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...ganizational capabilities. Capabilities, thus, refer to an organization’s ability to assemble, integrate, and deploy valued resources, usually, in combination or copresence (Amit and Schoemaker 1993; =-=Russo and Fouts 1997-=-; Schendel 1994). Capabilities subsume the notion of organizational competencies (Prahalad and Hamel 1990) and are rooted in processes and business routines. Grant (1995) describes a hierarchy of orga...

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...dards is more profitable than defaulting to lower or poorly enforced local environmental standards. This interpretation is consistent with other studies (e.g., Cohen et al. 1995, Hart and Ahuja 1996, =-=Russo and Fouts 1997-=-), all of which suggest a higher level of profitability associated with better environmental practices and efforts to reduce emissions and waste. We need to be careful, however, in explaining how stri...

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... can more than offset the costs of implementing environmental improvements (Hart and Ahuja, 1996; King and Lenox, 2002; Klassen and McLaughlin, 1996; Klassen and Whybark, 1999; Konar and Cohen, 2001; =-=Russo and Fouts, 1997-=-; Porter and van der Linde, 1995). We therefore hypothesize: Hypothesis 4: SRI funds that select firms for their portfolios based on environmental screening criteria will earn higher financial returns...

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...gement strategy is managing how stakeholders view a company’s impact on the natural environment. Stakeholders’ perceptions can be critical to firm performance and sometimes even survival (Hart, 1995; =-=Russo and Fouts, 1997-=-; Berman et al., 1999). Many companies attempt to enhance their environmental image by mitigating deleterious effects on the environment and publicizing (with varying degrees of accuracy) their succes...

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...esponsible for the observed association between lower emissions and profitability. (Environmental Strategy; Waste Prevention; Information Economics) Historically, scholars have argued that discretionary reductions in pollution by firms should lead to lower financial performance (Friedman 1970). According to this view, the cost of pollution is borne by the public. Reducing this public harm represents philanthropy, not profit maximization. Recently, however, some scholars have argued that pollution reduction provides both a public and a private benefit (Hart 1995, Porter and van der Linde 1995, Russo and Fouts 1997). Reducing pollution may increase production efficiency, increase demand from environmentally sensitive consumers, discourage stakeholder activism, and allow a firm to attract better workers (Reinhardt 1999). The dispute over whether and where it “pays to be green” is more than simply a debate over the private cost of pollution: It is a debate about whether managers systematically miss profit opportunities. Whatever the private cost of pollution, rational managers should choose the level of pollution that balances the costs and benefits (McWilliams and Siegel 2001). Beyond this level, addition...

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... that are not solely short-term economical in nature (Marcus & Anderson, 2006). Trust-based relationships with external audiences reduce objections put forth by external actors and increase goodwill (=-=Russo & Fouts, 1997-=-; Sharma & Vredenburg, 1998) while improving receptiveness to external technologies and market needs that reduce environmental impact (Hart, 1995; Russo & Fouts, 1997). Indeed, by listening to stakeho...

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...heoretical arguments assumptions about internal variables such as organizational routines (Dowell, Hart, & Yeung, 2000), implementation behavior (King & Lenox, 2000), and the use of new technologies (=-=Russo & Fouts, 1997-=-) without measuring them directly. The tendency of researchers in this field to make such assumptions about the internal nature of organizations is not universal, however. Several studies have surveye...

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...ions can generate significant goodwillsand new market opportunities by displaying social and environmental awareness (e.g., Fombrun et al.,s2000; Hart and Ahuja, 1996; Porter and Van der Linde, 1995; =-=Russo and Fouts, 1997-=-). However, theresis a growing belief that the economic benefits depend on the nature of environmental performance.sMore and more often, researchers argue that the advantages resulting from social and...