Opportunistic Behaviors in Green Signaling: When Do Firms Engage in

Symbolic Green Product Preannouncement?

ABSTRACT

Although firms widely use product preannouncements as a signaling strategy to influence

external audiences’ perceptions and decisions, environmental scholars have rarely investigated

this medium as a legitimation strategy. This study explores the impact of environmental

performance on firms' propensity to use symbolic green new product preannouncements to signal

their green actions. Building on a sample of 503 green product preannouncements from 2008 to

2012, the findings show that firms with lower environmental performance tend to issue more

symbolic green preannouncements. We also found that the level of concentration in the industry

moderates the relationship between environmental performance and symbolic green

preannouncements, such that firms tend to issue more symbolic preannouncements in highly

concentrated industries independently of their environmental performance to deter- or respond to

competitive signals. This study contributes to the environmental literature by unraveling the

determinants of symbolic green product preannouncements.

Keywords: Signaling theory; environmental performance; stakeholder relations, product

preannouncements

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In 2011, Danone preannounced a new bottle of mineral water made of organic plastic--

but later on a French journalist on national television revealed that the actual percentage of

organic plastic was less than 10%. A puzzling question is why would an established company

like Danone take the risk of preannouncing misleading information about its green practices?

Signaling theory may help explain this type of opportunistic behavior because one of its

principles suggests that, in the presence of severe information asymmetry, a party may resort to

opportunistic signaling when the benefits of sending a particular signal far outweigh its cost

(Spence, 1973).

New product preannouncements (NPPs), defined as formal and deliberate

communications of information about a product well in advance of its actual market introduction

(Eliashberg & Robertson, 1988), are widely used by firms as a signaling strategy because they

can influence the target audiences’ perceptions and decisions (Gerlach, 2004; Guiltinan, 1999;

Koku, 1998; Lilly & Walters, 1997; Su & Rao, 2010, 2011). However, given the numerous

competitive benefits of preannouncing a new product and the comparatively low signaling cost of

such an action, firms have strong incentives to behave opportunistically by making vague

announcements (Bayus, Jain, & Rao, 2001; Sorescu, Shankar, & Kushwaha, 2007). This

opportunistic behavior occurs when the firm perceives the benefits of signaling to be greater than

the costs incurred (Spence, 1973). For instance, in the environmental field, Danone’s organic

plastic bottle is an example where the benefits of claiming the use of organic materials (increased

market share and improved green image) may well exceed the cost of signaling (cost of

incorporating a negligible percentage of organic materials to be able to make the environmental

claim), providing an incentive for the established company to engage in such an opportunistic

behavior.

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The incentive to behave opportunistically is exacerbated in the presence of severe

information asymmetry and field opacity that inhibit the capacity of observers to verify the

veracity of a particular signal (Wijen, 2014), and thus to impose sanctions on deceptive signalers.

Although green products are particularly prone to greenwashing claims (Delmas & Cuerel

Burbano, 2011), the lack of regulations that sanction this type of misleading behavior makes

green NPPs a popular practice among firms wishing to signal environmental stewardship.

Preannouncing a new green product helps communicate a firm’s desire to conform to

stakeholders’ expectations concerning the environment, with the goal of being perceived as an

environmental-friendly organization. Conformance to these expectations is critical to maintaining

legitimacy as firms face growing pressures from external stakeholders to take actions in favor of

the natural environment (Berrone, Fosfuri, Gelabert, & Gomez-Mejia, 2013; Gilley, Worrell,

Davidson, & El–Jelly, 2000).

However, despite the increasing number of new green products in a wide range of markets

(US Department of Commerce, 2010) and the potential for firms to preannounce new products,

environmental management scholars have rarely examined how greening firms use NPPs to

signal their environmental actions. Current literature in environmental management indicates that

scholars are mostly interested in actions such as green innovation (Berrone et al., 2013; Chan,

Yee, Dai, & Lim, 2016; Chen, Lai, & Wen, 2006; Dangelico, 2015), green disclosure (Deegan,

2002; Huang & Chen, 2014; Marquis & Toffel, 2011; Marquis & Toffel, 2012), environmental

standards (Aguilera-Caracuel, Aragón-Correa, Hurtado-Torres, & Rugman, 2012; Christmann,

2004; Delmas, 2002; Delmas & Pekovic, 2013), environmental management systems (Comoglio

& Botta, 2012; Darnall & Edwards Jr., 2006; Lannelongue & González-Benito, 2012), and even

new green products (Albino, Balice, & Dangelico, 2009; Dangelico & Pontrandolfo, 2010;

Jabbour, Jugend, de Sousa Jabbour, Gunasekaran, & Latan, 2015; Pujari, Wright, & Peattie,

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2003), but none of these has studied NPPs. NPPs are different from the green actions mentioned

above as preannouncements are rhetorical in nature and tend to be intangible evidence of

corporate sustainability. Given the rhetorical nature of NPPs and the growing global pressure

toward sustainability, the use of NPPs for signaling environmental conformance to various

stakeholders including customers and investors is expected to increase among firms who wish to

appear green. Our research builds on the existing literature in marketing on NPPs as a strategic

signaling instrument to manage stakeholders’ impression (Bayus et al., 2001; Calantone &

Schatzel, 2000; Schatzel, Calantone, & Droge, 2001; Su & Rao, 2010) to investigate the factors

that influence firms' use of NPPs as a signaling strategy in the environmental field. Investigating

green NPPs can extend the scope of our understanding of organizations’ environmental actions

and strategies, and more particularly the factors that lead to opportunistic behavior.

