The Effects of IT System Utilization of SME on the Environment Management Performance
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Abstract
The current research is intended to examine the effects of IT system utilization of SME on the environment management performance, since IT system is essential to deal with environmental problems and constantly to monitor the unexpected accidents . The results of the study showed that of the corporate internal factors, the interest levels of CEOs concerning the environment did not significantly affect the establishment and utilization of information systems that required large expenses and investments in technological core competencies. Of the corporate external factors, the intensity of competition within the industry was shown to have a significant effect on building relationships for information and knowledge, but not on the establishment and utilization of information systems. The establishment and utilization of information systems had significant effects on building relationships for information and knowledge, but not on environment management performances. However, building relationships for information and knowledge showed significant effects on environment management performances, suggesting the importance of building relationships for information and knowledge with external parties.
초록
본 연구는 중소기업의 IT 정보 시스템 구축 및 활용이 정보 및 지식연계 관계 구축을 통한 환경경영성과에 미치는 영향을 밝히고자 한다. 환경경영분야에서 즉각적이며, 지속적인 조치와 감시가 필요하다는 점에서 실시간 정보시스템의 구축과 활용이 매우 중요하기 때문이다. 연구 결과, 중소기업 내부요인인 최고경영자의 환경에 대한 관심과 중소기업 외부요인인 산업 내 경쟁강도가 정보시스템 구축과 활용에 유의한 영향을 미치지 않는 것으로 나타났으나 정보 및 지식연계 관계구축에는 모두 유의한 영향을 미치는 것으로 나타났다. 또한 IT 정보시스템 구축과 활용은 정보 및 지식연계 관계구축에 유의한 영향을 미치는 것으로 나타났으나 환경경영성과에는 유의한 영향을 미치지 않는 것으로 나타났다. 마지막으로 정보 및 지식연계 관계구축은 환경경영성과에 유의한 직접적인 영향을 미치는 것으로 나타나 비교적 자사의 역량이 낮은 중소기업에서는 외부와의 상호협력 관계 구축이 매우 중요함을 나타냈다.
Keywords:
Small and Medium-sized Corporations(SMC), CEO Commitment, IT Establishment and Utilization, Building Relationships for Information and Knowledge, Environment Management Performance키워드:
중소기업, CEO의 환경에 대한 관심, 정보기술자원, IT 정보시스템 구축과 활용, 환경경영성과Ⅰ. Introduction
The Korean government reported its objective to reduce greenhouse gas emission 37% by 2020[1]. This implies the presumed rise in corporate investment in eco-friendly products in response to the rising consumer interests in environment consumptions. Recent external corporate environments have also been inclined to rapidly adopt and adapt to the proliferating demands for environment-friendliness, indicating more active measures taken for environmental management activities.
Environmental management refers to a management activity that pursues both economic profits and environmental sustainability by improving environmental performances throughout the entire chains of corporate activities[2]. However, SMCs, unlike large corporations, have faced difficulties with voluntary establishment of environmental management systems, development of eco-friendly products, and research and supporting activities for environmental perceptions and risks managements, due to the lack of owned resources and competencies. Previous studies have mainly focused on examining large corporations rather than on SMCs[3,4,5]. This tendency can be explained due to the disputes regarding the feasibility of SMCs’ product innovation through technology development that is required to produce eco-friendly products. Due to such disagreements, more topics have been studied regarding the influences of government policies or interest parties, the adoption of strategies for environmental innovation, and the relationship between the role of innovation and actual performances for SMCs’ environmental managements[4,6].
However, this study primarily examines whether SMCs commit to the improvement of environment management performances through environment management activities by focusing on the utilization of internal resources or building relationships for information and knowledge through externally associated parties in order to overcome the limitations of internal supplies. Therefore, the current study attempts to identify and distinguish the predicted significant internal and external factors that would influence SMCs’ environment managements, through the establishment and utilization of information systems and building relationships for information and knowledge.
