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Article

The Configuration Effect of Institutional Environment, Organizational Slack Resources, and Managerial Perceptions on the Corporate Water Responsibility of Small- and Medium-Sized Corporations

by
Jiahao Gu
,
Liyuan Zheng
*,
Changgao Cheng
and
Mengjiao Wang
Business School, Hohai University, Nanjing 211100, China
*
Author to whom correspondence should be addressed.
Sustainability 2023, 15(10), 7821; https://doi.org/10.3390/su15107821
Submission received: 2 March 2023 / Revised: 6 May 2023 / Accepted: 9 May 2023 / Published: 10 May 2023
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Abstract

:
Under the background of the water crisis, there has been much research on corporate water responsibility (CWR), a subfield of corporate environmental responsibility (CER). Studies on CWR and CER are mainly focused on isolated factors, such as institutional pressure, corporate features, and managerial perceptions, with a notable lack of consensus. These studies have largely ignored the complex relationship between different contributing factors; thus, the internal mechanism of the multi-level synergistic influence of such factors on CWR or CER remains unclear. Configuration theory forgoes consideration of the correlation between variables and instead analyzes the synergistic effect between variables from the perspective of set theory. Thus, this paper focuses on formal and informal institutional pressure, unabsorbed and absorbed CSR slack, and economic and ethical perceptions, and uses fsQCA to investigate the configurations contributing or unconducive to a high level of CWR from a configuration theory perspective. The results show that three configurations contribute and two configurations are unconducive to a high level of CWR. Managerial perception is foundational for implementing CWR, and ethical perception is a necessary condition for high-level CWR, while a lack of benefit perception contributes to a lower level of CWR.

1. Introduction

According to the newest report published by the World Meteorological Organization, 3.6 billion people face inadequate water supply for at least one month of the year, and the number is expected to grow to more than 5 billion by 2050 due to climate change and population growth [1]. The water crisis has become a top global concern, making it an important consideration for businesses [2]. Companies’ low levels of water management further increase water vulnerability, because they are not only the biggest users of water but are also major polluters of the water environment [3]. Under the background of the water crisis, scholars have emphasized the importance of corporate water responsibility (CWR) [4,5], but there is still considerable variability in its understanding and application [6]. Major global corporations have recognized and are now taking steps to address the impact of water vulnerability on their capacity to remain sustainable. For example, BHP Billiton has made water management a top concern in the management of its mining operations [7]. Nestle has taken the initiative to help farmers improve agricultural irrigation to guarantee adequate water resources and to demonstrate social responsibility, thus facilitating continued operation in the communities where it conducts business [8]. However, most companies still fail to recognize the threat posed by water-related challenges [9].
While studies have shown that the impact of various environmental issues on corporations is heterogeneous [10], the overall measurement of corporate environmental responsibility has blurred the differential performance of enterprises on various environmental issues [11]. The cognitive differences between enterprises and their stakeholders on different environmental issues affect the level of corporate environmentalism and the attitudes and reactions of stakeholders with regard to different environmental responsibilities [12,13]. These cognitive differences are influenced by the environmental embeddedness of enterprises and their stakeholders and the scale of the issues themselves [12,14].
Based on this, some studies have begun to explore what forces could drive corporations toward better water responsibility. Scholars have explored three key driving forces behind CWR. The first is the institutional environment. Using institutional theory, Tingey-Holyoak [15] established that corporate water responsibility is a strategic response to local institutional pressure. Wicaksono and Setiawan [16], Zhou et al. [17], and Christ [18] confirmed that pressure from the government is one of the most effective forces to drive corporations toward better water management. The pressure arising from consumer environmental awareness and business partners can also influence behavior [19,20]. The second driving force comprises corporate characteristics, such as organization size [18,21], corporate environmental strategy and social responsibility [18,22], and corporate governance and self-regulation [23,24,25,26]. The third variable considers the influence of the corporate management team. O’Connell [27] reported that corporate water responsibility relates to how managers perceive the environment and the choices that are available to them. Under the circumstance that water costs cannot fully reflect the scarcity of water resources, Egan [23] recognized that CWR mainly depends on the moral considerations of managers.
Despite the research relating to corporate water responsibility generating some interesting findings, many questions remain. Some results seem to conflict with one another. For example, Ben-Amar and Chelli [28] found that CWR was significantly higher in countries with common law systems, but Otras, Burritt, and Christ [29] found that there was no significant difference in CWR under different legal systems. This indicates that the effect of the external environment on CWR needs further study. Second, CWR is regarded as a subfield of CER [25,30]; thus, CER studies showing the complex relationship between variables may indicate a similar complexity in CWR research. For example, the institutional environment not only guides managers’ attention toward corporate environmental strategies but also moderates the effect of managerial perception on corporate sustainability [31,32]. Although some researchers use a contingency perspective to combine both environmental-level and firm-level factors (e.g., [31]), CER studies still focus on the effect of single variables. Single-factor studies fail to explain the multifaceted driving mechanisms because they lack the capacity to consider the complex interactions of factors [33]. Third, organizational slack, as an important factor of CER, may also have a significant impact on CWR implementation. Current CWR research has noted the impact of CSR performance on CWR implementation [22], but this has not been further studied from the perspective of organizational slack. In addition, there is no consensus on the effect of organizational slack, and few studies have proposed the influence of prior CSR performance as absorbed slack on future CSR implementation.
The questions above call for research to integrate multiple levels of variables to explore the implementation of CER and CWR [34]. However, the literature still focuses on studying the effect of certain key variables on CER and CWR, while variables at other levels are relegated to control variables or moderating variables. As a result, the internal mechanism of synergistic influence on CER and CWR at multiple levels is not clear. Based on the default independent variables, one-way linear relationships, and causal symmetry, traditional statistical methods explore the marginal “net effect” of independent variables on dependent variables by controlling other influencing factors or adding moderating variables to analyze the influence of the interaction on dependent variables [35]. Triple interaction is the interpretable upper limit [35]. Due to such limitations, existing studies inevitably show a certain degree of ineffectiveness when explaining, predicting, and guiding relevant practices [33]. Thus, scholars now propose that it is possible to use the perspective of configuration theory to study the influence of the synergistic relationship between multi-level variables on dependent variables. The analytical method of configuration theory was first pioneered by Ragin in 1987 and has been widely used in management studies [33,35]. Compared with the correlation between variables in the regression model, configuration theory analysis mainly focuses on the set relationship to solve the complex causal relationship between variables.
Therefore, this paper aims to use fuzzy-set qualitative comparative analysis (fsQCA) to investigate the effect of different configurations of the institutional environment, organizational slack resources, and management perceptions on corporate water responsibility. We first review the literature on the relationship between six variables. Using fsQCA, the core and peripheral conditions that drive or hinder corporate water responsibility can be explored. Theoretical and practical implications are further presented based on the research findings.

