The Interactions of Absorptive Capacity, Buffer Inventory, and Toxic Emissions on Firm Value

Lik Man Daphne Yiu and Ka Yui Karl Wu
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Lik Man Daphne Yiu: School of Business, Macau University of Science and Technology, Macau S.A.R, China
Ka Yui Karl Wu: School of Business, Singapore University of Social Sciences, Singapore 599494, Singapore

IJERPH, 2021, vol. 18, issue 4, 1-18

Abstract: A significant amount of research has been conducted on the impacts of emissions reduction, absorptive capacity, and buffer inventory on firm performance. According to the resource-based view (RBV), absorptive capacity and buffer inventory are organizational capabilities and resources to create sustainable competitive advantages. Yet, the resource orchestration perspective (ROP) of the RBV emphasizes that firms need to develop a new capability to orchestrate and deploy their existing capabilities and resources. From an organizational learning perspective, firms with the low-level release of toxic chemicals have established a structured system and systematic organizational routines, strengthening their learning capabilities to share and use internal and external information across functional areas for continuous improvements. This study explores and seeks to understand toxic emissions through systematic operational routines as an organizational mechanism. These routines orchestrate and deploy the firm-specific absorptive capacity and buffer inventory to generate a sustainable competitive advantage. We examine the impacts of the absorptive capacity and buffer inventory on firm value in terms of Tobin’s Q, respectively. We also explore how such impacts are moderated by toxic emissions. Our results show that the absorptive capacity significantly enhances the market value of firms. However, the relationship between the buffer inventory and firm value is insignificant. Our additional analyses indicate that the impacts of the absorptive capacity and buffer inventory on the firm value are both significantly positive when firms release low toxic chemicals. Our results further suggest that firms can maximize their market value with a high absorptive capacity, high buffer inventory, and low toxic emissions.

Keywords: absorptive capacity; buffer inventory; toxic emissions; firm value (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2021
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