When Does Corporate Sustainability Performance Pay off? The Impact of Country-Level Sustainability Performance

Xiao, C., Wang, Q., van der Vaart, T. & van Donk, D. P. Apr-2018 In : Ecological Economics. 146, p. 325-333 9 p.

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There has been considerable debate on and research efforts into the question as to if, and if so when, improving
corporate sustainability performance is not only beneficial for social and environmental wellbeing but also for
the financial wellbeing of a firm. So far, the literature has reported mixed results on the relationship between
corporate sustainability and financial performance. Drawing on instrumental stakeholder theory, we develop a
focal hypothesis arguing that the financial effect of corporate sustainability performance is negatively impacted
by country-level sustainability performance because stakeholders will take a firm's sustainability improvement
for granted in countries with good social and environmental performance. We test this focal hypothesis in a
cross-country setting drawing on the 6th International Manufacturing Strategy Survey. The current study supplements
these data with secondary data drawn from the Human Development Index and the Environmental
Performance Index. The results support our hypothesis that firms in countries with higher levels of sustainability
performance generally find it more difficult to capitalize on corporate sustainability performance than do their
counterparts in countries with relatively low levels of sustainability performance. This outcome helps to explain
the mixed findings in the literature. Moreover, our study suggests that sustainability management can be a
source of competitive advantage for firms located in emerging and developing countries, where in general the
level of sustainability performance is relatively low.
Original languageEnglish
Pages (from-to)325-333
Number of pages9
JournalEcological Economics
StatePublished - Apr-2018


  • Corporate sustainability performance, Corporate financial performance, Country-level sustainability performance, Cross-country analysis, Instrumental stakeholder theory

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