A Triptych Inquiry: Rethinking Sustainability, Innovation, and Financial Performance

Timo Busch, Bryan T. Stinchfield and Matthew S. Wood
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Timo Busch: ETH Zuerich, Switzerland
Bryan T. Stinchfield: Franklin & Marshall College, Lancaster, Carbondale
Matthew S. Wood: Cameron School of Business, University of North Carolina Wilmington

Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Management scholars have sought to answer the question: is there a financial payoff for ad-dressing ecological and social issues? We move beyond this question and include a time com-ponent for corporate financial performance (CFP) and a firm’s innovativeness in order to ask: when does it pay? Combining a contingency perspective with the resource-based view of the firm clarifies the positive relationship between corporate environmental and social perform-ance (ESP) and CFP, which only holds in the long-term but not in the short-term. Further, we find support for a moderating effect of innovation on the relationship between the ESP and short-term CFP as suggested by the literature. However, we empirically show that in the long-term, innovation mediates the ESP-CFP relationship suggesting that innovation should be considered as a long-term investment required to unlock the full potential of ESP initiatives.

Keywords: Sustainable development; innovation; firm performance; Tobin’s q; moderation and mediation (search for similar items in EconPapers)
JEL-codes: G30 L20 M14 Q01 (search for similar items in EconPapers)
Date: 2011-02-10
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Citations: View citations in EconPapers (4)

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