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Journal of Cleaner Production 22 (2012) 32e41

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Journal of Cleaner Production

journal homepage: www.elsevier .com/locate/ jc lepro

Knowledge resources as a mediator of the relationship between recyclingpressures and environmental performance

Dayna Simpson*

Department of Management, Monash University, PO Box 197, Caulfield East, VIC 3145, Australia

a r t i c l e i n f o

Article history:Received 9 September 2010Received in revised form16 September 2011Accepted 25 September 2011Available online 8 October 2011

Keywords:RecyclingEnvironmental performanceInstitutional pressureKnowledge resources

* Tel.: þ6199032674.E-mail address: Dayna.Simpson@monash.edu.

0959-6526/$ e see front matter � 2011 Elsevier Ltd.doi:10.1016/j.jclepro.2011.09.025

a b s t r a c t

Pressures to recycle are an increasingly prevalent influence on firms. Understanding of factors howeverthat will lead firms to both: a. successfully capture or reuse their waste, and b. benefit from the practice,is still in a nascent form. Whether regulatory instruments such as recycling laws or increased disposalcosts influence firms’ environmental performance is an area of active debate. Firm’s internal capabilitiesin particular, such as their experience and expertise, may limit the performance outcomes of suchpressure. In this study, the impact of recycling pressures on firms’ environmental performance wasassessed relative to their use of knowledge resources. Using a sample of U.S.-based manufacturers,knowledge resources were identified as a significant mediator of the influence of regulations, industrypractices and disposal costs on firms’ environmental performance. Firm size, industry and ISO14001certification were used as control variables. These findings have policy implications as well as contributeto understanding of the impact of increased institutional and economic pressures on firms to recycletheir waste.

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1. Introduction

Attempts by firms to ‘close the loop’ in their supply chain bycapturing and reusing waste material is of increasing interest tofirms, researchers, and policy makers (Pagell et al., 2007; Blackburnet al., 2004). Understanding of factors however that will lead firmsto both: a. successfully capture and reuse their waste, and b. benefitfrom the practice, is still in a nascent form. Governments haveimposed new recycling requirements, such as electronic producttake-back or packaging waste reduction targets on firms (Mazzantiand Zoboli 2006; Buehlmann et al., 2009). Higher landfill fees havealso forced firms to re-consider the costs of reuse against the costsof offsite transfer and disposal. More and more supply chains toohave sought to introduce recycled product (e.g. Keen shoes andHewlett Packard) which exposes an industry to recycling innova-tion (Toffel, 2003). Firms have been pushed to reuse and reducetheir waste rather than send it to landfill for a number of institu-tional and economic reasons (Buehlmann et al., 2009). Even thoughthe pressure on firms to recycle has increased however, very little isknown about its impact on a firm’s environmental performance.Improved environmental performance, such as an overall reduction

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in waste, is the intended outcome of an increased institutional andeconomic push for recycling. Growing evidence suggests howeverthat many firms, when forced to consider or use recycling willchoose expedient rather than optimal solutions (Lenox and King,2004; Sarkis and Dijkshoorn, 2007). Without practical experiencein how to effectively reduce their waste, firms might choose anexpensive alternative such as treatment (Stromberg, 2004; Kangand Schoenung, 2005; Begum et al., 2009). The engagement byfirms with recycling generally is highly limited by perceptions ofinsurmountable economic and technical barriers (French andLaForge, 2006). If firms lack fundamental skills in identifyingviable waste reduction solutions then external pressure may havea limited impact on firm performance (Foulon et al., 2002).

A firm’s knowledge resources have proven to be a significantdriver of successful waste reduction by firms (Lenox and King,2004; Sarkis et al., 2010). These resources provide firms with aninternal ‘know-how’ that allows them to understand the practicalcomplexities of performance problems (Kogut and Zander, 1992;Chen and Chang, 2010). Without these resources, firms may seekto only ‘satisfice’ external stakeholders with superficial responses.Or they may seek quick, simplistic solutions such as third partydisposal or incineration that meets a mandate but does little toimprove environmental performance (Mazzanti and Zoboli, 2006;Simpson, 2010). In the electronics industry for example, recyclingmandates have caused firms to simply stockpile end-of-life wastes

D. Simpson / Journal of Cleaner Production 22 (2012) 32e41 33

in warehouses or send the material to other countries (Kang andSchoenung, 2005; Kahhat et al., 2008: p. 956). Firms have alsobeen found to report success in meeting landfill reduction targetsby using expensive treatment methods that do not improve theirenvironmental performance (Sarkis and Dijkshoorn, 2007). Insti-tutional and economic pressures will force firms to respond byaltering their practices in both beneficial and deleterious ways.Many firms will also seek to ignore such pressures and not respondat all. Such pressures however also provide important signals tofirms about best practice, the future of their industry and innova-tions that may improve performance. Knowledge resources providea critical link between this pressure, a firm’s response and thesubsequent impact on firm performance.

The reality for many organizations is that increased pressure torecycle does not necessarily translate into the performance benefitsdesired by firms, supply chains and governments. Regulations thatforce firms to recycle, higher landfill fees and industry pressure areused to encourage firms to consider reuse options for their waste.Such recycling pressure however may not produce beneficialperformance outcomes where firms lack the know-how to under-stand and convert ideas into action at the plant level. In this study,the relationship that exists between external recycling pressuresand internal environmental performance is explored. A firm’saccess to relevant knowledge resources is proposed to mediate thisrelationship. This is tested with survey data collected from U.S.-based metals and chemical manufacturers. The outcomes of thisstudy contribute to theoretical and practical understanding of therelationship between recycling pressures and a firm’s environ-mental performance.

