Value Creation Chain for Going Green: Evidence from the Construction Industry

Going green is a mega trend in the construction industry and is incorporated in the project's delivery, front-end design, constructing process, contracting negotiation and facility operation. Such a green trend is also certified as a huge benefit for practical investors and debated in previous literature. However, the value creation path, from initiating a green concept until gaining economic payback, is still unclear and has only been investigated a few times in the construction industry. Studying such a green value creation chain can significantly help construction firms make wise decisions prior to investing any green business. The study also facilitates the understanding of key management issues when a construction company transforms into green business, such as pricing strategy, cost control, new market entry, and corporate financing. To fulfill these aims, this research conducts an empirical regression analysis based on 22 public firms in the US construction industry. A stepwise regression model tests firms' financial performances including Economic Value Added (EVA) and six accounting measures. The proposed result shows that embracing green business could create more value for construction companies through two chains: (1) by creating a higher operating profit margin; (2) by managing assets more efficiently with a higher turnover rate. Possible explanations and managerial implications are discussed at the end.