The Effect of Corporate Environmental Strategy Choice and Environmental Performance on Competitiveness and Economic Performance: An Empirical Study of EU Manufacturing MARCUS WAGNER, Centre for Sustainability Management, University of L € uneburg STEFAN SCHALTEGGER, Centre for Sustainability Management, University of L € uneburg This paper provides a discussion of the relationship between environmental and economic performance and the influence of corporate environmental strat- egy choice on this relationship. After formulating a theoretical model, it reports results of an empirical analysis carried out for the European manufacturing industry, which uses new data to test hypotheses derived from the model. Corporate environmental strategies are identified on the basis of their orienta- tion towards shareholder value. The analysis finds that for firms with shareholder value-oriented strat- egies the relationship between environmental per- formance and different dimensions of economic performance is more positive than for firms without such a strategy. Ó 2004 Published by Elsevier Ltd. Keywords: Environmental strategy, Environmental performance, EU manufacturing Theoretical Model and Hypothesis Development The impact of environmental management activities on competitiveness and corporate economic success has been debated strongly for many years (Bragdon and Merlin, 1972; Porter and van der Linde, 1995; Palmer et al., 1995; Lankoski, 2000). More recently theoretical analyses argue that there is no given auto- matic economic (positive or negative) effect of corpo- rate environmental protection activities on competitiveness and economic performance. Fur- thermore the analysis of environmental management activities from an economic point of view should be carried out in terms of the expected value (i.e. the mean) of returns of such activities as well as the risk (i.e. the variance) attached to these returns (Rein- hardt, 1999a,b). European Management Journal Vol. 22, No. 5, pp. 557–572, October 2004 557 doi:10.1016/j.emj.2004.09.013 European Management Journal Vol. 22, No. 5, pp. 557–572, 2004 Ó 2004 Published by Elsevier Ltd. Printed in Great Britain 0263-2373 $30.00