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Research paper

Drivers for the participation of small and medium-sized suppliers in green supply chain initiatives
Su-Yol Lee
nBiz Convergence Team, College of Business Administration, Chonnam National University, Gwangju, South Korea
Abstract Purpose This paper aims to describe what facilitates small and medium-sized suppliers in participating in green supply chain initiatives. These initiatives are inter-organizational initiatives attempting to improve environmental performance throughout the entire supply chain. This paper seeks to examine buyer green supply chain management practices, government involvement, and internal readiness of the suppliers themselves, as possible drivers. Design/methodology/approach The research framework and hypotheses were examined by using a mail survey conducted in South Korea in 2005. The empirical analysis used data from 142 small and medium-sized suppliers. Validity and reliability of the scales for the construct of interest were assessed through a factor analysis and Cronbach-alpha test. To test the hypotheses for the drivers of suppliers willingness to participate in green supply chain initiatives, hierarchical linear regression was adopted. Findings The study nds that buyer environmental requirements and support were positively linked to their suppliers willingness to participate in green supply chain initiatives. The government can play an important role in motivating these suppliers. Finally, the paper reveals that the more slack resources and organizational capabilities suppliers had, the more willingly they were to participate in those initiatives. Originality/value This research is one of the few studies which explore the drivers of participation in green supply chain initiatives by considering small and medium-sized suppliers and their most important stakeholders, including buyers and the government. Keywords Environmental management, Supply chain management, Small to medium-sized enterprises, Suppliers, Korea Paper type Research paper

1. Introduction
External pressures, such as European regulations on takeback and on the use of certain hazardous substances, have been driving rms and governments to turn towards including small and medium-sized enterprises (SMEs) in the environmental improvement process of entire supply chains for mainly two reasons. First, disruption risks engendered by environmental issues can pass on through suppliers. For instance, in 2001, Sony had to bear extensive costs for replacing parts, storing, and repackaging the nearly 1.3 million of its best-selling PlayStation, These PlayStations were stopped at the Dutch border because unsafe levels of cadmium were detected in the cables of the consoles (Business Week, 2005). The problem-causing cables were manufactured by Sonys suppliers. Second, a supply chain base as well as a countrys industrial base might primarily consist of SMEs. For example, 93.5 percent of the suppliers
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in the Korean automobile industry are SMEs (Choi, 2003). Therefore, the involvement of SME suppliers is vitally important in achieving national or corporate environmental targets (Holt et al., 2001). Over the past decade, the green supply chain (GSC) has emerged as an important component of the environmental and supply chain strategies of a number of companies. The GSC encompasses a broad range of practices from green purchasing to integrated supply chains owing from suppliers, to manufacturers, to customers, and to the reverse supply chain, which is closing the loop (Zhu and Sarkis, 2006; Rao and Holt, 2005). Seen from a life-cycle perspective, initiatives striving to achieve the goal of the GSC, a notable environmental and economic gain of the entire supply, are hard to implement successfully without the deep involvement of the supply chain partners. In other words, it is crucial to include SME suppliers in the supply chain-wide environmental improvement process. The author, however, has seen very little research on the issue of what motivates suppliers to take part in those green supply chain initiatives. A growing number of green supply chain management (GSCM) studies have dealt with the
The author would like to thank the Business Institute for Sustainable Development in Korea for assisting with the data collection.

Supply Chain Management: An International Journal 13/3 (2008) 185 198 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598540810871235]


Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

drivers for GSCM, its practices, and the relationships between GSCM and its operational and/or economic performance (e.g., Vachon and Klassen, 2006; Zhu and Sarkis, 2006; Lamming and Hampson, 1996). However, these scholarly works have primarily focused on large-sized buying rms; so they scarcely took into account the drivers to facilitate involvement of suppliers in green supply chain programs that were likely to be initiated by the government and large buying rms. Likewise, some scholars addressed environmental management in SMEs. For instance, Clark (2000) pointed out the difculty of SMEs in improving their environmental performance. Hitchens et al. (2003) revealed what factors lead to the adoption of advanced environmental management of SMEs. However, they paid less attention to the SMEs who were suppliers within the supply chains. As a result, SME suppliers can be treated as missing links between SME environmental management and green issues in supply chain management. The author can say that this study explored a research topic about what inuenced the involvement and/or participation of SME suppliers in green supply chain programs led by their buyers or government. Our research questions can be specied: What are the important inuential factors for the participation of SME suppliers in GSC initiatives? In particular, how do buyers and governments affect participation? How does participation vary according to the internal capabilities of the SME suppliers? For this purpose of study, we referred to several previous studies conducted in different research areas, such as environmental management, supply chain management and small business management. The author integrated this research for developing our research framework on the issue of the involvement of SME suppliers in supply chain-wide environmental improvement programs. This paper is organized as follows. In the next section, based on a synthesis of existing literature on green supply chain management, environmental management, and small business management, the author describes this research framework and resulting hypotheses. Following the next section, the research method, the author presents results of the empirical analyses and a discussion. In the nal section, the author highlights implications from the results and limitations of this study along with directions for future research.

2. Literature review
2.1. A GSC initiative and SME suppliers A GSC initiative can be dened as the programs striving to transfer and disseminate environmental management, in particular advanced environmental management practices, through the entire supply chain, by using the relationships between large-sized buying rms and their suppliers. The GSC initiative includes all the programs driven by buying rms and/or third parties, particularly the government, with the purpose of improving the environmental performance of suppliers through the buying rms inuences. When considering the buying rm-led GSC initiative, which is considered the intersection of environmental issues with supply chain management, several terms are commonly used such as green supply (Bowen et al., 2001), GSC (Sarkis, 2003), GSCM (Zhu and Sarkis, 2004), environmental supply chain management (Zsidisin and Siferd, 2001; Handeld et al., 2005), and green supply chain practices (Vachon and 186