2. Research framework

Recycling activity has increased in recent years because of: a.growing pressure on firms to limit their use of offsite disposalmethods, and b. the growing commercial value of the practice(Guide and Van Wassenhove, 2006). Traditionally, low costs forlandfill disposal and an absence of recycling laws have encouragedfirms to use end-of-pipe, offsite disposal methods such as landfilland treatment (OECD, 2005; Pagell et al., 2007). More recently,motivations for organizations to seek greater use of onsite disposalmethods have increased as various pressures have reduced theviability of landfill disposal (Seitz, 2007). The rate at which thesepressures have been introduced and brought to bear on organiza-tions however has not alwaysmatched the rate at which firms’ havedeveloped their understanding of recycling options.

2.1. Recycling pressures

2.1.1. Institutional pressuresInstitutions provide rules that structure the actions of organi-

zations (Scott,1995). Theycan be formal and regulatory, such as lawsthat set limits to air andwater pollution orwaste disposal, as well asless formal such as industry codes-of-conduct or supply chaintargets and standards (North, 1990; Taylor et al., 2005; Zhu andSarkis, 2004). Institutions can also be more voluntary and norma-tive (rather than enforced and coercive) where organizations can beguided by an established social network (Meyer and Rowan, 1977;Dimaggio and Powell, 1983). In recent years, decreasing landfillspace has led to increased regulatory restrictions on landfill disposaloptions (Alberini and Frost, 2006; Mazzanti and Zoboli, 2006;Buehlmann et al., 2009). In the EU for example, several new regu-latory requirements such as the end-of-life vehicles (EUCE, 2000)and the Waste Electrical and Electronic Equipment (EUCE, 2002)standards have forcedfirms to change their disposal practices. In theUnited States (U.S.) also, governments have sought new disposal

requirements for firms such as the introduction of e-waste disposalfees in California and preventing e-waste disposal to landfill in otherstates. Mandatory public reporting of toxic waste recycling to theToxic Release Inventory also motivates U.S. firms to reduce thevolume of waste they send to landfill (Khanna and Damon, 1999).

Institutional pressures have been found in many circumstancesto be a primary driver of environmental practice adoption andchange within organizations (Henriques and Sadorsky, 1999;Murillo-Luna et al., 2008). The promise of future as well as enac-ted legislative requirements encourages organizations to adoptpractices that they would not have sought voluntarily (Taylor et al.,2005; Doonan et al., 2005). Mandates from supply chain partnershave also been used as a driver of environmental performancechange particularly where requirements for a specific change areincluded in purchasing clauses (Bowen et al., 2001; Klassen andVachon, 2003). Many organizations however are motivated toadjust their operations only because of a perception that theadoption of a new practice will increase their peer and regulatory‘acceptance’ rather than improve performance (King et al., 2005;Delmas and Montiel, 2009). Social pressures such as legitimacyseeking within peer networks have been shown to change firm’spractices but not necessarily improve performance (Sarkis andDijkshoorn, 2007). Institutional pressure may lead to practicalchange but not necessarily desired performance outcomes.

2.1.2. Economic pressuresEconomic pressure to recycle increases as traditional disposal

options such as landfill, become prohibitively expensive. Increasedcosts for raw materials may also lead firms to consider the oppor-tunities for waste reuse in onsite processes (Jacobsen, 2006).Landfill fees and disposal liability in the U.S. for example has beenshown to significantly change firms’ choice of disposal method(Alberini and Frost, 2006). Motivations to recycle waste foreconomic reasons date back to the Industrial Revolution ematerialscarcity and limited access to transport forced the use of compre-hensive waste reuse and negligible disposal to landfill (Desrochers,2009). Industrial ecologies similar to those seen during theVictorian-era have slowly reappeared in Denmark (Kalundborg)and Wales however as an economic downturn forced firms towardgreater onsite waste reuse (Chertow, 2007).

Ideally, the capture and reuse of waste material by firms shouldlead to reductions in raw material use, energy consumption andwaste generation (Zhu and Sarkis, 2004; Jacobsen, 2006). Landfilldisposal and incineration are still preferred however over reuseamongst process-based industries (French and LaForge, 2006). Alarge disincentive to recycling is both the complexity of the activityand the volatility of markets for recycled materials. Recyclingmarkets tend to experience fluctuation in prices, a lack of longevityand ongoing competition from virgin raw materials (Stromberg,2004; OECD, 2005). The potential costs associated with the designand establishment of recycling networks and related infrastructurealso acts to limit participation (Presley et al., 2007; Gonzalez-Torreet al., 2010). Recycling can be economically valuable yet it is stillconsidered a too-expensive and exotic practice for many organiza-tions (Pagell et al., 2007). Firms require knowledge of the financialcosts and benefits of waste reuse if they are to understand its valuerelative to other, more familiar disposal options. Increasingeconomic pressure to reduce the use of landfill disposal and recyclewaste may not generate beneficial change if firms are reluctant orcannot clearly identify the value of such a change.

