Did reverse logistics practices hit the triple bottom line ...

Int. J. Production Economics 146 (2013) 106–117

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Did reverse logistics practices hit the triple bottom line of Chinese manufacturers? Kee-hung Lai a,1, Sarah J. Wu b,2, Christina W.Y. Wong c,n a

Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong Gabelli School of Business, Fordham University, Bronx, NY 10458, USA c Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong b

art ic l e i nf o

a b s t r a c t

Article history: Received 13 February 2012 Accepted 3 March 2013 Available online 14 March 2013

Reverse logistics (RL) practices represent an important and emerging trend in China's manufacturing practices. An increasing number of Chinese manufacturers have integrated RL practices in their operations to develop sustainable competitive advantage. There are six broad aspects of practicing RL which include waste management, recycling, reuse, reprocessing, materials recovery, and design for RL. The literature remains unclear, in particular Chinese manufacturing context, as to how these RL practices are related to organizational bottom line with respect to operational, financial, and social performance outcomes. Using survey data collected from Chinese export-oriented manufacturers, we applied seemingly unrelated regressions to determine if these six RL practices contribute to these three performance parameters simultaneously. The theory of production frontier is used to characterize the RL practices adoption and the performance implications. Our results indicate that the adoption of RL practices by Chinese manufacturers generates substantial environmental and financial gains, but not social benefits. This study extends the frontier of managerial knowledge for Chinese manufacturers by highlighting the emerging trends in RL practices and providing evidence on the business value of adopting RL practices. & 2013 Elsevier B.V. All rights reserved.

Keywords: Triple bottom line Manufacturing China Reverse logistics

1. Introduction China's success in manufacturing was primarily based on low labor cost. This cost advantage attracts companies from developed countries to relocate their production base to China or outsource production function to their Chinese manufacturer counterparts. After three decade of development based on low cost structure, there comes to a concern on the sustainability of such manufacturing practice in China. The rapid economic growth in the country will eventually lead Chinese manufacturers to lose their cost advantages as what was experienced in Hong Kong, Taiwan, Singapore, and South Korea. The country is also experiencing environmental degradation at catastrophic level due to industrial pollution where manufacturing is a major source and a solution is urgently needed. The increasing resources depletion together with the detrimental environmental burden due to productive activities have pressurized the Chinese

n

Corresponding author. Tel.: þ852 2766 6415. E-mail addresses: [email protected] (K.-h. Lai), [email protected] (S.J. Wu), [email protected], [email protected] (C.W.Y. Wong). 1 Tel.: þ852 2766 7920. 2 Tel.: þ1 718 817 4156; fax: þ 1 718 817 5544. 0925-5273/$ - see front matter & 2013 Elsevier B.V. All rights reserved. http://dx.doi.org/10.1016/j.ijpe.2013.03.005

government to develop and implement stricter regulatory policies such as the Chinese version of RoHS (i.e., Restriction of Hazardous Substances). These, in turn, have prompted many Chinese manufacturers to recognize the importance of ecological modernization, which stresses implementing innovative management practices to mitigate the environmental damage from the pursuit of profitable growth (Lai et al., 2012). Serving as the global factory, Chinese manufacturers are increasingly expected to respond to the environmental quest of the international community to mitigate the damages caused by their produced items to other countries through better life cycle management of their merchandises from sourcing and manufacturing to distribution and disposal. In particular, export-oriented manufactures in China are encountering various institutional and operational pressures that prompt their adoption of green practices. For instance, regulations on environmental protection such as the Waste Electrical and Electronic Equipment (WEEE) and the End of life Vehicle (ELV) Directive in Europe as well as the local Cleaner Production Promotion Law and the Saving Energy Law are pressuring Chinese manufacturers to become more accountable for residual and final products, long after the final product is sold and in the hands of the customers. This regulatory pressure on environmental protection is particularly salient for Chinese manufacturers seeking to compete in the global market. The different stakeholders in the international community including

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customers, suppliers, and environmental groups expect manufacturers to reduce harms caused to the natural environmental by their products and operations. To tackle all these challenges and pursue sustainable development, Chinese manufacturers need to build other competitive advantages in their operations system. Increasingly, they realize that a production system should not be a one-way system; rather it is a two-way closed loop. In fact, in many instances, manufacturers need to handle returned products which can be resulted from damaged or defective shipments, incorrect delivery, overstocks, and customer return due to dissatisfaction. Reverse logistics (RL) is one of the innovative practices helpful for Chinese manufacturers to improve business performance while preserving the environment in the locality and the global community. It is a viable environmentally friendly management approach helpful for Chinese manufacturers to better utilize resources, reduce wastes, improve efficiency, and meet the social expectation for environmental conservation (Lai and Wong, 2012). One example to illustrate RL practices in Chinese manufacturing is the Haier group, a multinational consumer electronics and home appliances enterprise located in Qingdao. This company is proactive in various environmental management initiatives, for instance, green product development. With government's support, Haier launched a project to demonstrate how to handle end-of-life product management issues, including a site with an annual capacity to process 200,000 used electronic products (Park et al., 2010). In 2007, a total of RMB $80 million (approx. US$12 million) was invested to construct the Haier recycling centre in Qingdao where 15% of the cost contributed by the government for this project. It was estimated that about 200,000 used home appliances, including TV sets, air conditioners and washing machines can be recycled per year in this center (Yang et al., 2008). This recycling center of Haier is classified as a “National-level wasted home appliances recycling demonstration site”( ) and is the first “Environmental protection education demonstration site” ( ) of China. Theoretically, adopting and implementing RL represent an attempt to develop new and innovative ways for environmental protection without compromising their capability to compete. Though anecdotal stories like Haier Group are encouraging, many Chinese manufacturers remain hesitant in investment decision on RL. One possible obstacle to diffuse RL among Chinese manufacturers can be uncertainty on its triple bottom-line benefits. The triple bottom-line essentially captures the intersection of social, economic, environmental, and social goals from the microeconomics standpoint. This study targets to evaluate how far Chinese manufacturers go along the line of sustainable development, providing insights of where to put more efforts specifically on RL to improve their chance for long-term success.

