LAUSR

Abstract Environmental management practices (or “EMPs”) afford a firm the opportunity to reduce the effects of its activities and products on the natural environment. However, companies compete in different industry contexts, and currently little is known about the moderating effects of these contexts on firm profitability. Improved understanding of how industry context influences the relationship between a firm’s environmental practices and its financial outcomes is needed to help managers make better EMP investment decisions. Combining insights from resource-based theory and industrial organization theory, this paper formulates and empirically investigates how the effects of a firm’s EMPs on its financial performance are contingent upon the joint influence of industry concentration and industry growth. Empirically rebuttable hypotheses are tested by fitting a multi-level model. We find that firms within high growth/high concentration industries that implement EMPs realize the greatest improvement in financial performance. Additionally, industry growth amplifies the effect on firm financial performance of engaging in EMPs in relatively concentrated industries, but not in less concentrated ones. The study’s findings shed valuable light on the possible context-influenced role and effect of EMPs, including potential managerial and policy implications.