Drivers for the Participation of SMEs Suppliers in GSC Initiatives

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Research paper

Drivers for the participation of small and

medium-sized suppliers in green supply chaininitiatives

Su-Yol Lee

nBiz Convergence Team, College of Business Administration, Chonnam National University, Gwangju, South Korea

AbstractPurpose This paper aims to describe what facilitates small and medium-sized suppliers in participating in green supply chain initiatives. Theseinitiatives are inter-organizational initiatives attempting to improve environmental performance throughout the entire supply chain. This paper seeks toexamine buyer green supply chain management practices, government involvement, and internal readiness of the suppliers themselves, as possibledrivers.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 wereassessed through a factor analysis and Cronbach-alpha test. To test the hypotheses for the drivers of suppliers willingness to participate in green supplychain initiatives, hierarchical linear regression was adopted.Findings The study finds that buyer environmental requirements and support were positively linked to their suppliers willingness to participate ingreen supply chain initiatives. The government can play an important role in motivating these suppliers. Finally, the paper reveals that the more slackresources 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 consideringsmall 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 take-

back and on the use of certain hazardous substances, have

been driving firms 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 weremanufactured 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

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 flowing 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 G SC, a notable

environmental and economic gain of the entire supply, arehard to implement successfully without the deep involvement

of the supply chain partners. In other words, it is crucial to

i nc lu de S ME s up pl ie rs i n t he s up pl y c hai n- wi de

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 current issue and full text archive of this journal is available at

www.emeraldinsight.com/1359-8546.htm

Supply Chain Management: An International Journal

13/3 (2008) 185198

q Emerald Group Publishing Limited [ISSN 1359-8546]

[DOI 10.1108/13598540810871235]

The author would like to thank the Business Institute for SustainableDevelopment in Korea for assisting with the data collection.

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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

firms; 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 governmentand large buying firms. Likewise, some scholars addressed

environmental management in SMEs. For instance, Clark

(2000) pointed out the difficulty 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 influenced the

involvement and/or participation of SME suppliers in green

supply chain programs led by their buyers or government.

Our research questions can be specified: What are the

important influential 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 researchframework and resulting hypotheses. Following the next

section, the research method, the author presents results of

the empirical analyses and a discussion. In the final 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 defined 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 firms and their suppliers. The

GSC initiative includes all the programs driven by buying

firms and/or third parties, particularly the government, with

the purpose of improving the environmental performance of

suppliers through the buying firms influences.

When considering the buying firm-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; Handfield

et al., 2005), and green supply chain practices (Vachon and

Klassen, 2006). Although these terms are used often with

subtle differences and within different contexts, they can be

understood as a buying firms intention to and activities that

integrate environmental issues into supply chain management

in order to improve the environmental performance of

suppliers and customers (Handfield et al., 2005; Bowen

et al., 2001). The third party-led GSC initiative is the

environmental program that facilitates environmentalimprovement of suppliers within the supply chain designed

by governments, non-for-profit organizations, and trade

associations. In particular, government-led environmental

programs are becoming popular in some countries. The

British governments Energy-Efficiency 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 firms and their suppliers is almost

identical to the buying-firms-led GSC initiative.

Holt et al. (2001) identified seven types of GSC initiativeswhich 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-profit 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 classification, the

company-driven initiative is equivalent to the buying firm-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 firms, in

particular large-sized companies paying more attention toSME 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: thelarge-sized lead companies and their upstream and

downstream suppliers. Many people have perceived that a

GSC initiative promotes efficiency and synergy among

business partners as well as their lead company (Rao and

Holt, 2005); however, a GSC initiative cannot improve one

players efficiency 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


Volume 13 Number 3 2008 185198

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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 findings are, andhow these studies are referred to in this study.

Studies on GSCM address the definition, 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

f actors such as top m anagem ent com mitm ent 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

G SC M p ra ct ic e a nd i ts p er fo rma nc e i n t er ms o f

environmental and financial performance (Rao and Holt,

2005; Zhu and Sarkis, 2004). The focus in most of those

works is on the perspective of the buying firms and not on the

suppliers. Therefore, to my knowledge, no research has

directly addressed the drivers for SME supplier participationin GSCM initiatives that are initiated and/or managed by

large-sized buying firms.