In this research, we investigate the determinants of a firm's propensity to issue symbolic

or substantive green NPPs. Symbolic green NPPs refer to a firm behaving opportunistically by

exaggerating a new product's environmental benefits in its announcements. In contrast,

substantive green NPPs refer to a firm communicating the true environmental benefits of a new

product. We argue that a firm’s propensity to issue symbolic green NPPs is partly determined by

its environmental performance. Since a basic principle of signaling theory is that signal cost is

inversely related to capabilities, it will be costlier for firms with lower vs. firms with higher

environmental performance to issue a substantive (non-symbolic) green NPP. Consequently,

firms with lower environmental performance will logically favor symbolic green NPPs in their

signaling strategy, leaving substantive NPPs to their counterparts with superior environmental

capabilities. We also propose that the level of concentration in the industry moderates the

relationship between environmental performance and symbolic green NPPs, such that firms tend

to issue more symbolic NPPs in highly concentrated industries independently of their

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environmental performance to deter or to respond to competitive signals. We test our contentions

on a sample of 503 green NPPs collected over a period of five years from 85 global firms

operating in polluting industries. We focus on polluting industries for two main reasons: Firms

which operate in these industries tend to face similar institutional pressures and scrutiny from

stakeholders (Berrone & Gómez-Mejía, 2009; Hoffman, 2001), and therefore constitute a more

homogeneous organizational field. Moreover, firms in polluting industries have more incentive to

respond to institutional pressures by taking environmental actions to gain legitimacy (Berrone,

Fosfuri, Gelabert, & Gomez-Mejia, 2013; King & Lenox, 2001).

NEW PRODUCT PREANNOUNCEMENT AS A SIGNALING STRATEGY

With mounting environmental consciousness among stakeholders, being viewed as an

environmentally-friendly company has become a competitive advantage for many firms (Dai,

Cantor, & Montabon, 2017; Du, Bhattacharya, & Sen, 2007; Zhu & Sarkis, 2016). One of the

most widely used market signaling instruments in competitive industries is an NPP (Bayus et al.,

2001; Su & Rao, 2010). A market signal is an action or announcement that conveys a firm’s

intentions and abilities (Porter, 1980). Past research has proposed that preannouncing new

products is an effective, rapid, and inexpensive means of communicating a company’s future

product plans (Calantone & Schatzel, 2000; Schatzel et al., 2001), with NPPs providing a cost-

efficient communication instrument for influencing a broad range of audiences and a credible

source of information regarding a firm’s future actions and strategies.

NPP has often been viewed from the marketing perspective and consists in sending

signals about potential new products to influence the behavior of market actors (Robertson,

Eliashberg, & Rymon, 1995). As such, the NPP literature may be approached from the point-of-

view of the signal sender, the receiver, and the market conditions that influence how receivers

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perceive and respond to signals. From the sender’s perspective, past studies have examined the

motivations of firms to preannounce, for instance, with the aim to deter entry into a particular

industry (Bayus et al., 2001; Ofek & Turut, 2013), to help establish industry standards (Dranove

& Gandal, 2003), or to influence the diffusion of a new technology (Farrell & Saloner, 1986).

Other studies have improved our understanding of how firm characteristics may influence market

reactions (Chen & Wong, 2012; Homburg, Bornemann, & Totzek, 2009). From the receiver’s

perspective, NPPs can encourage consumers to delay their purchase decisions about a

competitor’s product in favor of the preannounced product (Gerlach, 2004; Greenleaf &

Lehmann, 1995; Guiltinan, 1999; Lilly & Walters, 1997; Su & Rao, 2011), to affect consumer’s

perceptions of a brand (Lee & Colarelli O'Connor, 2003; Thorbjørnsen, Dahlén, & Lee, 2015),

and to create positive stock market reactions (Chen, Chiang, & Yang, 2014; Koku, 1998; Lee,

Chen, & Hartmann, 2016). Finally, market conditions may alter the signaling process between the

sender and the receiver. For example, innovative markets tend to be favorable to NPPs (Ofek &

Turut, 2013) and turbulent markets tend to influence the amount and consistency of information

firms convey in NPPs (Chen & Wong, 2012). Nonetheless, while the sender’s and receiver’s

perspective is well-developed in the literature, research on the moderating role of market

conditions and industry characteristics is more limited.

The NPP literature is intimately related to signaling theory as it addresses the classical

problem of information asymmetry between the sender and the receiver. In product

preannouncements, only the sender, and not the receiver, knows the true information about the

details of the product, such as its future characteristics, quality, and performance, and the release

date is known only to the sender (Sorescu et al., 2007). As a consequence, the receiver can only

infer the characteristics of the product from the signals of the sender. Such a scenario is more

harmful to a higher-quality firm than a lower-quality firm because of the probability that the

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receiver wrongly interprets the signal and selects the product of the lower-quality firm rather than

of the higher-quality firm. This phenomenon is known as adverse selection in agency theory

(Eisenhardt, 1989).

A central tenet of signaling theory and a mechanism for reducing information asymmetry

is the cost of producing the signal. A signal always involves a production cost, which can deter

lower-quality competing firms from imitation if it is sufficiently high. For instance, signaling a

firm’s environmental commitment through the announcement of a new green product based on a

patented invention is considerably more costly than signaling the announcement of the same new

green product through a minor modification of the packaging. Environmental innovation is a

long-term process that results from a firm’s continuing investments in specific technologies to

reduce pollution (Berrone et al., 2013; Chan et al., 2016), and it is thus less prone to imitation by

competitors that do not have a history of investing in these technologies. An additional

implication is that the cost of signaling is inversely related to the capabilities of the firm

(Eliashberg & Robertson, 1988). A firm with high environmental performance can more easily

send costly signals of its environmental conformance than a firm with low performance, because

the high-performance firm possesses the actual quality that is conveyed by the signal. Therefore,

a costly signal can act as a separating mechanism, distinguishing high-quality signalers from their

lower-quality counterparts.

DETERMINANTS OF SYMBOLIC AND SUBSTANTIVE PREANNOUNCEMENTS

Institutional theory suggests that firms respond to external pressures by adopting actions

that can be either symbolic or substantive (Ashforth & Gibbs, 1990; Meyer & Rowan, 1977;

Oliver, 1991). Symbolic actions convey subjective social meanings with the purpose of making

the firm appear to be in alignment with social expectations (Zott & Huy, 2007), and can be solely

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rhetorical with little actual implementation (Westphal & Zajac, 1998). As an example, firms can

respond to external pressures with actions that are largely ceremonial, thus decoupling any

conforming obligation from their business routines (Meyer & Rowan, 1977). For instance, an

organization can participate in a voluntary program to improve its environmental performance

without actually operating any structural change toward this goal (Delmas & Montes-Sancho,

2010). Even without actual implementation, this type of symbolic action can lead to the cognitive

acceptance of the organization as environmentally responsible with minimal effort and cost

(Aldrich & Fiol, 1994). Upon satisfaction of social expectations a firm is granted legitimacy,

which facilitates access to valuable resources and ultimately affects its survival (Scott, 1995;

Suchman, 1995). Therefore, some organizations tend to rely upon symbolic actions to

demonstrate their conformance with environmental expectations.