2.2. Knowledge resources

Pressure alone presents only part of the framework withinwhich organizations decide to seek options for waste reuse and

D. Simpson / Journal of Cleaner Production 22 (2012) 32e4134

reduction over landfill disposal. A lack of supporting informationand experience when faced with a complex problem can lowermotivation and increase perceived obstacles for firms (Davies andO’Callaghan-Platt, 2008; Gonzalez-Torre et al., 2010). Wastereduction practices in particular are heavily influenced by theknowledge base of an organization’s employees (Rothenberg et al.,2001; Klassen, 2001). King (1995) for example found the use ofenvironmental specialists in shop-floor environments to be animportant source of knowledge on regulations and technologies. Afirm’s resources provide it with unique capabilities that allow it toturn an identified opportunity into a competitive advantage(Barney, 1991). Knowledge resources offer the firm cognitivecapabilities that allow it to understand the operational implicationsof acquired information (Cohen and Levinthal, 1990). A firm’s‘know-how’ arises from its existing bank of operationally validatedknowledge (Lapre et al., 2000). Its knowledge resources developover time as it faces problems, applies its current resources, andlearns by doing (Hart, 1995). A firm can further improve its store ofrelevant knowledge by providing regular education to itsemployees, investing in knowledge development or importingrelevant expertise (Barney, 1991; Curkovic and Sroufe, 2007; Sarkiset al., 2010). Where the firm’s knowledge resources are nascent ornon-existent they may miss important performance opportunitiesor struggle to deal with the complexities of an operational problem.Recycling waste material for example, requires knowledge of thewaste material and its properties under conditions of reuse(Flowers and Linderman, 2003; Duval and Maclean, 2007). A will-ingness to explore un-conventional waste reduction options alsorequires past experience and awareness of its possible benefits(Lapre et al., 2000; Lenox and King, 2004). Without a level of‘recycling insight’, managers may simply ignore pressures torecycle, recycle for inappropriate reasons or lose potential perfor-mance benefits.

3. Problem statement and hypotheses

Very few studies have sought to understand the factors behindthe failure of firms to respond to and benefit from increased pres-sures to recycle. Institutional pressures to recycle are intended toforce firms to reduce their waste sent to landfill and encourageonsitewaste reuse and reduction. Economic pressures to recycle areintended to increase the value of waste reuse and reduction prac-tices to firms (Hodge et al., 2010). That firms do not improve theirperformance in the face of these significant and increasing pres-sures warrants investigation. Only a handful of investigations haveempirically addressed the environmental and economic perfor-mance implications of recycling practices (Jacobsen, 2006;

International Regulations

Domestic Regulations

Disposal Costs

Industry Practices

Institutional Pressure

Economic Pressure

PRESSURE TO RECYCLE

ExpR

Edu

KNOWRESO

Fig. 1. Conceptual framework showing un-mediate

Kocabasoglu et al., 2007). Recycling pressure does not necessarilyinduce firms to employ practices that will improve their environ-mental performance. Non-landfill disposal can include shifting ofwaste upstream (for example, to a storage location, supplier or thirdparty). A restriction on landfill disposal could also allow treatmentoptions such as incineration which does not improve firm perfor-mance or address the root causes of waste generation. Recycling isdefined by the OECD (1997) as: “the processing and use of wastes inproduction and consumption processes”. It should lead ideally, toimproved environmental performance in the form of: a. eventualwaste reduction, and b. more efficient use of material resources(Cordano and Freize, 2000; Hodge et al., 2010). Depending on anorganization’s understanding of the technical requirements ofrecycling and its potential benefits however, environmentalperformance improvement may not result from increased pressure.

In this study, it is proposed that recycling pressures can and dolead to the improvement of a firm’s environmental performancebut only where knowledge resources are present. These resourceseffectively mediate the relationship between recycling pressureand environmental performance as defined in Fig. 1 below.

To cope with the complexity of recycling suggests that firmsrequire a highly contextualized understanding of their waste andprocesses, which embedded knowledge resources can provide. Therole of knowledge resources in the relationship between recyclingpressure and environmental performance is positioned asa mediator.

Institutional pressures, both domestic and international maylead to improvements in a firm’s environmental performance butonly where knowledge resources also exist. Significant evidencepoints to the capacity of firms to change their practices in responseto regulatory pressures but without improving performance(Khanna and Damon,1999; King et al., 2005; Sarkis and Dijkshoorn,2007). This is particularly the case for late adopting firms thatsought change only after regulatory pressure forced them to do so.Knowledge resources provide firms with an advantage in that theycan better understand and respond to a regulatory change beforetheir competitors can (Porter and Van der Linde,1995; Toffel, 2003).They also provide firms with greater capacity to adapt their oper-ations to regulatory change and achieve related performancebenefits (Sarkis et al., 2010). Therefore it is initially proposed that:

H1: The relationship between institutional pressures to recycle(international and domestic regulations) and environmentalperformance is mediated by a firm’s knowledge resources.

Economic pressures, such as disposal costs, requirements ofcustomers and exposure to industry practices are an also influenceon a firm’s performance (Alberini and Frost, 2006; Field and Sroufe,2007; Delmas and Montiel, 2009). Economic pressure to recycle

ertise&Dcation

Environmental Performance

LEDGE URCES

PERFORMANCE

Model 1 (un-mediated)

Model 2 (mediated)

d (model 1) and mediated (model 2) models.