2. Theoretical Foundation and Research Model

2.1. What Is Corporate Water Responsibility?

Generally, corporate water responsibility (CWR) is a subfield of corporate environmental responsibility and, more broadly, corporate social responsibility [25,30,36]. From the perspective of management, the goal of corporate water responsibility is to significantly improve water efficiency and reduce water usage while increasing the extent of wastewater recycling and preventing the negative impact of wastewater on the environment [26,37,38]. From the perspective of stewardship, companies need to participate in a conscious collective action from the source to the supply chain—focusing solely on internal operational efficiency is insufficient to address water risks [20,39]. From the nexus perspective, companies should consider the relationship between water and other sustainability issues [40]. Thus, corporate water responsibility represents the responsibility of water efficiency promotion and the support of rights to adequate clean water.

2.2. Institutional Environment and Corporate Water Responsibility

Meyer and Rowan [41] found that enterprises conform to the expectations of their institutionalized environment to gain legitimacy in order to increase their survival prospects. Companies operating within a common institutional environment will begin to appear more similar than different [42,43]. Scott [44] split the institutional environment into regulatory pressure from the government, normative pressure from social norms, and cognitive pressure embedded in actors’ beliefs as a sociocultural factor. However, some research has shown that cognitive pressure is the personal internalization of external institutional forces, reflecting the perception of what proper actions should be taken [45]. Thus, the institutional environment, divided into formal and informal environments as presented by North [46], is also widely accepted, with the formal institutional environment representing the pressure from laws and regulations and the informal institutional environment coming from social norms [31,32].
The majority of studies have affirmed that regulatory pressure can drive corporations toward better environmental performance. Regulatory pressure brings significant uncertainties. Companies’ failure to comply with enforcement tools will result in regulatory sanctions and a loss of political capital, threatening the survival of the company [47]. Apart from enforcement, governments also enact market policies, such as water rights trading, to create economic incentives for corporations [48]. Firms with better water responsibility performance could achieve economic gains under such systems.
Other stakeholders, such as institutional shareholders, business partners, consumers, competitors, and peers, also exert informal pressures on corporations to demonstrate better water responsibility. Institutional shareholders care about both financial and social returns [49], and firms demonstrating better water responsibility seem immune to water vulnerability, and thus achieve social returns [8] and safeguard their financial performance [5]. Business partners and consumers exert informal institutional pressure by demonstrating their preference for water-friendly products. For the sake of a supply chain resilient to water risks, corporations will choose partners that demonstrate a commitment to water responsibility [50]. Consumers reward those corporations showing good CWR with solid reputations and increased market shares [19,20]. Peers and industry associations may promote industry-specific standards for water management [21]. Firms competing in a fierce product market may implement CWR to seek competitive advantages [51].
Therefore, formal and informal institutional pressure could promote CWR.