Klassen, 2006). Although these terms are used often with subtle differences and within different contexts, they can be understood as a buying rms intention to and activities that integrate environmental issues into supply chain management in order to improve the environmental performance of suppliers and customers (Handeld et al., 2005; Bowen et al., 2001). The third party-led GSC initiative is the environmental program that facilitates environmental improvement of suppliers within the supply chain designed by governments, non-for-prot organizations, and trade associations. In particular, government-led environmental programs are becoming popular in some countries. The British governments Energy-Efciency Best Practice campaign, the United States Environmental Protection Agencys (US EPA) Environmental Technology Best Practice program, and the Korean governments Supply Chain Environmental Management (SCEM) initiative are good examples. Although these initiatives are initiated by governments the core mechanism of utilizing the relationship between large buying rms and their suppliers is almost identical to the buying-rms-led GSC initiative. Holt et al. (2001) identied seven types of GSC initiatives which support SMEs in improving their environmental performance by classifying the organizations involved in arranging them: governments, trade associations and sector bodies, partnership groups, individual companies, business support organizations, non-for-prot green business-support organizations, and green business clubs. Although Holt et al. used the term of environmental business-support services interchangeably for green or GSC initiatives, the meanings of the terms are exactly the same. In their classication, the company-driven initiative is equivalent to the buying rm-led GSC initiative and other organizations-driven initiatives are equivalent to the third party-led GSC initiative in this paper. Why are the governments as well as buying rms, in particular large-sized companies paying more attention to SME suppliers? SME suppliers usually lack the information, resources, or expertise to deal with environmental issues. They have little know-how in bringing into effect the technical and managerial changes that would enable them to meet emerging environmental and social standards (Luken and Stares, 2005). Worse, they often hesitate to reach out for help without some external stimulus. As a result, SME suppliers can be a source of environmental risk and a bottleneck in pursuing the goal of a greener supply chain. In this situation, GSC initiatives are thought to be one of the key mechanisms used to diffuse more advanced environmental management to less environmental capable SME suppliers (Lamming and Hampson, 1996). These initiatives are inter-organizational projects between the key-players in the supply chain: the large-sized lead companies and their upstream and downstream suppliers. Many people have perceived that a GSC initiative promotes efciency and synergy among business partners as well as their lead company (Rao and Holt, 2005); however, a GSC initiative cannot improve one players efciency and performance individually because the environmental performance of the supply chain can be achieved only through the interaction of various activities undertaken by each player. That is why the involvement and participation of SME suppliers is important in GSC initiatives.

Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

2.2. The drivers for SME suppliers in GSC initiatives There are mainly two streams of research that are related to our work: GSCM and environmental management in SMEs. In what follows, the author provides an overview of the two research streams; however, the author note that the objective here is to position this work relative to the existing literature, rather than providing an exhaustive review. Table I illustrates what the existing studies focus on, what their ndings are, and how these studies are referred to in this study. Studies on GSCM address the denition, practices, drivers, and consequence of GSCM. The practices relating to GSCM encompass the monitoring-based approach. This approach involves the activities of gathering and processing supplier information, setting supplier assessment criteria, and evaluating the environmental performance of incoming goods and the suppliers that provide them. GSCM also encompasses the collaboration-based approach. This approach includes training and education programs given to suppliers, environmental managerial information sharing, and collaborative research with suppliers (e.g., Vachon and Klassen, 2006; Min and Galle, 2001; Bowen et al., 2001; Lippman, 1999). Those practices are known to begin mainly with external stakeholder pressures, in particular customer demands and regulations (Hall, 2000; Preuss, 2005). These practices are enabled by intra- and/or inter-organizational factors such as top management commitment and organizational capabilities including supply chain management capabilities, cross-functional teams, and closer cooperation with suppliers (e.g., Bowen et al., 2001; Theyel, 2001; Lippman, 1999). Furthermore, recent studies increasingly try to probe the relationship between the GSCM practice and its performance in terms of environmental and nancial performance (Rao and Holt, 2005; Zhu and Sarkis, 2004). The focus in most of those works is on the perspective of the buying rms and not on the suppliers. Therefore, to my knowledge, no research has directly addressed the drivers for SME supplier participation in GSCM initiatives that are initiated and/or managed by large-sized buying rms. In the SMEs environmental management stream, there are some studies where the unique characteristics of SMEs in adopting and implementing environmental management, such as less awareness about environmental issues, less environmental pressures from stakeholders, and lack of human, technological, and nancial resources required for advanced environmental management, have been considered (e.g., Clark, 2000; Hall, 2000). A few studies on environmental support programs, which were mainly case studies, mentioned the importance of supply chain pressures and support of partners such as in the form of industry leaders and experts given to SMEs as drivers and facilitators in improving their environmental performance (Luken and Stares, 2005; Friedman and Miles, 2002; Holt et al., 2001). A more comprehensive work performed by Hitchens et al. (2003) focused on the major inuential factors on adoption of clean technology in SMEs. Those existing studies on SMEs environmental management mentioned partially the inuential factors, such as regulations, external stakeholder pressures, support from external stakeholders, and internal organizational capabilities, to improve environmental capabilities and/or performance in SMEs; however, in general those scholarly and practical works barely considered a circumstance of the supply chain specically, 187

so their results missed the role of buying rms for involving SME suppliers in green supply chain initiatives. Moreover, to date, there have been no studies that proposed directly the inuencing factors of SME supplier participation in GSC initiatives as well as have tested them. 2.3. GSC initiatives in South Korea Social concern about the environment in Korea just began to emerge in the early 1990s. Before then, there was a high priority on economic growth. This high priority enabled the Korean economy to grow more than 500-fold for the three decades (Lee and Rhee, 2006). However, signicant environmental accidents and controversial events such as the phenol leakage in 1991 have driven Korean society to turn its attention to the environment. Moreover, external pressures resulting from regulations in the European Union, such as the RoHS and WEEE Directives[1], have led the Korean government, as well as companies, to consider the environmental impact engendered by the entire supply chain. The Korean economy heavily depends on overseas markets. Korean companies increasingly rely on their suppliers for gaining and sustaining competitiveness. For instance, more than 65 percent of the total cars made in Korea were exported[2]. The average purchase expenditure as a percent of sales dollars of Korean companies is up to 59 percent[3]. The case of Sonys PlayStation has also served as a reminder to the Korean government and industries of what may go wrong in national and industrial competitiveness if the supply chain is ignored. As a result, the Korean government established a new policy on expanding environmental management throughout the entire supply chain, in particular the SME suppliers. A national GSC initiative was started in 2003 based on this policy. This national program was originally programmed and supported, based on the benchmark of the Supplier Partnership for the Environment in North America, by the Korean government to encourage SME suppliers to improve their environmental performance utilizing relationships between the key-players of large-sized buying rms and their suppliers. It is called the supply chain environmental management (SCEM) program because supply chain management is adopted as a core tool to disseminate and transfer environmental management know-how of the large buying rms to the SME suppliers. Under this program, the in-depth environmental supportive programs and activities are given to the suppliers who participate in this national project with their purchasing companies. The environmental supports encompass the transfer of the skills of hazardous material analysis, mass balance management, product, and process environmental data proling, and the managerial support of the green procurement implementation and the environmental management system (EMS) buildup. All the supports are provided through cooperation of key buying companies with external expertise groups. This project has been implemented with funds from the national budget and matching funds from participating companies.