2. Conceptualization of reverse logistics RL is a management approach whereby adopting companies can become more environmentally efficient through recycling, reusing, and reducing the amount of materials used (Carter and Ellram, 1998). In the manufacturing context, it is defined as the process by which a manufacturer systematically takes back previously shipped products or parts from the point-of-consumption for possible recycling, remanufacturing, or disposal (Dowlatshahi, 2010). RL is helpful for extending the life of materials and products and hence reducing environmental burdens from industrial operations (Jayaraman and Luo, 2007). It involves the management of goods flowing from their final destination back to the point of origin with the objective to recover value or reduce waste (Rogers and Tibben-Lembke, 2001). Conventionally, manufacturers create value in the sequence from

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inbound logistics to operations, outbound logistics, marketing and sales, and finally to service in the value chain (Porter, 1985). Nowadays, manufacturers are expected to assume the responsibility for environmental protection with particular respect to handling their end-of-life-cycle products, which requires collection, product recovery, or proper disposal (Zhu et al., 2008b). In recent years, there is a stream of research examining ways to develop manufacturing competencies (Koufteros et al., 2007) and that RL is found to improve the profitability of manufacturers (Weeks et al., 2010). Using RL, manufacturers can systematically retrieve previously shipped products or parts from the consumption point back to the factory for possible product recycling. This management approach provides an alternative use of resources in a cost-effectively and ecologically friendly manner by extending a product's normal life beyond its traditional usage. According to Flapper et al. (2005), the types of RL in a close-loop supply chain can be classified as production-related, distributionrelated, use-related, and end-of life. There are obsolete materials, production scraps, and production defects below preset quality levels in the production-related stage that require RL for handling the returned materials. During distribution, there can be commercial returns of products that are sold with a return option, wrong deliveries as the products are refused by customers because they are delivered too early or too late, or otherwise not conforming to specification, and product recalls resulting from safety problems (e.g., food and automobile). A product currently in use may also need RL due to warranties and repair services. At the end-of-life stage, products are returned to the distributors or the original manufacturers because their components and materials can be valuable for reuse in other products, e.g., rare materials in electronic appliances. Previous research has also recognized the importance of greening the supply chain and the environmental management of product life cycle (Guide and Li, 2010; Klassen and Whybark, 1999; Zhu et al., 2010). The concept of RL should be explored and integrated as a viable option in the product life cycle from product design to manufacturing to shipment to the ultimate consumers. In many instances, manufacturers need to deal with returned products, which may be the result of damaged or defective shipments, incorrect shipments, overstocks, and customer returns due to dissatisfaction, and take advantage of their residual value. Regulations on environmental protection are also pressing manufacturing enterprises to become more accountable for residual and final products, long after the final product is sold and in the hands of the customers (Zhu et al., 2010). Since the entry of China into the World Trade Organization (WTO) in November 2002, Chinese manufacturers have been increasingly confronted with competitive challenges including fast changing international customer tastes, technology acceleration, and environmental-based trade barriers in their operations environment. The different stakeholders in the international community including customers, suppliers, and environmental groups also expect them to reduce damages caused to the natural environment by their products and operations. On the policy side, the Chinese government has increasingly emphasized corporate and industrial environmental measures through promoting the development of a circular economy in the country (Zhu et al., 2010). To tackle these challenges, Chinese manufacturers need to continuously develop new and innovative ways for environmental protection without compromising their capability to compete. There is growing interest on adopting RL in the manufacturing sector to gain cost efficiency while preserving the environment (Kenne et al., 2012). Better inventory control, reduced waste disposal cost as well as improved customer service and corporate image have been identified as potential benefits that may accrue to enterprises competent in RL (Carter and Ellram, 1998; Chan and Chan, 2008; Marien, 1998). Previous studies have also identified the strategic importance of

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RL (Autry, 2005). By adopting RL, enterprises can be a differentiator through which they are able to achieve market advantages such as building a loyal customer base and attracting new ones (Jayaraman and Luo, 2007). Using an activity-based management methodology framework, Presley et al. (2007) investigated the design and development of the strategic sustainability evaluation framework considering economic, environmental, and social dimensions for selection of reverse logistics service providers. Recently, Jack et al. (2010) found that resource commitments and contractual obligations positively influence RL capabilities and cost savings subsequently. Even though there are potential economic benefits of RL, firms’ traditional preoccupation with forward logistics, desires to “hide” inventory mistakes, low awareness of the magnitude of potential benefits, and lack of a holistic approach to deal with RL activities are barriers limiting allocation of resources to support its implementation (Daugherty et al., 2001; Krumwiede and Sheu, 2002). Rogers and Tibben-Lembke (2001) reported a list of significant difficulties curtailing the implementation of RL. These factors include the importance of RL relative to other issues, company policies, lack of RL information systems, competitive issues, management inattention, personnel resources, financial resources, and legal issues. Stock (2001) also pointed out the possibility that some companies are unaware of the value of RL to profitability and customer service, nor the benefits associated with efficient product returns. It is still not uncommon for companies to consider product returns as extra expenses incurred on top of their traditional forward logistics activities. Following Elkington's (1998, 2004) idea of triple bottom line, Carter and Rogers (2008) suggests that organizational sustainability, at a broader level, consists of three components: the natural environment, society, and economic performance. The triple bottom line essentially reflects the intersection of social, environmental, and economic performance; a simultaneous consideration of the balance among economic, environmental, and social goals from the microeconomics standpoint. The literature on RL has explored the total supply chain view that considers the production, transportation and distribution of products to customers for the success of RL programs (Das and Chowdhury, 2012) and the links with JIT (Chan et al., 2010) and third party logistics (Min and Ko, 2008) in implementation. Yet, it has not addressed the critical question—whether companies adopting RL can balance and improve their performance outcomes in multiple dimensions? This question is particularly timely and important to Chinese manufacturers as they need to develop other competitive advantages than cost. As such, this study aims to empirically investigate whether Chinese manufacturers adopting RL actually achieve better performance in these three performance dimensions simultaneously. Put alternatively, has the win–win situation been achieved by adopting RL? The answer to this question will also help clarify and begin to resolve the debate surrounding the relationships between environmental and social performance on the one hand, and economic performance on the other. As pointed out by Hoffman and Bazerman (2005), the key to resolving this debate is the recognition that social and environmental behaviors could be profit-compatible. When parties acknowledge this simple fact, it becomes easier to convince companies to adopt environmental and social initiatives that are mutually beneficial.