2.3. Organizational Slack Resources and Corporate Water Responsibility

Despite being under the same institutional pressures, corporations show great variability in CWR [52]. The CER literature attributes this phenomenon to the variety of organizational resources, especially organizational slack [53], which refers to the excess resources that a firm needs to maintain ordinary operations [54,55]. Organizational slack is widely divided into unabsorbed slack and absorbed slack. The former refers to the resources uncommitted to particular organizational activities and available to be redeployed for other organizational purposes, and the latter refers to those already committed to a specific domain [56].
Studies on the effect of unabsorbed slack have drawn opposite conclusions. Based on organizational theory, scholars believe that unabsorbed slack reduces internal constraints and alleviates the risks that managers face due to changes in the external environment. Thus, managers are able to look beyond short-term economic benefits and consider a wide range of external social problems, with an increased willingness to implement social responsibility [53,57]. However, studies based on agency theory argue that managers satisfy their opportunistic preferences when confronted with discretionary resources; thus, unabsorbed slack will not generate positive outcomes in CSR or CER activities [58].
Despite the majority of studies finding that absorbed slack impedes corporate CSR or CER endeavors because managers must seek out and redeploy absorbed slack for such activities [57], these studies ignore the domain where the organizational slack is absorbed [59]. A few studies noted that slack in the CSR domain led to improved activity in this area. The positive effect of CSR slack relates to the path-dependence effect of absorbed slack. Reactivation of absorbed slack is risky for managers as it is unclear whether the extensive organizational restructuring will lead to more effective and efficient ways of operating [53]. Thus, managers are more willing to maintain the status quo for absorbed slack resources as their first preference, and absorbed slack becomes a cost that will influence managers’ decisions toward path dependence [53,60]. That is, if slack resources have been absorbed into CSR, managers confronting pressure to promote the corporate image may be willing to continuously devote themselves to CSR-related activities. Weber and Saunders-Hogberg [22] found that corporations with better CSR performance have a higher probability of better water management. Another opinion is that the slack in CSR may hinder enterprises’ continued investment in the CSR field based on the diminishing marginal effect and compensatory ethics theory. Afrin, Peng, and Bowen [37] reported that investors provide less incentive for companies with high performance in CSR to continuously invest in CSR, indicating that managers would shift to other areas with higher profits from the perspective of economic rationality. Based on compensatory ethics theory, Ormiston and Wong [61] found that historical commitment to CSR is positively associated with ongoing CSR.
Therefore, unabsorbed slack and CSR slack (as an absorbed slack) are closely related to CWR; however, the specific effects require further consideration of the effects of other variables.

2.4. Managerial Perception and Corporate Water Responsibility

Scholars have noted that the variability in corporate water responsibility is related to the perception of managers [23,27], based on the premise that corporate strategies and actions reflect the cognitive characteristics of management [62]. Unlike psychologists, who describe cognitive characteristics as structural elements, management scholars often study managerial cognition from the perspective of attention and interpretation [63].
At present, management scholars mainly focus on two kinds of managerial perception. The first comprises perceived economic benefits, which refers to managers’ perceptions of the gains or losses (opportunities or threats) associated with corporate environmental responsibility [64,65]. The perceived economic benefit is a self-interested cognition based on the assumption of economic rationality. Managers attribute economic benefits, such as cost savings, market leadership, new market access, and increasing market share, to the fulfillment of CWR [19,20,30], or they are afraid of losing their competitive advantage [66].
Another managerial perception of CWR is related to ethics. The perceived ethical obligation reflects the psychological pressure of the firm’s internalized ethical rules related to environmental sustainability [67]. Considering that water is central to the natural environment and to human rights and that water sustainability has long been identified as a global priority, the international community has formed a code of conduct regarding water issues [4]. Accounting for the “social man” hypothesis, managers are also part of a social network and are constrained by social norms and ethical standards; that is, managers are also under cognitive pressure from a perceived ethical obligation to behave virtuously [68]. Egan [23] also presented that CWR is more likely promoted by managers’ perceived ethical obligations, especially when water prices cannot fully reflect the fair value of water resources.
According to the survey by Matta, Akhter, and Malarvizhi [69], perceived economic benefit and perceived ethical obligation are both prominent psychological factors driving managers to adopt environmentally friendly policies. Gao, Gu, and Liu [31] also showed that both perceived economic benefit and perceived ethical obligation are positively associated with corporate environmental responsibility. Therefore, perceived economic benefit and perceived ethical obligation could promote CWR.

