Inter-Firm ESG Rivalry: A Competitive Dynamics View

Abstract

Sustainability literature has largely focused on business practices that result in environmental benefits that might not always be profitable to the firm, and thus, tend to be less appealing to the corporate board rooms. In this study, I examine if the rival firm’s sustainability behavior is driven by the focal firm’s behavior. Although a growing number of firms globally have voluntarily adopted and carried out a wide range of sustainability practices, there are firms that are driven by the position taken by industry competitors. Here, I examine such phenomena, to determine if a focal firm’s sustainability behavior is influenced by the rival’s sustainability behavior. In addition, I also examine how the competitive landscape of the focal firm, in the form of the focal firm’s size, the rival’s sustainability reputation, and industry concentration moderates the behavioral influence. I find a positive association between the rival firm’s sustainability performance and the focal firm’s sustainability performance. I also find that the focal firm’s size and industry concentration positively moderate the rivalry. Rival firms’ sustainability reputation does not have an impact on the rivalry.