LINKING ORGANIZATIONAL COMMITMENT AND ENVIRONMENTAL PERFORMANCE IN MEXICO ABSTRACT INTRODUCTION

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1 LINKING ORGANIZATIONAL COMMITMENT AND ENVIRONMENTAL PERFORMANCE IN MEXICO Jacob A. Massoud, Pacific Lutheran University, School of Business, Morken Center, Tacoma, WA 98477, Ph: , Fax: , Bonnie F. Daily, New Mexico State University, Management, PO Box 30001/MSC 3DJ, Las Cruces, NM , Ph: , Fax: , James W. Bishop, New Mexico State University, Management, PO Box 30001/MSC 3DJ, Las Cruces, NM , Ph: , Fax: , ABSTRACT This investigation contributes to the growing body of literature on environmental management in developing nations such as Mexico. The relationships between perceived organizational support, organizational commitment, and perceived environmental performance were operationalized and tested using data from 123 Mexican maquiladoras that utilize an environmental management system (EMS). The hypothesized relationship between the three constructs was tested using structural equation modeling (SEM). The results of the structural model test are mixed. Organizational commitment positively influences perceived environmental performance. However, the predicted positive relationship between perceived organizational support and organizational commitment was weak. Additionally, the overall model fit was only moderate at best. INTRODUCTION Maquiladoras represent a significant contributor to the Mexican and American economies. The maquiladora industry is a unique business environment that often experiences high turnover (Miller, Hom, & Gomez-Mejia, 2001) and pollution (U.S. EPA, 2010). Impacts on the natural environment from economic expansion have tended to be adverse in the Mexican maquiladora industry. Thus, the industry faces both labor related and environmental problems. Organizational commitment is one means to reduce absenteeism and turnover. More relevant to this study, organizational commitment has frequently been related to improved organizational performance and prosocial behavior (Mowday, 1998). In theory, organizational commitment has the potential to improve a firm s environmental performance. Thus, developing a more complete understanding of the links between organizational commitment and environmental performance is particularly relevant in Mexico given the unique characteristics of maquiladoras. An environmental management system (EMS) has the primary purpose of preventing negative effects on the environment and improving a firm s environmental practices. This is achieved by developing environmental programs and practices. The adoption of cleaner production processes, greener products, and measures of environmental performance also contribute to the successful implementation of an EMS (Gupta, 1994). An EMS is a voluntary approach, which can lead to the reduction of environmental impacts such as pollutant emissions (Szymanski & Tiwari, 2004). Previous research also suggests that a strong link exists between HR factors and the 561

2 implementation of an EMS (Kitazawa & Sarkis, 2000). Additionally, HR tools are often used as a means to achieve strong employee commitment to the organization (Mowday, 1998). The objective of this paper is to examine the relationship between perceived organizational support, organizational commitment, and perceived environmental performance at a number of Mexican manufacturing firms that possess an EMS. For this study, supervisor perceptions of organizational support and organizational commitment were identified. Supervisor perceptions of firm environmental performance were also considered. This study contributes to both theory and practice. First, it extends the literature related to EMSs and environmental management constructs. Second, it tests the role of perceived organizational support and organizational commitment on environmental performance. Finally, the study has relevant implications for practitioners. Perceived Organizational Support REVIEW OF THE LITERATURE Organizational support for employees represents one mechanism for encouraging employees to generate ideas for sustainability (Ramus, 2001). Although more recently it has been applied to environmental management, organizational support plays a more widely encompassing role in managing employee behavior and performance. Perceived organizational support is grounded in the following conceptual ideas. First, employees in an organization develop beliefs regarding the degree that their contributions are valued by the organization. Employees also take into account how much an organization is perceived to care about his or her welfare. These ideas form the foundation of the construct. The commitment an employee has towards an organization is reflected by the beliefs about an organization s support for them (Eisenberger, Huntington, Hutchison, & Sowa, 1986). Research shows that organizational support is positively related to job satisfaction, positive mood, organizational commitment, organizational performance, reduced turnover, and lower rates of absenteeism (Rhoades & Eisenberger, 2002). Organizational Commitment Organizational commitment is often defined as an employee's identification with and involvement in a particular organization (Mowday, 1998; Eisenberger et al., 1986). Others have since expanded and built upon the concept, but for the purposes of this study I have adopted the definition above, which is operationalized in the Organizational Commitment Questionnaire. According to Eisenberger et al. (1986) identification refers to an employee's sense of unity with his or her organization. Organizational commitment positively affects performance outcomes such as productivity, quality, prosocial behavior, financial indicators, employee performance, absenteeism, and turnover (Mowday, 1998). Additionally, authors often depict organizational commitment as a mediator for outcome variables such as these performance related constructs (Bishop, Scott, & Burroughs, 2000; Mowday, 1998; Rhoades & Eisenberger, 2002). Previous research provides evidence of a positive association between perceived organizational support and organizational commitment in a variety of settings (Bishop et al., 2000; Rhoades & Eisenberger, 2002). Thus, it is predicted that these findings will translate to the maquiladora 562