D. Simpson / Journal of Cleaner Production 22 (2012) 32e41 35

may push firms to perceive onsite reuse of waste as moreeconomically viable than offsite disposal. If a firm believes thatonsite reuse or waste reduction is expensive or too difficult toimplement then they may significantly under-value the benefits ofthe activity. Short-term cost accounting methods for example havebeen shown to reduce firms’ understanding of the value of morecomplex environmental performance changes (Curkovic andSroufe, 2007). Adoption of industry practices that appear benefi-cial for other firms does not always lead to performance benefitspost-adoption (King et al., 2005; Raynolds et al., 2007). Organiza-tions who are more aware of a waste’s value or who alreadyunderstand how waste material can fit with existing processes aremore likely to reduce their waste (Lapre et al., 2000). Experiencewith new practices as well as evaluation skills suited to wastemanagement decisions are important to the conversion ofeconomic pressure into beneficial performance change. Therefore itis further proposed that:

H2: The relationship between economic pressures to recycle(disposal costs and industry practices) and environmental perfor-mance is mediated by a firm’s knowledge resources.

The two major hypotheses are tested using a sample of manu-facturers as described in the following.

4. Methodology

4.1. Measure development

A sample of U.S.-based manufacturing firms assumed to befacing pressure to recycle was used to test the study hypotheses.Each organization in the sample was mailed a survey for comple-tion. The survey was designed and pre-tested during a preliminarystudy involving site visits and interviews several managers atmultiple manufacturing plants. Full survey questions are providedin Appendix A.

Some criticism exists of the use of data reported directly byplant managers rather than data drawn archival sources. Podsakoffand Organ (1986) offer several tactics for researchers to use that canreduce the impact of common source bias. First, principles ofobjectivity in survey design can be employede survey questions onperformance outcomes for example were modeled on objective,commonly used measures. The use of likert scales and self-reporting was in keeping with other studies that have measuredsimilar concepts and items. For example, French and LaForge (2006)used a frequency scale of: Never (1) to Very often (5), to assessreuse options for waste materials. A recent study exploring theimpact of institutional pressures on environmental performance bySarkis et al. (2010) also used only self-reported survey items.Second, a Harmon’s single factor test can be applied to the entire setof self-reported items to identify any common factor loadings. TheHarmon’s single factor test produced six factors with the first factoraccounting for approximately 1/6th of the explained variance(shown in Appendix A). This indicated that a common method biaswas not a problem. Finally, it should be noted that field-basedresearch is an appropriate technique for studies involving firm-level problems. It allows for a deeper understanding of opera-tional problems in real settings (DeHoratius and Rabinovich, 2011).

Each of the study measures were designed and prepared asdescribed in the following.

4.1.1. Dependent variable e environmental performanceEnvironmental performance refers to a firm’s capacity to

improve in three main areas: prevention of waste before it occurs,recycling or reducing waste that arises from end-processes, andmore efficiently using its material resources (Klassen andWhybark, 1999; Cordano and Freize, 2000). Environmental

performance was measured using items drawn from establishedscales. Performance items were selected on the basis of theircapacity to represent the ideal goals of recycling e that ofpollution prevention and resource use efficiency. Self-reportedmeasurement of both environmental performance by facilitymanagers has been employed by other, similar studies. Cordanoand Freize (2000) for example used a self-reported ‘disagree/agree’ scale (1 through 7) to measure pollution prevention pref-erences of plant managers. More recently and directly relevant tothe study of recycling, French and LaForge (2006) used a self-reported scale (1 through 5) to assess preferences for a range ofreuse options amongst process manufacturers. Commonly usedmeasures for environmental performance are those regardingreduction of raw material use and pollution output for a specifiedperiod (usually 1 year) as well as hazardous material beingsubstituted with non-hazardous materials (Kitazawa and Sarkis,2000; Simpson et al., 2007; Zhu et al., 2005; Pagell et al.,2007). Capture and effective reuse of waste materials shouldalso lead to reductions in energy usage (which also acts asa proxy for reduced carbon emissions) (Zhu and Sarkis, 2004).Environmental performance was measured using facility-levelsurvey responses on a 5-point likert-scale. The final items areprovided in Appendix A.

4.1.2. Independent variable e pressures to recycleThe institutional environment informs an organization’s choices

through the generation of pressures that define ‘rules’, both directlyand indirectly (Granovetter, 1985). Institutions, particularlydomestic and international regulations, constrain actors in bothpositive and negative ways (North, 1990; Scott, 1995). Organiza-tions face pressure from regulations (such as WEEE, the BaselConvention and electronic recycling laws) that force them torecycle at greater than economic levels (Alberini and Frost, 2006;EUCE, 2000, 2002). Cost pressures and longer term liabilities mayalso force organizations to dispose of their waste material in waysthat reduce costs or avoid future liability (Mazzanti and Zoboli,2006). Peer and customer pressure, can influence organizationsand help to inform waste disposal choices. Supply chain andindustry-level networking in particular can be influential in the useof waste management innovation (Klassen and Vachon, 2003;Chertow, 2007; Schliephake et al., 2009). Institutional pressureswere assessed through questions regarding the influence of bothDomestic Regulations and International Regulations on firms.Economic pressures were measured in two ways: a. Industry Prac-tices e.g. mandates or practices passed on by customers, competi-tors or industry associations; and b. the influence of general wastemanagement costs such as disposal and waste transport fees(Disposal Costs). Items were measured using facility-level surveyresponses on a 5-point likert-scale. The final items are provided inAppendix A.

