Bringing strategy back in: Corporate sustainability and firm performance

Abstract

Despite the importance of firms' strategy in corporate sustainability (CS), insufficient research has focused on the role of business strategy in the relationship between CS and firm performance. Focusing on generic business strategy, this study examines when and under what conditions CS relates to firm performance. The main argument is that the effects of CS on firm performance are contingent on the firm's business strategy. The findings present that CS strengths are positively related to firm performance when firms pursue a differentiation strategy. Meanwhile, CS concerns are negatively associated with firm performance when firms operate with a differentiation strategy. Empirical evidence is obtained from a sample of U.S. firms and fixed effects panel regression models, which controls for unobservable time-invariant factors that are correlated with covariates. This study contributes to the literature on CS and firm performance by suggesting business strategy as an important moderating condition in the CS-firm performance link.