3. Theoretical development and hypotheses The conventional economic view suggests that any environmental improvement achieved by a firm transfers costs previously incurred by society back to the firm (Friedman, 1962; McGuire et al., 1988). Many scholars believe that environmental and social initiatives are costly undertakings. For instance, Walley and Whitehead (1994) stated that “win–win situations occur rarely as they are likely

overshadowed by the total cost of a company's environmental program. Hence, environmental performance was expected to be negatively linked to operational and ultimately, financial performance. Counter to this perspective, others have identified strategies in which environmental management can improve firm-level financial performance and overall competitiveness (Porter and van der Linde, 1995; Reinhardt, 1999). Poor environmental performance can even reduce a firm's market valuation (Klassen and McClaughlin, 1996; Konar and Cohen, 2001). Clarke (1994) indicated it is necessary to adopt a broader approach that focuses on basic change in products, services, and business strategies that offer opportunity financially as well as ecologically. He believed that win–win situations will increasingly arise as energy process inevitably increase and as greater transparency allows stakeholders to see further along a supply chain. Though synergy is expected to enhance the corporate image, competitive advantage and marketing exposure, many organizations still look upon green initiatives as involving trade-offs between environmental and economic performance outcomes (Klassen and McClaughlin, 1996). The link between environmental management and financial performance has been discussed for more than three decades, the results reported by empirical studies are often conflicting or ambiguous, fostering an ongoing debate in the literature (Corbett and Klassen, 2006). To reconcile the contradictory perspective, Porter and van der Linde (1995) argued that it is a static view to believe that there exists an inherent and fixed trade-off between social benefits and firms’ private cost for “being green”. That is, if technology, products, processes, and customer needs remain constant, that compliance to regulation raises cost and reduces competitiveness would be inevitable. However, companies operate in the dynamic environment where they continuously find innovative solutions to reduce the total cost of a product or increase its value. Such innovation requires companies to use inputs more productively – from raw materials to energy to labor – to offset the cost of improving environmental impact and avoid the impasse. Ultimately, this enhanced resource productivity allows a company to become more competitive. Porter and van der Linde's argument can be further elaborated by the theory of production frontier (TPF) since innovation is a major force to push the production frontier outward and opens up the opportunity to improve performance in multiple dimensions. 3.1. Theory of production frontier In economic theory, a production frontier (PF) is defined as the maximum output that can be produced from any given set of inputs under technical considerations (Samuelson, 1947). Schmenner and Swink (1998) extended PF to the field of operations management by expanding “output” to include all dimensions of manufacturing performance (e.g., cost, product range, quality) and extending “technical considerations” to include all choices affecting the design and operations of a manufacturing unit. As such, a PF is defined as the maximum performance that can be achieved by a manufacturing unit given a set of operating choices. Two types of PFs put constraints on a plant's performance. The asset frontier (AF) is formed by choices in plant design and investment. The operating frontier (OF) is formed and altered by changes in the choices in plant operations. Therefore, each plant's performance is immediately bounded by its policies and procedures (i.e., OF) but ultimately bounded by its AF. Both frontiers are movable, however, shifting AF occurs less frequently than moving OF because it normally requires large capital investments and radical changes to the physical plant. Consequently, we focus on the movement of OF in this study. Schmenner and Swink (1998) differentiated two types of beneficial movement of OF within the performance space: improvement

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Cost

A Improvement

A1 Betterment

Asset Frontier A2

Performance Fig. 1. Assets frontier and operating frontier (adapted from Schmenner and Swink (1998)).

and betterment. Improvement (from A to A1 in Fig. 1) is defined as “increased plant performance in one of more dimensions without degradation in any other dimensions” (p. 109), which can be achieved by increasing utilization or efficiency so as to bring performance up to a pre-determined standard (i.e., closer to its OF). Betterment (from A1 to A2 in Fig. 1), on the other hand, refers to “altering manufacturing operating policies (e.g., adoption of best practices) in ways that move or change the shape of the OF” (p. 109). They used TPF to argue that if a plant is far from the AF, it has the potential to simultaneously provide higher levels of performance in multiple dimensions, and that pursuing one performance dimension is not at the sacrifice of another. 3.2. Hypotheses development Applying the TPF to the context of RL, we can argue that firms adopting RL could gain performance in multiple dimensions through both improvement and betterment. First of all, adopting RL can be viewed as an endeavor to push the current OF outward the same way as JIT, TQM, and AMT do. These programs have been shown to dramatically enhance performance with little change in the amount or type of physical assets employed. By incorporating RL into a firm's forward supply chain, the firm can recapture value and recover asset from returned products (Guide, 2000) that push the OF outward. In addition, firms could learn while practicing RL and knowledge will be accumulated, disseminated over time, and stored in their procedures and rules as well as their less formal norms and social and communication patterns (Barney, 1991; March, 1991). This process transforms generic input factors into firms’ idiosyncratic capabilities/competencies that enable firms to coordinate activities and make use of their resources more effectively (Amit and Schoemaker, 1993). The more a capability is utilized, the more it can be refined and the more sophisticated and difficult to imitate it becomes. As such, the developed capability also could move a firm's OF outward and approach its AF. Meanwhile, a firm can enjoy the benefit of improvement from removing inefficiencies in transformation processes. As resources are used to generate desirable products and/or services, waste is implicitly produced as by products during each step of the integrated supply chain process. For example, packaging is used to protect products from damage but becomes an undesired item once products are consumed. The economic waste is a sign that resources have been used incompletely, inefficiently, or ineffectively. In addition, increased global competition, growing focus on environmentalism, shorter product life cycle, and potential revenue from resale encourage firms to process product returns at the end of their first use for recycling, reuse, refurbishing, remanufacturing, or remarketing (Srivastava, 2007; Toffel, 2004). This results in reverse logistics where product returns represent a valuable resource to enhance resale revenue or reduce materials costs (Jayaraman and Luo, 2007).

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Therefore, RL represents a way to improve resource productivity by reducing and eliminating waste. This new view of waste as resource inefficiency evokes the quality revolution of the 1980s. Today defects are seen as a sign of inefficient product and process design, not as an inevitable byproduct of manufacturing. The idea was a breakthrough which motivates companies to build quality into the entire process and use innovation to improve quality while actually lowering cost. Environmental issues are a natural extension of quality since waste often reveals flaws in the product design or production process. While TQM defines defects in terms of customer requirements (Lai and Cheng, 2005), the environmental perspective tells us to define defects in terms of societal concerns. Where “zero defects” was a central tenet of TQM, “zero waste” is a significant step beyond because waste is generated within a process or while using or disposing a product (Lai and Cheng, 2009). Any operational system that can minimize inefficiencies is also more environmentally sustainable (Corbett and Klassen, 2006). Put alternatively, taking care of various kinds of waste improves resource efficiency and makes a firm closer to its production frontier. Beyond these theoretical arguments, Porter and van der Linde (1995) provided several examples of how environmental conditions encouraged firms to use resources more efficiently and become more productive as a result. Hart (1995) provided a more detailed discussion of how a focus on environmental performance can be a competitive resource for firms. Larson et al. (2000) invoked the Schumpeterian notion of “creative destruction” to explain how firms, when forced to adopt a new perspective such as sustainability, become more innovative and end up discovering new goods and services. Wu and Dunn (1995) gave examples of how logistics managers can help preserve the environment while simultaneously meeting cost and efficiency objectives. Chan and Chan (2008) found in the Hong Kong mobile phone industry that firms implement RL systems to recapture value and recover asset, develop it as a strategic weapon, and be good corporate citizenship. For Chinese manufacturing, recognized the importance of ecological modernization with green supply chain management of Chinese manufacturers to green their operations (Zhu et al., 2011). Combining the prior arguments and empirical evidence, we propose the following hypothesis:

H. Reverse logistics practices can simultaneously improve the environmental, financial, and social performance of Chinese manufacturers. Specifically, we will test this hypothesis through several major RL activities. Carter and Ellram (1998) proposed a pyramid of RL practices. Resource reduction should be the ultimate goal in the RL process—minimizing materials used in a product and minimizing waste and energy achieved through the design of more environmentally efficient products. Once the resource reduction option has been exhausted, the firm should attempt to maximize reuse, followed by recycling. Disposal should be the last option. In a survey study, Rogers and Tibben-Lembke (2001) listed the most common ways to get rid of returned products—resold “as is”, remanufacturing or refurbishing, recycling or landfill, repackaging, recovering primary materials. Stock (2001) stated that RL includes a combination of activities such as recycling, refurbishing, and repair as well as waste disposal. Prahinski and Kocabasoglu (2006) summarized four disposition alternatives—reuse/resell, product upgrade (repackaging, repair, refurbish or remanufacturing), materials recovery (cannibalization and recycling), and waste management (incineration and landfilling the product). Reviewing the above literature together with our field observations from Chinese manufacturers, we identify various RL practices and broadly classify them into six categories: waste management, recycling, reuse, materials recovery, reprocess, and design for RL. The general hypothesis can be split into the following set of detailed hypotheses for testing.

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Waste is increasingly an environmental problem due to the rapid increase in production and consumption. There are wastes generated throughout a product life cycle when the product is discarded as useless or unwanted. In this regard, waste management is applied by companies to improve their materials flows and to satisfy the requirements of different stakeholders (Heidrich et al., 2009). In a study of small- and medium-sized manufacturing enterprises, solid waste management activities are found to benefit their performance (Sarkis and Dijkshoorn, 2007). In China, the ZTE corporation, a telecommunication equipment and network solution provider, pays attention to wastewater and solid wastes generated from operations, industrial processes and sanitation facilities in compliance with laws, regulations, and customer requirements. These wastes are to be characterized, monitored, controlled, and treated prior to discharge or disposal. We argue that waste management practices on incineration and landfilling can improve the performance of Chinese manufacturers. H1. Chinese manufacturers adopting waste management practices can simultaneously improve their environmental, financial, and social performance. Recycling refers to the collection of used materials that can be disassembled and remanufactured into new products. In doing so, the wastes for landfill resulting from used products can be reduced with scarce natural raw materials better utilized. For example, Nike works with its materials suppliers to recycle factory wastes for new footwear manufacturing. Such practice enables Nike to cut down its waste disposed to landfill from 25% in 2007 to 13% in 2009, while benefit from reduced purchase and consumption of new raw materials. The recycling of copper in support of sustainable development and the environmental protection is another such example on the value of recycling (Gomez et al., 2007). In China, Lenovo emphasizes close-loop recycling where the company recycles plastics from both end of life IT and non-IT sources to produce new products. Therefore, the practices on recycling used materials and collection of returned products can bring improvement benefits to Chinese manufacturers: H2. Chinese manufacturers that adopt recycling practices can simultaneously improve their environmental, financial, and social performance. Reuse refers to collecting products or packaging materials to be cleaned, refilled, and reused such as empty bottles for milk and beer. There are salvageable materials that can be reclaimed with opportunities for manufacturers to generate more revenue. It is therefore beneficial for manufacturers to separate reusable products and part components and reuse them many times before their final disposal or taking them to landfill. One example is the reuse of secondary packaging materials, which are used for shipment purpose. The reuse of packaging materials can bring economic benefits to manufactures with the materials used repeatedly several times requiring less resources consumption. We have also seen the use of wood pallets repeatedly for shipment purpose. A study also found that increased reuse of products can reduce consumption of new products and materials, simultaneously reducing costs for consumers and deriving more value from existing products (Thomas, 2003). Further to recycling, Lenovo is committed to product reuse which offers asset recovery services and product take back and recycling programs. In 2011, this company managed the processing of 12,700 metric tons of customer returned computer equipment. For these returns, they are mainly reused as products or parts, recycled as materials, incinerated with waste to energy recovery. This line of reasoning suggests that: H3. Chinese manufacturers that reuse their products can simultaneously improve their environmental performance, financial, and social performance.

Due to the value for reclaim, products should not be disposed to landfill unless all their reusable, remanufacturing, or recycling potentials are fully exploited. The object of product recovery is to capture the economic as well as ecological value of used products or materials for reducing wastes before their disposal (Thierry et al., 1995). Product recovery is a useful practice for closing the loop in the supply chain through which products are collected, reprocessed, and later redistributed to the customers (Beamon and Fernandes, 2004). One example is Tianzhong Electromechanical Company that collects used copiers for remanufacturing and sells them to emerging markets. This remanufacturing practice reduces new resources consumption for producing copiers, extends the lifespan of electronic goods, and benefits the environment and economy. Due to the increasing number of vehicles, disposal of used tires is a significant environmental issue. Recovery of used tires is an example to show the value of product recovery in reducing resources consumption and damages caused to the environment (Sasikumar et al., 2010). Recovering materials from returned products means lower frequency of product disposal and hence higher economic benefits for firms and social benefits for the environment. Another example to illustrate is the recovery of materials (e.g. copper) from discarded electric products such as printed circuit board (PCB) and air conditioners by Huaxin Green Spring Environmental Protection Company in Beijing. There are also opportunities for manufacturers to reduce costs in production, improve corporate reputation, and satisfy the escalating customer request on environmental protection (Toffel, 2004). Product recovery practices on disassembly, inspection of dissembled parts, recovery of reusable parts and their reuse in repairing, refurbishing, or remanufacturing of other products should allow manufacturers to reap productivity and environmental gains. Accordingly, we suggest that H4. Chinese manufacturers that recover materials from returned products can simultaneously improve their environmental, financial, and social performance. Manufacturers need to process many returned products even though they do not deal with consumers directly. These returns can be in the form of excessive stocks, end-of-season items, unsold or damaged goods, products that have been recalled, products sold with return option, and packaging materials for product shipment. With reprocessing, there are potentials to recover certain original value of the returned products. Manufacturers can choose to refurbish, remanufacture, repair, and reprocess returned products such as selling them to discounters or using them for spare parts. For example, Xerox reprocesses its reusable components and tests them for assuring their quality in conformance to the company's performance standards. The process of reuse, recovery, and reprocessing resulted in savings of over $80 million started in 1993. In China, ZTE corporation also ensures the safe handling, movement, storage, use, recycling, and disposal of hazardous substances if they pose harms to the environment. Other than the consideration for customer satisfaction, reprocessing of returned products to specific quality would help manufactures to establish an environmentally friendly image to the public with an environmental strategy to minimize waste. As such, we propose that: H5. Chinese manufacturers that reprocess returned products to specific quality could simultaneously improve their environmental performance, financial performance as well as social performance. Eco-design of product has been considered an essential part of environmental management programs by manufacturing companies (Zhu et al., 2008a). This aspect of the design for RL emphasizes use of standardized materials and adoption of modular design. The environmental damage caused by any product or materials should be