3 industry and perceived organizational support will be positively related to organizational commitment at facilities with an EMS. H1: Perceived organizational support will be positively related to organizational commitment. Environmental Performance Environmental performance is defined by ISO as an organization s success in managing the relationships between its activities, products, or services, and the natural environment. Thus, reducing the environmental impacts created from an organization s activities, products, and services, improves environmental performance (Rikhardsson, 1998). Additionally, approaches to measuring environmental performance tend to vary considerably. Commonly utilized measures include a variety of economic costs, profits, and environmental impacts (Characklis & Richards, 1999; Illinitch, Soderstrom, & Thomas, 1998). Due to the complexity of such measures and the lack of availability of such data, self-report measurements are often used. Subjective measures of organizational performance have been commonly used and frequently exhibit convergent validity with objective measures (e.g. cf. Dess & Robinson, 1984). Additionally, perceived measures of environmental performance are often employed (e.g. Judge & Douglas, 1998; Melnyk, Sroufe, & Calantone, 2003). Thus, perceived environmental performance is a perceived measure based on the dimensions of the ISO definition. A strong commitment by an organization and its employees has been linked to sustainability in organizations (Zutshi & Sohal, 2003). For example, Zutshi & Sohal (2003) found that employee involvement and commitment enhanced the process of establishing an EMS at several companies. Such studies reflect a link between employee commitment towards an organization and environmental management improvements. As stated previously, research also lends support to a positive relationship between organizational commitment and performance outcomes, such as organization s performance (Mowday, 1998). Because environmental performance is one aspect of a firm s overall performance, we reason that by extension organizational commitment should also be positively related to a firm s environmental performance. H2: Organizational commitment will be positively related to perceived environmental performance. Measurement Model RESULTS Although the items have been validated in prior studies, confirmatory factor analysis was employed to verify that the items loaded as theoretically predicted. This process served as a measure of discriminant validity among constructs. Likelihood Estimation (MLE) with pairwise deletion of missing values was used along with oblique rotation in order to allow for correlated factors (Hair, Black, Babin, Anderson & Tatham, 2006). The results suggest that the factors were cleanly extracted and that three factors are appropriate. 563

