The long-term benefits of organizational resilience through sustainable business practices

Natalia Ortiz-de-Mandojana, Pratima Bansal

Research output: Contribution to journalArticleResearchpeer-review

189 Citations (Scopus)

Abstract

Research summary: Prior work on the benefits of business sustainability often applies short-term causal logic and data analysis. In this article, we argue that the social and the environmental practices (SEPs) associated with business sustainability not only contribute to short-term outcomes, but also to organizational resilience, which we define as the firm's ability to sense and correct maladaptive tendencies and cope positively with unexpected situations. Because organizational resilience is a latent, path-dependent construct, we assess it through the long-term outcomes, including improved financial volatility, sales growth, and survival rates. We tested these hypotheses with data from 121 U.S.-based matched-pairs (242 individual firms) over a 15-year period. We also tested, but did not find support for, the relationship between SEPs and short-term financial performance. Managerial summary: Most managers look for short-term financial benefits to justify socially responsible or sustainable practices. In this article, we argue that such practices also help firms become more resilient, which helps them avoid crises and bounce back from shocks. However, it is difficult to measure the avoidance of shocks, so we analyzed long-term outcomes. We show that firms that adopt responsible social and environmental practices, relative to a carefully matched control group, have lower financial volatility, higher sales growth, and higher chances of survival over a 15-year period; yet, we were unable to find any differences in short-term profits. We hope this research provides good reasons for firms to practice sustainability beyond the pursuit of short-term profits.

Original languageEnglish
Pages (from-to)1615-1631
Number of pages17
JournalStrategic Management Journal
Volume37
Issue number8
DOIs
Publication statusPublished - Aug 2016
Externally publishedYes

Keywords

  • business sustainability
  • corporate social responsibility
  • organizational resilience
  • short-termism
  • social and environmental practices

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