee (1994), and D’Aveni and Ilinitch (1992). Thefourth root of capital intensity was taken to gener-ate a normal distribution.

Organizational slack

The measure of organizational slack is used to rec-ognize extra liquidity that could be invested insustainable development activities. Current assetsover current liabilities was used in the analysis

for each panel, which has also been used bySchuler (1996). The inverse of organizational slackwas used because it yielded the most normaldistribution.

Fines and penalties

This variable included two components that weresummed. The first component was the numberof times that the firm incurred a fine or penaltyunder the Canadian Environmental Protection Act(CEPA) and the Canadian Fisheries Act (CFA).Fines imposed in year t − 1 and t were included



because both would likely influence corporate sus-tainable development in year t . The second compo-nent was the number of fines or penalties disclosedin the annual report that were not covered underCEPA and CFA.

Mimicry

This variable was coded ‘1’ if the followingconditions were met: the firm conducted an envi-ronmental audit in that year; the firm had not beenassigned a ‘1’ in the past; and over 20 percent offirms in the prior panel for the industry conductedan environmental audit. The 20 percent rule wasapplied because Fligstein (1985) showed that firmswere more likely to adopt a multidivisional formonce industry adoption rates surpassed 20 percent.An environmental audit could include a formalor informal audit, conducted by an internal auditgroup or a consultant. Data were extracted fromannual reports.

Media attention

Media attention incorporated two measures: (1) thetotal number of articles that included a statementabout the company and their environmental issues,which was labeled ‘total media’; and (2) the num-ber of articles about the company with a nega-tive aspect of their environmental practices, whichwas labeled ‘negative media.’ The articles wereextracted from the computerized databases of twoof Canada’s national newspapers: the Globe andMail and the Financial Post. The search usedkeywords that included the company name andsignals for sustainable development (sustainabledevelopment, environmental, pollution, and toxic)for articles in the year prior to and the year ofthe panel. All relevant articles were included intotal media. Among the relevant articles, thosethat had a negative orientation were identified.Eighty of the articles were coded by a differ-ent researcher and an acceptable Cohen’s kappacoefficient of 0.87 was obtained for negativemedia. In total, 1343 articles were extracted, ofwhich 380 were considered negative. As the dis-tributions of both measures were highly skewed,with many firms with no articles, ‘1’ was addedto both measures, the natural log of each wastaken, and then summed to produce the final vari-able.

Control variables

Firm size

Larger firms tend to be more visible and attractmore media and stakeholder scrutiny, which influ-ences both their legitimacy and their reputation(Fombrun, 1996; Suchman, 1995). Given that bothresource-based and institutional processes workthrough firm size, it was treated as a control vari-able. The natural log of total assets was used forcompany size. Transforming total assets to the logof total assets was used to achieve a simple linearstructure, constant variance, and normal distribu-tion (Cox and Snell, 1981).

Financial performance

Prior researchers have argued that environmentalmanagement and corporate social responsibilityare related to financial performance (Klassen andMcLaughlin, 1996; McGuire et al., 1988). As aresult, return on equity was used as a proxy offinancial performance.

Data analysis

The data included 45 firms over four panels,allowing the use of time series cross-sectional dataanalysis techniques. This methodology is superiorto analyzing cross-sectional data because it con-trols for the confounding effect of time-invariantand company-specific variables, such as organiza-tional age, which are omitted from the regressionmodel, (Wiersema and Bowen, 1997). Prior to test-ing the model, I visually analyzed all the variablesand their bivariate relationships to ensure that therewere no anomalies in the data. To test the model,the software package STATA was used. The resultsof the Hausman specification test suggested thata fixed-effects model was appropriate. Hypothe-ses 1–6 were tested using a single model withall of the independent and control variables topredict corporate sustainable development. To testHypotheses 7a, 7b, and 7c, a linear trend variablewas introduced with values from one to four to rep-resent each contiguous panel. To test the hypothe-ses, the coefficients of the interaction between thehypothesized variable and the linear trend variablewere evaluated.


