Environmental Orientation and Economic Performance: A quasi-experimental study of small Swedish firms

Journal article, 2014

This paper investigates the relationship between the environmental orientation and economic performance of small firms. We conduct a quantitative analysis on a sample of 299 environmentally oriented and all other small (2-49 employees) Swedish firms. We estimate the effect of environmental orientation on profit margin to examine how environmentally oriented firms perform in relation to non-environmentally oriented firms. To do this, we employ a quasi-experimental design in which we create a control group of non-environmentally oriented firms that are very similar to their environmentally oriented counterparts. We use two measures of environmental orientation: 1) a third party classification, and 2) a self-assessment of environmental differentiation. The findings show a negative effect of environmental orientation on economic performance. Our contribution to the literature is in using a novel and more rigorous way to measure the relationship between environmental orientation and economic performance and providing implicit support for the existence of a causal link from economic performance to environmental orientation.