3. A conceptual model and hypotheses

Based on the existing studies into the streams of green supply chain management and SMEs environmental management, the author can articulate inuencing factors for SME supplier

Table I Relevant literature and link to this study

Major nding Theory building/ case study Research methodology Implication to supplier GSC participation Referred to the notion about the importance of the management in building capabilities for the development of the third hypothesis and measurement (GSC readiness of a supplier)


Major emphasis

Su-Yol Lee

Empirical study

Drivers in green supply chain initiatives

Interview/case study

Referred to the green supply for understanding and dening GSC initiatives (in particular, driven by buying rms) and for developing survey measurement (a buyers GSCM practices) Referred to the recommended effective strategies for developing the second hypothesis (a buyers GSCM practices)


(a) Green supply chain management (GSCM) Bakker and A framework for assessing organizational capabilities The capability assessment framework: interpretation Nijhof (2002) for responsible chain management of internal and external claims, integration into business processes, monitoring them, and communication with stakeholders/the role of management for building the capabilities The relationship between supply management Internal drivers for green supply implementation of a Bowen et al. (2001) capabilities and green supply practices rm: strategic purchasing and supply, corporate environmental proactivity, and supply management capabilities BSR (2001) Suppliers perspectives and insights for effective Positive business impacts of environmental initiatives strategies for supply chain environmental driven by customers (e.g., cost reductions and greater management (SCEM) operational efciency, effective strategies for SCEM (e.g., environmental incentives, a premium for environmental products, clear and timely communication, and more collaboration with suppliers Four generic categories of environment-related Cousins et al. Classication of environmental-related supplier (2004) initiatives in considering risks supplier initiatives: No choice, Go rst, why bother, and Enthusiasts
Conceptual framework/theory building

US EPA (2000)

A practical guide development for a lean and green supply chain

Referred to the environmental-related supplier actions for understanding the dening GSC initiatives (in particular, driven by buying rms) and developing survey measurement (a buyers GSCM practices) Referred to the suggested guides for understanding GSC initiatives (in particular, driven by buying rms)

Geffen and Rothenberg (2000) Hall (2000)

A guidebook synthesizing the best practices of leading Case study US companies for saving costs and reducing environmental impacts simultaneously The role of suppliers in improving environmental Elements of the successful application of Case study performance of manufacturing operations environmental innovation: strong partnership[s with suppliers and appropriate incentive systems The circumstances under which environmental supply Environmental innovations diffuse from a customer Case study chain dynamics emerge rm to a supplier rm if there is a channel leader with sufcient channel power over its suppliers Theory building/ case study

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Handeld et al. Integration of environmental management and supply Environmental supply chain management strategy (2005) chain strategies development processes: dene strategic importance, conduct research, develop objectives, implement strategy and monitor progress Krut and Current trends in supply chain environmental Trends in SCEM (towards integrating supply chain Karasin (1999) management (SCEM) in the electronics industry management and environmental issues, stronger external and internal driving forces for SCEM, and industrys response to SCEM forces)

Case study

Referred to the research results for understanding the importance of suppliers role in improving the entire supply environmental performance Referred to the role of a channel leader with sufcient channel power in diffusing environmental innovations within the supply chain for the development of the rst hypothesis (a buying rms GSCM practices) Referred to an address that top management support is a fundamental driver for GSCM for developing the third hypothesis (managers awareness as one of GSCM readiness characteristics) Referred to the denition of SCEM and its trends for understanding and dening GSC initiatives


Table I Major nding Case study Research methodology Implication to supplier GSC participation


Major emphasis

Lippman (1999) Case study

Elements for successful supply chain environmental management (SCEM)

Lippman (2001)

Current trends in supply chain environmental management (SCEM) and effective strategies for SCEM from a supplier perspective

Referred to the claried elements for the successful SCEM for developing the third hypothesis and survey measurement (GSC readiness of a supplier) Referred to the notion that green incentives, communication and collaboration are the effective strategies for SCEM for developing the rst hypothesis (a buying rms GSCM practices)

Su-Yol Lee

Drivers in green supply chain initiatives

Preuss (2005) Theory building/ case study

Environmental management practices in the supply chain management area of a rm

Characteristics of effective SCEM: top-level leadership, cross-functional team, communication within companies and suppliers, and working with suppliers Effective strategies for successful SCEM recommended by suppliers: integration environmental performance into purchasing decision, incentives encouraging supplier involvement, effective communication and collaborative approaches with suppliers Three approaches for greener supply chain management: managing greener materials transformation, managing greener formation and managing greener relationships

Rao and Holt (2005) Sarkis (2003) Literature review/ model development Case study/theory building

The link between GSCM and corporate performance

Empirical study

A decision framework for evaluating and selecting green supply chain practices

Referred to address that regulatory pressures transmitted to suppliers through customers green requirements (a second-hand regulation) for developing the second hypothesis; adopted the claried three approaches for developing survey measurement (a buyers GSCM practices) Referred to claried GSCM practices for developing survey measurement (a buyers GSCM practices) Referred to the green supply chain management practices for understanding and dening GSC initiatives (in particular, driven by buying rms)


Simpson and Power (2005)