2.5. Research Model

Factors associated with the institutional environment, organizational slack, and managerial perceptions could exert a “net effect” on CWR. However, from the perspective of contingency theory, it is the fit between organizational character and the external environment [53] and the fit between the external environment and management perception [31] that could help to interpret the variability in CWR. Meanwhile, studies have proven that the effect of organizational slack on corporate strategies and actions partly depends on how managers focus their attention, as well as their interpretations of events and issues [59,61,63,70]. This indicates that we must jointly apply several theories to explain CWR due to the complex phenomena involved [71].
Proposed by Charles C. Larkin, configuration theory is a theory based on a holistic perspective and is suitable for multi-level research. Drawing on typology and other ideas, configuration theory does not discuss the correlation between independent variables and dependent variables but the sufficient and necessary condition relations [33,35]. This means that the configuration theory holds that the effect of each variable on the result should not be looked at separately; instead, one should consider the effect that can be achieved by a set of variables. Second, the reasons for the result are complex, one of which is asymmetry. This means different configurations can lead to similar results, and the high and low levels of a variable are two completely different outcomes [72]. Third, each case is regarded as a combination of the result and the antecedent conditions, with the result produced under the comprehensive action of all conditions [33,73]. By analyzing the concentration degree of configurations and the repetition degree of variables in the configuration shown in the case, the main configurations and necessary conditions affecting the result can be obtained.
Based on the above, we propose that factors regarding the institutional environment, organizational slack, and managerial perception jointly exert configurational effects on CWR. The research model is presented in Figure 1.

3. Research Design

3.1. Research Methods

Fuzzy-set qualitative comparative analysis (fsQCA) is a qualitative comparative analysis method based on configuration theory to explore the causal relationship between variables [73,74]. The core logic is to consider a series of highly consistent antecedent conditions based on set theory to reveal the cause of a phenomenon. We chose fsQCA for our research for the following reasons. First, fsQCA can reveal the complex causal mechanism in which multiple ante-cause conditional variables jointly affect the outcome variables, and it can effectively explain the outcomes from the three levels of the institutional environment, organizational resources, and managerial perception. Second, fsQCA can reveal causal asymmetry and explore under which circumstances a certain variable will have a positive effect on corporate water responsibility and under which circumstances it will have a negative effect.

3.2. Samples

The samples of this paper were selected from Beijing, Shanghai, Shenzhen, Guangzhou, Yiwu, Chengdu, Suzhou, Changchun, and other areas with large clusters of small- and medium-sized enterprises. According to the selection principle of small- and medium-sized samples (15~20) of fsQCA, 400 questionnaires were sent to 20 enterprises, and 226 questionnaires were received, with a recovery rate of 56.5%, from September 2021 to July 2022. The exclusion criteria for questionnaires were as follows: all answers being uniform (e.g., 5 points for all options) and incomplete information.
After the invalid questionnaires were screened out, 158 questionnaires remained, with an effective recovery rate of 69.9%. According to the statistics, the sample enterprises and respondents have the following characteristics: most of the sample enterprises have operated for more than 5 years, and most of them are private enterprises (81.3%). There was no significant difference in the number of medium-sized enterprises (56.3%) and small enterprises (43.7%). Enterprises from first-tier cities, such as Beijing, Shanghai, Guangzhou, and Shenzhen, accounted for 54%, enterprises from second-tier cities, such as Chengdu, Changchun, and Suzhou, accounted for 33%, and enterprises from other cities, such as Fuji and Putian, accounted for 13%. Among the respondents, 74.7% were male, 79.7% had a bachelor’s degree or above, 31.6% were senior managers, and 68.4% were middle managers.

3.3. The Measurement of Variables and Fuzzy-Set Calibration

The measurement of variables was adjusted from previous studies. The measurement of managerial perception and the measurement of the institutional environment was in accordance with studies by Gao, Y., Gu, J., and Liu [31] and Wang, Wang, and Wang [75]. The measurement of unabsorbed slack was in accordance with Troilo, De Luca, and Atuahene-Gima [76], and absorbed slack was adjusted according to the study by Shahzad and Mousa [59]. The measurement of corporate water responsibility was taken from studies by Weber and Saunders-Hogberg [22] and Ben-Amar and Chelli [28], and it comprised the following: corporate water management strategies and policy; the awareness of water risk and the nexus between water and other environmental issues; consideration of water utilization, sewage discharge, and water reuse and recycling; technological innovation and capital investment in water saving and anti-water-contamination activities; water footprint management, and collective action in the basin or the community. All variables adopted the five-point Likert scale for measurement. The measurement of each construct can be found in Appendix A.
After the measurement of each construct, fsQCA began with the process of calibration. We followed the direct method to calibrate the causal factors and outcomes: the 90th percentile is the threshold for full membership, the median is the crossover point, and the 10th percentile represents full non-membership. We applied the same calibration process to all factors and outcomes. The robustness test indicated that our analysis was not overly sensitive to these thresholds. For example, our results were nearly unchanged if we used the 90th percentile, median, and 25th percentile as the three anchors for calibration.

4. Results

4.1. Reliability and Validity Test

According to Table 1, Cronbach’s α coefficient and the KMO value of all variables were higher than 0.7, the p-value of Bartlett’s test of sphericity was less than 0.001, and the factor loading value of each item was more than 0.6, indicating high reliability and validity.
From these initial findings, we investigated the substitutes and complements within and across causal factors. In line with Misangyi and Acharya [74], we adopted three criteria to assess model fit when comparing widely varying combinations: we deemed that a model that had higher solution coverage, displayed fewer configurations, and captured all empirically relevant and qualitatively different configurations emerging in our analyses was optimal for this study.