Ⅱ. Theoretical Background
2-1 Corporate internal factors, establishment and utilization of information system, and building relationships for information
As corporate CEOs hold key decision making powers, including establishing corporate missions as well as future goals and leading the company to particular projected directions, they also hold authorities to change corporate strategies. Therefore, the business objectives and projected directions for internal industrial level heavily depend on the interest levels of CEOs. Unlike large corporations, SMCs tend to have smaller worker scales with limited resources, making it difficult to distribute and designate human capitals on activities that digress from routine business activities, including environmental management and concerns. Therefore, SMCs hold a disadvantaged infrastructure to accumulate and implement internal expertise regarding environmental management and concerns[7]. Jaworski and Kohil(1993)[8] stated that the more innovative the disposition of a CEO, the more responsive attitude one displays regarding external changes, hence demonstrating a strong future-oriented market position. Therefore, the more committed attitudes CEOs show on environment management, the more adept and systemized the corporate internal communication infrastructure would be or the more advanced in the establishment and utilization of intranet the company would become, fostering innovative ideas through information sharing. The biological industry sector, the current study’s research subject, requires certain level of knowledge and expertise of CEOs, because it focuses on product output considering both environment and health. Thus, this study presumes that the establishment and utilization of the corporate internal information technology system would significantly depend on the values and interest levels of the CEOs. Amidst the rapidly changing environment, the higher environmental interests CEOs show, the more effort one would invest in overcoming the limitations on resources and establish a strong mutual and collaborative relationship with associate groups that closely relate to the firm’s industry sector. In other words, it is hypothesized that SMCs would progressively try establishing intimate external relations in order to effectively transfer expertise, knowledge and technology resources by being affiliating to organizations or signing MOU contracts with local governmental bodies and research institutions. Accordingly, we hypothesized the following:
H1a: Higher commitment levels of CEOs, would lead to increased establishment and utilization of corporate internal information system.
H1b: Higher commitment levels of CEOs would lead to the heightened establishment and utilization of relationships between information and knowledge.
The resource based theory defines resources as the assets, capabilities, organizational operational systems, corporate core competencies, information, and knowledge operated by a firm, encompassing all degrees of material, human capital, and organizational levels. A company’s competitiveness is not strictly defined by the resources the firm owns, but by the competency of their utilization through the combination of such resources[9]. In order to reinforce leadership in technology innovation of SMCs, it is imperative to foster inimitable resources, and further create a unique business combination by successfully collaborating and integrating resources on a feasible ground on a small and medium-sized level[10, 11].
Thereby, corporate internal information technology resources could not only compensate for the insufficient resources of SMCs, but also create a competitive advantage leading to a more effective management of controllable system establishment. Additionally, leadership in technology innovation for SMCs could also be influenced through external relations[12,13]. Among external networks, representative networking associates include: 1) local consumers who purchase products or services from SMCs, 2) local suppliers that provide parts or services to SMCs, and 3) competing corporations such as multinational corporations that compete against local SMCs and other local firms. Porter(1990)[13] stated that the differences between a company and its external networking factors, including local product markets, local component markets, local intensity in competition, and local regulations, are shown in the discrepancies in firm competitiveness. The supply of ideas regarding new products from local raw material suppliers or local governmental regulation or incentives could improve the quality of product and manufacturing. Furthermore, local consumers could also provide valuable feedback to contribute to developing new core competency. Through such means, possession of information technology resources in SMCs will put more emphasis on generating a synergy effect through efficient utilization of owned resources or through strong external relations. Accordingly, we hypothesized the following:
H2a: Greater information technology resources would lead to more active establishment and utilization of the corporate internal information system.
H2b: Greater information technology resources would lead to more active building relationships for information and knowledge.
