Network externalities, competition, and compatibility

Research on the effects on firm performance of “best practices” of environmental management, which are supposed to enable firms to simultaneously protect the environment and reduce costs, has so far ignored the roles of existing firm resources and capabilities. Drawing on the resource-based view of the firm, this study analyzes whether complementary assets are required to gain cost advantage from implementing best practices. Results based on survey data from 88 chemical companies indicate that capabilities for process innovation and implementation are complementary assets that moderate the relationship between best practices and cost advantage, a significant factor in determining firm performance.

Effects of “Best Practices” of Environmental Management on Cost Advantage: The Role of Complementary Assets

For the last ten years environmentalists and the trade policy community have engaged in a heated debate over the environmental consequences of liberalized trade. The debate was originally fueled by negotiations over the North American Free Trade Agreement and the Uruguay round of GATT negotiations, both of which occurred at a time when concerns over global warming, species extinction and industrial pollution were rising. Recently it has been intensified by the creation of the World Trade Organization (WTO) and proposals for future rounds of trade negotiations. The debate has often been unproductive. It has been hampered by the lack of a common language and also suffered from little recourse to economic theory and empirical evidence. The purpose of this essay is set out what we currently know about the environmental consequences of economic growth and international trade. We critically review both theory and empirical work to answer three basic questions. What do we know about the relationship between international trade, economic growth and the environment? How can this evidence help us evaluate ongoing policy debates? Where do we go from here?

Trade, Growth and the Environment

The business value of information technology (IT) has been debated for a number of years. While some authors have attributed large productivity improvements and substantial consumer benefits to IT, others report that IT has not had any bottom line impact on business profitability. This paper focuses on the fact that while productivity, consumer value, and bush ness profitability are related, they are ultimate1 Allen Lee was the accepting senior editor for this paper. 2 An earlier version of this paper appears in the

Productivity, business profitability, and consumer surplus: three different measures of information technology value

best strategy. That is not to say that strategizing efforts to deter or defeat rivals with clever ploys and positioning are unimportant. In the long run, however, the best strategy is to organize arid operate efficiently. Business strategy is a complex subject. It not only spans the functional areas in businessmarketing, finance, manufacturing, international business, etc.-but it is genuinely interdisciplinary-involving. as it does, economics, politics, organization theory, and aspects of the law. Business strategy has become increasingly important with the growth of the multinational enterprise and of international trade and competition. Although several different approaches to the substantive aspects of business strategy can be distinguished, the main contestants cluster under two general headings: strategizing and economizing. The first of these appeals to a power perspective; the second is principally concerned with efficiency. Both of these orientations are pertinent to the study .of business strategy, but power approaches have played a role in the recent business strategy literature that belies its relative importance. Partly that may be because the analysis of efficiency is believed to have reached such an advanced state of development that further work of this kind is not needed. Economizing is important, but we know all about that. What we don’t understand, and need to study, goes the argument, is strategizing. Not only is strategizing where many of the novel practices and new issues are said to reside, but the pressing realities of foreign competition are first and foremost of a strategizing kind. I take exception with arguments of both kinds. Thus, although it is true that efficiency analysis of the firm-as-production function genre has reached a high state of refinement, that does not exhaust all that is relevant to the assessment of efficiency. Efficiency analysis properly encompasses governance costs as well as production costs, and the analysis of comparative economic organization (governance) is still in

https://onlinelibrary.wiley.com/doi/pdf/10.1002/smj.4250121007

David Scheffman

Papers

Raising Rivals’ Costs