Escape from the Green Prison: Policy Entrepreneurship for Environmental Performance and Competitive Advantage
More than a quarter century of research has linked corporate entrepreneurship (CE) to economic performance and competitive advantage. Firms often undertake CE initiatives to meet the demands of stockholders for increasing returns. Increasingly, firms must also respond to a broader group of stakeholders demanding Environmental Performance (EP), i.e. business activity conducted toward the improvement of the environment and the enhancement of social welfare. Historically, corporate responses to environmental concerns have been viewed to come at a cost. More recently, writers have suggested that solutions that profit the environment can simultaneously yield profit for the firm. These dual-benefits we refer to as green profits. To the degree that firms have been able to reap green profits, the demands of stockholders and stakeholders have been aligned. However, where green profits are believed not to exist, EP has been constrained by the competitive imperative, requiring firms not to pursue EP initiatives that are costly. This constraint on costly EP initiatives is perceived by many to be fixed, resulting in a decision paradox that we dub the “Green Prison.” However, we contend that the Green Prison is a false prison, borne of objectivist, deterministic thinking that ignores the capacity of agents to influence the social and economic system. Recognizing this, we examine how firms “escape” from the Green Prison by creating contexts wherein EP yields green profits. Policy entrepreneurs pursue innovative strategies that reap green profits from EP by changing the reward and incentive structures of the market institutions in which they compete. In other words they create the contexts where opportunities for “green profits” can be found, and thereby escape the Green Prison while achieving competitive advantage. Thus, the logic on green profit seeking is expanded from cost advantage in a world of fixed rules, to value creation through policy entrepreneurship.