The Relationship between Culture, Sustainable Use of Resources, and Financial Performance: An Institutional and Natural-Resource-Based Perspective

Deon H. Engelke, Rhodes University, Makhanda, South Africa and IEE Varsity College, Gqeberha, South AfricaFollow
Noel J. Pearse, Rhodes University, Makhanda, South Africa
Fabio M. Correa, University of the Free State, Bloemfontein, South Africa
Frederick O. Skae, Rhodes University, Makhanda, South Africa

ORCID

D. H. Engelke: https://orcid.org/0000-0003-4517-4365

N. J. Pearse: https://orcid.org/0000-0001-7583-9845

F. M. Correa: https://orcid.org/0000-0002-6708-9316

F. O. Skae: https://orcid.org/0000-0003-2450-8231

Keywords

National Culture, Sustainability, ESG, Resource-Based Theory; Natural-Resource-Based Theory, Institutional Theory

Abstract

Modelling a dataset of 5230 globally listed firms through two statistical approaches reflecting the primary principles of Natural-Resource-Based Theory and Institutional Theory, respectively, this study provides evidence that sustainability initiatives developed by firms are being rewarded in the form of improved Corporate Financial Performance (CFP). Culture has a significant influence on both firm sustainability performance, captured in ESG ratings, and CFP and also interacts with other variables, including industry sector and socio-economic development of a firm’s markets. This study is unique in hypothesising and statistically proving that sustainability is a mechanism that activates the potential of culture to produce CFP. Natural-Resource-Based Theory (NRBT) and Institutional Theory (DiMaggio & Powell, 1983) provide complementary explanations for the relationship between the culture of a firm and its CFP being mediated by sustainability, effectively determining firms’ approach to the use of their resources in a sustainable or unsustainable way. Certain relationships between culture, sustainability performance, and CFP, however, are better explained by Institutional Theory than NRBT.

Recommended Citation

Engelke, D., Pearse, N., Correa, F., & Skae, F. (2024). The Relationship between Culture, Sustainable Use of Resources, and Financial Performance: An Institutional and Natural-Resource-Based Perspective. Economic and Business Review, 26(2), 61-80. https://doi.org/10.15458/2335-4216.1335