2-2 Corporate external factors, establishment and utilization of information systems, and building relationships for information and knowledge
Perceived threat in competition among intra-industrial enterprises helps a firm precisely identify the forthcoming most precarious competition threat factor to that specific company [14]. Competition intensity in the industry indicates the scope or degree of competition among firms within the same industry, in order to satisfy the consumer’s demand and expectations on eco-friendliness. A firm would have to decide whether to focus on the maximization of seizing market opportunities and strengthening competencies while minimizing its weaknesses, or offsetting their weakening factors through external resources. Firms would eventually decide upon the strategy to extend the company’s potential strengthening factors. This is because as industrial competition becomes ever-intense, competitive edge is hard to be secured or maintained only by relying upon corporate internal resources. Thus, acquisition of technology and knowledge by establishing mutual knowledge sharing through collaborations with external associations would reinforce the sustainability of the company. Therefore, as competitions become more heightened within the industry SMCs would not only establish and utilize the internal information system but also attempt to establish joint collaborations in order to promptly respond to the rapidly changing environment by strengthening the information and mutual knowledge ties between inter and intra-industrial enterprises. Accordingly, we hypothesized the following:
H3a: Heightened competition in the industry would lead to more active establishment and utilization of the corporate internal information system.
H3b: Heightened competition in the industry would lead to more active building relationships for information and knowledge.
Government regulation on the environment refers to an environmental authority establishing criteria in relation to environmental issues and enforcing the established criteria on corporations, taking the most representative forms of coercive measures on firms regarding environmental concerns[15]. The primary interests of the authority’s concerns lie in protecting the society from industrial risks or hazard occurring in the advent of environmental damages. Environmental regulations demand corporations to take an active, voluntary, and innovative stance in environmentally friendly activities, catalyzing the strengthening of competitiveness, implemented both politically and legislatively. This approach further stresses corporate innovation towards environmentally oriented direction, resulting in positive corporate performances[16]. Therefore, through continuous reinforcement of environmental regulation, firms are more compelled to establish corporate environmental standards in order to sustain its market position as well as conforming to the governmental regulations, consequentially taking a more active position in developing a corporate internal system to execute eco-friendly activities. Heightened enforcement of environmental regulation in practice would mean more active involvement of corporate environment-related technology innovation activities, environment planning establishments, pollutant reduction activities, and inclined directions towards environment-related regulation. This highlights corporate capabilities to take more vigorous position in response to more heavily enforced environmental regulations. Direct environmental regulations refer to utilizing final regulation equipment to confine a firm’s aftermath pollutant emission as well as waste water, explicitly specifying regulations on the displacement and formation of pollutants, technical methods for pollutant disposal, and management of pollution prevention facilities. Such forms of regulations may also inhibit certain innovative methods companies could possibly take at the expense of certain level of risks[17].
Additionally, the predictability of regulations also stimulates corporations to incorporate the firm’s strategy to be more aligned with the active engagement in environmental management. The main reason for this is the reassurance implied regarding the necessities of consistent corporate environmental investments[18]. This is also due to the risks corporations carry in tarnishing their public image on morality through the firm’s environment mismanagement on strategy employments or exacerbating corporate management by damaging relationships with interest parties[19]. Unlike large corporations, SMCs lack in financial investment and competencies in capacity, inevitably putting more emphasis not only on corporate internal system establishment and utilization, but also on external relations. Accordingly, we hypothesized the following:
H4a: Heightened governmental regulations on environment would lead to more active establishment and utilization of the corporate internal information system.
H4b: Heightened governmental regulations on environment would lead to more active building relationships for information and knowledge.
