* Corresponding author: [email protected]
Business Strategy and Corporate Environmental Performance: Evidence from High Environmental Risk
Countries in the Asian Region
HILMA TSANI AMANATI*
CHOIRUNNISA ARIFA Universitas Gadjah Mada, Indonesia
Abstract: This study aims to provide empirical evidence of the effect of business strategy on the management and operational performance of the company's environment. This study examines business strategy as a company's fundamental element in corporate decision-making. It focuses on prospector and defender business strategies as strategies at opposite extremes of the continuum. The research sample is non-financial companies listed on the Indonesia, India, and China Stock Exchanges. The final sample in this study consisted of 869 company observations and years, with the research period from 2015 to 2019. Data analysis was carried out by panel data regression using STATA 17 tools. We found that the company's business strategy had a significant effect on environmental management performance and the environmental and operational performance of the company. Overall, prospector and defender business strategies have different tendencies towards the level of environmental management performance and environmental and operational performance. Companies with a prospector business strategy can maintain their environmental externalities well even though they have a lower level of environmental management performance. Meanwhile, a company with a defender business strategy managerially has a strategic planning system that has been stable but tends to limit involvement in environmental activities in real terms with cost considerations. This research can illustrate for regulators to consider proactive environmental policies for companies.
Keywords: Business Strategy, Environmental Management Performance, Environmental, Operational Performance
Abstrak: Penelitian ini bertujuan untuk memberikan bukti empiris pengaruh strategi bisnis terhadap kinerja manajemen dan operasional lingkungan perusahaan. Penelitian ini menguji strategi bisnis sebagai elemen fundamental perusahaan dalam pengambilan keputusan perusahaan dan berfokus pada strategi bisnis prospektor dan defender sebagai strategi yang berada titik ekstrem kontinum berlawanan. Sampel penelitian merupakan perusahaan non keuangan yang terdaftar pada Bursa Efek Indonesia, India dan China. Sampel akhir dalam penelitian ini terdiri dari 869 observasi perusahaan dan tahun, dengan periode penelitian dari tahun 2015 hingga tahun 2019. Analisis data dilakukan dengan regresi data panel menggunakan tools STATA 17. Kami menemukan bahwa strategi bisnis perusahaan berpengaruh secara signifikan terhadap kinerja
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manajemen lingkungan maupun kinerja operasional lingkungan perusahaan. Secara keseluruhan, strategi bisnis prospektor dan defender memiliki kecenderungan yang berbeda terhadap tingkat kinerja manajemen lingkungan dan kinerja operasional lingkungan. Perusahaan dengan strategi bisnis prospektor meskipun lebih rendah tingkat kinerja manajemen lingkungannya, namun mampu menjaga eksternalitas lingkungannya dengan baik. Sementara perusahaan dengan strategi bisnis defender secara manajerial memiliki sistem perencanaan strategis yang telah stabil namun cenderung membatasi keterlibatan terhadap aktifitas lingkungan secara riil dengan pertimbangan biaya. Penelitian ini dapat menjadi gambaran bagi regulator untuk mempertimbangkan kebijakan lingkungan proaktif bagi perusahaan.
Kata kunci: Strategi Bisnis, Kinerja Manajemen Lingkungan, Kinerja Operasional Lingkungan
1. Introduction
The existence of the company needs to pay attention to three crucial aspects, including financial, social, and environmental (Elkington, 1997). One is because the company's business operations are essential in increasing emissions due to energy consumption in producing goods and services (Alam et al., 2019). Verisk Maplecroft's report in "Environmental Risk Outlook 2021" illustrates that countries in Asia dominate the regions with the most significant environmental risks in the world, including Indonesia, China, and India (Nichols, 2021). Human business activities cause environmental risks and natural factors, such as air quality, environmental pollution, and the availability of clean water. The Environmental Performance Index 2020 also states that global emissions are increasing in densely populated developing countries such as Indonesia, China, and India (Wendling et al., 2020). Based on the category of developing countries, the three countries are countries in Asia with environmental performance scores below the group average. Besides that, in terms of economy, China, India, and Indonesia are the three countries with the fastest economic growth in Asia (Acclime, 2022), with a GDP value per country reaching millions of dollars. The high level of economic activity and human population create any risk for the amount of waste produced and impacts the environment, especially if there is no suitable management mechanism. This condition indicates that companies operating in risk areas need to pay more attention to environmental factors from a managerial and operational perspective.