210 P. Bansal

RESULTS

Table 3 provides the means, standard deviations,and correlations for the dependent and indepen-dent variables. The descriptive statistics have beenreported for each panel because the relatedness ofthe variables over time exaggerates the bivariatecorrelations if the data are pooled.

Table 4 reports descriptive statistics for corpo-rate sustainable development over the researchperiod for each industry and for each of the sus-tainable development principles. The mean of cor-porate sustainable development was significantlydifferent (F = 11.88; p < 0.001) in each paneland increasing among the four panels. It is not sur-prising that sustainable development was increas-ing over time, given the inherent bias introducedby anchoring the operationalization of this depen-dent variable in the final panel. Corporate sus-tainable development was also significantly differ-ent over time among forestry and mining firms(F = 11.89 and F = 6.46 respectively), but thechanges were less pronounced in the oil and gassector (F = 1.48). Firms in the oil and gas indus-try appear to have lagged behind mining firmsand the forestry firms, the latter of which had thehighest level of corporate sustainable developmentin 1995. Table 4 also shows that environmentalintegrity and economic prosperity increased from1986 to 1992 but decreased slightly from 1992to 1995, which suggests that corporate sustainabledevelopment was being fueled by commitment tothe principle of social equity.

Table 5 speaks to the hypotheses. Of theresource-based variables, only international expe-rience was significant and positive as predicted byHypothesis 1. Although the coefficients for capitalmanagement capabilities and organizational slackwere positive as predicted in Hypotheses 2 and 3respectively, the coefficients were non-significant.Among the institutional variables, mimicry andmedia attention were significant and positive aspredicted by Hypotheses 5 and 6 respectively.Finally, although the coefficient for fines andpenalties was positive as predicted by Hypothesis4, it was not significant. In terms of control vari-ables, this study confirmed the belief that largerfirms are more likely to commit to sustainabledevelopment than smaller firms. Financial perfor-mance, however, was significant and negativelyrelated to corporate sustainable development.

Hypotheses 7a, 7b, and 7c addressed the time-related effects of the independent variables. Aspredicted in Hypothesis 7a, the main effect formedia was significant and its trend over timewas negative, suggesting a significantly decreas-ing impact of media on corporate sustainabledevelopment over time. Both the main effect andtime-related effects of fines and penalties werenon-significant. The coefficient for the time-relatedeffect of mimicry was non-significant. Finally, theonly resource-based variable that exhibited changeover time was organizational slack; its impor-tance declined over time. There were no significantchanges in the influence of international experienceand capital management capabilities over time.These findings partially support Hypotheses 7a, 7b,and 7c.

DISCUSSION AND CONCLUSIONS

This study aimed to explain why firms committo sustainable development and the reasons thatcommitment changes over time. In doing so, thispaper identified how the three principles of sustain-able development were incorporated by Canadianoil and gas, forestry, and mining firms from 1986to 1995. To operationalize the principles, inter-views of industry members involved with sustain-able development were conducted and companyannual reports were reviewed. The data revealedthat corporate sustainable development increasedfrom 1986 to 1995, fuelled primarily by greaterconcern for social equity especially in later timeperiods. This suggests that firm commitment tosocial equity developed later than their commit-ment to economic prosperity and environmentalintegrity.

As expected, the study also showed thatinternational experience, media pressure, mimicry,and organizational size were positively related tocorporate sustainable development. Surprisingly,return on equity was negatively related tothe dependent variable, which is counter tothe results of prior research (e.g., Russo andFouts, 1997; Waddock and Graves, 1997). Thedirection of causality cannot be deduced fromthis analysis; in other words, it is not clear ifcorporate sustainable development causes poorfirm performance or firms performing poorly aremore likely to commit to sustainable development.Prior research into the relationship between



Tabl

e3.

