Environmental management systems and financial performance: the joint effect of switching cost and competitive intensity

Despite the importance of environmental management systems, previous findings on its relationship with financial performance are inconsistent. This study aims to investigate how the relationship between environmental management systems and financial performance is moderated by switching cost, competitive intensity and their interaction drawing on contingency theory and an interactional perspective. We conducted two waves of survey to collect data from 214 Chinese manufacturing firms and employed hierarchical moderated regression analysis to test the research hypotheses. The results reveal that there is a positive relationship between environmental management systems and financial performance. This relationship is negatively moderated by switching cost and is positively moderated by competitive intensity. In addition, switching cost and competitive intensity have a negative joint moderating effect on the relationship between environmental management systems and financial performance. This study advances environmental management systems research by identifying the market conditions that augment or constrain the impact of environmental management systems on financial performance.