Linking responsible leadership with financial and environmental performance: determining mediation and moderation

Abstract

PurposeDrawing upon the institutional theory, this study examines the influence of responsible leadership on firm performance. Furthermore, this research investigates environmental management practices (EnvMP) as an underlying mechanism and institutional pressures as boundary condition between responsible leadership and firm performance.Design/methodology/approachTime-lagged data were collected using survey-questionnaire from 385 mid-level employees of construction industry in Pakistan. Partial least square-structural equation modeling (PLS-SEM) was used to analyze the data.FindingsResults demonstrate that responsible leadership impacts firm performance (financial and nonfinancial) directly and through EnvMP. Furthermore, institutional pressure moderates the link between responsible leadership and EnvMP. However, moderated mediation effect of intuitional pressures was found insignificant.Practical implicationsThis study suggest that EnvMP is a key process through which responsible leadership influences firms' financial and nonfinancial performance and shed lights as to when responsible leaders matter most in terms of firm performance through low or high institutional pressures.Originality/valueThis paper is an early attempt which contributes to the body of literature on responsible leadership by investigating mechanisms (how) and boundary condition (when) through which responsible leadership influences firms' financial and environmental performance.