2-3 Establishment and Utilization of Information Systems, Building Relationships for Information and Knowledge, and Environment Management Performance
A firm with objectives to the optimization in environmental management and strengthened competiveness commits to building networks with governmental institutions and suppliers, even establishing strategic partnerships with competing enterprises[20]. In other words, building relationships allow the long term communication among collaborative partners. Based on such long-term communication, firms attempt to strategically attain new knowledge from partners by taking corporate internal learning and accumulation procedures[21]. Such efforts will further contribute to promoting the firm’s environment management activities. That is, the establishment and utilization of the corporate internal information system will enable the firm to create an inimitable resource combination serving as the corporate key competitive advantage, compelling the firm to search for organizational improvements and adaptation, ultimately improving the quality in product, service, and consumer demand. Moreover, environment management performance reflects a firm’s voluntary dedication to focus on future environmental management activities and taking initiatives to strengthen the company’s core competencies. Such voluntary forms of objectives followed by efforts to strengthen core competencies have been shown to bring significant growth on sales, cost reductions, and effects on competitive advantage in market position[22]. Thus, a firm’s utilization of IT and building of relationships would lead to the enhancement of environment management performance. Accordingly, we hypothesized the following:
H5a: More active establishment and utilization of the corporate internal information system would lead to more active building relationships for information and knowledge.
H5b: More active establishment and utilization of the corporate internal information system will lead to the greater enhancement of environment management performances.
H6: More active building of relationships for information and knowledge will lead to the greater enhancement of environment management performances.
Ⅲ. Research Methodology
3-1 Research Model
Figure 1 shows the research model to test the hypotheses. The current study attempted to identify and distinguish the effects of internal and external factors of SMCs on the environment management performances, and examine the factors that improve the utilization of information systems and building relationships for information and knowledge.
Research Model
3-2 Sample of the Study and Data Collection
The current study bases its analysis measurement on industrial sectors that had relatively close environmental association, specifically surveying managers in environmentally related corporations. Examining enterprises as the research analysis measurement unit, this research targeted on directors, CEOs, and managers who held a general holistic view or executed corporate environmental administrative as well as managing decisions, selecting one participant per company. Firm selections were made through the report on corporation lists provided by the Regional Bio industry Foundation. Total data of 195 companies located in the southern regions in Korea were incorporated in the final analysis.
3-3 Sample Characteristics
The founding dates of respondent corporations included: 9 firms were established between 1967 and 1980(4.6%), 14 between 1982 and 1990(7.2%), 80 between 1991 and 2000(41.0%), and 92 in 2001 or after(47.2%). Numerical scale of employment included: 112firms with less than 10 workers(57.4%), 50 firms from 11 to 30 workers(25.6%), 23 firms from 31 to 50 workers(11.8%), and 10 firms with 51 or above(5.1%). The total asset distribution included: 26 firms that owned approximately from $18,000 to $90,000(13.3%), 65 firms from $90,000 to $900,000(33.3%), 28 firms from $900,000 to $2,700,000(14.4%), 14 firms from $2,700,000 to $4,500,000(7.2%), and 11 firms that owned $4,500,000 or above(5.6%). Total sales distribution included: 43 firms that earned approximately $90,000 or below(22.0%), 72 firms from $90,000 to $900,000(36.9%), 33 firms from $900,000 to $2,700,000(16.9%), 16 firms from $2,700,000 to 4,500,000(8.2%), 15 firms from $4,500,000 to $9,000,000(7.7%), and 16 firms that earned $9,000,000 or above(8.2%). Total of 141 male respondents(72.3%), and 54 female respondents(27.7%) participated in the study. Age distribution included 21 respondents aged from 28 to 29(10.7%), 55 respondents from 30 to 39(28.2%), 65 respondents from 40 to 49(33.3%), and 54 respondents 50 or above(27.7%). Distribution in position include: 48 CEOs (24.6%), 28 directors(14.4%), 105 managers and assistance managers(53.9%), and 14 Division Heads and Team Leaders(7.2%).(Exchange rate calculation based on $1 = 1,190 WON)
3-4 Measurement of Variables
The variables were properly modified for the study. A 5-point Likert-type scale was used to measure the variables, 5 being "Strongly Agree" and 1 being "Strongly Disagree." Measurements on the interest levels of CEOs, considered as primary internal factors, were examined based on three criteria: degree of value recognition regarding environment management and subsequent policy promulgated and implemented towards environment management; progressiveness in achieving objectives and benchmarks; and awareness of market trends regarding environment management. Applying Spanos and Lioukas(2001)’s[23] research index on corporate information technology resources, the study’s measurements were based on three criteria: the degree of information technology system establishment, environment management-related technology establishment system establishment and utilization, measured in comparison to the firm’s competing enterprise; Transaction Processing System(TPS), and Electronic Payment System(EPS). The intensity of competition within the industry and government regulation on environment were measured through Delmas and Toffel(2004)’s[14] criterion. First and foremost, the intensity of competition within the industry was based on four criteria; heightened competition for differentiation through environmental management activities within the industry; overall intensive competition on environment related matters; and increased levels of competing enterprises within the industry. The government regulation on environment was based on three criteria; overall strictness; restrictions on sales through environmental regulations; and consequences followed after violation on environmental regulations. The measurement on system establishment and utilization was based on the definition delineated by Welch and Pandey(2007)[24], referring to corporate internal business related system establishment and the effective and productive utilization of composing members of organization. Thus, measurement units were based on four criteria; strengthened degree of the organization by utilizing information technology; utilization of information systems by members of the organization; utilization on information technology on new product establishment; extended scope of chance on new product establishment utilizing information technology.