149 The development of awareness of the importance of environmental conservation efforts has encouraged countries in the Asian region to establish special regulations relating to the impact of company business operations on the environment. For example, the Government of India regulates environmental impacts through the Comprehensive Environmental Pollution Index (CEPI) (Kini et al., 2017) or Indonesia through the Company Performance Rating Program in Environmental Management (PROPER), based on the Decree of the State Ministry of the Environment Number 35 of 1995.
Meanwhile, the literature shows that environmental performance is a multi-dimensional construct, including the process or environmental management performance (EMP) and environmental, operational performance (EOP) dimensions (Bhattacharyya and Cummings, 2015; Endrikat et al., 2014; Trumpp et al., 2015). The EMP dimension shows the company's internal commitment to reducing negative environmental impacts through strategic actions (Trumpp et al., 2015; Xue et al., 2020). Meanwhile, EOP is operational performance in the form of operating results that directly impact the environment, such as the number of pollutants produced (Xue et al., 2020).
Business strategy is a fundamental element of a company to compete in certain business segments (Hambrick, 1983), so it determines the company's tendency to make decisions. Miles et al. (1978) built a strategy typology in several types: prospectors, defenders, analyzers, and reactors. Miles et al. (1978) categorized the strategic dimensions based on the response or organizational change to the movement of market segmentation and product preferences. This study focuses on prospector and defender business strategies because the two strategies are at opposite extremes of the continuum (Miles et al., 1978).
This study aims to provide empirical evidence of the effect of business strategy on the management and operational performance of the company's environment. Previous research has proven that the company's business strategy is a factor that affects the company's environmental performance (Kong et al., 2020; Magerakis and Habib, 2021).
Business strategy affects environmental, social, and governance performance related to efforts to increase the company's competitive advantage (Amran et al., 2015; Maniora, 2018). The company's attention to environmental management activities has proven to
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affect increasing the company's financial performance (Fujii et al., 2013; Gatimbu et al., 2018; Hang et al., 2019) and is part of the company's business strategy to be able to maintain economic performance in the future (Abbas, 2020; Abitbol and Lee, 2017).
However, cross-country research on the effect of business strategy on a company's environmental performance is still limited. This study builds on previous studies (Bhattacharyya and Cummings, 2015; Endrikat et al., 2014; Trumpp et al., 2015; Xie and Hayase, 2007) through cross-country sample testing by accommodating multi- dimensional constructs of environmental performance based on operational and management.
This study contributes to the literature on the role of business strategy in corporate environmental responsibility decision-making. Previous research was conducted on a sample of developed countries (Kong et al., 2020; Peng, 2020; Yuan et al., 2020), so this research will provide a novelty in the form of testing a cross-country sample of specific developing countries with high environmental risks in Asia. In addition, this study accommodates a multi-dimensional construct of environmental performance, namely environmental management and operational performance (Trumpp et al., 2015).
Previous research has separately tested the two elements in the form of environmental protection efforts (Kong et al., 2020) as a managerial action of the company and the emissions generated by the company's business operations (Magerakis and Habib, 2021) as a direct impact on the environment. So, this study aims to examine the role of the company's business strategy orientation on environmental management performance and the company's environmental and operational performance.
The structure of the paper is composed of: part 2 discusses the theoretical framework and hypothesis development, part 3 explains the data and methodology used, part 4 presents the quantitative descriptive analyses, and part 5 concludes the results.