The relationship between suppliers environmental management activity and the structure of customersupplier relationship

Theyel (2001)

The impact of supplier relations on environmental performance

Greening inbound, production and outbound leading corporate competitiveness and economic performance Development of a dynamic non-linear multi-attribute decision model for evaluating green supply chain alternatives and supporting the decision making within the green supply chain Positive inuence of customer rms involvement in improvements to suppliers lean performance and close relationship between them for the environmental practices of the suppliers Environmental relations between customers and suppliers leading environmental performance, such as waste reduction Empirical study

Referred to the proposition about the impact of a customer rms involvement on the environmental management of its suppliers for developing the second hypothesis (a buyers GSCM practices) Adopted the claried three types of environmental relations between customers and suppliers for developing survey measurement (a buyers GSCM practices) Referred to claried GSCP for understanding GSC initiatives and developing survey measurement (a buyers GSCP practices)

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Vachon and Determinants of green supply chain practices (GSCP) Positive relationships between technological Empirical study Klassen (2006) integration with primary suppliers (and Major customers) and green supply chain practices and the supply base reduction and environmental collaboration with suppliers Case study Wycherley Facilitators and barriers of greening supply chains Clarication of general facilitators (e.g., active (1999) engagement of a buyer, trust in long-lasting relationships, more awareness in environmental issues of suppliers, and committed individuals in suppliers) and barriers (e.g., increased costs, mistrusted suppliers, lack of information, resources and expertise of suppliers, and lack of government policies) in greening supply chains

Referred to the mentions about facilitators and barriers for developing hypotheses (e.g., a buyers engagement for the rst hypothesis, government policies for the second hypothesis, and more environmental awareness of suppliers and committed individuals for the third hypothesis)


Table I Major nding Empirical study Empirical study Research methodology Implication to supplier GSC participation Referred the claried GSCM practices for developing survey measurement (a buyers GSCM practices) Referred the claried GSCM practices for developing survey measurement (a buyers GSCM practices)
Su-Yol Lee


Major emphasis

Zhu and Sarkis The relationship between GSCM and environmental (2004) performance Zhu and Sarkis Differences in drivers and practices of green supply (2006) chain among industries Literature review/ theory building

Drivers in green supply chain initiatives

Zsidisin and Siferd (2001)

A buying rms GSCM practices inuencing its operational and environmental performance Regulation and globalization as main causes for the differences in drivers and practices of GSCM among industries in China A framework for theory development of environmental Suggestion of the denitions of the environmental purchasing supply chain management (ESCM) and environmental purchasing

Referred to the clarication and denition of ESCM and environmental purchasing for understanding and dening GSC initiatives (in particular, driven by buying rms)

Empirical study (descriptive analysis) In-depth interviews/ empirical study Case study

Antecedents of implementing and EMS in SMEs (rm size and the extent of pressures from foreign markets and customer) and strategies for effective EMS implementation and maintenance (managers environmental awareness, training and education, and cross-functional environmental communication) Supply chain pressures (in particular, well targeted and enterprise-specic CSR requirements) as an opportunities to improve environmental and social performance of SMEs Regulations and social concern for the environment as direct drivers and customers requirements as indirect drivers for the environmental innovation in SMEs Positive relationships between the level of environmental information an time resources of managers and SMEs environmental performance

(b) Environmental management in SMEs Friedman and The effect of regional environmental support programs External supports as an enabler for achieving Miles (2002) (UKs The Better Business Pack; BBB) in improving environmental and nancial benets in SMEs; but environmental performance of SMEs appropriate supports differ depending on the situations and rm characteristics Hitchens et al. Inuential factors for the take up of clean technologies Three key inuential factors for adopting advanced (2003) in SMEs environmental management in SMEs: rm competitiveness, culture, and use and availability of information and advice Effectiveness of environmental business-support Clarication of diverse SME support programs, clear, Holt et al. (2001) services for improving the environmental performance consistent and easily accessible guidance from of SMEs external organization for more effective environmental support services
Empirical study (descriptive analysis)

Jung and Lee (2004)

Trends on implementing an environmental management system (EMS) in the Korean SMEs

Referred to the BBB program for understanding GSC initiatives (in particular, driven by third parties) and the notion about the effect of the programs for developing the second hypothesis (government involvement) Referred to the ndings for understanding the importance of external support programs for SMEs, such as GSC initiatives, and developing the third hypothesis (GSC readiness of a supplier) Referred to the classication of environmental support services for understanding and dening GSC initiatives; referred to the recommendation for developing the rst and second hypotheses (a buyers GSCM practices and government involvement) Referred to the antecedents of EMS implementation and the strategies for developing the rst hypothesis (a buyers GSCM practices) and the third hypothesis (GSC readiness of a supplier), respectively

Luken and Stares (2005)

Practical methods for SMEs to meet corporate social responsibility (CSR) requirements

Case study

Referred to the research nding for developing the rst hypothesis (a buyers GSCM practices)

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Noci and Verganti (1999)

Antecedents of environmental research and development (R&D) and product innovation in SMEs

Case study

Supply Chain Management: An International Journal

Schaper (2002) The determinants of the environmentally responsible business behavior in SMEs

Empirical study

Referred to the results for developing the rst and second hypotheses about the role of buying forms and government in GSC initiative participation of SMEs, respectively Referred to the results for developing the third hypothesis (GSC readiness of a supplier)

Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

participation in GSC initiatives with three categories: buyer, third-party (specically, the government), and the SME supplier, itself. Although the author acknowledges that these and other variables may account for variation in the participation of SME suppliers in GSC initiatives, the author limited this model to the following factors that were thought to be more relevant to this issue.

