The impact of responsible production on market, financial, and operational performance

Abstract

As the significance of sustainability continues to escalate, responsible production, designated as the twelfth sustainable development goal (SDG12), has emerged as a viable strategy for Chinese manufacturers to attain the triple bottom line (TBL) of economic, social, and environmental sustainability. Nevertheless, manufacturers exhibit reluctance to embrace responsible production practices due to the associated economic uncertainties and heightened cost investments. This thesis presents three interconnected studies to assess these practices' impact on market, financial, and operational performance in both the short and long term. Study 1 delves into the short-term market reaction to manufacturers' adoption of responsible production practices, exploring the moderating effects of firm size and financial slack. Leveraging a dataset encompassing 392 manufacturers that implemented these practices from 2016 to 2023, this study utilizes an event study methodology to uncover the positive market valuation associated with adopting responsible production practices. Through cross-sectional regression analysis, this study reveals that firm size and financial slack amplify the market value gains derived from adopting these practices, particularly amidst the COVID-19 pandemic. These findings provide valuable managerial insights to guide firms' transition towards responsible production while preserving and enhancing their firm value. Study 2 evaluates the financial performance of resource-responsible production while examining the moderating effects of digital transformation and political connections. This study establishes the positive influence of resource-responsible production on financial performance by employing propensity score matching and difference-in-differences (PSM-DID) analysis on a dataset of 3,022 firm-year observations. The findings indicate that digital transformation and political connections amplify this positive impact, underscoring their pivotal role in enhancing the organization-resource relationship for financial success. This study contributes to the natural resource-based view literature by highlighting the significance of digital transformation and political connections in fostering sustainable financial performance. These insights offer practical guidance for managers seeking to effectively integrate resource-responsible production practices into their operations and for policymakers aiming to achieve sustainability goals. Study 3 assesses the influence of green gamification and its interactive effects on state ownership and R&D investment on operational efficiency. Utilizing a two-stage difference-in-differences (2SDID) analysis of 18,297 firm-year observations, the study finds that firms designated as green exemplars generally attain higher operational efficiency, with the most pronounced gains observed in the long term. Intriguingly, the results indicate that state ownership reinforces, while R&D investment diminishes, the positive impact of green gamification on operational efficiency. This research contributes novel insights to the operations management (OM) literature by underscoring the value of green gamification in enhancing operational efficiency and elucidating the moderating effects of organizational (state ownership) and technological (R&D investment) factors on this relationship. The findings offer practical recommendations for policymakers and manufacturers to harness green gamification strategies for greater efficiency gains. This thesis advances the literature about responsible production for sustainability by revealing its significance in performance improvement under varying conditions. More importantly, it provides managerial and policy implications for resource allocation to effectively embrace responsible production and achieve sustainable development.