2. Theoretical Framework and Hypothesis Development
The natural resource-based theory explains that the development of stakeholder orientation makes companies focus on the company's financial performance and consider the impact of the company's operational activities on the environment (Hart,
151 1995). Hart (1995) explains that environmental-based limitations and challenges are essential factors that affect the development of a company's competitive advantage.
Resource management and company capability development (Porter & Kramer, 2011), supported by the company's tendency to be actively involved in environmental conservation efforts, can create corporate moral values, which support the company's performance in a sustainable manner (Trumpp & Guenther, 2017).
Trumpp et al. (2015) explain that the company's environmental performance has a multi-dimensional construct consisting of management and environmental and operational performance. The company's environmental and operational performance explicitly shows the impact of the company's operational activities on the environment (Trumpp et al., 2015). Meanwhile, the performance of environmental management represents the efforts made by the company's management to minimize the negative impact of the company's operations on the environment (Tyteca, 1996; Ulubeyli, 2013).
The management and operational performance of the company's environment is a synthesis of a series of company organizational decisions in response to developing the company's business environment. To formulate organizational decisions that adapt to environmental developments and create effectiveness and efficiency in performance, companies use business strategy to illustrate the company's decision-making tactics plan (Porter & Kramer, 2011).
Companies with a prospector business strategy rely on dynamic capabilities and sensitivity to opportunities so that they tend to consistently innovate and create new products (Hambrick, 1983; Miles et al., 1978). Companies with prospector business strategies have high motivation related to long-term plans and focus on developing and achieving the company in the future (Chen & Jermias, 2014; Singh & Agarwal, 2002), which makes prospector companies understand the importance of environmental and social aspects. Porter & Kramer (2011) explain that companies need to improve financial performance while suppressing socially and environmentally harmful actions to realize sustainable business prospects. It is because companies with proactive environmental management policies provide more profitable long-term opportunities for companies (Berry & Rondinelli, 1998; Porter & Kramer, 2011). Meanwhile,
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defender companies tend to avoid risk and uncertainty (Yuan et al., 2020), reducing research and development spending and focusing on investment to create more competitive prices (Hambrick, 1983; Higgins et al., 2015; Miles et al., 1978). The company's activities related to environmental responsibility create additional costs beyond the core business operations, which is a significant factor in the active involvement of defender companies in environmentally oriented activities (Bhattacharyya, 2010). Based on this description, the first hypothesis in this study is as follows:
H1: Business strategy affects environmental management performance
The literature shows that companies with a prospector business strategy have sensitivity in analyzing environmental developments (Patrick & Charles, 2002; Woodside et al., 1999) as the basis for company innovation. Vilanova et al. (2009) explained that innovative prospector companies have strong principles related to sustainability, code of ethics, governance, and environmental policies, which causes prospector companies to value resources and the impact of environmental risks more. Utilizing and managing resources is essential in developing competitive capabilities (Barney, 1991; Hart, 1995), following the company's orientation in creating new market segmentation, exploiting opportunities, and continuous innovation. Companies also tend to form a company's competitive advantage through pollution prevention and sustainable development (Liu
& Kong, 2021). The prospector company's investment in developing new products, processes, and technologies has the potential to reduce the negative impact of the company's operations on the environment (Alam et al., 2019). R&D of the prospector company has an orientation to the creation of technology to produce efficiency that minimizes energy consumption and operational environmental impacts. Companies with a defensive business strategy focus on stabilizing existing systems, so they tend not to be involved in exploring environmentally friendly innovations (Magerakis &
Habib, 2021). To maintain stability, defender companies tend to optimize short-term performance and seek to lead the existing market rather than create new product lines (Rajagopalan, 1997). So, the second hypothesis in this study is as follows:
H2: Business strategy affects environmental, and operational performance
153 3. Research Method
This study uses quantitative methods to test the hypotheses developed based on the theory and previous research. The dependent variable in this study consisted of management performance and the company's environmental and operational performance. The company's management performance is measured using the average score of the Thomson Reuters Datastream ESG indicator (Biswas et al., 2018; Orazalin and Baydauletov, 2020; Xue et al., 2020), with the following description: Policy energy efficiency; Sustainable packaging policy; Water efficiency policy; Resource reduction policy; Eco-design products; Energy efficiency targets; Resource reduction targets;
Target water efficiency; Environmental supply chain management; Environmental supply chain policies; Environmental materials sourcing; Environmental management training; Environmental management team; ISO 14000 or EMS; and Environmental supply chain monitoring. We assess these indicators with a dummy, namely a value of 1 for information Y and 0 for information N.
