DOES IT PAY TO BE GREEN IN THE DEVELOPING WORLD? PARTICIPATION IN A COSTA RICAN VOLUNTARY ENVIRONMENTAL PROGRAM AND ITS IMPACT ON HOTELS' COMPETITIVE ADVANTAGE.

This paper studies the competitive implications of hotels' participation in a Costa Rican voluntary environmental program established by the government and identifies institutional factors that motivate participation in this initiative. By studying service industry firms in a developing country, this research offers the opportunity to compare the conclusions obtained by previous empirical work on voluntary environmental initiatives, nearly all of which have focused on manufacturing firms operating in developed countries. The main theoretical perspectives on the relationship between corporate environmental management and competitiveness offer contradictory conclusions. In general, the environmental economics perspective argues that there is a trade-off between environmental and competitiveness goals. On the other hand, the proactive environmental management perspective posits that appropriate environmental protection strategies can enhance firm competitiveness.This study approaches this controversy by using resource-based theory and institutional theory. The RBV argues that participation in voluntary environmental programs can generate differentiation advantages for firms operating in environmentally sensitive markets because these programs allow firms to develop credible 'green' reputations that are rare, difficult to create, costly to imitate, and that provide enhanced value to environmentally aware consumers. Additionally, the paper proposes that participation in voluntary environmental initiatives is not only the result of competitive economic rationality but is also affected by institutional factors. Cross-sectional data were collected for a sample of 164 hotels operating in Costa Rica. Environmental performance data were obtained from the voluntary Sustainable Tourism Certification Program (STC Program). The results indicate that hotels with higher performance in the STC Program gain differentiation advantages that result in significant price premiums. It was also found that participation in the STC Program was not only motivated by economic rationality, but also by institutional factors such as trade association membership and level of regulatory oversight. [ABSTRACT FROM AUTHOR]