Measurements on the building relationships for information and knowledge were based on Cui, Griffith, and Cavusgil(2005)’s[25] four criteria; performance on academic and collaborative research; building networks with industrial associates regarding information and knowledge relations; strengthening relations with other overseas corporations; and technology establishment funding received from governmental and associate institutions.
Measurements regarding environment management performances were derived from Selnes and Sallis(2003)[26] and Matsuno, Nentzer, and Ozsomer(2002)’s[27] research method, basing on three criteria; increased level of sales on eco-friendly products and efficient usage of environmental energy; environment related certifications and rewards received in relation to comparative enterprises within the industry; high performance scores received regarding measurements of pollutants, pollution level, and violation on environmental regulation.
Ⅳ. Data Analysis
4-1 Data Analysis
Confirmatory factory analysis was conducted to guarantee the validity and reliability of variable. The result showed the follow indexes χ2=249.15 df=131(p=.00), GFI=.91, AGFI=.89, NFI=.94, CFI=.95, RMSEA=.07, implying that all variable had convergent and discriminant validity[28].
Testing reliability with Cronbach’s coefficients, all the coefficients were within the range of .741~.935. Showing the reliability of the construct variables. In addition, representativeness of the constructs was verified from the composite reliabilities ranging .820~.936 which were higher than the commonly accepted level of .7[29].
Result of Confirmatory Factor Analyses
4-2 Results of Discriminant Validity Analysis
Discriminant validity was assessed with the analysis of correlation matrix(Φmatrix) that checks the measured difference as among the theoretical different constructs. The results are value of "1" [calculated with correlation ± (2×standard error)] out of range correlative coefficient among all the variables. Other method of testing discriminant validity was employed with average variance extract(AVE). The AVE’s value was .607~.861, establishing the reliability at an acceptable level[30].
4-3 Results of Hypotheses Testing
The analysis of the goodness of fit indexes of the research model showed χ2=274.64, df=135(p=.000), GFI=.90, AGFI=.87, NFI=.93, CFI=.95, RMSEA=.07 suggesting the superiority of the research model. The results of the analysis of causal relationships among the variables are shown in <Table 2>.