The environmental, operational performance variable is measured using the ratio of net sales per carbon performance value and environmental efficiency (Xue et al., 2020), as follows:
Environmental Operational Performance = 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐶𝑂2 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠
The independent variable in this study is the company's business strategy which is measured using a construct developed by Bentley (2013), adapting the measurement built by Ittner et al. (1997) and Miles et al. (1978), with the description of the components of the construct as follow:
1. R&D to sales ratio 2. Employee to sales ratio 3. Sales growth
4. The ratio of marketing expenses to sales 5. Employee fluctuations
6. A measure of capital intention
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Each component is assigned a quintile rating based on the current five-year average calculation results. The higher the cumulative component score reflects the company's prospector strategy orientation and vice versa. The cumulative strategy score has a range of values between 6-30, with the division of business strategy types based on the following scores: defender (6-12), analyzer (13-23), and prospectors (24-30). In testing the hypothesis, this study focuses on two business strategies at opposite endpoints of the continuum, prospector, and defender. This study uses the generalized least squares (GLS) method for testing the hypothesis by describing the regression model as follows:
EMPit = α0 + β1BSGit +β2SIZEit + β3 PROF + β4 LEV + β5 GROWTH + β6 MTB + β7 LQD + year fixed effect + industry fixed effect + εit ... (1)
EOPit = α0 + β1BSGit +β2SIZEit + β3 PROF + β4 LEV + β5 GROWTH + β6 MTB + β7 LQD + year fixed effect + industry fixed effect εit ... (2)
EMPit : Environmental management performance of company i in year t.
EOPit : Environmental operational performance of company i in year t.
BSGit : Business strategy of a company i in year t.
SIZEit : Size of a company i in year t.
PROFit : Profitability of company i in year t.
LEVit : Leverage of company i in year t.
GROWTHit : Asset Growth of a company i in year t MTBit : Market to book value of company i in year t LQDit : Liquidity of company i in year t
The sample in this study consisted of companies listed on the Indonesian stock exchanges (IDX), India (NSE), Shanghai (SSE), and Shenzhen (SZSE). All data were obtained through the Thomson Reuters datastream database. We exclude the financial industry with the year of observation from 2015 to 2019, resulting in 869 observations and years. The test is done by panel data regression using STATA 16 tools. We include year and industry-fixed effects and do not include country-fixed effects, assuming that the three samples in this study are developing countries with the same characteristics.
155 4. Results and Discussion
Table 1.
Descriptive Statistics
Panel 1A. Descriptive Statistic Model 1
Variable N Mean Std. Deviation Minimum Maximum
EMP 869 0.319 0.261 0 1.071
BSG 869 18.105 3.829 7 29
SIZE 869 15.406 1.356 12.133 19.772
PROF 869 0.062 0.104 -2.343 0.399
LEV 869 0.232 0.175 0 1.909
GROWTH 869 0,124 0,260 -0,741 5,353
MTB 869 2,112 2,468 0,053 20,197
LQD 869 1,889 1,917 0,146 31,329
Panel 1B. Descriptive Statistic Model 2
Variable N Mean Std. Deviation Minimum Maximum
EOP 175 0,024 0,046 0,000 0,375
BSG 175 18,04 3,403 11 26
SIZE 175 16,181 1,394 13,327 19,772
PROF 175 0,057 0,058 -0,142 0,280
LEV 175 0,236 0,152 0,000 0,747
GROWTH 175 0,087 0,103 -0,249 0,451
MTB 175 1,428 1,436 0,128 7,492
LQD 175 1,564 0,922 0,288 4,658
Table 1 shows the results of the descriptive statistics of the variables in this study.
