Relationships among Ethical Commitment, Ethical Climate, Sustainable Procurement Practices, and SME Performance: An PLS-SEM Analysis

Md. Mazharul Islam and Majed Alharthi
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Md. Mazharul Islam: Department of Finance, College of Business, King Abdulaziz University, Rabigh 21911, Saudi Arabia
Majed Alharthi: Department of Finance, College of Business, King Abdulaziz University, Rabigh 21911, Saudi Arabia

Sustainability, 2020, vol. 12, issue 23, 1-25

Abstract: Although plenty of discussions have been conducted on the importance of top management’s ethical commitment (TMEC), companies’ ethical climate (EC), sustainable procurement practices (SPP) and organizational performance, empirical studies to explain the mechanism through which the top management’s ethical commitment generates favorable performance for Small and Medium Enterprises (SMEs) are still not yet established. Constructing a formal theory, we recommend that TMEC contributes to SMEs’ performance by promoting the company’s EC and SPP. This hypothetical outline was empirically tested using a sample of SMEs in Saudi Arabia. This study tested hypotheses using structural equation modelling (PLS-SEM). Our analysis shows that TMEC significantly predicts companies’ EC and SPP, which then fully mediate the effects of TMEC on SMEs’ non-financial performance (NFP). This research supports the reasonable theoretical statement that TMEC boosts SME performance by providing empirical validation. The results also show that TMEC, the company’s EC, and SPP impact SMEs’ performance directly, except for the impacts of SPP on FP.

Keywords: ethical commitment; ethical climate; sustainable procurement practices; SME performance; structural equation modelling (PLS-SEM); Saudi Arabia (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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