Des

crip

tive

stat

istic

san

dPe

arso

nco

rrel

atio

nsa

Pool

ed(a

llye

ars)

1986

1989

Cor

rela

tions

(198

6ab

ove

diag

onal

,19

89be

low

)

Var

iabl

esM

ean

S.D

.M

ean

S.D

.M

ean

S.D

.1

23

45

6c7

89

Sust

aina

ble

deve

lopm

ent

4.73

4.37

1.94

2.33

4.42

4.00

0.34

∗−0

.42∗∗

−0.3

6∗−0

.08

00.

62∗∗

0.56

∗∗−0

.05

Inte

rnat

iona

lex

perien

ce0.

420.

460.

360.

420.

410.

470.

56∗∗

−0.4

8∗∗−0

.43∗∗

0.16

00.

130.

14−0

.06

Cap

italm

gtca

pabi

litie

s1.

070.

311.

100.

381.

090.

32−0

.41∗∗

−0.2

9†0.

64∗∗

−0.0

80

−0.2

3−0

.50∗∗

−0.2

6O

rgan

izat

iona

lsl

ack

0.76

0.44

0.74

0.42

0.80

0.51

−0.1

5−0

.15

0.37

∗−0

.03

0−0

.33∗

−0.5

1∗∗−0

.19

Fine

san

dpe

nalti

es0.

110.

340.

020.

150.

110.

380.

33∗

0.06

−0.2

3−0

.11

0−0

.10

0.02

0.00

Mim

icry

b,c

0.13

0.34

00

0.09

0.29

0.23

−0.2

2−0

.01

0.14

0.32

∗0

00

Med

ia1.

651.

991.

171.

811.

912.

280.

69∗∗

0.18

−0.2

2−0

.07

0.33

∗0.

52∗∗

0.66

∗∗−0

.08

Firm

size

6.25

1.74

5.64

2.03

6.16

1.81

0.56

∗∗0.

24−0

.09

0.02

0.14

0.41

∗∗0.

69∗∗

0.03

Fina

ncia

lpe

rfor

man

ce0.

330.

960.

471.

330.

450.

940.

040.

14−0

.13

−0.1

3−0

.11

−0.0

9−0

.07

0.21

1992

1995

Cor

rela

tions

(199

2ab

ove

diag

onal

,19

95be

low

)

Var

iabl

esM

ean

S.D

.M

ean

S.D

.1

23

45

6c7

89

Sust

aina

ble

deve

lopm

ent

6.00

4.56

6.55

4.73

0.43

∗∗−0

.24

−0.2

8†0.

170.

40∗∗

0.53

∗∗0.

48∗∗

−0.1

2In

tern

atio

nalex

perien

ce0.

430.

470.

470.

500.

61∗∗

−0.0

9−0

.31∗

−0.0

50.

37∗

0.24

0.27

†−0

.15

Cap

italm

gtca

pabi

litie

s1.

060.

271.

040.

27−0

.23

−0.1

60.

38∗∗

−0.0

90.

00−0

.15

0.20

0.21

Org

aniz

atio

nalsl

ack

0.80

0.43

0.69

0.38

−0.3

0∗∗−0

.12

0.59

∗∗0.

10−0

.15

−0.3

1∗−0

.24

0.00

Fine

san

dpe

nalti

es0.

160.

420.

130.

340.

28†

0.29

∗−0

.17

−0.0

9−0

.12

0.15

0.22

−0.0

6M

imic

ryb,

c0.

290.

460.

150.

37−0

.05

0.02

0.12

0.11

0.01

0.21

0.36

∗0.

17M

edia

1.64

1.83

1.89

1.98

0.24

0.13

−0.2

0−0

.06

0.44

∗∗−0

.08

0.68

∗∗−0

.20

Firm

size

6.37

1.54

6.83

1.34

0.39

∗∗0.

27†

0.08

0.12

0.36

−0.1

10.

57∗∗

0.12

Fina

ncia

lpe

rfor

man

ce0.

170.

900.

220.

490.

30∗

0.08

−0.1

0−0

.05

0.11

0.18

0.15

0.18

an

=18

0;†p

<0.

10;

∗p

<0.