3.1. Buyer inuence The catalyst for widespread recognition of environmental responsibility by SME suppliers is thought to come from supply chain pressure or regulations (Friedman and Miles, 2002). Smaller rms are relatively less exposed to the scrutiny of regulatory enforcement on environmental issues than large companies are; however, external environmental pressures are increasingly transmitted to SME suppliers by their customers along the supply chain (Noci and Vergandi, 1999). In addition, more lead companies in supply chains increasingly invest much time and energy in developing the environmental capability of their suppliers because they have come to realize their environmental goals cannot be accomplished by their environmental capability alone. The buyer GSC practices striving to improve the environmental performance of suppliers encompass green procurement activities, such as setting supplier assessment criteria and evaluating the environmental performance of incoming goods and the suppliers, as well as support activities, such as providing training and education programs to their suppliers, sharing information, and undertaking collaborative research and development (Vachon and Klassen, 2006). Without a doubt, buyers, particularly end-user product manufacturers in supply chains, are the most important and inuential stakeholders for the suppliers. Therefore, changes in procurement policies and practices of a buyer, which in turn appear as environmental requests, can directly affect the behavior of its suppliers by serving as an instigator in making them turn their attention to environmental issues. Hall (2000) predicted that a wave encouraging the greening of a supply chain is likely to be triggered by some powerful nal buyers who reect market pressures onto their suppliers. It is a wellknown fact that the dominance of a powerful buyer has important implications for changes in the entire supply chain. In addition, the suppliers who have experience receiving technical and managerial assistance from their buyers when improving their environmental performance are likely to participate in cooperative environmental initiatives with their business partners. Actually, suppliers can feel positive about making the requested changes because they can likely expect cost reductions, greater operational efciencies, and enhanced value to customers by participating in GSC initiatives with their buyers. For example, General Motors Company provided their suppliers environmental training and education in North America in the late 1990s, which, in turn, contributed to the energy-efciency improvement of its suppliers, which then made them strong supporters of GMs GSCM program (Lippman, 1999, 2001). All of these arguments lead to the rst hypothesis: H1. Buyer GSC practices have a positive inuence on the willingness of SME suppliers to participate in GSC initiatives. 191

3.2. Government involvement The role of the government in GSC has been getting increasing attention over the past decade. As global environmental regulations shift emphasis from pollution controls at manufacturing plants to the life cycle of the products, more governments are becoming involved in GSC initiatives. For instance, the British government has undertaken the energy-efciency best practice campaign, Making a Corporate Commitment, which provides free advice and technical support to SMEs through the Environmental Technology Best Practice Programme (Holt et al., 2001). The US EPA utilizes a more indirect way in comparison with the UK cases. The EPA focuses on developing the best practices of GSC and bringing awareness of those practices through guidebooks and manuals (e.g., US EPA, 2000). In Korea, a similar government-driven initiative started in 2003. This national project was designed to encourage SME suppliers to develop their own environmental management system by utilizing the relationship between large-sized buying rms and their suppliers (Lee and Jang, 2003). Government involvement in these initiatives includes a range of scope from direct technical and nancial support to indirect encouragement with tax-cut incentives and to infrastructure development for environmentally friendly industrial complexes. The question still exists whether the government-driven initiatives are assisting the vast majority of SMEs to move towards greener enterprises (Friedman and Miles, 2002; Holt et al., 2001). The government, however, is seen to play a more important role in driving SME suppliers to be interested in GSC initiatives. Noci and Vergandi (1999) claim that governmental support and regulations are a more important trigger for environmental innovations in SMEs. Accordingly, the above arguments lead to the following hypothesis: H2. Government involvement in GSC initiatives has a positive inuence on the willingness of SME suppliers to participate in GSC initiatives. 3.3. GSC readiness Cooperating with business partners in GSC initiatives is not an easy task. It requires many changes for SME suppliers; therefore, the attitude towards these green initiatives may vary depending on their internal characteristics. Although SME suppliers, in general, tend to be negligent in dealing with environmental issues and suffer from a lack of know-how and resources (Luken and Stares, 2005; Schaper, 2002), differences still exist among them. Sharma et al. (1999) mentioned that the range of the environmental strategy might differ depending on the availability of resources of the rms and the managerial interpretation of environmental issues. Likewise, the willingness to participate in those GSC initiatives is expected to be inuenced by the internal characteristics of the SME suppliers. These internal characteristics are referred to as GSC readiness in this paper. This GSC readiness can be measured by a range of diverse indicators, including manager environmental awareness, cross-functional environmental communication, and human, technical, and nancial slack resources. First, managers are heavily responsible for identifying external challenges and deploying internal resources to respond to them (Amit and Schoemaker,

Drivers in green supply chain initiatives Su-Yol Lee

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1993). Environmental strategies and the response of a rm are likely to differ, at least in part, with the managers evaluation of external stakeholder requirements, and then subsequent translation of their interpretation into specic environmental practices, such as GSC initiatives (Bakker and Nijhof, 2002; Sharma et al., 1999; Lippman, 1999; Jung and Lee, 2004). Second, there is an argument that a rms organizational capabilities facilitate the adoption of proactive environmental management practices. For instance, existing cross-functional teams and borderless communication among departments based on total quality management principles lead to pollution-preventive approaches in dealing with environmental issues (Hart, 1995), GSCM (Lippman, 1999), and EMSs(Jung and Lee, 2004). Third, a series of changes, including taking part in GSC initiatives, may require human, technical, and nancial resources to deploy even though a large of portion of the needed resources can be compensated for by buyers or by government support. In actuality, the difference in the environmental strategies and environmental innovation of the rms is strongly inuenced by nancial slack resource, technical capabilities, and human resources (e.g. Ramus and Steger, 2000; Sharma et al., 1999). Each factor mentioned above may play an important role in choosing and developing environmental strategies and practices. However, we consider those factors as one variable, GSC readiness, because the author expects that the variation in each factor among SME suppliers is not signicant. All of these arguments lead to the following hypothesis: H3. The GSC readiness of SME suppliers has a positive inuence on the willingness of SME suppliers to participate in GSC initiatives. From all of this reasoning and the subsequent hypotheses, the author can suggest a research framework of a study on the determinants of the participation of SME suppliers in GSC initiatives. As seen in Figure 1, the willingness of participation mainly relies on three inuential factors: buyer GSC practices, government involvement, and the readiness of the SME suppliers, themselves.