4.1.3. Mediator e knowledge resourcesKnowledge resources are proposed to allow firms to identify

improved waste reduction options. Without knowledge resources,organizations might miss opportunities for valuable reuse orreduction or over-value the services of waste treatment firms(Gonzalez-Torre et al., 2010). Resources beneficial to goals of wasteprevention, reduction or reuse in particular have included relatedtraining, experience, and expertise (Lapre et al., 2000; Lenox andKing, 2004). These resources provide firms with operationallyvalidated experience that can assist with complex problems (Chenand Chang, 2010). Knowledge resources include the firm’s use of: a.employee waste management education (Sarkis et al., 2010); b.employees with waste management duties (King, 1995; Lenox andKing, 2004); and c. the use of experts (Lenox and King, 2004).

Table 1Demographics of the study population.

Demographic Number

IndustryMetals 138Chemicals 31Plastics 6Other 44

Respondent roleCEO 22Vice President 38Environmental Manager 115Operations Manager 27Quality 4Other 10

Supply chain positionRaw materials 15Manufacturer 192Assembler 4Services 8

Firm size10e50 pp 2650e100 pp 50100e200 pp 42200e500 pp 62>500 pp 35

ISO14001 certification 69

D. Simpson / Journal of Cleaner Production 22 (2012) 32e4136

Knowledge resources were measured using facility-level surveyresponses on a 5-point likert-scale. The specific items are providedin Appendix A.

4.1.4. Control variablesThree control variables were employed to assess performance

differences that might occur as a result of demographics ratherthan specific pressures. Three common control variables inenvironmental performance studies are ISO14001 certification (atwo-level variable: yes or no), industry type (a 3-level variable:metals, chemicals or other) and firm size (natural log of thefirm’s reported number of employees) (Melnyk et al., 2003; Zhuand Sarkis, 2004; Babakri et al., 2004). Firm size was particu-larly useful for identifying any effects attributable to facility sizeor waste volume having to be managed by the firm (Darnallet al., 2010).

4.2. Sample and data collection

The sample was drawn from the USEPA’s Toxic Release Inven-tory (TRI), which provides a database of firms required to publiclyreport their annual waste emissions. These firms have greater than10 employees and release ‘listed’ toxic substances to land, air orwater. They face significant institutional and economic pressure toreduce their waste. Metals and chemicals manufacturers werechosen as they produce the highest total waste volume by industryof organizations reporting to the TRI. A sample of 1690 organiza-tions was mailed a survey, instructions and a reply-paid envelope.The survey mailing and follow up phone calls occurred over anapproximately 4-month period between December 2008 andMarch 2009. 49 surveys were returned incomplete or un-openedand 183 respondents contacted by phone, either no longer exis-ted, had altered (such as sold) their operations, or declined toparticipate. A total of 220 useable surveys was returned with a finalresponse rate of 16%. This response rate is consistent with otherpaper-based studies using the TRI database (e.g. Delmas and Toffel,2008). A demographic breakdown of the finals sample is providedin Table 1.

Approximately 90% of respondents described their supplychain position as ‘manufacturer’. Most of the respondents occu-pied management-level positions in either operations or envi-ronment functions. An assessment of non-response bias wasconducted using a comparison test between early and laterespondents (as recommended by Armstrong and Overton, 1977).Late respondents tend to most closely match the profiles of non-respondents. Late respondents were classified as those returningtheir surveys later than four weeks from the initial mail-out(tracked by date identifiers on each survey). Early and laterespondents were compared against industry, firm size and grossprofit. A second test compared responses from the first two-month mailing period with the second two-month mailingperiod. For both comparisons, no significant differences in meanswere detected.

4.3. Data preparation and analysis

Following data collection, all data was checked for multivar-iate analysis assumptions such as data normality, hetero-scedascticity, missing values and outliers (Hair et al., 2006).Normally distributed items can be checked visually with distri-bution plots and statistically with skewness tests. Skew values forall items and measures did not exceed �1.96 which demonstratesnormal distribution (Hair et al., 2006). Individual items weremerged into multi-item measures using both exploratory factoranalysis (EFA) and confirmatory factor analysis (CFA). First,exploratory factor analysis (EFA) using an eigenvalue greater than1 criterion and a varimax rotation produced 6 factors. A Har-mon’s single factor test, as described in Section 4.1 above alsoconfirmed that common method bias was not a likely problemfor the dataset. Using EFA, similar items were grouped andreduced to as parsimonious a group of variables as possible.Criteria for item removal were factor loadings of less than 0.65,or cross-loading on multiple factors at values greater than 0.40(Tabachnick and Fidell, 2001; Hair et al., 2006). Second, confir-matory factor analysis (CFA) was conducted for all items identi-fied during the EFA. With CFA, factor scores should load to theidentified measures and should exceed values of 0.60 (Nunnallyand Bernstein, 1994). Composite reliability scores should beclose to a minimum threshold of 0.70. Convergent validity isassessed using average variance extracted (AVE) which shouldexceed 0.50 (Fornell and Larcker, 1981). Final measures werecompared to identify any significant correlations (above 0.70being unacceptable) (Hair et al., 2006). The results of the corre-lation test and general properties for each measure such asmeans, skew and standard deviation are provided in Table 2. Fullsurvey items and results for both EFA and CFA are provided inAppendix A.

