TMT attention and environmental strengths: Implications of discretionary and non-discretionary environmental events

Abstract

Drawing upon the attention-based view, this study explores how different types of environmental events capture the attention of top management team (TMT) and then influence the development of a firm's environmental strengths. We argue that discretionary and non-discretionary environmental events differentially shape TMT attention, which is essential to improving a firm's environmental behavior. Utilizing a content analysis of shareholder letters from 70 firms listed on the NYSE composite that operate in highly polluting industries over 10 years and applying the generalized method of moments (GMM) to address endogeneity and autocorrelation, this study reveals attention to non-discretionary environmental events is marginally associated with environmental strengths when there is a sufficient time interval between the attention and environmental strength. Meanwhile, when the interval is shorter, corporate governance mechanisms significantly moderate the relationship. These findings indicate that organizations need to consider the type of environmental events when directing TMT attention as part of attentional control and strategically integrate corporate governance mechanisms to support the development of environmental strengths.