How industry peers improve your sustainable development? The role of listed firms in environmental strategies

Factors driving firms to become more sustainable have been widely investigated in the literature on environmental strategy, but some important horizontal factors are still missing, such as influence from peers in the same industry. Drawing on signaling theory and expectancy theory, we complement existing studies by highlighting the role of listed firms in raising other firms' awareness and motivation of adopting environmental strategies, while taking the moderating capability factor into account. By setting our study in the context of listed and nonlisted private-owned enterprises in China, the empirical analysis of 1,391 nonlisted firms indicates that the number of listed firms in an industry has positive effects on both reactive and proactive environmental strategies of nonlisted firms. The superior performance of these listed peers motivates nonlisted firms to adopt a proactive environmental strategy but constraints the reactive one. These effects are further strengthened by the relative scale of a nonlisted firm.