A Proactive Environmental Strategy: Analyzing the Effect of SCM Experience, Age, and Female Representation in TMTs

• Published date: 01 October 2018
• Date: 01 October 2018
• Author: Anupam Kumar,John‐Patrick Paraskevas
• DOI: http://doi.org/10.1111/jscm.12179

A PROACTIVE ENVIRONMENTAL STRATEGY: ANALYZING

THE EFFECT OF SCM EXPERIENCE, AGE, AND FEMALE

REPRESENTATION IN TMTS

ANUPAM KUMAR

Howard University

JOHN-PATRICK PARASKEVAS

Miami University

As the importance of maintaining a proactive environmental agenda gains

significance, an understanding of the impact of the characteristics of the

top management team (TMT) on environmental strategy is of critical

importance. Given the impact of environmental initiatives on the supply

chain, experience in this area can benefit decision-making in TMTs for a

proactive environmental or green strategy. Drawing on upper echelon the-

ory (UET), the theory of generativity, and prior work leveraging the

knowledge-based view (KBV), we analyze the impact of supply chain man-

agement (SCM) experience in TMTs for a proactive environmental strategy.

To further contextualize the characteristics of the TMT in the SCM context,

we include age and female representation in our analysis as important fac-

tors in setting the green agenda of a firm. The theory is tested with an

original panel dataset of 2,703 firm-year records. Measure of a proactive

environmental strategy is drawn from Kinder, Lydenberg, and Domini

(KLD) database, while TMT characteristics are derived from executive pro-

files recorded in Bloomberg. Our findings support the positive impact of

executives with SCM experience in TMTs, aging TMTs, and TMTs with

higher female representation on a proactive environmental agenda. Fur-

thermore, the results reveal that the desire for a proactive environmental

agenda in aging and in TMTs with increasing female representation can

benefit from the additional presence of SCM experience. In sum, this

study highlights the significance of female representation and age, and

makes a strong case for the importance of SCM experience in TMTs for a

proactive environmental strategy.

Keywords: top management teams; panel studies; environmental issues; diversity

issues; strategy development

INTRODUCTION

With a growing focus on the triple bottom line (Elk-

ington, 2004), environmental strategy has become an

area of key focus for firms. Environmental or ecologi-

cal responsiveness has been tied to economics, sur-

vival, and corporate morale (Bansal & Roth, 2000).

Indeed, a significant amount of research has looked at

the relationship between environmental and financial

performance (Barnett & Salomon, 2012; Delmas,

Nairn-Birch & Lim, 2015; Klassen & McLaughlin,

1996; Russo & Fouts, 1997; Trumpp & Guenther,

2015). In determining an appropriate environmental

management strategy, firms can adopt a compliance-

only reactive strategy or a voluntary beyond-compli-

ance proactive approach (Hart, 1995a; Walls, Berrone

& Phan, 2012). A proactive approach is reflective of

the future posture in terms of a firm’s environmental

Acknowledgments: The authors wish to thank their respective

academic institutions for the financial assistance provided for

this research project. The authors are listed alphabetically and

contributed equally to this work.

Volume 54, Number 4

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Journal of Supply Chain Management

2018, 54(4), 20–41

©2018 Wiley Periodicals, Inc.

performance through voluntary efforts such as—devel-

opment of green products, use of clean energy,

deployment of environmental management systems—

and requires underlying strategic capabilities intended

to improve environmental performance (Walls et al.,

2012). Supply chain management (SCM) activities in

particular have been noted as enablers of such envi-

ronmental pursuits (see Rao & Holt, 2005; Tate, Ell-

ram & Kirchoff, 2010). Given the strategic nature of a

proactive environmental approach, the characteristics

of a firm’s management team gain salience for its abil-

ity in recognizing opportunities for improving envi-

ronmental performance (Sharma, 2000).