Directory[4]. The author chose SME suppliers who were aware of at least what programs of the Korean government exist and what programs were available. Restricting the sample to this limited number of SME suppliers in Korea may have limited the generalizability of the ndings. The model and ndings should not be generalized without due consideration of possible limitations. However, a restricted sample can add more power to the ndings, because it has been said to be more difcult to uncover ndings in a sample in which the variance in the independent variables has been restricted than with a large variance (Bansal, 2005). The data were then collected through questionnaires mailed to top-level executives (see the Appendix). The respondents were mainly top managers; however, some respondents were top-level managers of sales, production, or planning departments who were well acquainted with buyer requirements, government support, corporate strategies, and environmental management of their rms. To encourage responses, an initial mailing of surveys was followed one week later by reminder phone-calls to the contact persons at the companies that did not answer the survey. Data collection was completed in May 2005. A total of 142 surveys were returned, representing a response rate of 13.4 percent. In general, response rates greater than 20 percent are recommended in supply chain management research (e.g., Prahinski and Benton, 2004; Pagell et al., 2004). However, this sample size met the level of 100 and above that Hair et al. (1992) recommended for providing valid results. Because of the receipts of 13 incomplete responses, only 129 surveys were used in our hierarchical regression analysis. Table II provides a summary of the respondents. Non-response bias was tested by comparing the responses that were returned early with those returned late. The responses were split into two groups based on if the surveys were returned before or after the reminder phone-call. Seven items were randomly selected from the survey and t-tests were performed on the responses of the two groups (n1 53, n2 76). The t-tests yielded no statistically signicant differences among the seven survey items tested. 4.2. Research variables and measurements A survey instrument to measure the constructs of interest heavily relied on the previously tested and validated instruments wherever possible. First, four items used to measure buyer GSC practices were chosen and modied from the questionnaires used in existing studies, such as Vachon and Klassen (2006) and Zhu and Sarkis (2004). Second, we developed ve items to measure government involvement

4. Research methodology
4.1. Sample selection Consistent with the purpose of this study, small and mediumsized manufacturing suppliers were sampled. A Korean sample of 855 SME suppliers, with more than 20 employees and less than 500, was complied from an exclusive source, the Small and Medium Sized Enterprise Support Program

Figure 1 Drivers for the willingness of SME suppliers to participate in GSC initiatives


Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

Table II Summary of responses

Industry Sample size Respondents Response rate (%) Sales (US$ million) No. of employees Machinery 154 21 13.6 26.0 125 Metal 202 29 14.4 21.8 82 Electric and electronic 225 32 14.2 38.3 154 Chemical and textile 134 22 16.4 24.9 111 Others 140 25 17.9 11.3 48 Total 855 129 15.1 24.5 104

based on the literature which addressed what roles the government and other institutions expected to be taken in improving the environmental performance of SMEs (e.g., Friedman and Miles, 2002; Holt et al., 2001; Freel, 2000). Third, the scale for GSC readiness was compiled from a series of previous studies on the determinants of proactive environmental strategy (e.g., Bakker and Nijhof, 2002; Sharma et al., 1999; Hart, 1995). A total of six items were extracted. Finally, for a newly developed construct, the willingness to participation in GSC initiatives (referred to GSC participation), four items, including level of understanding and awareness of GSC initiatives, intention to participate and expectation of benets, were employed. All items were assessed using a ve-point Likert scale. To control the SME supplier characteristics, we considered two variables: rm size and age. Firm size has been known to be an important contextual variable to tell more environmentally proactive companies from lesser ones (e.g., Grant et al., 2002; Klassen, 2000). In this study, rm size was measured by the number of employees (full-time equivalent) as of March 2005. The natural logarithm of this measure was used in the regression analysis. The age of a SME supplier was introduced as a proxy for the age of the process and technology in plants in the previous research of Vachon and Klassen (2006). 4.3. The validity of the measurement model The author used three ways to support the content validity of this survey: 1 an extensive literature review; 2 in-depth interviews with managers at a purchasing rm and its suppliers which were participating in the Korean national GSC initiative as well as a researcher from the Korea National Cleaner Production Center (KNCPC), who had designed this national project; and 3 a pre-test of the survey by the interviewees after designing the survey. Even though the author already had an understanding of GSC initiatives because the author was also taking part in this project as outside support experts where the authors role was to assist the participant SME suppliers in adopting environmental management, these interviews and the pretest provided better understandings and suggestions on wording and improvements in format. The unidimensionality and reliability of each scale for the variables were tested by conducting a factor analysis and Cronbachs alpha, respectively (Table III). For each, the items loaded on only one factor in all cases, in spite of the low extracted variance of around 50 percent. As for reliability, the values of Cronbachs alpha exceeded the recommended cutoff of 0.70 (Nunnally, 1978), except for the variable of government involvement. Based on the one factor loading 193

and the reliability index approximately reaching to the recommended level (Cronbachs alpha 0:67), we retained all ve items for the variable of government involvement.

5. Results and discussion

Bivariate correlations and descriptive statistics are presented in Table IV. Hierarchical linear regression was used to test the three hypotheses, which were the relationships between buyers GSC practices, the governments involvement, the GSC readiness of SME suppliers, and the participation willingness of SME suppliers to GSC initiatives. According to the results in Table V, two of the three hypotheses were strongly supported. Evidence of a positive relationship between GSC participation and government involvement was relatively weak, so the second hypothesis was not supported with a usual cut-off p-value of 0.05; however, according to other studies applying a cut-off p-value of 0.1 (e.g., Krause et al., 2000; Prahinski and Benton, 2004), it can be said that overall the potential drivers suggested in this paper were seen to have a positive impact on the participation and involvement of SME suppliers in GSC initiatives. In the regression model, the incremental variance, explained by the three variables, was statistically signicant (DR2 0:39, p , 0:01). First, the author saw strong evidence that buyers played a critical role in facilitating SME suppliers to take part in GSC initiatives. For many rms, the key channel for receiving a demand for more environmental friendly products is their customers. The suppliers in this case, therefore, often responded to a second-hand regulation conveyed through the supply chain, in particular from their buyers (Green et al., 2000). The result of this research was very consistent with previous arguments that the supply relationship and the direct involvement of buyers in supplier practices lead to greener suppliers. For example, Rao (2002) addressed that collaborative relationships between customers and their suppliers as well as support from the customers can contribute to high levels of advanced environmental management practice of the suppliers. The environmental pressures and support from the buyers were seen to drive SME suppliers to improve their environmental capability, and, in turn, to participate in GSC initiatives. Second, the governments involvement was likely to be linked with a greater willingness of SME suppliers to take part in GSC initiatives. This result re-conrmed how important the government role can be in diffusing environmental management practices throughout industries, particularly for SME suppliers. Governmental direct and/or indirect supports were thought to be external sources of nance, know-how, and technology for small rms; thus, these supports facilitated innovations in those companies who were suffering from a

Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

Table III Validity and reliability analyses

GSC readiness Items Ready1 Ready2 Ready3 Ready4 Ready5 Ready6 Eigenvalue Variance explained (%) Cronbachs alpha Estimate 0.59 0.74 0.85 0.85 0.87 0.78 3.69 61.53 0.87 Buyer GSC practices Items Estimate Buyer1 Buyer2 Buyer3 Buyer4 0.81 0.80 0.62 0.71 0.72 2.18 54.61 0.72 Government involvement Items Estimate Government1 Government2 Government3 Government4 Government5 0.70 0.67 0.60 0.72 0.60 2.18 43.55 0.67 Items GSC participation Estimate 0.77 0.79 0.66 0.78

Participation1 Participation2 Participation3 Participation4

2.25 56.34 0.74

Table IV Correlation matrix

Mean 1. 2. 3. 4. 5. 6. GSC Readiness Buyer GSC practices Government involvement GSC participation Firm sizea Age of rm 2.67 2.63 3.52 2.92 4.11 19.08 SD 0.75 0.99 0.66 0.78 1.25 10.43 1 0.32 * * * 2 0.28 * * * 0.66 * * * 0.16 * * 2 0.13

0.07 0.46 * * * 2 0.08 0.27 * * *

2 0.02 0.02 0.02

2 0.14 * 0.36 * * *


Notes: The number of observations varies from 130 to 142 because of missing data; Natural logarithm of the number of employees (full-time equivalent); * p-value , 0.10, * * p-value , 0.05, * * * p-value , 0.01

Table V Results of hierarchical linear regression

Model 1 Beta Model 2 Beta Hypothesis Support/reject

Control variables Firm size 0.26 * * 0.17 * * * Age of rm 2 0.02 2 0.01 Independent variables Buyer GSC practices 0.18 * * * H1 supported Government involvement 0.13 * H2 not supported GSC readiness of suppliers 0.54 * * * H3 supported 0.15 * * * 0.54 * * * Adj-R2 DR2 0.39 F statistics 12.67 31.46 No. of observations 129 129
Notes: * p-value , 0.1; * * p-value , 0.05, * * * p-value , 0.01

lack of internal resources. Actually, in the UK and Korea, there were several support programs driven by the government to help SMEs improve their environmental performance (Holt et al., 2001; Lee and Jang, 2003). External assistance, such as environmental management consultancy, provided free of charge to SMEs through national government funds, alleviated acknowledged internal resource constraints, therefore encouraging SME suppliers to participate in GSC initiatives. SME suppliers tended to expect that the government be much involved in those initiatives through a range of activities, including funding for environmental management diffusion programs, building networks, and national centers for information, knowledge, and best practice 194

sharing. The result suggested that the more governments were involved in GSC initiatives, the more SME suppliers took part in them. Third, the GSC participation of SME suppliers was directly related to their readiness. Contrary to our expectation that the variation in the resources and capabilities of SME suppliers was not signicant, GSC readiness, consisting of internal slack resources and organizational capabilities, was shown to be the most inuential determinant for SME suppliers becoming involved in GSC initiatives. This result suggested that a resource-based view of the rm, which contended that differences in a rms performance could be explained by the specic resources and capabilities that they own (e.g. Wernefelt, 1984; Barney, 1991; Grant, 1991), can be applied to even SME suppliers. This result provided a strong theoretical foundation in answering the question of why rms showed different levels of environmental practice and performance. For example, organizational capabilities, such as continuous improvement, multi cross-functional management, stakeholder integration, and manufacturing innovation were antecedents for proactive environmental management (e.g., Hart, 1995; Florida, 1996). GSC readiness represented a series of organizational capabilities, such as cross-functional communication and pervasive environmental awareness among managers, as well as the availability of internal resources, such as the rms nancial, human, and technical reserves. A GSC initiative has been a relatively new and more advanced concept in environmental management practices considering a life-cycle perspective. Participating in this initiative may require rms to take a more proactive stance in environmental management. Based on this reasoning, the author concluded that the SME suppliers participation in GSC initiatives was strongly inuenced by its

Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

GSC readiness, which was very consistent with a number of previous studies claiming a positive relationship between rms resources and capabilities and its proactive environmental management performance (e.g. Klassen and Whybark, 1999; Ghobadian et al., 1998; Hart, 1995), or its corporate sustainable development (e.g. Bansal, 2005). This study controlled two variables of rm size and age because these variables were known to have inuence on the adoption of advanced environmental practices. As expected, rm size proved to affect the GSC participation of SME suppliers as important contextual variables. Even among SMEs, which ranged from 20 to 300 employees, larger rms were thought to be more willing to participate in GSC initiatives, which were led by buying rms and/or the government, than smaller rms. Even though GSC initiatives were known to lead to operational performance as well as environmental performance of both buying rms and their suppliers, nancial and human resources were required to conduct the initiatives in the beginning stage. SMEs may be more averse to expense the cost of adopting advanced environmental management, which lead to this result that the more resourceful, in other words, bigger suppliers were willing to participate in the GSC initiatives. The other control variable, rm age, was seen not to have any relationship with GSC participation from the results. These additional results, relating to the control variables, were very consistent with environmental management and green supply chain management literature (e.g., Vachon and Klassen, 2006; Klassen, 2000). The survey in this study was conducted based on a stratied sample where SME suppliers were thought to be more aware of external information on governmental support programs than other SME suppliers excluded in this survey. Except for this possible difference, the author expected other external conditions that other SME suppliers in Korea encounter, such as pressures and support from their buyers. There was likely to be no signicant differences in rm characteristics, in terms of rm size and age, between the surveyed SMEs and other SMEs in Korea[5]. Therefore, we expect that the results of this study can be generalized for other SME suppliers in Korea if we consider a few of the possible specic differences and limitations. The Korean industrial base, as with that of all other countries, primarily consists of SMEs[6]. As the Korean economy is heavily dependent on overseas markets, global environmental regulations, which are usually transmitted by large buying rms, have multifaceted implications for Korean SME suppliers. The results of this paper also implied that this model could apply to other countries, such as China and other Asian countries whose economies heavily rely on SMEs and export. For instance, environmental issues have risen dramatically in China, which drove the Chinese government to enforce a RoHS-like regulation. Environmental pressures engendered by export and sales to foreign customers have been increasingly intensied on Chinese enterprises and their suppliers (Zhu and Sarkis, 2006).