The study model proposes a mediated relationship betweenrecycling pressures and a firm’s environmental performance. Formediation to be present, three conditions must be met: first,a significant relationship must exist between recycling pressureand environmental performance (model 1: un-mediated); second,this significance should reduce to a negligible level in the presenceof the mediator, knowledge resources (model 2: mediated); andthird, recycling pressures must significantly relate to knowledgeresources and knowledge resources must significantly relate toenvironmental performance (model 2: mediated) (Baron andKenny, 1986). Partial mediation is also possible however signifi-cance at condition 1 still needs to reduce to some degree in thepresence of the mediator for mediation to be supported. Mediationwas tested using a structural equation model (SEM) and maximumlikelihood estimation in AMOS (Arbuckle, 2006). SEM is moreappropriate for testing mediation than linear regression methods

Table 2Correlations and measure statistics.

Mean S.D. Skew Correlations

1. 2. 3. 4. 5. 6. 7. 8.

1. Environmental performance 2.30 0.76 0.41 12. International regulations 1.73 1.05 1.56 0.20** 13. Domestic regulations 2.97 1.24 0.25 0.24** 0.43** 14. Disposal costs 3.19 1.09 �0.07 0.22** 0.09 0.18** 15. Industry practices 1.91 0.82 1.26 0.23** 0.32** 0.34** 0.23** 16. Knowledge resources 3.65 1.06 �0.40 0.22** 0.17* 0.32** 0.30** 0.21** 17. Firm size 5.22 1.20 0.83 0.11 0.18* �0.05 0.11 �0.00 0.24** 18. ISO 14001 e e e �0.12 �0.13 �0.03 �0.07 �0.11 �0.19** �0.14* 19. Industry e e e �0.05 �0.02 0.05 0.05 �0.06 0.16* 0.02 �0.09

* Correlation is significant at the 0.05 level.** Correlation is significant at the 0.01 level.Skew values should not exceed �1.96 to demonstrate a normal distribution (Hair et al., 2006).

D. Simpson / Journal of Cleaner Production 22 (2012) 32e41 37

and addresses many of the measurement issues found in singlesource survey research (Fornell and Larcker, 1981; Sarkis et al.,2010). The three control variables were included and positionedso as to indicate effects on the dependent variable.

All modeled paths, both un-mediated and mediated, weretested for their structural fit using multiple goodness-of-fitindices including CFI, IFI and RMSEA. Recommended minimumvalues for each of these indices were drawn from commonlyused sources. For CFI and IFI, values should be greater than 0.90(Bentler, 1990; Hair et al., 2006); and RMSEA should be less than0.10 (Hair et al., 2006).

5. Results and discussion

Structural model testing indicated that all paths andmodels metan appropriate level of fit. Values for CFI, IFI and RMSEA werewithin acceptable limits for all tests. Tests for the un-mediatedrelationship (Model 1) indicated that recycling pressure wasa significant driver of a firm’s environmental performance. For theun-mediated relationship, disposal costs exerted the most signifi-cant influence on environmental performance (p< 0.001), followedby domestic regulations (p< 0.01), industry practice (p< 0.01) and

Table 3Results for the un-mediated (model 1) and mediated (model 2) relationship between re

Model Path Std. Est. R2

1 (Un-mediated) IR/ EP 0.18* 0.062 (Mediated) IR/ EP 0.15* 0.15

IR/ KR 0.23**KR/ EP 0.32***

1 (Un-mediated) DR/ EP 0.21** 0.082 (Mediated) DR/ EP 0.06 0.13

DR/KR 0.42***KR/ EP 0.33**

1 (Un-mediated) DC/ EP 0.26*** 0.102 (Mediated) DC/ EP 0.14t 0.15

DC/ KR 0.40***KR/ EP 0.30**

1 (Un-mediated) IP/ EP 0.30** 0.122 (mediated) IP/ EP 0.22* 0.17

IP/KR 0.38**KR/ EP 0.28**

Control variables Firm size/ EP 0.14t

ISO14001/ EP �0.11Industry/ EP �0.03

tp< 0.10; *p< 0.05; **p< 0.01; ***p< 0.001.IR¼ International Regulations; DR¼Domestic regulations; DC¼Disposal Costs; IP¼ IndStd. Est. is standardized regression estimate.

international regulations (p< 0.05). Tests for mediation (Model 2)indicated that knowledge resources fully mediated both thedomestic regulations/ environmental performance and thedisposal costs/ environmental performance relationships.Knowledge resources only partially mediated the industry practi-ces/ environmental performance relationship and did notmediate the international regulations/ environmental perfor-mance relationship. The results for the two models are shown inTable 3.

In the primary, un-mediated relationship, several findingsshould be highlighted. Domestic regulations and disposal costpressures, for these firms, were significant drivers of environ-mental performance. Because the sample population was drawnfrom the TRI database, it is not surprising that domestic regu-lations were a significant driver of firms’ environmental perfor-mance. These firms are required by law to publicly report theirwaste disposal choices e this would presumably encourage firmsto actively seek a reduction in either their total reported wasteor waste sent to landfill. As others have described (Taylor et al.,2005; Alberini and Frost, 2006), mandatory reporting can bea significant driver of firm behavior. Whether or not changes inreported waste would also be reflected in reductions of total

cycling pressure and environmental performance.

CFI IFI RMSEA Hypothesis Supported?

0.94 0.94 0.08 No0.96 0.97 0.06

0.97 0.97 0.07 Yes: full mediation0.97 0.97 0.06

0.94 0.94 0.08 Yes: full mediation0.97 0.97 0.06

0.96 0.96 0.05 Yes: partial mediation0.94 0.94 0.07

Minor significanceNon-significantNon-significant

ustry Practices; KR¼ Knowledge Resources; EP¼ Environmental Performance.