4.2. Necessary Conditions for High CWR

We analyzed the necessary conditions and then tested the sufficiency of the mechanisms for the high performance of CWR. Necessary conditions refer to the antecedent condition variables that must exist when the result occurs, but the existence of these conditions does not necessarily lead to the result. According to Table 2, a high perceived ethics and obligation of managers is a necessary condition for firms to have a high level of CWR (consistency: 0.923 > 0.9), and a lack of perceived economic benefit leads to relatively low performance in CWR (consistency: 0.93 > 0.9), indicating that these two variables are the key factors. This initial finding echoes the opinion presented by Egan [23] that the ethical perception of managers is fundamental for corporate water responsibility.

4.3. Configuration Effect Analysis

Considering the asymmetric causal relationship, we used the fsQCA method to analyze the configurations that produced high and non-high CWR. As shown in Table 3, the consistency and the overall consistency of the five configurations all exceeded the critical value of 0.75, and the overall coverage of a high level of corporate water responsibility was 0.712, while that of a non-high level of corporate water responsibility was 0.528.

4.3.1. Configuration Leading to a High Level of CWR

Three configurations generated a high level of CWR (passive adaptation H1, active adaptation H2, and self-driving H3 (H means High Level of CWR)). Perceived ethics and obligation, which was proven to be a necessary condition, was present in all three configurations.
Passive adaptation H1: Under institutional pressures and a lack of CSR slack, managers’ perceived ethics and obligation was associated with a high level of CWR. Such enterprises generally receive expectations from stakeholders, including consumers, the public, suppliers, etc., with regard to the implementation of CWR, as well as taking into account government requirements regarding corporate CWR. To maintain sustainability, managers identify the social demand for water-friendly production and the gap between this demand and existing production processes. Where the company’s previous investment in CSR is limited, there is a failure to obtain sufficient moral licensing and establish a good image of responsibility. Therefore, when managers believe that investment in CWR is a moral decision, they choose to demonstrate a high level of CWR to make up for their previous lack of social responsibility.
Active adaptation H2: Under informal institutional pressure, firms with unabsorbed slack resources tend to have a high level of CWR if managers perceive that CWR can achieve both economic and moral goals. This kind of enterprise judges the corporate environment and internal conditions and believes that enterprises should adopt CWR to cope with environmental changes to achieve the dual goals of economic and social accomplishment. Enterprises will reflect on their current situation, finding a gap between the existing production methods and social expectations. Managers perceive that gap to be indicative of future change, with CWR incorporated into regulatory constraints by stakeholders through social movements; thus, firms can build their competitive advantage if they can be among the first to make a move. If CWR fails to become a mandatory requirement, managers will also consider the implementation of CWR as an obligation that should be fulfilled as a social responsibility.
Self-driving H3: Even in the absence of institutional pressure, this will result in a high level of CWR if managers have a high level of ethics and benefits perception, and the company, having unabsorbed slack resources, has consistently performed well in terms of CSR. The implementation of CWR in this kind of firm is mainly driven by the ethical and moral standards of the managers. Here, managers give greater weight to moral standards than to economic gains. When enterprises are faced with unabsorbed slack resources, they will give priority to investing resources in the field of social welfare under the condition that they can generate economic benefits. Such investment may bring a good reputation to managers and enterprises, thus strengthening the ethical perception of the managers in a positive way. Therefore, managers are actively willing to engage in high-level CWR when they have unabsorbed slack, despite having already invested a great deal in CSR.
According to these three configurations, the highest coverage occurred in configuration H2, which explains 62.1% of the results, reflecting the triggering effect of the configuration among informal institutional pressure, unabsorbed slack, and managerial perceptions, especially perceived benefits, on CWR. The coverage of configuration H1 reached 53.4%, and that of configuration H3 reached 36.7%, indicating that there is more than one way to promote enterprises to implement CWR, and current formal institutional pressure and absorbed slack in CSR also have an impact on CWR.