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4. Research methodology

& Bradstreet. In China, reverse logistics is at the beginning stage for manufacturing operations, not comparable to the maturity level by their western counterparts. We purposely chose to study exportoriented manufacturers as they are pioneers in RL practices due to the pressures induced by their international customers (Zhu et al., 2012). It is appropriate to study the export manufacturers to ensure sampling validity in sample selection that the respondent Chinese manufacturers possess operational RL practices in their activities. We used a key-informant survey design and collected the executive names, and their respective company name, address, and phone number to facilitate our primary data collection. We sent a survey package, including the questionnaire, prepaid self-addressed reply envelop, and a cover letter explaining the research to each target informant. We followed up the mailing by phoning or emailing the informants to ask for their receipt of the package, to reiterate the research objectives, and to highlight the importance of their reply. We waited for 2 weeks for the informants to reply and sent out the second mailing of survey package to the ones who had not replied. We repeated the follow-up phone calls and emails 2 weeks after the second mailing, and sent out the third survey package to the non-respondents after 2 weeks. The data collection was concluded 3 weeks after the last mailing. The survey resulted in 134 returned questionnaires, representing the response rate of 16.7%. However, six returned questionnaires have significant missing data, resulting in an effective response rate of 16%, which is comparable with other environmental-related studies having executives as informants and survey-based environmental research (Wong et al., 2012b; in press). The profile of the responded Chinese manufacturers is summarized in Appendix A.

4.1. Sample and data collection

4.2. Common method biasand non-response bias

The six hypotheses are tested by survey data collected from a sample of Chinese manufacturers during 2008–2010. We are interested in evaluating the performance implications of RL practices in China for a number of reasons. First, China's manufacturing industry has been important in providing a wide variety of products to markets in different countries. While environmental protection becomes an international issue, many countries impose regulations ranging from restricting materials used in products to mandating extended producer responsibility to take back end-of-life products. The implementation of RL can be useful for Chinese manufacturers to improve their performance by having access to these markets. Second, due to inflation, the cost of supplies increases continuously. RL serves as an opportunity that allows Chinese manufacturers to save costs in sourcing new materials by retrieving resalable products and recovering reusable components and parts (Martin et al., 2010). Third, China has been criticized for giving rise to serious environmental issues due to its rapid pace of industrialization and irresponsible environmental operations of manufacturers. Following the procedures of questionnaire development by Gerbing and Anderson (1988), we first conducted exploratory interviews with 35 executives of Chinese manufacturers to understand RL practices in the industry. The interview revealed that RL practices become increasingly important for manufacturers to compete. Second, based on an extensive review of previous literature and the interviews findings, we developed the measurement items and pretested the survey instrument with six executives and five academics in the discipline to assess the relevancy, phrasing, and comprehensiveness of the measurement. We refined the measurement and conducted a pilot test to 30 executives. Using the data collected from the pilot test, we conducted an exploratory factor analysis to purify the scales and further refined the survey instrument to finalize the questionnaire. To administer the mass survey, we randomly drew a sample of 800 export-oriented Chinese manufacturers from the database Dun

There is potential of common method bias in this study due to data collection from a single informant and we took two tests to check for such possibility. We followed Podsakoff et al. (2003) and conducted Harmon's one-factor using the exploratory factor analysis on all the measurement items in the finalized questionnaire. The results show that the measurement items clustered into more than one factor, with eigenvalue greater than 1.0. Moreover, we tested if a marker variable, which is a variable that is not theoretically related to any variable in the study, is related to the variables in this study. We used “firm ownership type” as the marker variable. The results show that “firm ownership type” is not significantly related to the variables in the study, providing evidence that common method variance is not a serious issue in this study. We followed Armstrong and Overton (1977) to check for potential of non-response bias. First, we used the extrapolation method and compared the responses between the first and second mailings. We found that the first and second mailings have shown no statistical difference at po0.05. Second, we compared the firm size (i.e., number of employees) between the respondent and non-respondent firms using the objective data we have collected from the directory. The t-test results indicate no significant difference between the two groups at po0.05. These results collectively suggest that nonresponse bias did not seem to be a problem in this study.

mitigated at the design stage in such a way that product components are easy for disassembly for reuse and recycling. Pioneering companies have learnt that making product returns profitable relies on design for RL (Krikke et al., 2004). In this way, manufacturers are able to disassemble component parts for capturing residual values of returned products due to the use of standardized materials and modular design. For instance, TCL, a white electronic home appliance manufacturer emphasizes energy consumption, health, and safety issues. All the color TV manufactured are energy-saving products with certification consuming less than 3 W on sleeping mode. In recent years, the company uses optical injection technology with special high-gloss materials. Doing so helps reduce spray and other highly polluting processes and achieve zero-emission of waste water, gas and oil residue, lowering pollution and resources consumption per unit of output. The company also uses advanced disassembling technologies to transform solid wastes from used household appliances into renewable resources to provide raw materials and establish a circular economy-based manufacturing chain for its business. It has been argued that eco-designs necessary to close the loop in the supply chain (Zhu et al., 2008b). Design for RL is meant to address product functionality while simultaneously minimizing life-cycle environmental impact. Therefore, we hypothesize that: H6. Chinese manufacturers that adopt design for RL could simultaneously improve their environmental, financial, and social performance.

