Nexus of sustainability and organizational resilience: The role of operational slack

Abstract

The outbreak of COVID-19 provides a unique opportunity to examine new challenges for organizational resilience. This study empirically investigates the relationship between a firm's sustainability performance (in the form of an environmental, social, and governance [ESG] score) and its organizational resilience while considering the moderating effects of operational slack. To address these issues, we collected 1167 cross-sectional data points with samples in manufacturing firms from the China Stock Market & Accounting Research and the Wind Financial Terminal databases in the year 2020, when the manufacturing industry is severely hit by COVID. Using the ordinary least squares and Cox survival methods to conduct regression analyses, our results reveal that a firm's ESG performance has positive impacts on its resilience in the form of stability and flexibility. We also find that three types of operational slack (production capacity, labor productivity, and inventory slack) positively moderate the relationship between ESG performance and stability. Additionally, production capability slack and labor slack positively moderate the relationship between ESG performance and flexibility. By doing so, we contribute to the emergent stream of research on the nexus of sustainability and resilience in the context of a global pandemic.