6. Conclusion
Much attention has been paid to the importance of GSC initiatives, which are inter-organizational projects striving to improve environmental performance as well as economic efciency throughout the entire supply chain. These initiatives, however, are successfully implemented only if the 195

participation of all the players, in particular SME suppliers, is guaranteed. This study investigated what factors facilitate SME suppliers to willingly take part in those initiatives. According to the results, the willingness of SME suppliers to participate in GSC initiatives heavily rested on two inuential factors: buyer GSC practices and supplier GSC readiness. Also, government involvement in the initiatives inuenced the participation of SME suppliers. SME suppliers and large-sized buyers as well as governments who want to improve their environmental performance throughout the supply chain can obtain implications from this study. First, consistent with our expectations, buyer GSC practices motivate SME suppliers to participate in interorganizational GSC initiatives. The SME suppliers who are under more environmental pressures and who are provided with environmental support from their buyers are likely to be involved in these initiatives. This implies large buying rms who intend to reduce the environmental risk engendered by their supply chains should enhance environmental procurement and support to their suppliers, particularly their SME suppliers. Second, we found that the suppliers with a higher level of environmental awareness, cross-functional communication, and nancial, human, and technical slack resources have a signicantly higher willingness to take part in GSC initiatives. SME suppliers should be aware that these initiatives promote efciency and synergy with their business partners, such as their buyers. Furthermore, these initiatives can provide very good external resources that they can easily access and utilize. Even though SME suppliers are suffering from a lack of slack resources, they need to put more effort into improving their readiness. There are several activities recommended, such as increasing the managers environmental awareness through training and education, integrating environmental function into a strategic decisionmaking process, and putting more resources into pollution preventive solutions. Third, our research showed a slight signicance in the effect that governments have on SME suppliers participating in GSC initiatives. Governments also must bear in mind that SME suppliers can have a fundamental role in regional and national environmental improvement as well as economic vitality. Therefore, governments should keep encouraging SME suppliers to be interested in GSC initiatives. Both a direct way of providing nancial and technical support and an indirect way of coordinating buyers and their suppliers and building a participative atmosphere and infrastructure are strongly recommended. By clarifying the limitations of this paper, we suggest directions for future research. The sample used in this study was extracted from a specic governmental directory, so it may not represent all SME suppliers comprehensively. Moreover, a relatively low response rate and a small number of samples might have created grounds for bias. In addition, the fact that each questionnaire was answered by only one respondent can be seen as the third limitation because a single respondent is likely to cause common method variance. This paper awaits further rened studies considering these limitations. In addition, another potentially important variable, the consequence of GSC initiatives in terms of economic and environmental performance of both buyers and suppliers, remains to be explored.

Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

1 The European Unions directives on the restriction of the use of certain hazardous substances (RoHS) and wastes of electric and electronic equipment (WEEE). 2 Data in 2005 from the web site of the Korea Automobile Manufacturers Association, 3 Data in 2003 from the web site of the Korea National Statistical Ofce, 4 This is a list of the Korean small and medium-sized enterprises which have been given nancial and technical support from the Korea Small and Medium Business Administration. 5 The total number of small and medium sized enterprises ranging from 20 to 500 employees in Korea were 8,473 in 2005. Average annual sales and an average number of employees of these SMEs were US$28.2 million and 119, respectively. However, the author is not sure how many SMEs among them were suppliers or were selling their products into the consumer markets directly. 6 For instance, SMEs represent over 90 percent of the suppliers in the Korean automobile industry (Choi, 2003).

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Appendix. Questionnaire items

Supplier GSC readiness (1 strongly disagree to 5 strongly agree) Ready1 Our managers are aware of the importance of environmental issues. Ready2 Environmental issues are well communicated between the environmental function and other departments. Ready3 An environmental management system is established. Ready4 Our rm has nancial reserves to invest in advanced technologies, including environmental solutions. Ready5 Our rm has information and know-how relating to emerging environmental issues in our industry. Ready6 Our rm has human resources to deal with emerging environmental issues in our industry.

Drivers in green supply chain initiatives Su-Yol Lee

Supply Chain Management: An International Journal Volume 13 Number 3 2008 185 198

Buyer GSC practices (1 strongly disagree to 5 strongly agree) Our major buyers . . . Buyer1 Incorporate environmental considerations in selecting their supplies and suppliers. Buyer2 Request us to have an environmental management system (e.g. ISO 14001). Buyer3 Have interest in greening the supply chain. Buyer4 Provide us with environmental training, education, or technical assistance. Government involvement (1 strongly disagree to 5 strongly agree) Local or central governments . . . Government1 Coordinate the GSC initiatives. Government2 Increase funds for the GSC initiatives. Government3 Provide information and technical assistance to small- and medium-sized rms. Government4 Popularize knowledge of environmental management. Government5 Build infrastructure for facilitating GSC initiatives.

Supplier willingness to participation (1 strongly disagree to 5 strongly agree) Our rm . . . Participation1 Is aware of the GSC initiatives. Participation2 Is willing to participate in the GSC initiatives. Participation3 Has managers who have interest in the GSC initiatives. Participation4 Expects environmental and economic benets from the GSC initiatives.

Control variables 1 As of the beginning of May 2005, how many employees (full-time equivalent) work at your company? (Firm size.) 2 When was your rm founded? (Age of the rm.)

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