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SMES AND GREEN PRODUCTS DIVERSIFICATION
STRATEGY : THE ROLE OF STAKEHOLDERS
Quang LE VAN and Manh Hung
NGUYEN
ABSTRACT
Facing the challenge of environmental degradation in Vietnam, a growing number of firms
have begun to integrate environmental management systems into their business strategies and
develop green product diversification strategies. Based on the stakeholder theory, this paper
attempts to explore the influences of stakeholders on the implementation of horizontal and vertical
green product diversification. Empirical results show that foreign customers play a significant
role in driving companies to adopt strategy of green product diversification. For foreign-invested
enterprises, the effect is limited to the adoption of horizontal green product diversification. It
further reveals that
Institutional weakness, lack of transparency, community stakeholders and
regulatory stakeholders have no significant effect on the corporate green product strategy.
1. INTRODUCTION
With the advent of severe environmental deterioration, green product development strategy
has received increasing attention and is being thought of as an essential path to achievefirms’
environmental sustainability (Crowe and Brennan, 2007; Bos-Brouwers, 2010; Hall and Wagner,
2011). There is increasing social and political awareness of the importance of developing
environmental responsibility at corporate level (Babiak and Trendafilova, 2011). Corporate
Environmental Responsibility (CER) can be defined as company practices that benefit the
environment and go beyond simply complying with environmental laws (Gunningham, 2009).
When focusing on issues of responsibility, large companies are frequently perceived to be more
responsible for driving climate change and resource depletion (Cassells and Lewis, 2011), that is,
there is a misconception that small and medium-sized firms (SMEs) (following the definition of
the Wold Bank, an SME having fewer than 300 employees) are less aware of the negative effects
of their operations and lack interest in pursuing environmental practices (Cassells,Lewis,2011 ;
Baumann-Pauly and al, 2013). Furthermore, SMEs provide little information regarding their
strategies and financial performance and, therefore, this contributes to their being less studied
(Bos-Brouwers,2010).
It is often unclear that SMEs, unlike large companies, maintain a close relationship with their
community (internal and external stakeholder). For Csikszentmihalyi (1997) creativity is the result
of an interaction between the context, the individual and the collective. These factors favor creativity
in the company (Bessant and Tidd, 2007, p.40). These three main concepts are very present and
important in SMEs. Because of its limited resources, according to Carrier (2007, p.120), SMEs
must mobilize the creative strength of each of their employees (who indicate the individual), their
teams (which indicate the collective) and actors in its environment (which indicate the context).
Moreover, another SME asset is its organizational flexibility, that is, it has a «simple and little
hierarchical structure [....] where relationships are often informal» (Carrier, 2007). Because of this
flexibility, individuals can work with different groups inside and outside (Georgsdottir et al., 2003,
p.182). It allows the SME to adapt quickly to changes and make quick decisions. This is possible