4.3.2. Configuration Restricting a High Level of CWR

Two configurations produced the non-high level of CWR (institution-benefit perception absence L1 and slack-benefit perception absence L2 (L means Non-High Level of CWR)), which do not represent the reverse combination of the previous cases leading to high levels of CWR. The lack of perceived economic benefit, which has been proven to be a necessary condition, existed in both configurations.
Institution-benefit perception absence L1: The lack of formal institutional pressure and perceived benefit together produce the core role, and the lack of informal institutional pressure produces the peripheral role. The reason for this result is managers’ reluctance to actively move toward more water-friendly activities. Investment in CWR is large and the returns are very limited, requirements relating to water topics set by the government are narrowly focused, and the probability of social movement requiring corporations to shoulder water responsibility is relatively low; thus, the main aim for managers is to seek compliance.
Slack-benefit perception absence L2: As long as the enterprise lacks the managerial perception of benefit and unabsorbed slack and has already acquired moral licensing, it has no incentive to implement a high level of CWR. Managers do not believe that CWR could bring economic gains, such as cost reduction and market expansion. Plus, the firm has fewer discretionary resources. Based on economic rationality, managers are pressed to invest their limited resources in areas where they can make more money. Despite the importance of CSR, managers think that the prior investment in CSR has proven the morality of the firm, and the defects in CWR will not have a serious negative impact on the moral identity that the firm has acquired.
According to the coverage of the two configurations above, configuration L1 was slightly higher than configuration L2, accounting for 43.6% and 33.5% of the resulting variables, respectively. In addition, by comparing the two configurations, it can also be seen that there was an alternative relationship between institutional pressure and organizational slack. That is, under the circumstance of a lack of perceived benefits, the lack of institutional pressure, or a firm with a high level of prior CSR lacking unabsorbed slack can inhibit CWR.

5. Conclusions and Discussion

5.1. Conclusions

Methods to drive corporations toward water responsibility comprise a subfield in CER research. Prior research has typically analyzed the relationship between the factors regarding the institutional environment, organizational slack, managerial perception, and CWR using linear models, which treat factors in isolation and neglect complex combinations among them. Drawing on the configuration theory, we integrated the extant CWR and CER/CSR literature to specify the main factors and then used fsQCA to investigate whether formal and informal institutional pressure, unabsorbed and absorbed CSR slack, and economic and ethical managerial perceptions substitute or complement one another and to distill the different combinations of factors sufficient for the presence of a high level of CWR.
The main findings are as follows. First, perceived ethics and obligation is a necessary condition for a high level of CWR implementation, and a lack of perceived benefit is a necessary condition for the hindrance of a high level of CWR. Second, there are three types of drivers for a high level of CWR, namely, passive adaptation, active adaptation, and self-driving. Passive adaptation indicates that the high level of CWR implemented by enterprises is mainly driven by the pressure of external institutions, especially when enterprises themselves have certain deficiencies in the fulfillment of social responsibilities. Active adaptation indicates that although enterprises do not consider current government requirements on water resource management as a primary driver, the public and business partners and other stakeholders may have expectations for them to implement CWR, and it is important for enterprises to have certain resources and capabilities to meet the expectations of stakeholders. Self-driving reflects that the managers’ perception drives enterprises to actively pursue environmental friendliness. This pursuit transcends the instrumental meaning of environmental responsibility. These three configurations show the importance of improving the external institutional environment for CWR implementation, as two of the three types indicate the driving forces of the institutional environment.
There are two types of ways to inhibit a high level of CWR; that is, the institution-benefit perception absence type and the slack-benefit perception absence type. Institution-benefit perception absence indicates that if enterprises lack the expectation of the economic benefits of CWR implementation and are not faced with mandatory institutional requirements, it is unlikely for enterprises to actively implement CWR. Slack-benefit perception absence indicates that if enterprises lack economic expectations as a result of the implementation of CWR, they will give priority to economic development rather than CSR implementation when their available resources and capabilities are limited, especially if they believe they have made sufficient investment in CSR fulfillment. The above conclusions suggest that it is necessary to improve managers’ economic expectations of CWR in order to promote CWR implementation. That is, social actors should establish the instrumental value of CWR so that corporate managers can use it to guide their investments.

5.2. Theoretical Discussion

As an emerging concept, CWR is just beginning to be studied, and an in-depth discussion is limited [37,39]. Our study confirmed some of the previous findings of CWR and provided a possible explanation for some contradictory results. This study found that perceived ethics and obligation is a necessary condition to promote CWR, echoing the opinion presented by Egan [23] that the ethical perception of managers is fundamental for corporate water responsibility. A lack of perceived economic benefits is a hindrance for a firm to implement high-level CWR, echoing the opinion presented by Burritt and Christ [9] and corroborating the study by Zhou, Chen, and Zeng [51]. It appears that managers lack the benefit perception toward the change of institutional environment or lack the benefit perception of pursuing CWR because of the marginal diminishing effect of CSR. When a firm has previously performed well in terms of CSR, this leads to relatively low CWR implementation. Our results also showed that the conflictual results between Ben-Amar and Chelli [28] and Otras, Burritt, and Christ [29] may be due to the heterogeneity in organizational slack.
Second, considering that CWR is a sub-field of CER, this study contributes to CER research by proving the existence of multiple concurrent factors affecting CWR and revealing the synergistic mechanism of the independent variables. This study suggested the importance of a holistic approach comprising multi-level factors with regard to the organizational environment, corporate characteristics, and managers’ characteristics, and provided a new perspective and basis for alleviating the contradictions in the research of corporate social responsibility. FsQCA, as a novel method in the management field, has emerged only in the last few years, and its application in CER research is limited. Orr et al. [34] identified the influence of multi-level factors on CER, but they used a regression model to investigate the net effect of every single factor. Our study indicated that although a variable may have a net effect on CER, this does not guarantee that the factor is sufficient or necessary, echoing the appeal of Orr et al. [34] to retain the multi-level design to further investigate and revisit the driving forces of CER.
Third, this study contributes to the organizational slack literature by identifying absorbed slack in CSR. The majority of studies on organizational slack only identify unabsorbed slack and absorbed slack (e.g., Pavlos et al., [53]) or identify financial, employee, and innovation slack (e.g., Shahzad and Mousa [59]). We referred to previous studies to further point out that prior CSR performance, which is the result of investment in social welfare issues, also represents absorbed slack that managers need to identify, utilize, or redeploy if necessary. Considering the conflicting opinions about absorbed CSR slack (that is, prior CSR performance), our research showed that the effect of CSR slack depends on managerial perceptions, showing that the combination of ethical perception and CSR slack contributes to a high level of CWR, and the combination of CSR slack and a lack of benefit perception leads to a relatively low level of CWR.