05;

∗∗p

<0.

01bC

ateg

oric

alva

riab

le,so

mea

nsan

dS.

D.no

tsh

own.

cZer

o(c

onst

ant)

in19

86.


212 P. Bansal

Table 4. Descriptive statistics of corporate sustainable development over time

Pooled 1986 1989 1992 1995 ANOVA F

Pooled (n) 180 45 45 45 45Mean 4.73 1.94 4.42 6.00 6.55 11.88∗∗∗

S.D. 4.37 2.33 4.00 4.56 4.73Range 0–17.11 0–8.80 0–14.67 0–14.91 0–17.11

By industryForestry (n) 60 15 15 15 15

Mean 7.35 3.05 7.61 9.21 9.55 11.89∗∗∗

S.D. 4.19 1.99 3.38 3.21 4.42Range 0–17.11 0–6.60 1.96–14.67 3.91–14.91 2.69–17.11

Mining (n) 48 12 12 12 12Mean 4.36 1.30 2.93 6.15 7.07 6.46∗∗∗

S.D. 4.28 2.09 2.88 4.97 4.12Range 0–13.44 0–6.36 0–7.09 0–13.44 1.22–12.22

Oil & Gas (n) 72 18 18 18 18Mean 2.78 1.45 2.74 3.22 3.71 1.48S.D. 3.41 2.51 3.61 3.49 3.75Range 0–14.42 0–8.80 0–9.53 0–10.51 0–14.42

By principleEnvironmental integrity

Mean 2.15 0.91 1.80 2.96 2.93 11.65∗∗∗

S.D. 2.10 1.22 1.84 2.45 2.04Range 0–7 0–4 0–5 0–7 0–7

Economic prosperityMean 1.03 0.40 1.04 1.36 1.31 6.28∗∗∗

S.D. 1.23 0.72 1.17 1.38 1.33Range 0–5 0–2 0–4 0–5 0–5

Social equityMean 1.56 0.64 1.47 1.82 2.31 9.40∗∗∗

S.D. 1.64 1.00 1.53 1.54 1.93Range 0–6 0–4 0–5 0–5 0–6

†p < 0.10; ∗ p < 0.05; ∗∗ p < 0.01; ∗∗∗ p < 0.001

corporate environmental performance, corporatesocial performance, and financial performance hasshown mixed results, especially when the elementsof each of these measures are deconstructed.For example, in the area corporate environmentalperformance, Klassen and Whybark (1999) foundthat pollution prevention was positively relatedto manufacturing performance, while pollutioncontrol was negatively related. Similarly, in thearea of corporate social performance, Hillman andKeim (2001) found that stakeholder managementactivities were positively related to market-valueadded, whereas social issue participation wasnegatively related. The negative relationshipbetween return on equity and corporate sustainabledevelopment may be because of the compositenature of the dependent variable, or it may reflectthe short-term costs of investing in corporatesustainable development.

In addition to the pooled cross-sectional analysis,this research also investigated the time-relatedeffects of the independent variables on corporatesustainable development. Here, institutional vari-ables were integrated with resource-based viewvariables to explain corporate sustainable develop-ment. This study found that the media and organi-zational slack decreased in importance over time.These findings are important because they sug-gest that institutional pressures, such as the media,can be present in early periods but its importancemay erode over time. Similarly, it was interest-ing to note that organizational slack was relativelyimportant in early periods, when firms are accom-modating new changes in respect to sustainabledevelopment, but once the firm had moved alongthis path organizational slack was increasingly lessimportant. It is also worth noting that there wereno significant time-related effects for international



Table 5. Regression analysis

Variables Main effects Time-relatedeffects

Independent variablesInternational experience 4.84∗∗ 3.07∗∗

Capital management capabilities −0.02 −0.21Organizational slack 0.40 0.37Fines and penalties 0.27 0.12Mimicry 0.44† 0.43Media 1.46∗∗ 1.37∗∗

ControlsFirm size 1.58∗∗ −0.03Financial performance −0.51† −0.24Linear trend 0.97∗∗

Time-related effectsInternational experience × linear trend 0.34Capital management capabilities × linear

trend0.21

Organizational slack × linear trend −0.75∗∗

Fines and penalties × linear trend 0.12Mimicry × linear trend −0.31Media × linear trend −0.43†R2 0.42 0.49F 11.71∗∗ 10.23∗∗

n = 180; †p < 0.10; ∗ p < 0.05; ∗∗ p < 0.01; ∗∗∗ p < 0.001

experience, suggesting that this variable is relevantin both early and later time periods.