Panel 1A shows the descriptive results of the first model consisting of 869 observations of companies and years. The environmental management performance variable has an average value (standard deviation) of 0.319 (0.261). The average business strategy value (standard deviation) is 18,105 (3,829). The firm size in the first model shows an average value (standard deviation) of 15,406 (1,356). Further, in the first model, the company's profitability has an average value (standard deviation) of 0.062 (0.104). The company's
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leverage shows an average value (standard deviation) of 0.232 (0.175). The asset growth has an average value (standard deviation) of 0.124 (0,260). The company's market-to- book value has an average value of 2,112 (2,468) and the company's liquidity of 1,889 (1,917).
Panel 1B shows the descriptive results of the second model consisting of 175 observations of companies and years. The environmental operation performance variable has an average value (standard deviation) of 0.0274 (0.046). The company's business strategy's average value (standard deviation) is 18,04 (3,403). The company's size shows an average value (standard deviation) of 16,181 (1,394). The company's profitability has an average value (standard deviation) of 0.057 (0.058) and the company's leverage of 0.236 (0.152). The average (standard deviation) of asset growth companies shows a 0,087 (0,103) value. The market-to-book value of the company has an average value (standard deviation) of 1,428 (1,436). The average (standard deviation) of company’s liquidity is 1,564 (0,922).
Table 2
Business Strategy and Environmental Management Performance
EMP Coef Std. Error z P>|z| [95% Conf. Interval]
BSG -0,006 0,002 -2,73 0,006*** -0,0098008 -0,0016169
SIZE 0,091 0,008 11,17 0,000 0,0748831 0,1067546
ROA 0,075 0,099 0,76 0,448 -0,1184079 0,2678512
LEV -0,114 0,067 -1,69 0,090 -0,2455774 0,0178963
GROWTH -0,045 0,032 -1,42 0,154 -0,1078567 0,0170461
MTB 0,007 0,004 1,68 0,092 -0,0012293 0,0161904
LQD -0,011 0,005 -2,16 0,031 -0,0203253 -0,0009957
Cons -1,189 0,145 0,41 0,678 -0,0963672 0,1481024
Year fixed effect
Yes Industry
fixed effect
Yes
Table 2 shows the relationship between business strategy and corporate environmental management performance. After controlling for the variables of firm
157 size, profitability, and leverage level, the results of the first model test show the business strategy coefficient value of -0.006 with a p-value > |z| of 0.006, which indicates that the first hypothesis in this study is statistically supported. These results suggest that the higher the company's orientation towards the prospector strategy, the lower the company's environmental management performance will be. On the other hand, the higher the company's orientation towards the defender strategy, the better the environmental management performance of the company.
Previous research (Peng, 2020; Yuan et al., 2020) found that companies with prospector business strategies had better CSR performance than defender companies.
This difference is caused by the influence of markets and regulations in developing countries that tend not to force companies to be under owner control. In addition, Liu and Kong (2021) also show that although prospector companies in China invest intensively in R&D programs, they tend to be less likely to engage in green innovation than defender companies. Furthermore, the findings in this study indicate that the sustainability aspect is not a top priority in the fast growth pattern of prospector companies in the Asian region due to high profitability risks and limited innovation funding (Liu and Kong, 2021). Maniora (2018) stated that prospector companies have more potential to fail in managing sustainability issues properly than defender-oriented companies.