5.3. Practical Implications

For practitioners, our research has three main implications. First, we should recognize that the absence of economic benefit perception inhibits the performance of CWR. Thus, the opportunities and challenges of water risks that businesses are currently facing should be recognized and green finance should be promoted, especially water-related financial activities, to raise the benefit perception of managers toward CWR. Second, stakeholders should recognize the importance of ethical perceptions in the promotion of CWR and be wary of enterprises with a high level of CSR, as this does not guarantee that enterprises will continue to implement CWR at this level, or at all. Implementation of CWR partly depends on how managers view prior CSR performance and CWR activities. Thus, stakeholders should be cognizant of the ethical standards of managers. Third, the improvement of water-related regulation is important to promote CWR because it is relatively weak at present. The coercive regulation enacted by the government in China is narrowly focused on water pollution. NGOs, such as the Alliance for Water Stewardship, CDP, CEO Water Mandate, etc., who have initiated programs to guide firms toward better water responsibility, also need to be supported.

6. Limitations and Future Research

Here, we highlight several limitations in our study for future research. First, our data were collected from self-reported surveys. Interviewees may exaggerate the positive and avoid the negative. Therefore, models combining secondary data and self-reported measurements will be more reliable. We expect future studies to test the robustness of the results using additional proxy variables and other statistical methods.
Second, the sample firms in this research are SMEs, which may limit the generalization of the findings. Although we argue that the findings can be adopted in China or other countries and regions with immature institutional environments, empirical evidence is lacking to support the generalization of the findings. Thus, future research can verify this modeling by using data from publicly listed companies in China and other countries and regions.
A third concern relates to the small sample size of this study. Mas-Verdú, Ribeiro-Soriano, and Roig-Tierno [77] suggested that “unlike conventional statistical techniques, fsQCA overcomes limitations related to sample size. In addition, fsQCA is less restrictive than case study methodology, which means that generalization of conclusions and extrapolation of results to larger populations is possible”. Thus, the small sample size may be a limitation that future research can overcome.
Finally, we focused on six conditions from three different levels of variables, namely, the environment, the firm, and management. Many important factors, such as the governance structure of firms, were not covered in this research; hence, more variables could be added in future studies.

Author Contributions

Conceptualization, J.G.; Software, L.Z.; Validation, C.C.; Formal analysis, J.G.; Data curation, M.W.; Writing—original draft, J.G.; Writing—review & editing, L.Z.; Supervision, L.Z. and M.W. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data are available from the corresponding author upon request.

Conflicts of Interest

The authors declare no conflict of interest.

Appendix A

Table
Table A1. Constructs and measurement items.
Table A1. Constructs and measurement items.
ConstructItem
Formal institutional pressureOur corporate water responsibility is greatly influenced by regulations posed by government agencies.
Legislation in water-related fields can affect the continued growth of our firm.
Several penalties have been imposed on firms that violate water standards and regulations.
Stricter water regulation and surveillance are major reasons why our firm is concerned about the impact on water.
Our industrial cluster is faced with strict water regulations and surveillance.
Informal institutional pressureThe increasing water consciousness of consumers has spurred our firm to implement corporate water responsibility.
Being water responsible is a basic requirement for our firm to be part of this industry.
Being water responsible is a basic requirement for our firm to be part of the supply chain.
Nongovernmental organizations around our firm expect us to implement corporate water responsibility.
Stakeholders may not support our firm if our firm does not implement corporate water responsibility.
Perceived benefitsThe implementation of corporate water responsibility is useful to reduce our firm’s environmental cost and environmental impacts and thus enhance the firm image.
The implementation of corporate water responsibility is beneficial to increase our firm’s competitiveness and legitimacy.
Reducing the water impact of our firm’s activities will lead to quality improvements in our products and processes.
Our firm can increase its market share by making our current products more water friendly.
The implementation of corporate water responsibility can help reduce our firm’s operational costs and identify new opportunities.
Perceived ethics and obligationThe adoption of corporate water responsibility is an ethical obligation.
When deciding on corporate water responsibility, it is important to study considerations beyond the financial aspect.
When implementing corporate water responsibility, it is personally important for me to think beyond the financial aspect.
I have an ethical obligation to corporate water responsibility where I am a manager.
Unabsorbed slackUnused resources are available to support strategic initiatives in a short period of time in our firm.
There are plenty of resources available to support initiatives in the short term.
Our firm could acquire resources to support new strategic initiatives in the short term.
Absorbed slack in CSROur firm has invested above-average resources in our industry to fulfill social and environmental responsibilities.
The performance of our corporate social and environmental responsibility has exceeded social expectations.
The resources invested in social and environmental responsibility need further utilization.
Corporate Water ResponsibilityOur firm has established and strictly implemented water management strategies and policies.
Our firm is fully aware of water risks and the nexus between water and other environmental issues.
Our firm has pushed hard to reuse, recycle, and exploit unconventional water; thus, the efficiency of water utilization has reached above the average in our industry.
Our firm attaches great importance to technological innovation and capital investment in water-saving and anti-water-contamination activities.
Our firm conducts social publicity on the theme of water resource protection or invests long-term funds in public welfare projects in the field of water resource protection.
Water responsibility is an important factor in our selection of suppliers, and we also inform our customers of our water responsibility.