Although the environmental management literature has recently investigated different

types of symbolic action and their determinants in organizations’ conforming behavior (Berrone,

Gelabert, & Fosfuri, 2009; Christmann & Taylor, 2006; Delmas & Cuerel Burbano, 2011;

Delmas & Montes-Sancho, 2010; Kim & Lyon, 2012; Marquis & Toffel, 2012; Short & Toffel,

2010), it has not yet addressed NPPs as a strategic instrument for signaling conformance. Green

NPPs signal a firm’s abilities to develop environmentally friendly products and the intention to

conform to external stakeholders’ expectations about protecting the natural environment.

However, this form of announcement is not immune to opportunistic behavior that essentially

constitutes impression management of stakeholders’ notion of the firm’s environmental

conformance.

Moreover, NPPs suggest environmental commitment in that they provide a tangible

evidence of the firm’s green effort, whereas conventional corporate actions are limited to green

initiatives, disclosures, and adherence to regulatory and normative standards, all of which are

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intangible and less visible forms of commitment. In terms of signaling theory, new products tend

to attract greater media coverage than most other types of corporate action, as illustrated by the

considerable number of articles on the next version of Apple’s iPhone and Samsung’s Galaxy S

phones well ahead of the release date, and can therefore effectively reduce the initial information

asymmetry between the announcing firm and its audiences. Since signaling theory is concerned

with communicating about unobservable qualities, higher-quality firms have more incentive and

more resources to send signals frequently in an attempt to reduce information asymmetry

between the firm and its stakeholders. Bringing together insights from the NPP and

environmental management literature, we hypothesize that firms with superior environmental

performance are more likely to issue a greater number of green NPPs. In our research, firms with

superior environmental performance are high-quality firms whereas those with lower

environmental performance are low-quality firms.

Hypothesis 1: The higher the firm’s environmental performance, the greater the firm’s

propensity to issue green NPPs (both symbolic and substantive)

Quality Signals and Symbolic Management

Assuming that firms with superior environmental performance tend to make more green

NPPs (both symbolic and substantive) begs the question how a firm's environmental performance

is related to its propensity to behave opportunistically by issuing symbolic NPPs. In short, does a

firm's environmental performance not only determine its propensity to issues green NPPs but also

exhibit opportunistic behavior? Combining the assumption of rationality (Su & Rao, 2010) and

the notion of signal cost (Eliashberg & Robertson, 1988), we suggest that firms will make a green

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NPP only if the benefits to be gained are greater than the cost of making the announcement. The

cost–benefit equilibrium changes according to the quality of the firm. Since cost is inversely

related to firm quality (and capability), a similar signal can be costlier for a low-quality firm than

for a high-quality firm because a firm that possesses the actual quality can more easily signal it to

its audiences. Similarly, a benefit can be greater for a low-quality firm than a high-quality firm as

the low-quality firm has much more to gain in terms of incremental social acceptance than the

high-quality firm.

All things being equal, the cost of a signal is considerably higher for substantive than for

symbolic NPPs. Substantive actions require more profound organizational change to improve the

firm’s environmental performance, even at the cost of disrupting internal flexibility (Darnall &

Edwards Jr., 2006; Hawn & Ioannou, 2012). In this case, while symbolic actions represent the

formal response to external pressures with a minimal link to actual performance, substantive

actions aim at directly minimizing a firm’s environmental impact (Berrone et al., 2009). Given

the clearer link between substantive actions and environmental performance, both high-quality

firms and external stakeholders are likely to favor this type of action as a signal of conformance.

Because firms with higher environmental performance naturally attempt to create a separating

equilibrium (a situation where the cost of replicating a signal is dissuasive for lower-quality

firms), they are likely to use substantive announcements as signals of conformance. From the

perspective of stakeholders, the higher credibility of substantive announcements reduces both

information asymmetry and its associated risk of adverse selection.

In contrast, firms with lower environmental performance are more inclined to make

symbolic NPPs because making substantive NPPs would be considerably costlier for them

relative to their level of performance. Moreover, in most instances, the benefits to be gained in

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terms of social acceptance, at least at a cognitive level, are likely to exceed the lower cost of

making symbolic announcements. Such a benefit–cost equilibrium is also commonly found in

greenwashing practices, which are defined as the intersection of low environmental performance

and positive communication about environmental performance (Delmas & Cuerel Burbano,

2011). Consequently, we hypothesize that a firm’s level of environmental performance will

determine its propensity to issue symbolic green NPPs, such that firms with lower performance

tend to be behave more opportunistically by relying on symbolic practices because they extract

the greatest benefit from this type of signals:

Hypothesis 2: The lower the firm’s environmental performance, the higher the firm’s

propensity to issue symbolic green NPPs

Industry Concentration

Following our hypothesis above that firms with lower environmental performance tend to

issue more symbolic NPPs, we now turn our attention to factors that may affect this relationship.

Specifically, we examine whether the industry characteristic of the level of concentration can

influence a firm's propensity to issue symbolic NPPs because it relates to the extent to which

firms consider signaling behavior an effective way to communicate with stakeholders. The level

of concentration in an industry affects the interactions between competitors (Scherer & Ross,

1990; Waldman & Jensen, 2001). In highly concentrated industries, a smaller number of players

dominate the industry so that one player’s actions have greater impact on its competitors (Bain,

1968; Scherer & Ross, 1990), leading to an environment of close competitive monitoring and

frequent responses to a firm’s particular actions (Ferrier, Smith, & Grimm, 1999). In contrast,

low concentration involves a multitude of players holding smaller market shares. The greater

number of players complicates the task of monitoring others’ actions and dilutes the impact of

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competitive signals. As a consequence, we expect industry concentration and its associated level

of monitoring to have a direct impact on the extent to which firms resort to symbolic NPPs to

communicate their green actions.

