Environmental Engineering Reference
In-Depth Information
term guaranteed support to encourage investors.
Using transaction costs economics, Delmas and
Marcus (2004) compare the economic efficiency
of firm-agency governance systems for pollution
prevention. They note that the choice of gov-
ernance system depends on the strategies (e.g.
sustainability-focused strategies) firms pursue.
Natural-resource-based view and natural-
transaction-cost-economics theories propose
sustainability-focused companies to increase
vertical integration level. On the other hand, col-
laboration in sustainable supply chains is another
way that leads company to successfully pursuing
sustainability practices.
that predict the green supply behavior. Managers
can develop these capabilities to help fostering
sustainability practices. Klassen and Vachon
(2003) assessed the customer- and plant-initiated
collaboration in Canadian sustainable businesses.
They found that as the companies increase
customer-initiated collaboration, managers prefer
to make investments towards preventing environ-
mental pollution. In other words, collaboration in
sustainable supply chain affects both the level and
form of investment in environmental technologies.
The summary of the literature review was
illustrated in Figure 1. In “Vertical Integration
Measurement with Fan & Lang Method,” we
will continue with introducing Fan & Lang's
vertical integration measurement method and its
implementations.
Collaboration in Sustainable
Supply Chain
Firms may prefer buying outside or producing in
house. Literature indicates that collaboration is
very important in sustainable supply chains as an
alternative to the vertical integration. Collabora-
tion with suppliers may facilitate the implementing
and managing sustainable supply chains (Green et
al., 1996; Lamming and Hampson, 1996; Vachon
and Klassen, 2008). In cooperative customer-
supplier relationships, companies plan and design
their products and processes for the purpose of
reducing the impact to the environment (Noci,
1997). Environmental collaboration is defined by
Vachon and Klassen (2008) as follows:
VERTICAL INTEGRATION
MEASUREMENT WITH FAN & LANG
METHOD
Lemelin (1982) uses input-output tables for mea-
suring industry relatedness to consider patterns
of diversification. Fan and Lang (2000) extended
this study to construct alternative measures of
relatedness. In this study, we will follow Fan and
Lang's (2000) method which provides us detailed
information of vertical integration calculation at
both the industry and firm levels. They state that
two industries are vertically related if one indus-
try uses the other's output as its input. Fan and
Lang (2000) developed vertical relatedness and
complementarity variables as interindustry and
intersegment measures based on I-O tables. At the
industry level, they show that the proposed input-
output-based vertical relatedness and complemen-
tarity measures provide better description of firms'
relatedness than previously generated SIC-based
measures. The use of SIC based measures has been
widely criticized by various researchers (Nayyar,
1992; Farjoun, 1994; Robins and Wiersema, 1995;
Silverman, 1999; Fan and Lang, 2000). Fan and
“the direct involvement of an organization with
its suppliers and customers in planning jointly for
environmental management and environmental
solutions” (p. 301).
Noci (1997) developed a green vendor rating
system that includes supplier selection procedure
to help developing proactive sustainable strategies.
Bowen et al. (2001) conluded that capabilities
in sustainable supply chains are developed by a
proactive corporate-environmental approach and