Extant research has highlighted the impact of the

top management team (TMT) on firm strategy and

performance (Hambrick, Cho & Chen, 1996). For

example, it has been established that TMT composi-

tion impacts a firm’s stock market performance

(Pollock, Chen, Jackson & Hambrick, 2010). Demo-

graphic characteristics, such as TMT diversity to

include gender and age, have also been examined as

drivers of strategic decision-making (Dwyer, Richard &

Chadwick, 2003; MacCurtain, Flood, Ramamoorthy,

West & Dawson, 2010). Although extant studies have

emphasized the importance of TMT support in estab-

lishing an environmental agenda (Gattiker & Carter,

2010; Pagell & Wu, 2009), there exists a gap in our

understanding of specific TMT characteristics, such as

gender composition, age demographics, and executive

experience and their impact on a proactive environ-

mental strategy. With regard to executive experience,

given the role of TMTs and the importance of SCM in

enabling a proactive environmental agenda, it is there-

fore important to examine SCM experience in TMTs as

a contributor to a proactive environmental strategy.

As was noted by Piet (1994) that executives will have

to develop a vision of how a sustainable company oper-

ates. While a significant body of extant research has

looked into the motivations for adopting environmen-

tally friendly strategies (Bansal & Roth, 2000; Etzion,

2007; Russo & Fouts, 1997), scholars have primarily

focused on factors such as regulatory pressures and pres-

sures from stakeholders. More recently, scholars have

expanded the drivers for environmental initiatives to

competitive pressures as well (Hofer, Cantor & Dai,

2012; Kumar, Cantor, Grimm & Hofer, 2017). Our

understanding of the impact from internal factors, such

as organizational structure on environmental perfor-

mance, is still evolving. A smaller number of studies

have looked at the organizational characteristics and its

impact on environmental performance. Russo and Har-

rison (2005) find a significant link between plant man-

ager compensation and emissions reduction, but their

analysis suggests a reactive mentality on environmental

issues. While a reactive mentality supports a compli-

ance-only approach, it has been argued that a proactive

environmental strategy can improve performance

through improved processes and products (Clarkson, Li,

Richardson & Vasvari, 2011). In this regard, researchers

have raised the question of what leads companies to

form a proactive environmental strategy (Gonz

alez-

Benito & Gonz

alez-Benito, 2005). By focusing on TMT

characteristics of SCM experience, age, and gender, this

study attempts to provide a partial answer. In doing so,

the study highlights the experiential knowledge of TMT

members with SCM experience and emphasizes the

importance of the knowledge management in strategic

decision-making(Dayan, Heisig & Matos, 2017).

Prior research on firmgovernance has provided impor-

tant insights into the effect of upper management on

decision-making (Hambrick & Mason, 1984). Besides

ownership and managerial incentives, Walls et al.

(2012) have also looked at board characteristics and cor-

porate governance to assess the impact on environmen-

tal performance. While corporate boards yield

considerable influence, their role is typically advisory in

nature. They lack the insight and the ability to deploy

discretionary resources compared to the TMT. Studies

have identifiedTMTs as a primary driver of firm behavior

(Hambrick, 2007). Research hasshown that TMT charac-

teristics such as education level and age diversity impact

product performance (MacCurtain et al., 2010). De cen-

tralization of decision-making in the TMT has also been

found to impact firm CSR (Wong, Ormiston & Tetlock,

2011). The composition of the TMT can also impact a

firm’s stock market performance (Pollock et al., 2010).

Further research has identified that the background of

top managers can influence the actions of the firm

(Finkelstein, 1992). Chief Executive Officer (CEO) liber-

alism, CEO hubris, and CEO narcissism have all been

found to drive corporate social responsibility (CSR)

(Chin, Hambrick & Trevi~

no, 2013; Petrenko, Aime,

Ridge & Hill, 2016). Within CSR, proactive environmen-

tal strategies form part of the strategic planning process

(Buysse & Verbeke, 2003; Russo & Fouts, 1997) and can

benefit from a TMT that can recognize opportunities and

is inclined to adopta proactive environmental strategy.

The range of activities impacted by a proactive envi-

ronmental strategy brings sharp focus on the impor-

tance of SCM experience in the TMT. Recent work has

discovered that supply chain and operations manage-

ment representation in the TMT can have substantial

impact on the firm. Hendricks, Hora and Singhal

(2014) found that when firms appoint supply chain

and operations management executives to the TMT,

the stock price of the firm increases significantly. Hult,

Ketchen, Adams and Mena (2008) find that the sup-

ply chain orientation of top-level executives has a pos-

itive impact on firm performance. Studies have also

found that the appointment of SCM executive to the

TMT can lead to improved financial performance

(Roh, Krause & Swink, 2016). However, none of these

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EM Strategy and SCM Experience in TMTs

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