Results of Analyses on the Research Model
Ⅴ. CONCLUSION AND IMPLICATIONS
5-1 Summary of Findings and Implications
The summary of findings in this study and their implications are as follows:
First, the interest levels of CEOs, considered as corporate internal factor, did not have significant effects on the utilization on information systems, while the interest levels showed significant effects on the building between information and knowledge. This indicates that increasing interest levels of CEOs not only stimulate information exchange with associating corporations and industries but also knowledge acquisition through building relationships as one of the contributing factors to promptly respond to the change in management environment, rather than kindling the establishment of corporate internal information systems. The results provide further insight into the necessity for government and associate institutions that work with SMCs to encourage CEOs’ interests in environmental issues through a wide variety of programs, including consulting and education, both directly and indirectly leading to the improvements of environment management performances. Corporate information technology resources showed positive effects both on the establishment and utilization of information systems and on building relationships for information and knowledge, which seems due to the increased ease in the establishment and utilization of information systems within the company. Additionally, the more information technology resources company owns, the more adept the firm would become in responding to corporate environmental changes, encouraging building relationships for information and knowledge through associate enterprises and institutions. Second, competition intensity within the industry, considered as corporate external factor, did not show a significant effect on the establishment and utilization of information systems whereas it showed a significant effect on building relationships for information and knowledge through associate enterprises and institutions. Such results suggest that despite their passive position taken regarding the establishment and utilization of information systems even if the intensity of competition was increasing within the industry SMCs have shown to take more active measurements in building relationships for information and knowledge through various routes. This commitment could be explained by the direct impact on the enterprises sustainability as industrial competition intensifies. On the other hand, the external factor of competition intensity within the industry was formed to be directly related to the corporate survival, leading to building relationships through various routes, including collaborative research and funding for technology establishment. Third, government regulation on the environment showed significant effects on both the establishment and utilization of information systems and building relationships for information and knowledge. This seems because the more intensified government environmental regulations become the more efforts firms put on the establishment and utilization of the internal information system, parallel to the more active building of external relationships. It can be further explained as the government’s simultaneous commitments to regulation enforcement as well as corporate supporting policies. Fourth, establishment of information systems had a significant effect on building relationships for information and knowledge through associate enterprises and institutions although it did not affect environment management performances. The results reveal that while the establishment and utilization of the corporate internal information system could only serve as the company’s enhanced competitiveness, not directly contributing to the performance levels, it could strengthen the building of relationships for information and knowledge with associated institutions and enterprises. Lastly, building relationships for information and knowledge through associate enterprises and institutions showed a significant impact on environment management performances. This suggests that the efforts to strengthen external relations for SMC environment management performances contribute to overcoming the limitations of internal sources, further leading to the enhanced performance levels. Therefore, industry-university-institute collaborative programs are shown to be of paramount importance in successfully improving SMC environment management performances.
5-2 Limitation and implications for future studies
The hypothesis on the causal relationship related to the acquisition of market knowledge was not supported in this study.
First, this study attempted to explain the process of corporate internal and external factors, utilizing information systems, and contributing to the building of external relations in environment management execution. However, the study includes limitations in that the interest levels of CEOs and information technology included in the study were adopted on a limited basis. Therefore, caution should be exercised in generalizing research results. Future research should encompass more diverse variables that may affect information technology on environment management performances, promoting a broader research base on information systems and environment management. Secondly, the study exclusively focused on SMCs regarding environmental concerns. However, as the government’s strategy for environment establishment industry, unlike general industrial groups, renewable energy industrial groups could promote awareness and build core competencies through environment management activities. In addition, in comparison to pure manufacturing enterprises, IT industrial groups could promote unique value awareness in environment management activities in terms of product manufacturing and disposal procedures. Therefore, it is crucial to consider the fortification of core competencies for environment management through specifically categorized and distinguished studies of industrial groups. Third, the results of the study do not show the impact of the establishment and utilization of information systems on environment management performances. It seems because the limited competencies participating corporations held, of which 57.4% employed less than 10 workers, instead of displaying systematic relations. Future research should continue efforts to collect adequate participating companies in order to appropriately explore the environment management performances of SMCs.
Acknowledgments
“This study was supported by research fund from Chosun University, 2019”
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1999년 : 조선대학교 경영학(석사)
2007년 : 조선대학교 경영학(박사)
2009년～2014년: 조선대학교 BK21(지역의 산업마케팅전문인력양성팀) 연구교수
2015년～2017년: 조선대학교 SSK 연구교수
2018년～현재: 조선대학교 소프트웨어 중심대학사업단 조교수
※관심분야： 기술경영, 산업정책, 소비자행동