We previously hypothesized that environmental performance has a negative relationship

with propensity to issue symbolic green NPPs. Firms with lower environmental performance tend

to issue more symbolic green NPPs while firms with higher environmental performance tend to

resort less to green NPPs. We suggest that this negative relationship will be strengthened by

industry concentration. Since monitoring from competitors is more intense in highly concentrated

industries, greener firms have less incentive to resort to symbolic NPPs because this type of NPP

will be more easily discovered by their peers. A green firm's image is more easily affected by

symbolic NPPs because close monitoring within a highly concentrated industry tends to lower or

even annihilate the impact of opportunistic behavior. In this scenario, green firms have more

incentives to protect their environmental image by discarding symbolic NPPs. Therefore, we

propose that the negative relationship between environmental performance and symbolic green

NPPs is moderated by industry concentration, such that, in highly concentrated industries,

greener firms will be more inclined to refrain from using green NPPs:

Hypothesis 3: Industry concentration moderates the relationship between environmental

performance and propensity to issue symbolic green NPPs, such that the

negative relationship between environmental performance and propensity

to issue symbolic green NPPs gets stronger as industry concentration

increases

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METHODS

Sample and Data

We first compiled a list of global firms that have appeared for five consecutive years in

Fortune magazine’s Global 500 listing. Employing the SIC codes appearing in the literature, we

then narrowed the number of firms by selecting those that operated in polluting industries

because these firms tend to undergo higher environmental pressures from stakeholders, and

therefore have more incentives to respond these pressures (Berrone et al., 2013; Berrone &

Gómez-Mejía, 2009). The last stage consisted in compiling this list with environmental

performance data from MSCI’s Intangible Value Assessment (IVA) database. IVA is a

consolidation of the Kinder-Lydenberg-Domini (KLD) and Innovest indices on corporate social

responsibility (CSR), both of which have been used extensively in CSR research. The final

sample comprised 503 green NPPs that were communicated between 2008 and 2012 from 85

global publicly traded firms operating in 12 highly polluting industries: airfreight and logistics

and airlines, automotive, construction and machineries, chemicals, electric power and electric

utilities and components, food products, industrial heavy machineries, oil and gas, metals and

mining, steel, paper and forestry, and pharmaceuticals.

Independent and Moderating Variables

We used the average environmental score of the firms in the IVA database as a basis for

measuring the independent variable “environmental performance.” The score is calculated from

the firms’ ratings on 15 environmental issues ranging from objective data (emissions, toxic

releases, water pollution, etc.) to policy evaluations (environmental strategy, employee training,

environmental governance, environmental management system, etc.). Given our perspective on

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firms as social actors (King, Felin, & Whetten, 2010), using this type of score seemed more

appropriate than employing emission levels as it captures the political and strategic aspects of an

organization’s environmental actions. For the moderating variable “industry concentration,” we

used the ratio of the combined sales of the four largest firms to the total sales of each industry as

provided by Compustat (Lee, Smith, Grimm, & Schomburg, 2000). The averages of both

variables were lagged by one year, as the NPP behavior of the current year is likely to be affected

by the environmental performance and industry concentration of the previous year.

Dependent Variable

Using Lexis-Nexis, we collected and analyzed 503 unique green NPPs released by the 85

firms in our sample from 2008 to 2012. We relied on a single source of NPPs to avoid potential

duplications (Bansal & Clelland, 2004). The authors independently reviewed all the NPPs to code

them as either symbolic or substantive. An NPP was coded as neutral after the review if the

authors did not reach agreement during the cross-checking process.

Research concerning NPP as a signaling strategy has relied on content specificity (amount

and level of product details) as an indicator of preannouncement credibility (Su & Rao, 2010). An

NPP with specific details about the product is often correlated with the product’s development

stage and the firm’s confidence about its ability to deliver the new product as it is announced and

in a timely manner (Bayus et al., 2001; Lilly & Walters, 1997). A signal is more credible when it

offers irreversible information on the new product or puts important constraints on the firm so the

cost of reneging on the promises would be very high (Boulding & Kirmani, 1993; Sorescu et al.,

2007). Not keeping its initial promises can affect the firm’s credibility for future announcements

(Herm, 2013; Hoxmeier, 2000; Sorescu et al., 2007; Wu, Balasubramanian, & Mahajan, 2004).

For example, Sorescu et al. (2007) measured content specificity by identifying the number of

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objective information (price and release date) in the NPP. Bayus et al. (2001) and Lilly et al.

(1997) compared announced release dates to actual ship dates to measure announcement

accuracy. Su and Rao (2010) proposed that specific information about the upcoming product such

as expected performance, technical characteristics, and exact release date is an indicator of

credible NPPs.

We adapted content specificity to the case of green products. The function of

environmental-friendly products is to help reduce the negative impact of a firm’s business

activities on the environment through pollution control or prevention (Berrone et al., 2013;

Rehfeld, Rennings, & Ziegler, 2007). Therefore, a substantive product preannouncement is likely

to indicate a certain level of expected performance in pollution or prevention. An example of a

performance indicator for pollution control is a new car gasoline tank that reduces carbon dioxide

emissions by 30% compared to existing tanks. Pollution prevention could be a new car engine

with 20% more fuel efficiency. Objective performance indicators are irreversible information that

reflect the company’s intention to send credible signals of its environmental activities. In

contrast, a symbolic preannouncement would be silent on specific performance indicators, such

as an announcement describing a new product that is expected to (nonspecifically) reduce carbon

dioxide emissions. Therefore, the level of content specificity determines the substantive or

symbolic nature of a green NPP, such that vague announcements will be symptomatic of

symbolic NPPs while specific announcements will be associated with substantive NPPs. This

approach is consistent with past research in the environmental management field which has often

pointed to performance indicators as a determinant of symbolic or substantive actions (Berrone et

al., 2009; Christmann & Taylor, 2006; Delmas & Montes-Sancho, 2010).