The second model shows the results of testing the second hypothesis, which states that the company's business strategy affects environmental and operational performance. The regression test shows a coefficient value of 0.025 with a p-value > |z|
of 0.058. These results indicate that the second hypothesis in this study is statistically supported at a significance level of 10%. It indicates that the higher the company's orientation towards the prospector's business strategy, the higher the company's environmental and operational performance level. On the other hand, the more it leads to the defender's business strategy orientation, the lower the operational performance of the company's environment. These results are in line with the research of Magerakis and Habib (2021), which found that companies with a prospector business strategy produce less chemical waste to the environment than defender companies. Companies
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with prospector strategies are more likely to take environmental protection measures than defender companies (Kong et al., 2020). In this case, a company with a prospector business strategy maintains the company's legitimacy. It supports the company's business sustainability by trying to suppress the negative impact of its business operations on the environment. On the other hand, companies with a defender business strategy avoid involvement in environmentally oriented activities because of the additional costs incurred.
Table 3
Business Strategy and Operational Environmental Performance
EOP Coef Std.
Error
z P>|z| [95% Conf. Interval]
BSG 0,025 0,013 1,90 0,058** -0,0008115 0,0504033
SIZE -0,022 0,042 -0,53 0,596 -0,1052198 0,0603981
ROA -0,749 1,052 -0,71 0,477 -2,810446 1,313226
LEV 0,604 0,378 1,60 0,110 -0,1375869 1,345813
GROWTH 0,602 0,436 1,38 0,167 -0,2526431 1,457177
MTB 0,096 0,050 1,93 0,054 -0,0015975 0,1927144
LQD 0,031 0,063 0,49 0,627 0,0934974 0,155097
Cons -2,033 0,837 -2,43 0,015 -3,672531 -0,3926125
Year fixed effect
Yes Industry
fixed effect
Yes
Additional Analysis
This study performs additional analysis by examining the effect of business strategy on the company's environmental management performance and divides the sample of companies into three strategic orientations: prospector, defenders, and analyzers. We split the sub-sample of the prospector, defender, and analyzer by Bentley's (2013) criteria; defender (6-12), analyzer (13-23), and prospector (24-30).
159 Table 4
Additional analysis
EMP Defender (n=61) Analyzer (n=682) Prospector (n=123) Coef P>|z| Coef P>|z| Coef P>|z|
BSG 0,050 0,055** -0,004 0,260 0,009 0,546
SIZE 0,086 0,050 0,072 0,000 0,008 0,000
ROA -1,897 0,016 0,102 0,346 0,288 0,594
LEV -1,217 0,000 -0,002 0,984 -0,020 0,905
GROWTH -0,146 0,500 -0,073 0,153 -0,006 0,894
MTB 0,029 0,060 0,010 0,072 -0,000 0,958
LQD -0,038 0,112 0,007 0,258 -0,007 0,635
Cons -1,132 0,088 -0,709 0,000 -1,147 0,023
EMP Defender (n=11) Analyzer (n=144) Prospector (n=20) Coef P>|z| Coef P>|z| Coef P>|z|
BSG 0,034 0,700 0,026 0,059** -0,136 0,157
SIZE 0,207 0,069 -0,004 0,951 -0,181 0,207
ROA -7,088 0,000 0,621 0,199 11,737 0,004
LEV -2,681 0,002 0,128 0,679 2,037 0,136
GROWTH 0,081 0,932 0,030 0,844 -1,236 0,021
MTB 0,255 0,000 0,040 0,258 -0,131 0,101
LQD -0,246 0,000 -0,087 0,049 -0,725 0,000
Cons -1,804 0,472 -2,71 0,010 4,667 0,236
The results of the additional analysis test show that companies with prospector and defender business orientations have no significant effect on environmental management performance as companies with defender and prospector orientations on environmental and operational performance. Meanwhile, companies with defender orientation significantly affect environmental management performance, and companies with analyzer orientation significantly affect environmental and operational performance.