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 financial resources required for

advanced environmental management, have been considered

( e.g., Clark, 2 00 0; Hall, 2 00 0) . A f ew 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 influential factors on adoption of

clean technology in SMEs. Those existing studies on SMEs

environmental management mentioned partially the

influential 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 specifically,

so their results missed the role of buying firms for involving

SME suppliers in green supply chain initiatives. Moreover, to

date, there have been no studies that proposed directly the

influencing 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 toemerge 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, significant

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

governm ent, as w ell as com panies, 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 improvetheir environmental performance utilizing relationships

between the key-players of large-sized buying firms 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 firms 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 profiling, 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 influencing factors for SME supplier


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participation in GSC initiatives with three categories: buyer,

third-party (specifically, 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 influence

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 firms 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 theirenvironmental 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

influential stakeholders for the suppliers. Therefore, changes

in procurement policies and practices of a buyer, which in

turn appear as environmental requests, can directly affect thebehavior 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 final buyers

who reflect market pressures onto their suppliers. It is a well-

known 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 efficiencies, and enhancedvalue 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-efficiency improvement of its

suppliers, which then made them strong supporters of GMs

GSCM program (Lippman, 1999, 2001). All of these

arguments lead to the first hypothesis:

H1. Buyer GSC practices have a positive influence on the

willingness of SME suppliers to participate in GSC

initiatives.

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-efficiency best practice campaign,Making a Corporate Commitment, which provides free

advice and technical support to S MEs 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 firms and their

suppliers (Lee and Jang, 2003).

Government involvement in these initiatives includes a

range of scope from direct technical and financial 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 influence on the willingness of SME suppliersto 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 firms and the managerial

interpretation of environmental issues. Likewise, the

willingness to participate in those GSC initiatives is

expected to be influenced 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 financial slack

resources. First, managers are heavily responsible for

identifying external challenges and deploying internal

resources to respond to them (Amit and Schoemaker,


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1993). Environmental strategies and the response of a firm

are likely to differ, at least in part, with the managers

evaluation of external stakeholder requirements, and then

subsequent translation of their interpretation into specific

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 firms

organizational capabilities facilitate the adoption of proactiveenvironmental 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 financial 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 firms is strongly influenced

by financial 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

significant. All of these arguments lead to the following

hypothesis:

H3. The GSC readiness of SME suppliers has a positive

influence 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 influential factors: buyer GSC

practices, government involvement, and the readiness of the

SME suppliers, themselves.

4. Research methodology

4.1. Sample selection

Consistent with the purpose of this study, small and medium-

sized 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

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 findings. The model

and findings should not be generalized without due

consideration of possible limitations. However, a restricted

sample can add more power to the findings, because it hasbeen said to be more difficult to uncover findings 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

departm ents w ho w ere well acquainted w ith buyer

requirements, government support, corporate strategies, and

environmental management of their firms. 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 significant

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 modified from

the questionnaires used in existing studies, such as Vachon

and Klassen (2006) and Zhu and Sarkis (2004). Second, we

developed five items to measure government involvement

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


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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

G SC participation) , f our items, including level of

understanding and awareness of GSC initiatives, intentionto participate and expectation of benefits, were employed. All

items were assessed using a five-point Likert scale.

To control the SME supplier characteristics, we considered

two variables: firm size and age. Firm size has been known to

be an important contextual variable to tell m ore

environmentally proactive companies from lesser ones (e.g.,

Grant et al., 2002; Klassen, 2000). In this study, firm 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 firm

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 pre-

test 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

and the reliability index approximately reaching to the

recommended level (Cronbachs alpha 0:67), we retained

all five 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 significant (DR2 0:39,

p , 0:01).

First, the author saw strong evidence that buyers played acritical role in facilitating SME suppliers to take part in GSC

initiatives. For many firms, 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-confirmed 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 finance, know-how,

and technology for small firms; thus, these supports facilitated

innovations in those companies who were suffering from a

Table II Summary of responses

Industry Machinery Metal Electric and electronic Chemical and textile Others Total

Sample size 154 202 225 134 140 855

Respondents 21 29 32 22 25 129

Response rate (%) 13.6 14.4 14.2 16.4 17.9 15.1

Sales (US$ million) 26.0 21.8 38.3 24.9 11.3 24.5

No. of employees 125 82 154 111 48 104


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lack of internal resources. Actually, in the UK and Korea,

there w ere several support program s 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

