Research Framework for Analyzing the Relationship Between Greening of Suppliers and Green Innovation on Firms’ Performance

Introduction

Rapid technological advancement has made life more convenient, but has also resulted in increasingly shorter product life cycles. Consequently, as products are replaced and disposed of more frequently, there are negative impacts on the environment, such as more waste. One of the most effective ways to tackle such environmental problems is to focus on waste prevention and control at the source through green procurement (Min and Galle, 1997). More importantly, well-designed environmental standards can increase producers’ incentives to adopt green product and technological innovation (Shrivastava 1995). As a matter of fact, some of the leading international organisations have developed their own environment management systems and criteria to motivate their suppliers. For example, Sony’s “Green Partner Standards” (Sony Corporation, 2009), and HP’s supply chain social and environmental responsibility (Hewlett-Packard, 2008). Avery’s study found that in 1993 only 40% of 1000 buyers of office equipment and supplies in the UK were taking part in environmental initiatives within their organisation, but the figure had soared to 80% in 1995.

It is therefore becoming very important for organisations to adopt green innovation and implement Green Supply Chain Management (GSCM) within their value chain (Steger, 1993). Rao and Holt (2005) conducted empirical research and found a positive relationship between GSCM practices and competitiveness and economic performance. In general, organisations can further reduce production cost and increase their economic efficiency through such initiatives (Porter, 1991). Furthermore, improvement in corporate environmental performance and compliance with environmental regulations can contribute to a company’s competitiveness (Bacallen, 2000).

The implementation of GSCM has been found to contribute towards corporate competitiveness and environmental performance by a number of authors (e.g. Rao, 2002; Tukker et al., 2001; Cairncross, 1992; Hart, 1995; Schmidheiny, 1992; Shrivastava, 1995; Poter and Linde, 1995; Vermulen, 2002). GSCM can be broadly classified into external and internal environment management (Rao, 2002). In terms of external environment management, it is related to the greening of suppliers (Bowen et al., 2001; Lloyd, 1994; Rao, 2002; Hamner, 2006; Makower, 1994; Green et al, 1998; Rajagopal and Bernard, 2006). Internal environment management can be reflected by green innovation, which can also be divided broadly into product and process innovations (Klassen and Whybank, 1999; Porter and Van der Linde, 1995; Hart, 1995; Schmidheiny, 1992). Green innovation has not been addressed well in the green supply chain management literature in spite of the fact that it can create a competitive advantage for firms (Porter and Van der Linde, 1995; Chen et al., 2006). In addition, not many studies have investigated the relationship between the greening of suppliers, green innovation, environmental performance and competitive advantage. The objective of this article is thus to propose a conceptual model, based on a review of relevant literature and performance indicators on the factors discussed above, to identify areas for future research.