Defining and measuring variables

The concepts of corporate environmental responsibility (CER), corporate financial perfor-mance (CFP) and IT capabilities will be measured by using variables found in the theoretical foundation. Concepts of IT capabilities and financial performance are scale variables, while the concept of environmental responsibility is a categorical (nominal) variable. The data will be analyzed by using SPSS Statistics.

Measuring of the independent variables of IT capabilities, the competitive advantage and cor-porate environmental responsibility (CER), the determinant, is based on the idea that they in-teract with one another. The dependent variables, operating revenue, change in operating rev-enue and financial performance indicate corporate performance, which is the outcome of the two independent variables. The results are expressed in a way where CER has a positive ef-fect towards financial measures of companies and where IT capabilities moderate the efef-fect of CER and financial measures when all hypotheses are affirmed. In the next chapters, the meas-ured variables will be introduced based on previous research.

4.1.1 Measuring environmental responsibility

Corporate environmental responsibility (CER) has mainly been studied with qualitative meth-ods, but in this research CER activities will be measured as categorical variables. Since there are no fixed factors for measuring corporate environmental responsibility, the measurement will be made by using environmental management systems (EMS) or environmental manage-ment practices (EMP) since they represent CER activities as manage-mentioned in the chapter of measurement methodologies in CER. As implementing EMS causes indirect benefits for the society, they represent a standardized measurement methodology for environmental as well as social responsibility. (Gunningham 2009, 543-548.)

Reasons for applying or planning environmental management systems (EMS) are conducted from Steger’s (1993) Motives for the importance assigned to environmental protection in companies (Steger in Gunningham 2009, 394) and Economist Intelligence Unit’s (2009) lead-ing motivations for sustainability initiatives. Environmental management systems (EMS) (Steger 1993; Auld et al 2008) will be used to identify CER in companies and later referred to as EMS. Environmental responsibility is measures through nominal scales (categorical data).

4.1.2 Measuring IT capabilities

As it was pointed out by Ross (2018) and Iansiti and Lakhani (2014), digital technologies are homogenous and replicable and they cannot be considered as a competitive advantage of a corporation, the interest of this study was specified towards IT capabilities that measure the corporation’s technological development. Therefore, Bharadwaj et al’s (1999), Tippins and

Sohi’s (2003) Webb and Schlemmer’s (2008) and Kmieciak et al’s (2012) groundwork for IT competencies, IT capabilities or IT assets will be put into practice. IT capabilities are multidi-mensional and consist of multiple factors, such as IT knowledge, IT operations, IT objects and IT in internal communications. In this study the concept is introduced as IT capabilities and the dimensions are more specified than in previous research. Measuring IT capabilities will be conducted from different dimensions of the IT capability concept introduced below.

As there are no fixed factors or clear groundwork, measuring these dimensions separately pro-duce more reliable results concerning the concept of IT capability.

Different dimensions of IT capability will be measured through a 1-10 graphic rating scale (interval scale). The model of IT capabilities as moderators of corporate environmental re-sponsibility and corporate financial performance used in the analysis is following:

W * y = x.

The concepts used in the research are presented in the following table. The framework is based on Tippins and Sohi (2003), Webb and Schlemmer (2008) and Kmieciak et al (2012).

Table 1. IT capabilities

& Sohi 2003; Webb &

Schlemmer 2008;

Kmieciak et al 2012)

1. We are very knowledgeable about new IT-based innovations.

Tippins & Sohi (2003), Webb & Schlemmer (2008), Kmieciak et al (2012).

IT operations (Tippins

& Sohi 2003); Webb &

Schlemmer 2008) / Integration of IT with business strategy (Kmieciak et al 2012)

2. We use information technology to collect and analyze market in-formation.

3. We have set procedures for col-lecting customer information from

4. We budget every year a signifi-cant amount of funds for new in-formation technology (hardware and software).

Tippins & Sohi (2003), Webb & Schlemmer (2008).

4.1.3 Measuring financial performance

Corporate financial performance (CFP) can be described as absolute, and therefore it is the most common way to evaluate and measure corporate performance. As Bourne and Bourne (2011) stated, performance can only be measured inside the organization or industry and therefore relative measures need to be put to use.

CFP is typically measured with profitability ratios that are retrieved from financial statements.

They are relatively standardized and readily available statistics, which makes them easy to use. (Galant & Cadez 2017.) Companies’ financial ratios will be gathered from Amadeus

database where all the revenue and profit information of the companies’ included in the re-search is shared. The annual financial information will be gathered from three-years-time, starting from the year 2017 until the year 2019 (last available year).

The financial measure used in this research is operating revenue. As a dependent variable, it is used as an absolute to measure the financial resources and as a percentage change to measure financial performance. The percentage change is calculated by:

(n – n-1) / n-1, where n is the last reported year and n-1 is a reference year (2 years earlier).

In addition to these, a secondary subjective data will be used adapted from Webb and Schlemmer’s (2008) financial performance of firms in different industries:

1. revenue

2. increase in sales compared to competitors 3. market share

4. return on investment (ROI)

These are measured through a 5-point Likert scale in the survey, where the respondents have to value their financial performance in three-years-time.

A view based on Barney (1991), Hawawini et al (2003) and Chan, Bhargava and Street (2006) assumes that differences in performance are firm specific and not related to changes in the industry. In this study the interest is in firm-based outlines, so the firm-specific approach is applied to support the subjective outcomes. Financial performance is measured with ordinal and interval scales through a primary and secondary data.