These results have important implications forresearch in organizations and the natural environ-ment, and for the resource-based view and institu-tional theory. For research on organizations and thenatural environment, this study indicates that bothresource-based and institutional arguments influ-ence corporate sustainable development. In partic-ular, the media and mimicry were closely relatedto the corporate sustainable development. Of theresource-based drivers, only international experi-ence was important. Most research in the areaof sustainable development has taken either aninstitutional (Hoffman, 1999; Jennings and Zand-bergen, 1995; Prakash, 1999) or a resource-basedposition (e.g., Hart, 1995; Klassen and Whybark,1999; Russo and Fouts, 1997). This study renewsthe call by Oliver (1997b) for research that inte-grates both perspectives.

These findings are also important in light ofprevious research in institutional theory, which hasfound remarkably consistent results in the diffusionof new administrative forms: economic or techni-cal explanations are more powerful in explainingearly adoption, and are later supplanted by insti-tutional explanations. Early adopters recognize the

improvements to performance that can be capturedthrough the innovation. After a sufficient numberof firms adopt the innovation, the practice becomesaccepted as an emerging norm. Through mimetic,coercive, and normative institutional pressures,remaining firms adopt the norm leading to its insti-tutionalization. These results have been supportedby studies researching civil service reforms (Tol-bert and Zucker, 1983), the multidivisional form(Fligstein, 1985; Mahajan, Sharma, and Bettis,1988; Palmer, Jennings, and Xhou, 1993), per-sonnel programs (Baron, Dobbin, and Jennings,1986; Edelman, 1992), long-term incentive plansfor CEOs (Westphal and Zajac, 1994), and totalquality management (Westphal and Zajac, 1994).This study, however, raises questions as to whetherthese findings necessarily apply to corporate sus-tainable development.

The findings presented here suggest that institu-tional pressures can exist in early years and thattheir role in the organizational change process,as in the case of the media, can be of decliningimportance. Institutional pressures may have beenimportant in early years because of the ambigu-ity associated with the meaning, measurement, andimpact of sustainable development and because ofits high externalities. The visual impact and high


214 P. Bansal

externalities of clear-cut forests, open-pit mining,and oil spills generate greater public concern thando the multidivisional form, personnel structures,or civil service reform. Further, resource-basedopportunities may exist throughout time partlybecause of the ambiguity associated with sustain-able development and the difficulty of measuringits impact on firms. Some firms will take advan-tage of the imperfectly competitive strategic fac-tor markets created by this ambiguity and impactto generate rents from resources and capabilities.As sustainable development becomes increasinglyinstitutionalized, the resource-based opportunitiesbecome more transparent. I found post hoc sup-port for this finding in the interview transcripts inthe following statement made by a forester: ‘Wehave been forced to implement certain practicesand technologies for environmental reasons thatwe were resistant to; however over time we havelearned that some of these practices are actuallybetter for the environment and they pay off eco-nomically.’ Cairncross (1995) and Schmidheiny(1992b) write that businesses are often surprisedto discover the financial rewards pursuant withenvironmental management activities. This study,therefore, calls for further research into the rela-tive timing of the resource-based and institutionalexplanations when administrative innovations areambiguously defined, firm outcomes are unknown,and social involvement is significant.

