The Relationship between Corporate Environmental Responsibility and Firm Performance: A Moderated Mediation Model of Strategic Similarity and Organization Slack

Xiangzhi Bu,Jianming Wang,Van Thac Dang,Ninh Nguyen

doi:10.3390/su11123395

Abstract

There has been growing interest among business managers and academics in corporate environmental responsibility (CER), which represents a company’s focus on its long-term sustainability and society. Past research, however, has reported inconsistent and mixed results with regard to the link between CER and firm performance. This study, therefore, proposes and validates a moderated mediation model of strategic similarity and organizational slack to better explain the relationship between CER and firm performance. Data were obtained from 260 listed firms in China from 2015 to 2017, resulting in 780 firm-year observations. Multivariate data analysis indicates that strategic similarity mediates the relationship between CER and firm performance. Furthermore, organizational slack moderates the relationship between CER and strategic similarity and the indirect effect of CER on firm performance through strategic similarity. The findings of this study provide insights for business managers attempting to understand and enhance the quality of their decision making regarding CER. Importantly, business managers should engage in CER activity and pursue strategic similarity to deal with pressure from stakeholders while following the competitive speed of competitors in the marketplace.

Highlights

The issue of corporate environmental responsibility (CER) has been widely discussed in recent years
Organizational slack was positively related to strategic similarity (r = 0.22, p < 0.01) and firm performance (r = 0.24, p < 0.01) but not to CER (r = −0.02, p > 0.05)
Such findings provide insights for business managers and leaders attempting to develop and implement CER practices, which contribute to corporate long-term sustainability and environmental quality

Summary

Introduction

The issue of corporate environmental responsibility (CER) has been widely discussed in recent years. Business firms still hold skeptical attitudes about the effects of CER on firm profits [2] As a result, they reluctantly engage in CER activity and cautiously comply with government regulations [1]. The clarification of the link between CER and firm performance is critical for business practice, academia, and government agencies [3] This approach will persuade business firms to actively take actions if they understand the link between CER and firm performance. Environmentally responsible behavior increases firms’ reputations and makes firms become an attractive investment. Such firms can achieve support from stakeholders [3], reduce operational risk, and obtain long-term growth [8]

Objectives

Methods

Results

Discussion

Conclusion