The Firm Boundary Decision for Sustainability-Focused Companies

This paper examines the vertical integration level of environmentally sustainable and non-sustainable companies. The first part develops the theoretical foundation for linking sustainability strategies to organizational structure. The second part empirically examines the vertical integration level of 144 sustainability-focused companies in 9 different industries. The results demonstrate that sustainability-focused companies in the Health Care Industry and the Industrials Industry tend to have more vertically integrated organizational structures than their industry competitors that are not pursuing such a strategy since these two industries are production oriented and they have closer relationships with their suppliers. There was no significant difference in the vertical integration level of sustainability-focused versus non-sustainability-focused companies for the other seven industries studied. Research shows the linkage between environmental strategies and vertical integration has not been thoroughly examined. This study’s results are useful to researchers and managers who are interested in corporate sustainability behavior.