4.3. Construct measurements Following the discussion in the prior section, we specifically examine six constructs of RL practices. The measurement for each of them (as shown in Table 1) covers the major activities in each practice based upon the literature review and our expert interview results. As such, the way that the constructs are developed indicates they are formative and composite in nature, that is, the measurement items influence the construct and the construct is a combination of the measurement items (Bollen and Lennox, 1991). The respondents

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Table 1 Constructs and measurements of reverse logistics practices. Constructs

Measurements

Factor Loadings

Reliabilitya

% of variance explained

Please indicate the extent to which your firm performs the following revere logistics practices to your products(1—not at all, 2—little, 3—moderate, 4—some, 5—to a great extent) Waste management

Incineration—burning to ash Landfilling

0.87 0.87

0.69

76.36

Recycle

Collection of returned products recycle

0.85 0.85

0.61

72.09

Reuse

Reuse Separation of reusable products Separation of reusable parts

0.94 0.93 0.80

0.87

79.97

Reprocess

Refurbish Remanufacture Repair Reprocess

0.91 0.88 0.83 0.78

0.87

72.40

Materials recovery

Disassembly

0.90

0.80

71.43

Inspection of dissembled parts Recover reusable parts and reuse them in repairing, refurbishing, or remanufacturing of other products

0.98 0.78

Use of standardized materials Adoption of modular design

0.87 0.87

0.66

74.87

Design for RL

a

Cronbach α is presented for constructs with more than two measurement items. Otherwise, correlations are presented.

were asked to indicate the extent to which their organizations perform the following practices to their products from 1—not at all to 5—to a great extent. Constructs’ unidimensionality and reliability were checked in SPSS via factor analysis and reliability analysis as shown in Table 1. Mean values of constructs were extracted for the later regression analysis. The impact of RL practices on performance is examined via three aspects—environmental performance, financial performance, and social performance. We use operational performance as a proxy for environmental performance for two major reasons. First, those decisions that influence environmental performance also have a direct impact on operational performance as they are related to resource productivity. For instance, changing a product design to make it easy for disassembly will reduce waste, and it will also open up an opportunity to improve product quality. Second, environmental performance influenced by operational decisions may vary dramatically across companies. Some manufacturing sectors such as automobiles generate much air emission, and other sectors such as chemicals discharge much polluted water. Consequently, it is not feasible to develop reflective measures for environmental performance. In contrast, operational performance can be relatively easily measured by the standard dimensions. The constructs and measurements for performance are summarized in Table 2. The respondents were asked to indicate the extent to which their organizations perform in operational, financial, and social performance after adopting RL. Social performance, operational performance and financial performance were checked for unidimensionality and reliability in SPSS via factor analysis and reliability analysis (Table 2). Mean values were extracted for each performance dimension in the later regression analysis. 4.4. Regression model Since we test whether RL practices could achieve the win–win situation along multiple performance aspects, performance variables were viewed as a system. That is, any operations decision could generate an impact on any of the performance variables. As such, we employed seemingly unrelated regressions (SUR), which was first

proposed by Zellner (1962). SUR is a class of multivariate regression with correlated error terms. Originally applied in micro-economic contexts, SUR is now widely used in many research areas (Wang and Kockelman, 2007). A distinctive feature of SUR models is that they comprise several regression equations, each having its own dependent variable and potentially different sets of exogenous explanatory variables. Each equation is a valid linear regression on its own and can be estimated separately, which is why the system is called seemingly unrelated. Yet, in fact, the error terms across the equations are assumed to be correlated. Normally, the model can be estimated equation-byequation using standard ordinary least squares, and consistent estimates can be obtained. But in SUR models the error terms from different equations are correlated. Moreover, according to the general theory of the least square method, which takes covariances of errors into account, such systems should be solved as a whole set of equations. Otherwise, the minimal variance of the errors in estimated regression parameters cannot be achieved, that is, they are generally not as efficient as the SUR estimates, which amounts to feasible generalized least squares with a specific form of the variance–covariance matrix (Lado et al., 2004). In this study, three regression models were run simultaneously for each RL practice construct with the control variables. The SUR models can be expressed in a general form as: 8 > < social performance ¼ β0 þ β1 RL þ β2 employees þ β3 sales operations performance ¼ γ 0 þ γ 1 RL þ γ 2 employees þ γ 3 sale > : financial performance ¼ φ þ φ RL þ φ employees þ φ sale, 0

1

2

3

where RL represents each of the six reverse logistics practices. We only consider the impact of each RL on performance in each set of SUR because of two reasons. First, each manufacturer may choose to use or focus on different sets of RL practices but not all of them are based on its product, process, major markets, or competitive environment. Some are more concerned about the individual effect of RL rather than the overall effect. Second, since some manufacturers may use more than one of them at the same time there could be high correlations among RL practices. We would run

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Table 2 Constructs and measurements of performance dimensions. Constructs

Measurements

Factor loadings

Reliabilitya

% of variance explained

Please indicate the extent to which you agree or disagree with the statements on performance impacts after adopting reverse logistics practices. (1—strongly disagree, 3—neutral, 5—strongly agree) Operational performance

Significantly improved product quality Significantly improved lead time Improved position in marketplace Developed better products Reduced waste in production Improved chances of selling products in international markets

0.83 0.83 0.88 0.87 0.78 0.82

0.91

69.74

Financial performance

Decrease of disposal costs Increase of revenue from resale Effective in handling recovery of assets related to our returned products Effective in handling cost containment related to our returned products Reduction of inventory investment

0.84 0.81 0.85 0.86 0.88

0.90

71.70

Social performance

Improve our firm's service quality Improve our corporate image

0.93 0.93

0.85

87.18

a

Cronbach α is presented for constructs with more than two measurement items. Otherwise, correlations are presented.

into multicolinearity if all of them were included in the regression model as a set of independent variables. In order to assess the actual contribution from RL practices to performance, we control the effect from the size of the company to performance. Though they are not the interest of the study, control variables are believed to have an influence to the dependent variables. For instance, large companies tend to be more profitable and have more slack resources to deploy for the implementation of administrative innovations, such as quality management (Kull and Wacker, 2010; Naor et al., 2010), mass customization (Huang et al., 2010), and in our case, reverse logistics. One could argue that performance disparity largely come from the size of the company, but not from the adoption of RL practices. With control variables in the regression model, we can clearly separate the performance impacts between the size of the company and RL practices. Size of the company is operationalized by annual sales and the number of employees (Ettlie, 1995; Donaldson, 2001). Since they suffered from a severe non-normality problem, LOG transformation has been conducted for correction and both of them significantly improved.

