Is It Necessary to Centralize Power in the CEO to Ensure Environmental Innovation?

Abstract

Using data from a sample of 4863 international firms corresponding to the period 2002–2017, this paper examines the role that chief executive officer (CEO) power plays in environmental innovation and the impact that these strategies have on financial performance. Both issues have been the subject of considerable debate in the literature, with opposite views and contradictory findings. The results indicate that investing in environmental innovations related to the use of clean technologies, ecological production processes, and the design, manufacture and commercialization of environmentally sustainable products requires that CEOs have a greater degree of power in order to support projects that do not entail a higher return in the short and medium terms. Additionally, the results show that the negative economic effect of eco-innovation reverses in the fourth and fifth years after environmental innovations were implemented. Thus, this study supports the view regarding a “bright side” of CEO power with regard to corporate sustainability.

Executives’ Environmental Awareness and Eco-Innovation: An Attention-Based View

“…Executives' environmental awareness has a positive impact on eco-innovation, in particular, on both eco-management innovation and also eco-product innovation. The results are consistent with previous research [37,41], emphasizing the positive effect of executives on eco-innovation. On the one hand, the improvement of executives' environmental awareness has enhanced their emphasis on environmental protection laws and measures.…”

“…Eco-innovation often has high risks and uncertainties, and it needs to invest a lot of resources in the short term to generate uncertain long-term returns [36]. Executives play a key role in the generation and implementation of environmental innovation and whose personal image (personality [37], religious beliefs [38], political connections [36] and ability [39]) and situation [40,41] (power and position) have influence on eco-innovation. Arena et al (2018) [37] proved that CEO hubris positively affects eco-innovation, but its influence degree is affected by organizational slack and the external environment.…”

“…In addition, the research showed that the CEO's power is related to environmental innovation. When the CEO has a high degree of environmental awareness, empowering the CEO is beneficial to eco-innovation [42], which makes the company design an appropriate monitoring structure [41], but other executives with certain rights will feel that their positions are guaranteed, and as a result, they will not act in the best interests of different stakeholder groups and participate in less corporate social responsibility [40], thus restraining eco-innovation.…”

Different Leaders in a COVID-19 Scenario: CEO Altruism and Generous Discourse

“…Thus, various studies indicate that the CEO's moral values and beliefs explain the formulation, adoption and implementation of responsible policies (i.e., [10][11][12][13][14]). However, the pandemic has meant that all companies are affected by an event that threatens their stability and that of the business sector in which it operates, both nationally and globally.…”

Analysis of the Dialogue with Stakeholders by the IBEX 35 Companies

“…Investors and shareholders are also a key stakeholder group whose interest in CSR has increased greatly over time [55,56]. In line with the Principles for Responsible Investment (PRI), investors include ethical, social, and environmental criteria into their investment decisions encouraging companies to improve their CSR performance [57] and disclose CSR information [58].…”