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Following the logic above in our study, a NPP was classified as substantive if it provides

an objective indicator of performance gain (often expressed in percentage or absolute number). It

was classified symbolic or neutral otherwise. After the initial coding, two additional researchers

coded a sample of NPPs. The process yielded an inter-coder reliability of .87. The final sample

comprised 503 green NPPs, of which 44% are symbolic, 41% are substantive, and 15% are

neutral. Examples of NPPs are provided in Table 1. We used the ratio of symbolic NPPs to total

number of NPPs as a measure of the propensity to issue symbolic green NPPs.

Please insert Table 1 about here

Control Variables

Following previous studies concerning NPPs, we first controlled for the effect of size as

measured by total assets (Eliashberg & Robertson, 1988) and industry (Eliashberg & Robertson,

1988; Kohli, 1999; Lilly & Walters, 1997). Large firms are more likely to preannounce more

products than smaller firms given the breadth and depth of their lines of business. The number of

NPPs can also vary across industries depending on product life cycles (short vs. extended),

customers (industrial buyers vs. consumers), and prices (premium vs. commodity pricing). We

also added advertising intensity and research and development intensity to the list of control

variable, since high expenditures relative to sales in these areas would increase the likelihood of

multiple preannouncements for public relations and advertising purposes, even for smaller

incremental improvements. The data were obtained from Compustat. Table 2 provides an

overview of the sample and measures in this study.

Data Analysis

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Following Berrone et al. (2010), we used the average number of green NPPs between

2008–2012 to calculate the propensity to issue symbolic green NPPs (dependent variable), and

the average scores of the environmental performance and industry concentration from 2007–2011

to estimate the rank of each firm within its respective industry (independent variables). We

followed the same procedure for the control variables. Since we were not interested in capturing

how changes in a firm’s environmental performance impact its green NPPs in the following year,

but rather in the relationship between environmental performance and green NPPs over a given

period, the use of averages was more appropriate. Moreover, some firms in our dataset did not

issue any NPP for a particular year but issued more NPPs in subsequent years. This is as expected

as product development typically spans over longer periods (especially green products) such that

firms are unlikely to issue an NPP in the year following a change of its environmental

performance. Finally, using averages has been shown to be an efficient means of avoiding

spurious effects and data variability in panel data (Balkin, Markman, & Gomez-Mejia, 2000;

Tabachnick & Fidell, 2001). This approach is also more appropriate than classical panel data

analysis given the shorter time period of the data (e.g. Houthoofd & Heene, 1997; Johnson,

Hoskisson, & Hitt, 1993; Myles Shaver, 2011; Waddock & Graves, 1997).

ANALYSIS OF RESULTS

Table 2 provides the descriptive statistics of the measures and Table 3 and 4 show the

results of the multiple regressions with OLS and Tobit. Given that we used a censored measure

(ratio) of the propensity to issue symbolic NPPs to test hypothesis 2 and 3, we selected the Tobit

model for data analysis. As expected, the inclusion of an interaction term in models 4 and 8

raised multicollinearity issues, which were handled by mean-centering the independent variables.

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After mean-centering, all scores of the variance inflation factor (VIF) test were below 5.

Although we have added control variables in all regression models (size, advertising intensity,

R&D intensity and industry), we did not find any significant effect for the controls.

To test the first hypothesis, we regressed the total number of green NPPs on

environmental performance while controlling for size (.855, p > .05), advertising intensity (-.223,

p > .05), R&D intensity (-.469, p > .05), and industry, and found a strong positive relationship

(1.527, p < .05). The results of the OLS regressions are found in Table 3. Hypothesis 1, which

states that companies with superior environmental performance issue more green NPPs, is

supported. To test the second hypothesis, which states that there is a negative relationship

between environmental performance and symbolic green NPPs, we regressed symbolic green

NPPs on environmental performance while controlling for size, advertising intensity, R&D

intensity, and industry, and found a strong negative relationship (-.211, p < .001). Hypothesis 2 is

supported. Hypothesis 3 is also supported, as the negative and significant effect (-.771, p<.05) of

the interaction term (environmental performance*industry concentration) indicates a moderation

effect of industry concentration. A negative effect in this relationship implies that as industry

concentration increases, the negative effect of environmental performance on symbolic green

NPP gets stronger. This finding suggests that in highly concentrated industries, firms with higher

environmental performance are more inclined to refrain from using symbolic green NPPs. In

order to illustrate this finding, we analyzed the marginal effect of environmental performance on

symbolic green NPPs at various levels of industry concentration. As shown in Figure 1, as

industry concentration increases, the effect of environmental performance on symbolic green

NPPs tends to be increasingly more negative. All results were consistent between OLS and Tobit

models. The results are found in Table 4.

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Please insert Tables 3, 4 and 5 about here.

Please insert Figure 1 about here.

Robustness Checks

We performed a robustness check for our model to test the consistency of the results. We

used a non-neutral ratio of symbolic green NPPs to substantive green NPPs while discarding the

neutral NPPs. Such a ratio could provide a more stringent indicator of the propensity to issue

symbolic green NPPs since the inclusion of neutral contents in the initial models may have

diluted the proportion of this type of NPPs. This approach is similar to studies using the Jadnis-

Fadner coefficient of imbalance to measure the favorability of a set of media contents in the

evaluation of a firm’s legitimacy (Bansal & Clelland, 2004; Vergne, 2011). Studies using this

coefficient can either include or exclude neutral contents depending on the objective of the

research. Table 5 provides the results for four Tobit models using a coefficient without neutral

contents. The results of models 1 to 4 are similar to those in Table 4.

Please insert Table 6 about here.

Endogeneity Test between Environmental Performance and Green NPP

The environmental literature has suggested that new green products can improve a firm’s

environmental performance (Chen et al., 2006; Dangelico & Pujari, 2010; Klassen &

McLaughlin, 1996; Pujari et al., 2003). Such a feedback loop implies a potential endogeneity due

to simultaneity (Wooldridge, 2002, p. 51). However, we believe our study’s variables

“environmental performance” and “green NPP” are conceptually and empirically unrelated.

