Deviations from aspirational target levels and environmental and safety performance : implications for operations managers acting irresponsibly

Abstract

The relationship between sustainable operations and a firm's financial performance has been an ongoing focus of operations management scholars. Previous literature has extensively explored the impact of acting responsibly on financial performance. This article applies the behavioral theory of the firm and prospect theory to assess the much-neglected reverse relationship, exploring whether a firm's relative aspirational financial performance impacts its likelihood of acting irresponsibly. Furthermore, we explore whether operational slack in the form of capacity, productivity, and inventory attenuates a firm's likelihood of acting irresponsibly when its actual financial performance deviates from its aspirational level. We use a matched pair design with privately held manufacturing firms in the United Kingdom who acted irresponsibly matched with similar firms who did not act irresponsibly. While most firms do not act irresponsibly, we find that the further a firm moves (positively or negatively) from its aspirational level of financial performance, the more likely it is to act irresponsibly. The results also indicate that slack generally does not prevent managers from acting irresponsibly, especially when performing relatively well. This study contributes to the sustainable operations literature and provides important theoretical, managerial, and policy implications.