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 significant, GSC readiness, consisting of internalslack resources and organizational capabilities, was shown to

be the most influential determinant for SME suppliers

becoming involved in GSC initiatives. This result suggested

that a resource-based view of the firm, which contended that

differences in a firms performance could be explained by the

specific 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 firms 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 firms financial,

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 firms 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 influenced by its

Table III Validity and reliability analyses

GSC readiness Buyer GSC practices Government involvement GSC participation

Items Estimate Items Estimate Items Estimate Items Estimate

Ready1 0.59 Buyer1 0.81 Government1 0.70 Participation1 0.77



Ready4 0.85 Buyer4 0.71 Government4 0.72 Participation4 0.78Ready5 0.87 0.72 Government5 0.60

Ready6 0.78

Eigenvalue 3.69 2.18 2.18 2.25

Variance explained (%) 61.53 54.61 43.55 56.34

Cronbachs alpha 0.87 0.72 0.67 0.74

Table IV Correlation matrix

Mean SD 1 2 3 4 5

1. GSC Readiness 2.67 0.75

2. Buyer GSC practices 2.63 0.99 0.32 * * *

3. Government involvement 3.52 0.66 20.28 * * * 0.07

4. GSC participation 2.92 0.78 0.66 * * * 0.46 * * * 20.02

5. Firm sizea 4.11 1.25 0.16 * * 20.08 0.02 20.14 *

6. Age of firm 19.08 10.43 20.13 0.27 * * * 0.02 0.36 * * * 0.09

Notes: The number of observations varies from 130 to 142 because of missing data; a 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 Model 2 Hypothesis

Beta Beta Support/reject

Control variables

Firm size 0.26 * * 0.17 * * *

Age of firm 20.02 20.01Independent variables

Buyer GSC practices 0.18 * * * H1 supported

Government involvement 0.13 * H2not supported

GSC readiness of suppliers 0.54 * * * H3 supported

Adj-R2 0.15 * * * 0.54 * * *

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


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GSC readiness, which was very consistent with a number of

previous studies claiming a positive relationship between

firm s 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 firm size and age

because these variables were known to have influence on theadoption of advanced environmental practices. As expected,

firm 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 firms

were thought to be more willing to participate in GSC

initiatives, which were led by buying firms and/or the

government, than smaller firms. Even though GSC

initiatives were known to lead to operational performance as

well as environmental performance of both buying firms and

their suppliers, financial 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, firm 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 stratified

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 significant differences in firm characteristics, in termsof firm 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 specific 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 firms, 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 intensified 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

efficiency throughout the entire supply chain. These

initiatives, however, are successfully implemented only if the

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

influential factors: buyer GSC practices and supplier GSC

readiness. Also, government involvement in the initiatives

influenced the participation of SME suppliers. SME suppliersand 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

mo ti vat e SM E s up pl ie rs t o p ar ti ci pa te i n in te r-

organizational 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 firms

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-functionalcommunication, and financial, human, and technical slack

resources have a significantly higher willingness to take part in

GSC initiatives. SME suppliers should be aware that these

initiatives promote efficiency 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

recom mended, such as increasing the m anagers

environmental awareness through training and education,

integrating environmental function into a strategic decision-

making process, and putting more resources into pollution

preventive solutions. Third, our research showed a slightsignificance in the effect that governments have on SME

suppliers participating in GSC initiatives. Governments also

m ust bear in m ind that S ME 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

financial 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 specific governmental directory, so itmay 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 refined 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.


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Notes

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, www.kama.or.kr

3 Data in 2003 from the web site of the Korea National

Statistical Office,www.kosis.nso.go.kr

4 This is a list of the Korean small and medium-sized

enterprises which have been given financial 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.

R eady3 A n environmental m anagem ent system is

established.

Ready4 Our firm has financial reserves to invest in advanced

technologies, including environmental solutions.

Ready5 Our firm has information and know-how relating to

emerging environmental issues in our industry.

Ready6 Our firm has human resources to deal with

emerging environmental issues in our industry.


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Buyer GSC practices


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


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 firms.

Government4 Popularize knowledge of environmental

management.

Government5 Build infrastructure for facilitating GSC

initiatives.

Supplier willingness to participation


Our firm . . .

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

benefits 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 firm founded? (Age of the firm.)

Corresponding author

Su-Yol Lee can be contacted at: [email protected]


Su-Yol Lee



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Drivers for the Participation of SMEs Suppliers in GSC Initiatives