5. Major results and discussions Correlation among the RL constructs and performance constructs was reported in Table 3. As can be seen, RL practices are highly correlated. SUR were performed in STATA. Table 4 reports the SUR results of six RL practices on performance outcome variables. The results can be summarized in three different patterns. First, practicing waste management cannot improve a manufacturer's operational and financial performance and may even hurt its social performance. H1 was not supported. Second, recycle, reprocess, and recovery practices improve operations and financial performance but have not contributed to the improvement of social performance. Thus, H2, H4, and H5 were partially supported. Third, reuse practices and design for RL not only improve operations performance and financial performance substantially, but also enhance social performance (po0.1). As such, H3 and H6 were supported. Control variables were not significant in most of the cases. Overall, the findings indicate that RL practices except waste management practices could positively influence a manufacturing enterprise's environmental and financial performance. In addition, reuse and design for RL could generate a significant positive performance impact in all three performance dimensions, which strongly

supports the idea of triple bottom line.The results are discussed based on these observed patterns. First, the results from Table 4 showed that only practicing waste management cannot improve a manufacturer's operational and financial performance and may even hurt its social performance. That means waste management is the last resort in RL practice. In the past, manufacturers have not had much incentive to refurbish returned products. Returns were a liability to be disposed of as cheaply as possible, often by sending them to the local landfill. Increasing restrictions on what can be placed in a landfill and the cost of landfilling have made disposal a less attractive option. Meanwhile, the rate at which products become obsolete has also increased and manufacturers generate more unsalable products. Throwing away substantial amounts of these items is a costly and unacceptable option to undertake. Therefore, manufacturers need to proactively look for ways to recover more value from those products or avoid generating waste in the system in order to boost their performance. Second, the results also demonstrated strong evidence that recycle, reprocess, and recovery practices improve operations and financial performance but have not contributed to the improvement of social performance. Though we did not find these practices hit the triple bottom line, the results were still promising because manufacturers are hesitant to adopt RL practices due to the potential negative impact on their financial performance.Our findings will mitigate this concern and encourage more manufacturing enterprises to seriously consider many of the RL options due to the improved resource productivity and better resource utilization. The findings also complement the conclusions from many existing studies. For example, Derwall et al. (2005) found that firms with environmentally responsible practices consistently experience better stock market performance than others, a phenomenon that cannot be explained in the usual risk-return paradigm of capital market theory but that is consistent with this notion of recurrent but unpredictable benefits. Corbett and Klassen (2006) conjectured that the benefit to operations management theory and practices of adopting an environmental perspective are subject to the “law of the expected unexpected side benefits”. That is, adopting an environmental perspective is beneficial but that these benefits usually materialize in unexpected forms and hence are usually greater after the fact than can be accurately predicted in advance. This is consistent with Crosby's (1979) claim that “quality is free”. Surprisingly, recycle, reprocess and recovery practices were not found to improve social performance. It seems that RL influences financial performance in a different way on social performance. The financial performance is affected by RL in a variety of ways.

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Table 3 Correlation among the major constructs.

1. Waste management 2. Recycle 3. Reuse 4. Reprocess 5. Material recovery 6. Design for RL 7. Operational performance 8. Financial performance 9. Social performance 10. Annual sales 11. Total employees n

1

2

3

4

5

6

7

8

9

10

11

1 0.35** 0.42** 0.41** 0.62** 0.27** 0.09 0.10 0.15 0.04 0.03

1 0.67** 0.58** 0.59** 0.49** 0.22* 0.27** 0.16 0.05 0.06

1 0.73** 0.64** 0.65** 0.33** 0.34** 0.16 0.08 −0.06

1 0.69** 0.54** 0.20* 0.26** 0.05 0.12 −0.10

1 0.48** 0.17 0.22** 0.02 0.07 −0.09

1 0.26** 0.23** 0.17 0.02 −0.16

1 0.46** 0.46** 0.11 0.04

1 0.64** 0.22* 0.14

1 0.19* 0.19*

1 0.57**

1

p o 0.05. p o0.01.

nn

Table 4 SUR results of reverse logistics practices on performance. Hypothesis

Independent variables

Dependent variables Social performance

Operational performance

Financial performance

−0.16 (0.04) 1.00 (0.17) 0.22 (0.28)

0.09 (0.26) −0.16 (0.82) 0.22 (0.28)

0.08 (0.29) 0.34 (0.63) 0.34 (0.09)

H1

The impact of waste management

Waste management Employee Sales

H2

The impact of recycle practice

Recycle Employee Sales

0.07 (0.22) 0.88 (0.23) 0.21 (0.33)

0.14 (0.015) −0.28 (0.69) 0.22 (0.28)

0.17 (0.002) 0.18 (0.78) 0.34 (0.08)

H3

The impact of reuse practice

Reuse Employee Sales

0.11 (0.09) 1.22 (0.10) 0.13 (0.53)

0.22 (0.001) 0.06 (0.93) 0.14 (0.48)

0.23 (0.001) 0.63 (0.35) 0.24 (0.20)

H4

The impact of reprocess practices

Reprocess Employee Sales

0.03 (0.61) 1.17 (0.12) 0.16 (0.47)

0.12 (0.06) 0.07 (0.92) 0.15 (0.47)

0.17 (0.005) 0.72 (0.30) 0.22 (0.26)

H5

The impact of recovery practice

Recovery Employee Sales

0.01 (0.95) 0.97 (0.19) 0.21 (0.32)

0.12 (0.09) −0.01 (0.99) 0.18 (0.38)

H6

The impact of design for reverse logistics

Design for RL Employee Sales

0.13 (0.03) 1.38 (0.06) 0.12 (0.57)

0.17 (0.003) 0.20 (0.78) 0.16 (0.44)

0.1 6(0.02) 0.55 (0.43) 0.28 (0.15) 0.15 (0.006) 0.72 (0.30) 0.27 (0.17)

Note: Coefficients are reported with p-value in the parentheses.

When waste is minimized as part of environmental management, it results in better utilization of natural resources, improved efficiency and higher productivity, and reduced operating costs. It could also usher in tremendous marketing advantage, and leads to improved revenue, increased market share, and new market opportunity. Similarly, greening of production process results in minimization of pollution, a form of inefficiency, re-use of materials, and recycling initiatives. This leads to savings in raw materials, water and energy usage and thus brings competitive and economic performance. However, social performance related to corporate image may be more influenced by marketing function instead of operations function. Manufacturers need to effectively communicate with their stakeholders regarding what kinds of RL practices they actually use and what the positive impacts are. Otherwise, RL practices may fail to improve social performance. Last, the results indicated that reuse practices and design for RL not only improve operations performance and financial performance substantially, but also enhance social performance (po0.1). That is, implementing these practices does not preclude achieving one goal at the expense of the other and manufacturing enterprises could reach the triple bottom line. Tibben-Lembke (2002) underlined that development is an excellent time to begin considering the RL implications of the product's design. In recent years, much has

been learned about the importance of considering the manufacturing and logistics implications of design decisions, which has given rise to the fields of design for manufacturing and design for logistics. For instance, automakers such as BMW are paying attention in their design process to how cars can be disassembled at the end of their life, known as design for disassembly. Using postponement strategy as design for logistics, computer makers such as Hewlett-Packard reduce unused shipment space, save transportation costs, and lower the carbon footprint generated in the shipment process. Reuse seems to be a superior practice than recycle, reprocess, and recovery practice. While recycling gives discarded materials a new life after some chemical or physical processes, reuse employs the same item multiple times in its original form so that little is discarded (Wu and Dunn, 1995). As such, reuse is a more cost effective and ecologically friendly practice by extending products’ normal life cycles. Moreover, this practice can be easily identified by the customers and link with corporate image since it keeps the original form of the product. For instance, Kodak single-used camera can be reused nine times. Customers when buying this type of camera have already realized that this is a reused product. In contrast, customers are not aware of whether a product used is a recycled item (whether a can of Coca-cola uses recycled can), whether a company extracts valuable items from returned products and use it in the production.

