Linking environmental corporate social responsibility to firm performance: The role of partnership restructure

Environmental Science and Pollution Research https://doi.org/10.1007/s11356-023-25776-1 RESEARCH ARTICLE Linking environmental corporate social responsibility to firm performance: The role of partnership restructure Zohaib Hussain Makhdoom1 · Yongqiang Gao1 · Xi Song2 · Wali Muhammad Khoso3 · Zulfiqar Ali Baloch3 Received: 15 November 2022 / Accepted: 2 February 2023 © The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2023 Abstract In this study, we integrate the signal institutional theory and stakeholder theory to examine partnership restructure as a critical mechanism linking environmental corporate social responsibility (ECSR) to corporate financial performance. Keeping in line with most prior studies, we first argue that a positive relationship exists between ECSR and firm performance. Then we propose that partnership restructure mediates the nexus between ECSR and firm performance because ECSR may motivate firms to change their partners in the better interests of the firms. In addition, we propose that the firms’ industry power will exaggerate while dysfunctional competition will weaken the positive nexus between ECSR and partnership restructure. Evidence based on a survey covering 206 manufacturing firms in China offers good support for our predictions. This last section offers research contributions and implications for the managers based on the findings. Keywords Environmental corporate social responsibility · Partnership restructure · Dysfunctional competition · Firm performance · Industry power Abbreviations CSR Corporate social responsibility ECSR Environmental corporate social responsibility SEM Structural equation modelling AMOS Analysis of moment structures SPSS Statistical Package for Social Sciences CMIN Chi-square value RMSEA Root mean error of approximation Responsible Editor: Arshian Sharif * Zohaib Hussain Makhdoom Yongqiang Gao Xi Song Wali Muhammad Khoso Zulfiqar Ali Baloch 1 School of Management, Huazhong University of Science and Technology, Wuhan, China 2 School of Management, Lanzhou University, Lanzhou, China 3 College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing, China CFI Comparative fit index NFI Normed fit index NNFI Non-normed fit index IFI Incremental fit index Introduction Corporate social responsibility (CSR) has been a fascinating field among industrial experts and research scholars in the last few decades. According to European Commission (2011), CSR is the responsibility of firms for their impacts on society. A CSR firm must consider the actions’ social, environmental, and consumer consequences to maximize its shareholders’ wealth. CSR has become widespread in many firms over the last few decades. In this research article, we have specifically focused on the environmental domain of CSR called environmental corporate social responsibility (ECSR) because it can significantly enhance the production of critical resources while simultaneously reducing the negative impact on the environment (Deng et al. 2022; Işik et al. 2017; Song and Yu 2018). Furthermore, it would be easier for the firms to manage growing pressure from society, government, and international agencies and help firms to have a competitive advantage in the market (Calantone et al. 2002; Khan et al. 2022). Therefore, ECSR aims to reduce the 13 Vol.:(0123456789) Environmental Science and Pollution Research hazardous effect on the environment created through continuous business activities and maintain firm performance simultaneously. Environmental corporate social responsibility (ECSR) refers to organizations’ actions to address environmental issues and promote sustainable development. This can include reducing carbon emissions, conserving natural resources, and promoting environmentally friendly products and services. Research has shown that ECSR can positively impact a firm’s performance (Habaragoda 2018; Rahman and Post 2012; Wang et al. 2021). Adopting ECSR practices can lead to cost savings through resource efficiency, increased revenue through developing new products and services, and improved reputation and brand image (Işık et al. 2021; Razzaq et al. 2022). Additionally, many consumers and investors are becoming increasingly interested in socially responsible investing and are more likely to support environmentally responsible companies. During the development of sustainable industries, ECSR can play a crucial role in helping firms to stay competitive (Ahmad et al. 2021a, b; Pata and Isik 2021). It can enable firms to take advantage of new market opportunities, improve their reputation, and reduce their environmental impact (Işık et al. 2022; Sinha et al. 2021). However, it is important to note that implementing ECSR practices can also be challenging and may require significant investment, so firms should consider the costs and benefits before deciding. Overall, ECSR can positively impact a firm’s performance, especially during the development of sustainable industries. It can help companies reduce costs, increase revenue, and improve their reputation, ultimately leading to better performance. Partnership restructuring refers to bringing changes in the firm’s partnership to deal with unforeseeable issues. When a firm adopts high ECSR, it may expect its partners to make some change (restructuring). That is because, strategically, it is an excellent option to reorganize the firm partnership structure to find a competitive position to take advantage of the prospects that are currently accessible. Therefore, high ECSR may motivate the focal firm to initiate partnership restructuring, which will likely enhance firm performance. Furthermore, “industrial power” is a term that describes a company’s status in a social rank or hierarchy and its level of influence inside a particular industry (Feng et al. 2015; Khan et al. 2021). In the case of high industrial power, firms are often highly recognized with respect and recognition from the competitors in terms of performance and status of the firm, which is socially constructed (Deng et al. 2022; Lee 2009). Taking the case of emerging countries, the development of the market institutions is not stable; suitable property protection is limited and dysfunctional competition is proven to impact the financial performance of the firms negatively (Jean et al. 2014; Smirnova 2020). On the other hand, it is believed 13 that dysfunctional competition is not necessarily destructive, especially regarding new modifications in the business structure (Xu et al. 2021), as dysfunctional competition has the potential to compel a company to sharpen its focus and search for a more efficient approach (Liu and Atuahene-Gima 2018) by significant innovative practices (Du et al. 2016; Zhao et al. 2021). This research examines how dysfunctional competition moderates between ESCR and partnership restructure. This research has made se (...truncated)