D. Simpson / Journal of Cleaner Production 22 (2012) 32e4138

waste however is an important question. Equally, economicpressures such as industry practices and costs were under-standably a significant driver of these firms particularly at thetime of the survey (post-GFC and toward the end of 2008).International regulations were the least significant influence onfirms’ environmental performance, which suggests that thesefirms were more focused on domestic supply issues. If thesample had been drawn from industries that were more exposedto European Union waste restrictions, e.g. electronics or auto-motive, then this effect may have been more significant.

When mediation effects were taken into account, the impact oftwo of the recycling pressures on environmental performancewerecompletely explained by the presence of knowledge resources.Further, this influence was not attributable to either industry orfirm size effects (see Table 2). Without available knowledgeresources, firms either do not know how to respond to recyclingpressure or may employ tactics that do not effectively reduce theirwaste. These practices might include end-of-pipe reduction tacticssuch as increased onsite treatment rather than reduction (e.g.incineration) or methods that lower publicly reported volumes butdo not prevent waste (French and LaForge, 2006; Field and Sroufe,2007; Simpson, 2010). With knowledge resources however firmswere able to effectively meet these pressures and improve theirenvironmental performance. The influence of industry practices onenvironmental performance was only partially mediated byknowledge resources. Whilst knowledge resources should providea larger and more reliable source of operationally validated expe-rience for firms, industry partners may partly replace or comple-ment its impact. Knowledge resources did not mediate therelationship between international regulations and environmentalperformance.

The availability of experience and knowledge at the plantlevel has been shown in other studies to increase the interestthat managers have for more complicated waste reductionmethods (Lenox and King, 2004). Embedded knowledgepresumably allows managers to reduce their search costs whenlooking for viable solutions and increases their options (Chenand Chang, 2010). Training and experience have also beenshown to significantly mediate the translation of waste reductionpressures into environmental benefits by improving creativityand availability of options (Lapre et al., 2000). Domestic regu-lations can produce compliant behaviors that do not necessarilylead to desired performance improvement. This is the caseparticularly for poorly resourced firms that seek to ‘satisfice’their stakeholders but not look to make no significant opera-tional change (Sarkis and Dijkshoorn, 2007). Presumably, firmswithout knowledge resources perceive regulatory pressures asa distraction and will look for superficial, non-optimal solutions.They may search only for off-the-shelf solutions and late in anadoption cycle for their industry (King et al., 2005). Withknowledge resources however firms are better equipped tomanage regulatory pressures and in this study, were better ableto improve their performance as a result. Disposal costs are moremarket-driven and theoretically should encourage waste reuseand reduction activity without much additional incentive orinternal knowledge (Alberini and Frost, 2006). In this studyhowever, knowledge resources proved to be an importantmediating factor in the disposal cost pressureeenvironmentalperformance relationship. Firms may only be capable of appre-ciating disposal cost pressures against their awareness of thecosts of other options. If a firm has no prior experience withwaste reuse, which can be operationally difficult to implementonsite, it is less likely to use the practice to reduce its costs(Lapre et al., 2000). Most firms are inherently conservative andchoose options that best minimize their risks and achieve short-

term savings (Margolis and Walsh, 2003). Therefore, withoutappropriate experience, education or expertise, they would meetcost pressures with expedient and less valuable solutions. In therelationship between industry practices and environmentalperformance, knowledge resources partly mediated the pressurebut did not completely explain its influence. Supply chain part-ners, trade associations and industry members generally tend toshare practices and experiences openly on waste managementproblems (Kocabasoglu et al., 2007; Schliephake et al., 2009).Industry members also provide important authorizing effects fornew practices and larger firms can ‘test’ practices for smallerfirms (King et al., 2005; Murillo-Luna et al., 2008; Delmas andMontiel, 2009). This is a positive outcome for industries in thatfirms might actively seek to network with one another tomanage their recycling pressures where their knowledgeresources are low.

Firm size was a minor influence on environmental perfor-mance with performance increasing slightly as size of the firmincreased. This type of effect has been noted in other studiesand is usually attributed to the likelihood that larger firms willexperience greater public scrutiny, have more resources and areoften more innovative (Darnall et al., 2009). This is supported bythe small but significant correlation between firm size andknowledge resources (Table 2). Some studies have alluded to thelikelihood that larger firms might experience greater difficultymanaging larger volumes of waste (Atasu et al., 2009) orperhaps benefit from economies of scale and find waste reduc-tion easier. Both Klassen (2001) and King and Lenox (2001), alsousing TRI reporting firms, found firm size to be negativelycorrelated with waste generation and prevention, suggestingthat larger firms are able to prevent more waste than smallerfirms. In both cases however the relationship was only slightlysignificant (p< 0.05) and similar to the findings of this study. Asignificant correlation was also noted between ISO14001 certi-fication and knowledge resources (Table 2), which is notsurprising considering the skill-enhancing nature of the standard(Curkovic and Sroufe, 2007; Babakri et al., 2004). No significantindustry effects were identified however the sample waspredominantly made up of metals firms with only two indus-tries represented.