4 However, noticeable cross loading was evident for items OC5 and OC8, which loaded on both organizational commitment and perceived organizational support. Items OC5 and OC8 might not fit the sample, given that the instrument was translated into Spanish and administered in Mexico. Oftentimes, with cross-cultural research in which language translation takes place, the measurement scales do not generalize as expected, because translated items do not always possess cultural or psychometric equivalence (Hulin and Mayer, 1986). Therefore, items OC5 and OC8 were removed. In order to preserve the underlying measurement theory as much as possible, no additional items were removed. Reliability was used to evaluate the extent of consistency between multiple measurements of the variables. The inter-item reliability was calculated using Cronbach s coefficient of alpha. As Cortina (1993) points out, high alphas are often associated with a large number of items and fewer dimensions. Thus, variables contained between five and seven items. All coefficient alphas for the variable scales fell within an acceptable range (Hair et al., 2006). Thus, inter-item reliability is supported. Table 1 illustrates our scale reliability. Table 1. Scale Reliability Overview of Variables and Scale Measures Variable Name No. Items Mean S.D. Cronbach's Alpha Perceived Organizational Support Organizational Commitment Perceived Environmental Performance Structural Model Structural equation modeling was used to test the dependency relationships in my hypothesized model. LISREL Version 8.50 was used to conduct this analysis. The test results and an evaluation of the multivariate assumptions applicable to SEM are discussed in more detail below. Independence of observations is assumed among respondents, because a random sampling plan was employed. Univariate tests of skewness and kurtosis were applied to assess the univariate normality of the variables. In general, the assumption of normality is not supported. Although kurtosis is a problem, it appears to be less of a problem than skewness. Several outliers likely play a role in the lack of normality of the data. According to Babakus, Ferguson, and Jöreskog (1987), nonnormal data could adversely impact parameter estimates, standard errors, and fit statistics. Therefore, nonnormality was considered in selecting an estimator and matrix correlation method. We chose maximum likelihood estimation, because it performs well under conditions of nonnormality (McDonald & Ho, 2002). A correlation matrix was used to estimate the structural equation model, and missing data were treated by using pairwise deletion, which tends to permit better model fit and convergence than other options (Brown, 1994). 564

5 The hypothesized model s goodness of fit was χ 2 (187) = , p = Based on these results, the model has poor overall fit. However, since the Chi-Square statistic should be no more than two times the degrees of freedom, the χ 2 /df ratio is close to an acceptable value at 2.16 (Hu & Bentler, 1999). In this model, the global fit index (GFI) = Values close to 0.95 reflect good fit (Schumacker & Lomax, 2004). Thus, GFI corroborates poor fit. The RMSEA also exceeds the cutoff criteria of 0.06 (RMSEA = 0.098). However, Hair et al. (2006) explain that RMSEAs below 0.10 serve as acceptable measures of fit. The SRMR also exceeds the cutoff criteria of 0.06 (SRMR = 0.077). Schumacker and Lomax (2004) maintain that NNFI (TLI) values close to 0.95 pertain to a good model fit. The NNFI for the proposed model was The CFI should also be close to 0.95 (Hu & Bentler, 1999). The CFI for this model equals The NNFI and CFI convey moderate fit. Taken together, the model fit appears to be moderate at best. Due to the poor to moderate fit of the model, several error variance terms were added to the model in order to improve fit (Anderson & Gerbing, 1988). The greatest improvements in chisquare were achieved by adding correlated error covariances between the following items: EP1 and EP5 (-18.2), OC1 and OC2 (-21.7), OC4 and OC6 (-30.5), and OC3 and OC9 (-14.3). This resulted in a slightly better fitting model than the hypothesized structural model. Table 2 illustrates improvements in the goodness of fit for the model. The goodness of fit for the model was χ 2 (183) = , p = 0.00 and RMSEA = Most notably, the χ 2 /df ratio improved from 2.16 to These results indicate improved model fit, and overall, moderate fit. However, in general the fit statistics do not meet the suggested cutoff criteria discussed above. Table 2. Model Fit Indices Fit statistics for validating the structural model Sample Size Chi-Square df GFI RMSEA NNFI CFI SRMR Maquiladora Facilities We also tested an alternative fully saturated model with the addition of a path from perceived organizational support to perceived environmental performance. The resulting fit did not improve, indicating that organizational commitment fully mediates perceived organizational support and perceived environmental performance. The difference in chi-square was The fully saturated model had the following fit statistics χ 2 (182) = , p = 0.00 and RMSEA = The χ 2 /df ratio remained Hypothesis 1 was supported. The positive relationship between perceived organizational support and organizational commitment was supported statistically. The t-statistic was significant at the α = 0.05 level (t c = 2.26). However, the practical significance was minimal (R 2 = 0.046). Additionally, hypothesis 2 was supported; organizational commitment is positively related to perceived environmental performance. The t-statistic was significant at the α = 0.05 level (t c = 6.39). From a practical standpoint, the R 2 was relevant at Parameter estimates are reported in Figure 1 below (e.g. path estimates). 565