Environmental performance as measured here relates to a third-party assessment of a firm’s

19

environmental strategy, policy and operations. Green NPPs are preannouncements that may or

may not lead to actual product introduction, and therefore should not have a significant impact on

the third-party assessment of a firm’s environmental performance. We also did attempt to partly

contain the endogeneity problem by giving a one-year lag to “green NPP” to address the potential

feedback loop. Nonetheless, for the sake of clarity, we used a 2SLS regression model to test and

control for endogeneity (Bascle, 2008). Country carbon dioxide emission (CO2) per capita and

country size served as instrumental variables for firm environmental performance. Both variables

were correlated with the endogeneous variable but not with the dependent variable. A low level

of national CO2 emission may indicate that firms in the country tend to be environmental friendly.

To acquire information on CO2 emissions per capita per country, we used the World Bank

statistical data. The size of a country may affect firm environmental performance as smaller

countries tend to have a proactive environmental policy. An intuitive assumption is that no

relationship exists between national CO2 emission, country size and NPP behaviors. The results

of the 2SLS analysis indicate that the two instruments were both relevant (first stage) and

exogeneous (second stage), and also confirm hypotheses 2 and 3.

DISCUSSION AND CONCLUSIONS

Building on prior literature on signaling theory, symbolic management, and product

preannouncement in marketing, this study investigates the antecedents of symbolic

preannouncements of new green products. We first examined the relationship between firms’

environmental performance and their propensity to issue green NPPs as signals of conformance

to stakeholders' expectations about environmental protection. Then, we focused more particularly

20

on symbolic NPPs and their relationship to environmental performance. Finally, we investigated

the moderating role of industry concentration in the relationship between environmental

performance and symbolic NPPs. We tested our contentions using a sample of 503 green NPPs

from 85 firms operating in highly polluting industries between 2008 and 2012.

Our results reveal that firms with superior environmental performance have a greater

propensity to issue green NPPs (both symbolic and substantive). However, they rely less on

symbolic green NPPs than their counterparts with lower environmental performance. Firms with

lower environmental performance make symbolic preannouncements because they can signal

conformance to stakeholders at a lower cost. Preannouncements from large firms are often visible

in media outlets and are commented on by journalists well before the actual release of the

product. Thus, non-environmental conscious firms can use the benefit of the doubt to their

advantage during the pre-release period, especially when stakeholders lack sufficient incentive to

evaluate the true environmental characteristics of the product, and thus are more inclined to grant

cognitive legitimacy to the preannouncing firm (Aldrich & Fiol, 1994).

In contrast, since signal cost is inversely related to capabilities, environmental-friendly

firms tend to send costly signals because (1) these signals are less costly for them than for less

competent competitors because they actually possess the internal capabilities to deliver the green

promises of the product; and (2) they attempt to create a separating equilibrium to prevent

replication by lower-capability competitors. Consequently, these firms are less prone to making

symbolic preannouncements in the environmental area but rather resort to substantive green

NPPs.

However, to assume that environmentally friendly firms will systematically send costly

signals would be a mistake. Because audiences have varying levels of willingness to process

information, knowledge in the product domain, and personal objectives, costly signals in the form

21

of specific details about the performance of the future product are not valued by all audiences.

For example, investors and non-governmental organizations (NGOs) tend to be more attentive to

costly signals because they are knowledgeable and more willing to search and verify

environmental claims by companies. In contrast, consumers and local communities may be more

tolerant of vague claims because of their limited knowledge and unwillingness to spend time to

cross-check promises with actual actions. While symbolic NPPs may be insufficient to satisfy

investors and NGOs, they may have some positive impact on consumers and local communities.

As a consequence, although substantive NPPs are theoretically more efficient in reducing

information asymmetry between firms and stakeholders, symbolic NPPs may still be appropriate

in specific contexts with some groups of stakeholders—a possibility offering a good avenue for

future research.

We also find that industry concentration increases the use of symbolic green NPPs among

all firms. The number of firms in highly concentrated industries can strongly affect firms’

signaling behaviors by facilitating the task of monitoring signals for all parties, including the

competing firms and the stakeholders, as the number of signals tends to be both smaller and more

noticeable. In this context, signals have a greater impact on the competing firms and, thus, trigger

more frequent responses to the signal of the announcing firm. Such an environment increases the

use of symbolic preannouncements because firms are more pressured to formulate immediate

responses in reaction to the competitive signal. Therefore, high industry concentration tends to

exacerbate reactive signaling behaviors that are decoupled from the actual environmental

performance of the signaling firms.

Theoretical Implications

22

This research makes four contributions to the literature. Our first contribution clearly lies

at the intersection of firm environmental management and NPP. From the perspective of NPP,

our research is one of the first to study how firms use NPPs to signal green conformance. While

the NPP literature has often used an innovation approach to examine the link between NPPs and

new product adoption and success (e.g. Farrell & Saloner, 1986; Ofek & Turut, 2013; Sorescu et

al., 2007), it has not yet looked at how firms may also use NPPs to signal conformance intentions

to their stakeholders. Our study differs from previous studies in that the preannouncing firm may

be less concerned with the new product’s adoption and success on the market but be more

attentive to the perceptions of stakeholders (including customers, competitors, investors and

governments). In other words, firms use NPPs as instruments for their nonmarket strategy. From

the perspective of environmental management, many scholars have focused on new green

products as signals of conformance (for a review, see Dangelico, 2015), but few have studied

preannouncements. NPPs are different from new product announcements in that they are

rhetorical in nature and may or may not lead to actual product launches, and therefore, may be

more prone to symbolic manipulations by greening firms. Although our findings are consistent

with those of previous NPP studies, they also show that NPPs are relevant units of analysis in the

study of firm conformance behaviors in a highly-institutionalized field.

