Doctor of Business Administration
Sydney Business School
Manatsa, Augustine, Dynamic capabilities, institutions and firm performance of firms responding to climate change: the case of Australia and South Africa, Doctor of Business Administration thesis, Sydney Business School, University of Wollongong, 2017. https://ro.uow.edu.au/theses1/39
Limited research has evaluated how the adoption of proactive climate change strategies impacts firm performance, more so a good understanding of the organisational components that link such strategies to performance. For this reason, the relationship between climate change strategies and other corporate strategies and how they could enhance firm performance is not well understood. In this study, organisational capabilities that underlie a firm’s ability to generate and enhance performance by adopting proactive climate change strategies is pursued. The study develops and tests a model of dynamic capabilities enhancing firm performance through the development of proactive climate change strategies. Results from a survey of 166 energy and materials (E&M) firms, archival data and eight semi-structured interviews strongly support the model.
To investigate this relationship, this study identifies the dynamic capabilities and climate change practices of energy and materials (E&M) firms in Australia and South Africa. Given, the location differences, the study further explored the relationship between institutional capacity, proactive climate change practices, and firm performance. The investigation was guided by three objectives, with data obtained from archival and primary data sources. The primary data is obtained via an online survey and semi-structured interviews targeting company executives from eight purposefully sampled firms (four from each country).
The results reveal that South African firms have higher climate change proactiveness compared to Australian firms, although climate change proactiveness was moderate overall (r= 0.522; p< 0.001). In this regard, South African firms are more actively seeking to collaborate, develop partnerships and report their climate change practices than Australian firms. Regarding the extent of the presence of dynamic capabilities, absorptiveness was the most demonstrated in both countries, followed by adaptiveness and lastly innovativeness. Australian firms are more receptive to innovativeness compared to South African firms which focused on knowledge acquisition (a component of absorptiveness).
The study finds that as individual components, the dynamic capabilities impact on firm performance varies by component. As a construct, dynamic capabilities have no significant direct impacts on firm performance. Instead, proactive climate change practices strongly mediate the dynamic capabilities construct and performance. Climate change proactivity is, therefore, an important competence for E&M firms that seek to enhance their performance when faced by climate change disruptions. The presence of institutions has a weak influence on dynamic capabilities development, but strongly impact the climate change proactivity of participating firms. Therefore, the study finds that institutional presence indirectly influences the performance of firms.
The study contributes to “the beyond green” debate by linking climate change strategies and firm performance with studies that seek to rationalise proactive climate change practices. Previous studies had not considered that overall environmental proactivity was the major driver of the proactive strategies developed by such firms. Since the three dynamic capabilities were not incorporated in previous models, it is likely that the effect of climate change proactivity on firm performance was spuriously exaggerated. While the results show some significant relationships, the results could also be rather spurious given that both climate change proactivity and firm performance depend on firms’ capabilities.
The study findings support existing literature but provide new knowledge specific to firms’ capabilities and functional competencies that drive climate change practices and performance. Further research into the dynamic capabilities of proactive climate change practices of firms in more diverse countries and over a longer period is likely to extend this knowledge. Future research could also investigate the knowledge businesses require to identify and incorporate climate change risks into broader company risk management.