Forced to be green? The performance impact of energy-efficient systems under institutional pressures

Abstract

With institutional pressures from various stakeholders concerned with climate change and efficient energy use in firms' operations, it has formed the belief that energy efficiency is crucial part for sustainable operations and firm competitiveness. While an increasing number of firms have adopted energy-efficient systems (EES), a limited understanding of the actual impact of EES adoption on financial performance and how institutional pressures moderate that impact remains. Based on 238 listed firms that have deployed EES, the study reveals that firms improve their return on assets (ROA), and different institutional pressures have significant and diverse effects on the performance of EES adoption. While pressures imposed by government policies and environmental non-government organizations (NGOs) provide less financial benefits of EES, pressures from competitors provide more financial benefits of EES. The research provides empirical evidence of how pressures from energy efficiency policies, environmental groups, and competitors affect the EES-performance relationship. We also discuss implications of the findings for managers, public policymakers, NGOs, and academia.