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Sustainability 15 07821 g001 550
Figure 1. Research model.
Figure 1. Research model.
Sustainability 15 07821 g001
Table
Table 1. Reliability and validity test results.
Table 1. Reliability and validity test results.
Cronbach’s α CoefficientKMO 1Bartlett’s Test of SphericityFactor Loading Value
Formal institutional pressure0.8420.8130.000 < 0.0010.732~0.854
Informal institutional pressure0.8200.8110.695~0.820
Unabsorbed slack0.8650.8320.743~0.878
Absorbed slack in CSR0.8230.8100.722~0.897
Perceived benefits0.8450.8320.755~0.877
Perceived ethics and obligation0.8580.8310.719~0.860
Corporate water responsibility0.8760.8440.766~0.876
1 KMO, the Kaiser–Meyer–Olkin test, is often used to test the validity of questionnaire data, mainly to test whether questionnaire data can accurately measure variables. If the value is higher than 0.8, it indicates high validity. If the value is between 0.7 and 0.8, it indicates that the validity is good.
Table
Table 2. Test results and antecedent conditional variables.
Table 2. Test results and antecedent conditional variables.
ConditionOutcome
High Level of CWRNon-High Level of CWR
Formal institutional environment0.6780.475
~Formal institutional environment0.4270.763
Informal institutional environment0.8120.522
~Informal institutional environment0.4650.799
Unabsorbed slack0.7570.611
~Unabsorbed slack0.4730.764
Absorbed slack in CSR0.7160.483
~Absorbed slack in CSR0.4810.750
Perceived economic benefit0.7820.463
~Perceived economic benefit0.4010.930
Perceived ethics and obligation0.9230.534
~Perceived ethics and obligation0.4090.737
Note: ~ indicates the negation of the condition.
Table
Table 3. The antecedent configuration of outcome variables.
Table 3. The antecedent configuration of outcome variables.
ConditionHigh Level of CWRNon-High Level of CWR
H1H2H3L1L2
Formal institutional environment● ⊗⊗
Informal institutional environment●●⊗⊗
Unabsorbed slack ●● ⊗
Absorbed slack in CSR⊗ ● ●
Perceived economic benefit ● • ⊗⊗
Perceived ethics and obligation • • ●
Coverage0.5340.6210.3670.4360.335
Net Coverage0.0610.0560.0370.0520.036
Consistency0.8810.8550.8790.8710.865
Overall Coverage0.7050.528
Overall Consistency0.8230.861
Note: ● indicates the core condition; • indicates the peripheral condition; ⊗ indicates the lack of the core condition; blank space indicates an irrelevant condition.
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Gu, J.; Zheng, L.; Cheng, C.; Wang, M. The Configuration Effect of Institutional Environment, Organizational Slack Resources, and Managerial Perceptions on the Corporate Water Responsibility of Small- and Medium-Sized Corporations. Sustainability 2023, 15, 7821. https://doi.org/10.3390/su15107821

AMA Style

Gu J, Zheng L, Cheng C, Wang M. The Configuration Effect of Institutional Environment, Organizational Slack Resources, and Managerial Perceptions on the Corporate Water Responsibility of Small- and Medium-Sized Corporations. Sustainability. 2023; 15(10):7821. https://doi.org/10.3390/su15107821

Chicago/Turabian Style

Gu, Jiahao, Liyuan Zheng, Changgao Cheng, and Mengjiao Wang. 2023. "The Configuration Effect of Institutional Environment, Organizational Slack Resources, and Managerial Perceptions on the Corporate Water Responsibility of Small- and Medium-Sized Corporations" Sustainability 15, no. 10: 7821. https://doi.org/10.3390/su15107821

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