Get access

Constructing the License to Operate: Internal Factors and Their Influence on Corporate Environmental Decisions


  • We thank Raymond Paquin and Gopal Raman for valuable research assistance, as well as Lori Snyder Bennear. We also thank Dan Fiorino, Fiona Haines, Andrew Hoffman, Robert Kagan, Jane Nelson, John Ruggie, Colin Scott, participants at the 2006 Law and Society Association annual meeting and the 2003 Greening of Industry Network conference, and our anonymous reviewers for their comments. Research was made possible with support from the U.S. Environmental Protection Agency Office of Policy, Economics, and Innovation, Grant No. R-83056701, and the Corporate Social Responsibility Initiative, John F. Kennedy School of Government, Harvard University. This article represents the authors’ views, not necessarily those of the research sponsors.

Address correspondence to Jennifer Howard-Grenville, Lundquist College of Business, Lillis Business Complex, 1208 University of Oregon, Eugene OR, USA, 97403-1208. Telephone: (541) 346-3347. E-mail:


Voluntary programs intended to improve corporate environmental practices have proliferated in recent years. Why some businesses choose to participate in such voluntary programs, while others do not, remains an open question. Recent work suggests that companies’ environmental practices, including their decisions to participate in voluntary programs, are shaped by a license to operate comprised of social, regulatory, and economic pressures. Although these external factors do matter, by themselves they only partially explain business decision making, since facilities subject to similar external factors often behave differently. In this article, we draw from organizational theory to explain why we would expect a company's license to operate to be ultimately constructed by internal factors, such as managerial incentives, organizational culture, and organizational identity, as these shape both interpretations of the external pressures and organizational responses to them. Using qualitative data from an exploratory study of matched facilities that reached different decisions about participating in a prominent voluntary environmental program, we then report evidence indicative of the role of these internal factors in shaping facilities’ environmental decisions. Finally, we offer suggestions for future research that could further develop understanding of how internal organizational characteristics influence environmental management decisions, including those concerning participation in voluntary programs.

Get access to the full text of this article