The Impact of Green Practices in Value Chain on Firm Performance in the Context of a Developing Country

Abstract

Background: Companies need to go green to remain relevant. Previous studies have confirmed that going green leads to superior performance for companies. However, research of green practices in a value chain requires further attention, especially in identifying the green value chain activities that lead to superior performance. A value chain analysis focuses on identifying competitive advantages of firms through five primary and four support activities. Methods: This study extends from Ong et al. (2019), who developed and validated the instrument for the nine green value chain activities, to also examine their effect on firm performance. The 207 valid responses in this study are collected through a questionnaire survey of the sampling frame consisting of companies in Bursa Malaysia and the Federation of Malaysian Manufacturers Directory. Results: The findings reveal that the companies' green practices in primary value chain activities are higher than in the supporting value chain activities. Technological development is the activity with the lowest green attention among the nine value chain activities. Our multiple regression analysis shows that 25% of the variation in firm performance can be significantly explained by the nine green value chain activities. In terms of the individual green value chain activities, green technology development is the only activity that can positively and significantly explain firm performance. Conclusions: The findings of the study suggest that companies intending to build their green core competence need to engage in green technology development. Companies that go green for the purpose of complying to regulations and fulfilling minimum customers' demands can still embed green practices into their green value chain without compromising their performance.