Research Findings and Implications

This study highlights the financial and internationalization implications of environmental management practices in the context of construction firms. Given the peculiarities of construction firms and the difficulties in obtaining environmental information in the construction industry, very few studies have examined the interplay between environmental management and business performance from a firm-level perspective. This study examines the available environmental information through content analysis of firm environmental disclosures and unpacks the information with theoretical support. Through the content analysis, total 38 types of environmental management practices have been discovered. Among these coded practices, every firm in our samples reported their corporate environmental policies and about 95% reported on their environmental initiative. There are some coded items not disclosed by most of the sample firms, such as internal communication (31% reported), engage with shareholder (33% reported), and engaging with industry associations (34% reported). Through the content analysis, the study success to reveal prevalent construction practices employed by multinational construction firms. These information is useful for future work to conduct further analysis on environmental management of construction firms. This study successfully achieves the five objectives mentioned in Chapter 1. Besides, there are theoretical and managerial implications from the findings reported in Chapter 4 to Chapter 6.

7.1.1 Implications of Environmental Strategies on Internationalization

Based on RBV theory, three environmental strategies emerged from the clustering, which are reactive, preventive, and proactive in strategic environmental management. These classification is useful in delineating the competitive advantages embedded under complex configuration of bundles resources. As presented in Chapter 4, this section answers three research questions:

(i) Does environmental strategy have any influence on the internationalization of a multinational construction firm?

(ii) If environmental strategy has impacts on internationalization, in which dimension that internationalization is affected by environmental strategy?

(iii) Does the environmental strategy adopted by a firm would influence its business distribution portfolio across developed and developing regions?

In concert with previous studies that highlight entering international construction market as an impetus of environmental management (Turk, 2009; Zeng et al., 2003), this study provide empirical evidence on the relationship. The results suggest firms with higher level of strategic environmental management are associated with higher degree of internationalization, but only to an extent that firms pursuing preventive strategy would have higher degree of internationalization (DOI) than those using reactive strategy, while firms pursuing proactive strategies have limited impact on DOI. In addition, three DOI variables, RDI, NSI, and FSTS have been adopted to explore the relationship with environmental strategy. Among these three variables, NSI shown the strongest linkage with the environmental strategy, and follow by RDI, whereas FSTS is insignificantly associated. The results simply imply geographical factors are more important than investment intensity in the interplay between DOI and environmental strategy. The study admits there is inadequacy in the DOI variables used, further study is required to construct

a more meaningful and comprehensive indicator on DOI to affirm the validity of this study. Nevertheless, the study postulates environmental strategy plays a great role when a firm deploy in multiple countries. Besides, in comparison with reactive and preventive clusters, proactive firms also exhibit greater geographical portfolio focus in developed countries when compare to their deployment in developing countries. Thus, environmental strategy adopted by a firm would influence a firm’s business distribution portfolio.

In term of managerial implication for construction firms, three suggestions have been pinpointed in Chapter 4. First, construction firms that adopt reactive strategy would likely to lag behind in international expansion. Second, although the importance and demand of environmental competency towards multinational construction firm varied across their markets in developed and developing countries, environmental capability is a source of competitive advantages in the process of internationalization. Third, firms that adopt proactive strategy might not be outstanding in the scale of internationalization but they can focus on environmental sustainable business through invest more in developing environmental innovation. Besides, proactive firms can target developed countries as their main markets which impose stringent environmental regulations.

7.1.2 Implications of Environmental Management Practices on Financial Performances

Drawing upon the most commonly disclosed information found in the reporting, stepwise analysis differentiates those environmental management practices that are associated with financial performance from those that are inert, enabling comparisons as well as revealing limitations of the research. The findings provide valuable information on the environmental management practices that have been implemented and disclosed by

multinational construction firms. Alongside accounting data, environmental reports can be a reliable source for investors to interpret a firm’s condition and make informed investment decisions.

Five environmental management practices have been revealed to significantly associated with financial performances. These practices include pollution abatement on-site, environmental scanning, management systems and procedures, environmental innovation, and stakeholder engagement. Generally, the findings are concurred with RBV theory, where environmental competency is a form of competitively valuable organizational capability, that would translate competitive advantages such as cost advantages, and differentiation advantages etc, into financial profits.

With respect to short-term and long-term financial implications, this study reveals five environmental management practices associated with financial performance, but the practices present different forms of relationship. The study generally supports the view that proactive environmental management practices perform better in business. Echoing previous studies, environmental scanning, EMS (management systems and procedures) and stakeholder engagement are found to have linear positive impacts on financial performance. Nonetheless, the inverted U-shaped curvilinear relationship (pollution abatement on-site) and U-shaped curvilinear relationship (product innovation) highlight that there are optimal points of financial benefit. For pollution abatement on-site, excessive implementation can adversely impair financial performance. On the other hand, high and low innovation firms are more likely to generate greater revenue growth than moderately innovative firms. These findings can assist managers of construction firms in determining the key environmental management practices that are able to enhance their competitive edge and financial performances. In addition, firms require to focus and invest resources in these specific environmental competencies to improve their profits.

7.1.3 Implications of Moderating Effects

Stemmed on transactions costs, resource-based view, and organizational learning perspectives, this study established the importance of regional diversification as moderator in the relationship between environmental management practices and financial performances. The results partially supported regional diversification moderate the relationship between environmental management practices and financial performances.

The following findings have been observed in the study:

(i) Regional diversification negatively moderates the relationship between environmental scanning and short term financial performance ROA (Hypothesis 1a) and long term financial performance Tobin’s Q ratio (Hypothesis 1b).

(ii) Regional diversification positively moderates the relationship between process-related pollution abatement practices and ROA (Hypothesis 2)

(iii) that regional diversification negatively moderates the relationship between environmental innovation and long term financial performance, Revenue Growth (Hypothesis 3)

The above results are noted as partially supported because the interaction effects only manifested in one of the two indicators used for respective short and long term financial performances. None of the interaction terms are significant in both financial variables for the hypothesis testing. Nonetheless, internationalization manifests sophisticated influences on the environmental management practices and financial performances. Regional diversification can be either positively or negatively moderate the relationship, and it depends on whether the benefits of internationalization outweigh the costs of internationalization. Previous study highlights global contractors are found to be more proactive in environmental strategies than their local counterparts (Park and Ahn, 2012), however the study did not provide theoretical framework as well as empirical

evidence on how and why environmental management related with internationalization.

In this study, the relationships are posited to moderate by regional diversification due the cost-benefit of transactions costs, resource-based view, and organizational learning.

It is essential for managers of construction firms pay more attention to environmental competency as well as their international diversification.

Internationalization might attenuate the financial benefit of environmental management as governance costs can rise rapidly to a point at which the governance costs exceed any internalization benefits when growing number of internal transactions that increases with the number of foreign subsidiaries established by a firm (Hitt et al., 1997). Three theories are invoked in this study, for instances, transaction cost focuses on effective governance structure in the multinational transaction, RBV underscore the contribution of firm’s resources and capabilities to generate competitive advantages, and organizational learning allows construction firms to acquire new knowledge through interacting with new cultures, demographics, regulations, and technologies. Transaction cost associated with internationalization can be leveraged with competitive advantages accrued from firm’s resources, capabilities and learning effects. Therefore, construction firms must carefully monitor the costs and the benefits of environmental management practices launched in their different global market regions.