Second, we previously stated in the literature review that more attention is needed to

unravel the market conditions that moderate the signaling process between senders and receivers

in NPPs. While past research has found that the signaling process is altered in innovative markets

(Ofek & Turut, 2013), turbulent markets (Chen & Wong, 2012), and competitive environment

(Talay, Akdeniz, & Kirca, 2017), the management literature informs us that other market

characteristics may also play an important role. We identified that industry concentration has not

been examined as a moderator in previous NPP studies. However, management literature has

23

shown that the level of concentration in an industry affects the ways competitors interact and

respond to each other’s actions (Scherer & Ross, 1990; Waldman & Jensen, 2001). Our study

contributes to the NPP literature by showing that the level of industry concentration either

impedes or exacerbates the use of symbolic NPPs.

Third, few studies have explained how the level of corporate environmental performance

can lead to different signaling strategies. Our study builds on these two conceptual frameworks to

bring further insights as to when companies are likely to use symbolic and substantive signals,

and therefore contributes to explaining firms’ heterogeneous responses to institutional pressures

(Philippe & Durand, 2011). More specifically, the current literature on corporate

environmentalism has examined the context that leads to opportunistic behavior (Wijen, 2014)

and has also attempted to categorize the different types of opportunistic behavior (Delmas &

Montes-Sancho, 2010; Kim & Lyon, 2012; Rodrigue, Magnan, & Cho, 2013), but no previous

study seems to have linked opportunistic behavior to firm environmental performance. Our study

is one of the first to bring empirical evidence that links these two notions. Wijen (2014) has

theorized the context of opportunistic behavior with regard to environmental management, but

more empirical studies are needed to elicit the antecedents of this types of behavior. Our study

brings new knowledge to the field in that we found a direct impact of environmental performance

and industry concentration on the opportunistic use of NPPs.

Finally, signaling theory in management research has rarely focused on negative signals

(Stern, Dukerich, & Zajac, 2013), although these signals can have an important impact on

perceptions (Lipe & Salterio, 2002). In this study, symbolic green NPPs emanating from firms

with low environmental performance may be considered a form of greenwashing which is

defined as the intersection of low environmental performance and green claims (Delmas &

Cuerel Burbano, 2011), and thus may constitute a negative signal in the eye of stakeholders in

24

most contexts. Our study contributes to the field by showing that firms with poor environmental

performance are more inclined to resort to symbolic NPPs. This finding is interesting in that the

current literature has warned about the drawbacks of symbolic green actions (Berrone et al.,

2009; Christmann & Taylor, 2006; Short & Toffel, 2010), yet we found that firms with poor

environmental performance resort more to this type of action when they should focus more on

substantive action to improve their image (Berrone, Fosfuri, & Gelabert, 2015).

Limitations and Future Studies

Like most empirical studies, ours has several limitations. First, the sample is composed of

very large corporations operating globally. This type of firm tends to be highly visible and

scrutinized by stakeholders and media, which implies that (pre)announcements are strongly

emphasized in popular media. Such a context limits the possibility of generalizing the findings to

smaller, less visible firms. Future studies can investigate whether these findings apply to less

visible and smaller firms. Second, although we look at two antecedents of symbolic or

substantive green NPPs, additional antecedents may help discern firm NPP behaviors. For

example, the environmental literature has suggested the role of managers and ownership type to

be important determinants of firm environmental behaviors (Berrone et al., 2010; Berrone &

Gómez-Mejía, 2009).

Practical Implications

While we argue that symbolic NPPs can have some beneficial effects for companies, our

intention is not to encourage greenwashing activities. We found that symbolic NPPs tend to be

predominant under conditions of low environmental performance and high industry

concentration, and could bring short-term benefits in terms of audience perceptions, but this

25

finding does not imply that such practices are sustainable in the long run. An important point is

that institutional stakeholders such as NGOs, semi-governmental organizations, and investors

spend considerable time collecting and cross-checking information on firms in highly polluting

industries. Therefore, unreasonable use of symbolic NPPs most likely affects stakeholder

relations in the long term, which in turn may affect mainstream stakeholder groups such as

consumers and local communities. Overall, our findings suggest that while firms use both

symbolic and substantive NPPs, substantive NPPs are the most valuable for quality signals, as

they accurately reflect the quality of the firm’s environmental performance.

A particularly interesting finding from our study is that the use of symbolic green NPPs

tends to be predominant among firms with lower environmental performance. This may be seem

both logical and counter-intuitive. It may seem logical because these firms do not have sufficient

tangible green assets to signal and thus resort more to symbolic signaling. However, it may also

be counter-intuitive as low environmental performance should prompt firms to develop

substantive green assets to improve their green image. Our recommendation is that firms with

lower environmental performance should strike a reasonable balance between symbolic and

substantive action in their signaling strategy, especially if they operate in highly-concentrated

industries as the level of monitoring is more intense.

26

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Table 1

Examples of NPPs in Six Polluting Industries

Symbolic NPP

Heavy industries

Additionally, the product A can be paired with one of Firm A’s proven off-wire power supply systems to preserve historic cityscapes and minimize impacts on the environment.

Chemical These projects, in cellulosic ethanol and biobutanol, are on track towards commercialization.

Electrical Firm A continues to expand its industry-leading LED portfolio with a new family of luminaires that offer the sustainability and energy-efficiency of fluorescent lighting with all the benefits of LED technology.

Substantive NPP

Airline This new seat is also more environmentally friendly, since environmental aspects were taken into account at the start of the design stage…. It represents a reduction of 5,200 tons of CO2 per year.

Chemical Up to 90% of all components in the unique Product A concept work shoe developed by Firm A can be given eco-compatible properties. The outer soles and midsoles, for example, contain up to 70% renewable raw materials. The same applies to the polycarbonate compounds, which comprise up to 40% renewable raw materials.

Automotive It can reduce [carbon dioxide] emissions by more than 30% when compared with conventional tanks because plant-based resins are made from plants that absorb [carbon dioxide] during photosynthesis.