6 Figure 1. Statistical Model (Estimates) POS1 EP1 POS2 EP2 POS3 R 2 =.46 R 2 =.55 EP3 POS4 POS5 Perceived Organizational Support.22 Organizational.74 Commitment Environmental Performance EP4 EP5 POS6 EP6 POS7 EP7 OC1 OC2 OC3 OC4 OC5 OC6 OC7 OC8 OC9 Chi-Square = , df = 183, p-value = 0.000, RMSEA = Implications for Theory and Practice DISCUSSION The results have application for both theory and practice. The theory on organizational commitment has been developed further to include environmental performance in addition to its traditional relationship with measures of performance outcomes such as productivity, quality, and turnover. Although the overall goodness of fit for the model was only poor to moderate, organizational commitment does appear to exhibit a strong positive effect on environmental performance. As Mowday (1998) explains, organizational commitment is often achieved via HR systems. Thus, indirectly these findings support previous research on the positive influence of HR factors on environmental performance (Epstein & Roy, 1997; Gupta, 1994). The first hypothesis was only partially supported. Prior studies support a theoretical relationship between perceived organizational support and organizational commitment (Bishop et al., 2000; Rhoades & Eisenberger, 2002). Surprisingly, although statistically significant, the relationship was rather weak for this sample of maquiladoras. Interestingly, research by Miller et al. (2001) indicates that the Mexican maquiladora industry is a unique case. For example, many maquiladora perks and incentives targeted at employees do not reduce turnover as intended. Under most circumstances, one would likely predict that such employee benefits programs would lead to higher perceived organizational support and hence loyalty to a firm. Perhaps, other underlying factors affiliated with maquiladora culture modify the relationship between perceived organizational support and organizational commitment. Culture might weaken this relationship in the maquiladora industry. The results of this study have application for practice as well. Practitioners should be aware of 566

7 the importance of organizational commitment to firms with an EMS. Efforts to improve organizational commitment should be employed as one ingredient to improve a firm s environmental performance. Practicing managers should take note of HR systems and tools that enhance organizational commitment from employees (Mowday, 1998). Rewards and training programs are some examples of HR tools that could be implemented. Limitations and Future Research A number of limitations are evident in this study. First, the sample size was small. Perhaps, this played a role in the lack of normality in the sampling distribution. Obtaining a sample with greater than 200 respondents would be appropriate for SEM. Biased parameter estimates, standard errors, chi-square, and fit statistics might be present in this study, because of the nonnormal sample distribution (Babakus, Ferguson, & Jöreskog, 1987). Alternative estimation methods are also worth considering. Additionally, even though the model implies dependency relationships among the variables, it should not be interpreted as causal. Only an experiment could verify causality. Because only one method was used in this study (e.g. self-report survey), it is possible that a mono-method bias is present (Churchill, 1979). Other biases associated with cross-cultural studies and translating surveys might be undetected within the results. Additionally, although perceived measures of environmental performance are acceptable, a more concrete measure such as a continuous metric would be preferred. Due to the specific focus on the Mexican manufacturing sector, the generalizability of this study is debatable. Additional studies are needed to broaden the scope of generalizability, as well as to confirm these results. Several other potential avenues for future research exist. Another interesting project could utilize multi-group SEM methods to conduct a comparative study of American and Mexican manufacturing facilities. In general, EMSs and environmental management appear to be a growing area of research with a variety of opportunities. Conclusions For this study, several constructs were operationalized and measured in the field at Mexican maquiladoras. These constructs included: perceived organizational support, organizational commitment, and perceived environmental performance. A hypothesized structural model was tested among facilities implementing an EMS. The results of the model are mixed. Future research is required to elucidate the link between organizational support, organizational commitment, and environmental performance. Nevertheless, this project provides useful insight into the relationship between perceived environmental performance and organizational commitment at maquiladoras utilizing an EMS. Additionally, it contributes to the growing body of literature on environmental management in developing countries such as Mexico. REFERENCES Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice: A review and recommended two step approach. Psychological Bulletin, 103(3),

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