This study has several limitations. First, theremay have been measurement issues. I attemptedto address these measurement issues by tacklingthree different measures of capital intensity andorganizational slack. However, all efforts to findmeasures that were significant failed. In the caseof fines and penalties, the measurement issues weremore difficult to overcome. Given that the reg-ulations enforcing sustainable development wererelatively new and infrequently enforced at thetime of this study, there was low variability in thismeasure. Fines and penalties in the Canadian con-text were not heavily imposed during the researchperiod, so non-significant results are not entirelysurprising and may reveal an empirical limitation,rather than a theoretical one. If this interpretationof the non-finding is correct, it is worth notingthat fines and penalties may have little influenceon corporate sustainable development if they areused only occasionally.

Second, important resource-based and institu-tional variables that explain corporate sustainable

development may have been omitted, in otherwords, this model may be under-specified. Inan effort to anticipate this potential weakness,exploratory research was used to identify the rel-evant variables through the interviews, corporatedocuments, and the extension of prior theory.However, managers may not have been willing todisclose the reasons for committing to sustainabledevelopment, or the reasons may not even be clearto them. Similarly, while prior theory may suggestthe existence of the relationships investigated here,prior studies have primarily evaluated antecedentsafter the decision was made and was subject topost hoc rationalization.

Finally, this research also found relatively fewtime-related effects, and none regarding capitalmanagement capabilities, international experience,and mimicry. This may be because this studyincluded data from only four time periods. Had thetime period been longer, more significant findingsmay have emerged. It is important to reinforcethe earlier point, however, that time series cross-sectional data analysis presents a higher hurdle foruncovering significant findings than strictly cross-sectional data analysis.

This study raises important avenues for pursu-ing future research. Speaking to the last limitationfirst, it would be worthwhile for future researchersto explore this analysis over a longer period toreveal more time-related effects. Also, these find-ings reveal the opportunity, arguably the need,to integrate institutional and resource-based viewarguments to explain corporate sustainable devel-opment. Given that researchers tend to come fromone tradition or the other, important opportuni-ties exist to identify the ways in which the twoperspectives cross-fertilize each other. This studyhas also highlighted the opportunity to refine theview that technical or resource-based view expla-nations are ultimately supplanted by institutionalarguments. In fact, there is likely a complex inter-active relationship between the two sets of expla-nations, particularly when the innovation beingexplored is defined ambiguously, its adoption isuncertain, and high externalities exist. Finally, thisstudy anchored the operationalization of the depen-dent variable, corporate sustainable development,on a sample of three industries in 1995. At theoutset, I argued that the definition of sustainabledevelopment was ambiguous, and even since thisstudy was executed society’s understanding of sus-tainable development has evolved. For example,



notions of poverty alleviation, ‘selling to the bot-tom of the pyramid,’ and the rights of indigenouspeoples have emerged as important aspects of sus-tainable development. There is an opportunity forfuture researchers to provide a more general opera-tionalization of sustainable development rooted ona wider time frame and industry sample.

As corporate sustainable development becomesmore commonplace, there is an associated needto understand the forces that influence this com-mitment. It is important to understand how socialand economic processes interact in order to answerwhen and why firms commit to sustainable devel-opment. This research highlights the opportunityto investigate not only the relative importance ofinstitutional and resource-based forces, but alsohow the forces reinforce each other, and the pro-cesses by which they effect change. For example,uncovering these motivations can assist govern-ment policy-makers to determine the relative effi-cacy of different initiatives such as regulations,voluntary initiatives (e.g., ISO 14 001, EnergyStar), information disclosure (e.g., Toxics ReleaseInventory), and market mechanisms (e.g., carbontaxes). Only through such research is it possibleto develop public and organizational policies thatinfluence or shape corporate sustainable develop-ment.

ACKNOWLEDGEMENTS

I owe Jodi Evans the deepest debt for helpingto conceive this study and assist with the datacollection and analysis. Kendall Roth also helpedsubstantially by commenting on the data analysisand multiple drafts of this manuscript. The valueof Irina Brinza’s diligent research assistance alsodeserves recognition, and I would like to thank theSocial Sciences and Humanities Research Councilof Canada for funding part of this research.

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