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Likewise, customers may not know products that have gone through reprocess (e.g., remanufacturing, refurbish, repair) when making a purchase. As discussed before, to improve social performance, a manufacturer may need to strengthen its ability to inform customers about its RL practices.

6. Conclusions and limitations According to Prahinski and Kocabasoglu (2006), research on RL is important because: (1) there is a high volume of product returns where some industries need to handle returns at over 50% of their sales; (2) the potential to generate revenue from sales in secondary and global markets from previously discarded products is promising; (3) business enterprises are increasingly required to effectively manage their entire life of the product due to regulatory requirements in the European Union and the United States; (4) the responsibility to take back products containing hazardous wastes is increasingly requested by consumers; (5) environmental alternatives such as repackaging, remanufacturing, and recycling become more sustainable due to limited and expensive landfill capacity. Many business enterprises such as BMW, General Motors, and Hewlett-Packard have realized the benefit of adopting RL where these enterprises have their manufacturing operations in China. For instance, recognizing the value of product recovery, BMW has set a direction to design a “totally reclaimable” automobile, in which all the components can be recovered, reconditioned, and reused. With RL, this carmaker can reap the dual benefits of cost reduction due to purchasing less new components and improved corporate image as a socially responsible business (Thierry et al., 1995). Alternatively, enterprises that are less attentive to RL may lose the opportunity to earn revenue from product recycling or remanufacturing, while risking damages to their corporate and brand image (Jayaraman and Luo, 2007). Yet, the literature of RL is more descriptive and anecdotal (Carter and Ellram, 1998; Wu and Dunn, 1995), with case studies being widely used (Lau and Wang, 2009). Little empirical work has addressed reverse process (Prahinski and Kocabasoglu, 2006). Many examine only relatively narrow aspects, lacking a holistic view of RL (Pokharel and Mutha, 2009). Dowlatshahi’s review (2005) indicated that many of studies on RL are general, piece-meal, and practitioneroriented, and did not provide an in-depth analysis and integration of RL topics. This study contributes to the existing body of knowledge in the following ways. First, it provides a theoretical framework to examine the performance implications of RL practices. Particularly, it draws on the TPF to build the argument for the impacts of RL on environmental, social, and economical performance outcomes. Second, it investigates a broad range of RL activities in manufacturing enterprises and that the performance implications of the RL practices in different performance dimensions are shown. The results provide Chinese manufacturers with empirical evidence on the business value of adopting RL. As China is gradually losing its cost advantage in production, this study shows that a potential new competitive advantage could be built upon RL practices for sustainable economic development. Recycle, reuse, recovery, reprocess, and design for RL all demonstrate favorable impact to environment and financial performance. This study also provides important guidelines for manufacturing enterprises in adopting RL practices. A manufacturer may hurt its image by only implementing the very basic RL practices such as waste management. Product design has to be integrated with RL to reap performance improvement all around. There are several limitations of our study findings that should be cautious in interpretation. Nevertheless, these issues provide fertile ground for future studies to extend this line of research. First, the SUR models provide a snapshot of the RL-performance links for Chinese manufacturers. A longitudinal study will be a useful complement to

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understand how the different RL practices evolve and contribute performance benefits to manufacturer adopters in the longer term. Further research can also extend by investigating the success stories or factors of Chinese manufacturers on their RL practices. There can also be richer insights if this investigation is extended to other industrial contexts such as retailing (Lai et al., 2010) and shipping and transport logistics (Ng et al., 2013; Wong et al., 2012a). Second, export and trade in the international market is an important driver for Chinese manufacturers to implement environmental management practices such as RL. In many instances, Chinese manufacturers are coerced to comply with environmental regulations before their products are allowed entry into foreign markets such as the European Community Directive on Waste Electrical and Electronic Equipment (WEEE) for product take-back obligation. Further studies may examine the relative emphases of individual RL activities in implementation and their performance contributions under changing regulatory environmental requirements for international trade. The factors that prompt manufacturers to pursue RL or not and their underlying considerations can be investigated. Third, there can be contingent factors on management practices such as just-in-time principles and quality assurance determining the outcomes of RL activities. It is useful to investigate how these other management practices collectively affect the bottom-line of manufacturers implementing RL. Lastly, RL activities require active participation of both upstream and downstream partners in the supply chain to be successfully implemented. The leadership of manufacturers to promote and diffuse the RL activities in the supply chain is crucial for achieving the desired outcomes. Supply chain coordination can be a promising topic for further investigation (Wong et al., 2009; C.W.Y. Wong et al., 2011; C.Y. Wong et al., 2011). Acknowledgments The authors are grateful to two anonymous reviewers for their helpful comments on an earlier version of this manuscript. This research is partially supported by the Research Grants Council of Hong Kong Special Administrative Region, China (GRF 5455/11). Wong is partially supported by The Hong Kong Polytechnic University (Grant no. A-PL75).

Appendix A. Profile of the respondents.

Company characteristics

Respondents Company (%) characteristics

Number of employees

Respondents (%)

Product type

1–10

14.8

11–50

33.6

51–100

35.9

101–500

6.3

4500

2.3

Tobacco products Petroleum refining and related industries Rubber and miscellaneous plastic products Leather and leather products

4.7 1.6

7.0

1.6

25

116

Unknown

K.-h. Lai et al. / Int. J. Production Economics 146 (2013) 106–117

7.0

Total annual sales (million USD) o $10 13.3 4 $10–$20

31.3

4 $20–$50

35.2

4 $50–$100

10.9

4 $100 Unknown

2.3 7.0

Stone, clay, glass, and concrete products Apparel and other finished products made from fabrics and similar products Lumber and wood products

7.8

2.3

Fabricated and metal products

6.3

Paper and allied products Industrial, commercial, machinery, and computer equipment Printing, publishing, and allied industries Electronic and other electrical equipment and components

3.1 1.6

1.6

3.1

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