The prospector orientation, which focuses on innovation and the development of new market segments (Miles et al., 1978), causes companies not to achieve value chain efficiency (Maniora, 2018). It encourages financial distress (Ittner et al., 1997), which
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causes companies to be unable to synergize their financial and environmental objectives to the fullest.
Table 5.
Additional analysis
EMP China (n=764) India (n=75) Indonesia (n=27)
Coef P>|z| Coef P>|z| Coef P>|z|
BSG 0,000 0,953 -0,023 0,015*** 0,005 0,606
SIZE 0,092 0,000 0,108 0,001 -0,013 0,923
ROA 0,113 0,215 1,151 0,052 -0,538 0,503
LEV 0,008 0,898 -0,254 0,291 -1,303 0,003
GROWTH -0,019 0,506 -0,254 0,189 0,341 0,199
MTB -0,004 0,441 -0,008 0,483 0,015 0,707
LQD -0,004 0,388 -0,019 0,696 -0,010 0,656
Cons -1,372 0,000 -0,450 0,352 0,730 -2,914
EMP China (n=126) India (n=35) Indonesia (n=14)
Coef P>|z| Coef P>|z| Coef P>|z|
BSG 0,020 0,113 -0,052 0,074** -0,659 0,010***
SIZE -0,075 0,226 0,167 0,117 3,463 0,069
ROA 0,145 0,782 -0,419 0,828 -9,376 0,003
LEV 0,436 0,172 -0,327 0,635 5,578 0,268
GROWTH 0,099 0,491 -1,762 0,062 -1,593 0,088
MTB 0,013 0,679 0,052 0,520 2,317 0,018
LQD -0,119 0,049 -0,030 0,848 0,223 0,021
Cons -0,875 0,428 -3,347 0,016 -50,033 0,065
On the other hand, defender orientation makes companies focus on reducing business risk (Bentley, 2013) to maintain the stability of business operations and profitability (Miles et al., 1978). The defender orientation has good attention to a stable business so that the managerial environment can be controlled even though operationally, it is still not considered urgent to increase the company's financing and reduce the profit level. Analyzer orientation refers to companies on a continuum between prospectors and defenders. Analyzer-oriented companies affect environmental
161 and operational performance. The analyzer orientation encourages companies to minimize risk while maximizing profits (Miles et al., 1978), which causes companies to try to align environmental responsibility activities with the company's profitability goals (Galbreath, 2010). The combination of prospector and defender characteristics in analyzer companies allows companies with analyzer orientation to map out the benefits and risks in activities that directly impact the environment and integrate the company's business interests and the interests of company stakeholders.
The test shows that only India has a business strategy that significantly influences environmental management performance. In addition, the company's business strategy in China and Indonesia significantly influences the company's environmental operation performance. It can be caused by the level of application of regulations by the company's management and the demands of the company owners in showing the company's performance. The sample of this study is a developing country with a policy tendency that is voluntary or not coercive. Claessens & Yurtoglu (2013) prove that the voluntary mechanism does not have a maximum impact if the country's weak governance system.
5. Conclusion, Implication, and Limitation 5.1. Conclusion
This study examines the relationship between a firm's business strategic orientation and environmental management and operational performance in Asia countries with high environmental risks. The researcher found that business strategy significantly affected each environmental management performance and the company's environmental and operational performance. Overall, the test results indicate different trends between prospector and defender business strategies on environmental management and company operational performance. Even though prospector performance of environment management is not optimal enough, they can better maintain their environmental externalities. While defender-oriented companies tend to limit their involvement in environmental activities, they have significant environmental strategic planning.
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5.2. Implication and Limitation
The results of this study can be used as consideration for regulators to make proactive environmental policies and maintain a sustainable business environment.
However, this study still has limitations in cross-country analysis and the possible indirect relationship between business strategy and operational performance influenced by the company's environmental management performance. Further research can also develop a prospector, defender, analyzer, and reactor sub-sample analysis in different institutional settings.
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