6. Conclusions and further research

Pressures to recycle are an increasingly prevalent influence onfirms. Very little empirical research however has sought toestablish whether or not regulatory instruments such as recyclinglaws or increased disposal fees help to improve firms’ environ-mental performance. In this study, the influence of increasedrecycling pressures faced by firms e both institutional andeconomic e were shown to be significantly mediated by a firm’savailable knowledge resources. Regulatory pressures have beena fairly traditional method used by governments and increasinglysupply chains to force firms to improve performance by reducingwaste. Firms however may not be able to identify efficientresponses to such pressures if they are unaware of all of theirpotential waste reduction options. A lack of experience with newor unusual waste reuse and reduction options may discouragemore conservative firms from attempting them. In this study,even disposal cost pressures were ineffective where firms wereunable to draw from knowledge resources such as expertise,educated employees and experience. Compliant rather thaninnovative behavior from firms when faced with regulatorypressure to improve environmental performance is not new(Taylor et al., 2005). It is becoming increasingly important forresearchers however to look to internal features that may limit

D. Simpson / Journal of Cleaner Production 22 (2012) 32e41 39

firms’ effective responses to changing regulatory and marketconditions. Firms will look for information that will assist themwhen seeking to accommodate changing regulations andincreased costs. They will, as shown by this study, draw thisinformation from both the practices of their peers and theirembedded knowledge resources. From a practical perspective thissuggests that supply chains and industries can benefit from anincreased use of peer networking and peer-driven education toprovide firms with important waste reuse and reduction infor-mation. A further, minor influence was firm size in that largerfirms appeared to have slightly higher environmental perfor-mance. This was attributed to the likelihood that large firmsattract greater public scrutiny and have more resources forenvironmental management.

Recycling pressures from various stakeholders are driven bysignificant social and economic factors that intend ideally toencourage and force firms to reduce their waste. Firms however donot necessarily understand the connection between pressure andeffective outcome and tend to make choices that allow onlysuperficial responses to this growing market and regulatory chal-lenge. Waste reuse and reduction however is increasingly recog-nized as a source of both environmental and economicperformance benefits. Firms have increasingly developed their owninternal resources in this area and may choose to leverage suchknowledge resources for advantage in the future. This study iden-tifies an important role for knowledge resources in that they allowfirms to more effectively meet externally imposed recycling chal-lenges. Knowing how to reuse waste onsite, reduce waste at its

CFA estimate AVE Compreliab

Environmental PerformanceQ. During the last 12 months,

has your organization?Reduced the amount of raw materials

needed to manufacture our products1.000 0.61 0.83

Reduced our total tonnage of solid wastes 1.311Reduced our total volume of liquid wastes 1.290Reduced our total energy usage 0.887Reduced our use of hazardous/toxic

materials in processes and products0.950

Q. To what extent have each of the followingmotivated your organization to increaseits recycling efforts?

International RegulationsExport and international trade laws 1.000 0.90 0.89European Union environmental laws 0.864Domestic RegulationsLocal government environmental laws 1.000 0.86 0.93U.S. State government environmental laws 1.275U.S. Federal government environmental laws 1.266Disposal CostsCosts of transportation 1.000 0.86 0.90Costs charged by waste management companies 1.305Costs of disposal to landfill 1.266Industry PracticesPurchasing requirements of customers 1.000 0.65 0.68Education and advice from our main

Industry Association1.694

Recycling practices of our competitors 1.164Knowledge ResourcesQ. How well do the following statements reflect

the practices of your organization?We have environmental specialists working at our firm 1.000 0.67 0.71We regularly educate our employees in aspects

of waste management1.043

We have one or more employees that specificallymanage waste materials

0.946

source or convert waste into new products requires a higher level ofunderstanding by firms.

As landfill fees, treatment costs and raw material purchasingcosts have increased firms have sought to capture value fromwaste management activities. Waste materials arising fromvarious sources e such as reverse channels, used packaging orprocess byproducts e are increasingly described as a valuableresource. The choices of firms when faced with pressure toreduce their waste and the factors that can enhance theirresponse is a growing but under-researched area. The potentialbenefits of interaction with industry partners in the pressur-eeperformance relationship in particular is an aspect only partlyaddressed by this study. This study considered a range of recy-cling pressures faced by firms, with a sample of manufacturers inonly two industries. Further research should incorporate largersamples as well as different industries different pressures. Thestudy results also relate to a sample drawn from firms with U.S.-based manufacturing facilities. While many of the firms in thesample produced components for sale to international customersand markets, possible differences still exist in pressure responsebetween U.S.-based and European Union-based firms. Morecomprehensive recycling regulations and higher landfill fees forEuropean Union firms may increase the impact of certain pres-sures relative to others.

Appendix A. Survey items, measure reliability and validityand general measure characteristics.

ositeility

Alpha % of variance EFA factor loading

0.81 15.64 .772 .090 �.028 .106 �.070 .054

.805 .050 .172 .156 .063 .022

.790 .087 .138 .037 .099 .040

.691 �.126 .041 .029 .289 .097

.717 .190 .034 .023 .066 .055

0.89 12.53 .113 .240 .072 .072 .169 .885.102 .206 �.025 .062 .121 .911

0.92 13.75 .128 .820 .046 .060 .158 .178.075 .922 .062 .176 .105 .135.071 .899 .076 .195 .102 .168

0.88 10.64 .112 .181 .840 .019 .136 .068.101 .031 .914 .197 .044 .020.087 �.023 .897 .195 .079 �.033

0.67 9.53 .111 .104 .142 �.173 .697 .134.082 .261 .075 .205 .758 .003

.111 .031 .036 .188 .756 .151

0.71 8.94 �.085 .036 .079 .790 .027 .080.200 .225 .134 .695 .147 .041

.163 .110 .143 .759 �.004 �.024

D. Simpson / Journal of Cleaner Production 22 (2012) 32e4140

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