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Mismanagement of Sustainability: What Business Strategy Makes the Difference? Empirical Evidence from the USA

Janine Maniora ()
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Janine Maniora: Technical University of Dortmund

Journal of Business Ethics, 2018, vol. 152, issue 4, 931-947

Abstract: Abstract This paper examines whether and to what extent the overall business strategy influences the firm’s mismanagement of sustainability. Specifically, an empirical measure for the mismanagement of sustainability is developed by exploiting the newly available materiality guidelines for US firms to define industry-specific material sustainability issues. Using this measure, this paper shows that mismanagement of sustainability can represent unethical business behavior when firms intentionally perform better on immaterial issues than on material issues by diverting stakeholders’ attention from the firm’s low overall sustainability performance. This paper assumes that the right business strategy can prevent such unethical actions. Based on Miles and Snow’s (Organizational strategy, structure and process, McGraw-Hill, New York, 1978) organizational theory, this paper distinguishes between Prospector and Defender business strategies. By employing multiple firm-level panel regressions, the findings suggest that Prospector-type firms are more likely to mismanage sustainability issues compared to Defender-type firms intentionally. The results give implications for researchers, regulators and standard setters, auditors, sustainability practitioners, and scholars.

Keywords: Business ethics; Business strategy; Corporate performance; Corporate social responsibility; Materiality; Strategic management; Sustainability (search for similar items in EconPapers)
JEL-codes: G3 L2 M1 M2 M3 M4 (search for similar items in EconPapers)
Date: 2018
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