Operating Inflexibility and Greenhouse Gas Emissions : International Evidence

We examine whether a firm’s operating inflexibility affects its carbon footprint. Using a large sample of firms from 30 countries over the 2003–2021 period, we provide first evidence that operating inflexibility reduces firms’ greenhouse gas (GHG) emissions. The negative effect of operating inflexibility is economically sizeable and remains robust to endogeneity and sample-selection bias concerns. In additional tests, we show that the effect of inflexibility on GHG emissions is more pronounced for more operationally efficient firms, with less operational complexity, and with looser financial constraints. We also show that the carbon reduction effect of inflexibility is more visible in more polluting contexts, as well as in developed economies with better institutional quality. While prior studies often associated operating inflexibility with negative outcomes, our findings highlight its positive impact on environmental performance