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Table2

Description of Sample and Measures

Sample and Measures

Data source Comments Previous studies

SampleList of global firms

Fortune Magazine’s Global 500

Ranking of 500 global firms by revenue

(Kolk, Walhain, & Van de Wateringen, 2001; Muller & Whiteman, 2009)

List of firms operating in polluting industries

Electronic Data Gathering Analysis and Retrieval (EDGAR) system from SEC's Division of Corporate Finance

The Standard Industrial Classification (SIC) Codes indicate the company's type of business. We selected the industries with the largest CO2 emissions

(Berrone et al., 2013; Berrone & Gómez-Mejía, 2009)

Independent and dependent variablesFirm environmental performance

MSCI’s Intangible Value Assessment (IVA) database

IVA is a consolidation of the Kinder-Lydenberg-Domini (KLD) and Innovest indices on corporate social responsibility (CSR). We used the average environmental score of the firms

(Cai, Pan, & Statman, 2016; Liang & Renneboog, 2017; Tashman, Marano, & Kostova, 2019)

Industry concentration

S&P COMPUSTAT We used the ratio of the combined sales of the four largest firms to the total sales of each industry

(Lee et al., 2000)

NPPs Lexis-Nexis We collected and analyzed 503 unique green NPPs released by the 85 firms in our sample from 2008 to 2012

(Anand & Khanna, 2000; Paul & Wooster, 2008; Sorescu et al., 2007)

Symbolic and substantive NPPs

Lexis-Nexis We used content specificity (in terms of product details) to classify NPPs as either symbolic or substantive

(Bayus et al., 2001; Lilly & Walters, 1997; Sorescu et al., 2007; Su & Rao, 2010)

Control variablesTotal assets, industry, advertising expenditures, R&D expenditures

S&P COMPUSTAT We used the natural logarithms for total assets, advertising expenditures and R&D expenditures, and dummies for industry

(Eliashberg & Robertson, 1988; Kohli, 1999; Lilly & Walters, 1997)

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Table 3

Descriptive Statistics and Correlations

Obs. Mean SD Min Max 1 2 3 4 5 6

1. Symb. green NPP 85 .25 .26 .00 1.00 1

2. Total assets (log) 85 3.17 .31 .30 3.35 -.09 1

3. Ad. intensity (log) 85 -2.06 1.42 -5.59 6.11 -.02 .02 1

4. R&D intensity (log) 85 -4.17 2.38 -12.89 5.64 -.08 .07* .60 1

5. Env. performance 85 5.13 .89 2.63 6.95 -.62* .16 -.04 .10 1

6. Industry concentration 85 .10 .12 .00 .58 .10 .05 -.04 .03 .02 1

7. Env. Perf.*Industry con. 85 .00 .67 -.67 2.54 .10 .04 -.04 .03 .00 .99*

**p < .01*p < .05

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Table 4

Determinants of Total Green NPP

***p <.001 **p <.01

*p <.05

35

Dependent Variable : Total Green NPP1 2

OLS OLS

Industry dummies Yes Yes

Size 1.278(1.895)

.885(1.851)

Advertising Intensity

-.432(.583)

-.223(.574)

R&D Intensity -.330(.405)

-.469(.398)

Environmental Performance

1.527*(.671)

Constant .014(6.260)

-7.050(6.833)

Observations 85 85F-score 3.35*** 3.67***R2 .35 .40

Table 5

Determinants of Symbolic Green NPP

***p <.001 **p <.01

*p <.05

36

Dependent Variable : Symbolic Green NPP1 2 3 4 1 2 3 4

OLS OLS OLS OLS Tobit Tobit Tobit TobitRandom Random Random Random

Industry dummies Yes Yes Yes Yes Yes Yes Yes Yes

Size -.025(.071)

-.069(.085)

-.028(.069)

-.039(.067)

.002(.085)

-.052(.104)

-.004(.081)

-.018(.078)

Advertising Intensity

-.002(.022)

.015(.026)

-.006(.021)

-.003(.020)

-.024(.026)

-.004(.032)

-.028(.025)

-.025(.024)

R&D Intensity -.011(.015)

-.025(.018)

-.011(.014)

-.012(.014)

-.010(.018)

-.030(.022)

-.009(.018)

-.011(.017)

Environmental Performance

-.158***(.025)

-.159***(.025)

-.169***(.024)

-.211***(.032)

-.209***(.030)

-.225***(.031)

Industry Concentration

.457*(.229)

.468*(.183)

.514**(.180)

.693**(.288)

.645**(.224)

.656**(.222)

Env. Performance* Ind. Concentration

-.511*(.249)

-.771*(.368)

Constant 1.073***(.264)

.323(.283)

1.061***(.254)

1.132***(.251)

1.326***(.315)

.341(.346)

1.293**(.300)

1.414***(.297)

Observations 85 85 85 85 85 85 85 85Left censored 15 15 15 15Right censored 5 5 5 5F-score / χ2 7.08 3.21 7.55 7.65 56.51 26.29 64.49 69.21R2 .48 .25 .52 .54 .66 .31 .76 .81

Table 6

Results of Robustness Check

Dependent Variable : Symbolic Green NPP without Neutral1 2 3 4

Tobit Tobit Tobit TobitRandom Random Random Random

Industry dummies Yes Yes Yes Yes

Size -.221(.164)

-.311(.202)

-.220(.155)

-.227(.144)

Advertising Intensity

-.022(.029)

-.000(.036)

-.026(.028)

-.024(.027)

R&D Intensity -.009(.020)

-.031(.025)

-.008(.020)

-.010(.019)

Environmental Performance

-.232***(.035)

-.230***(.034)

-.249***(.035)

Industry Concentration

.666*(.322)

.609*(.250)

.628*(.248)

Env. Performance* Ind. Concentration

-.866*(.411)

Observations 85 85 85 85Left censored 15 15 15 15Right censored 7 7 7 7χ2 65.36 33.66 71.17 75.96R2 .60 .31 .65 .70

***p <.001 **p <.01 *p <.05

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Figure 1

Marginal Effects Analysis

-.6-.4

-.20

Effe

cts

on S

ymbo

lic G

reen

NP

Ps

0 .1 .2 .3 .4 .5Industry Concentration

Average Marginal Effects of Env. Performance with 95% CIs

38