Sustainable Supply Management Practices and Sustainability Performance: The Dynamic Capability Perspective

Sustainable Supply Management Practices

Sustainability practices of businesses are the element of capability (Dabhilkar et al., 2016; Pullman et al., 2009), and in literature, SSM practices have been referred to as businesses’ dynamic capabilities (Kilubi & Rogers, 2018; Reuter et al., 2010). SSM practices outline how businesses device and attain sustainability in the process of supply management and purchasing decisions (Kähkönen et al., 2018). The definition of SSM practices is rooted in the definition of SSCM. In literature, SSCM practices have been defined in varied ways; for example, according to Pagell and Wu (2009), the particular managerial activities relating to the supply chain aim to make them genuinely sustainable chain. However, many other authors deemed SSCM as supply chain management, the focus of which is to maintain stability relating to environment, economic and social activities to achieve further long-term sustainable growth (Ahi & Searcy, 2013; Ciccullo et al., 2018; Fahimnia et al., 2015; Seuring & Müller, 2008). According to Kähkönen et al. (2018), the definition of supply chain management can be considered for SSM study since such studies focus on the business activities that ensure sustainability while they select, assess, and manage suppliers.

Altogether, from these conceptions, it is clear that society’s sustainable growth rests on sustainable supply chain management up to a certain degree. Hence, many academicians focus on the SSCM notion to study theoretical and practical issues. However, when traditional supply management and purchasing practices compared, many stakeholders and customers do not distinguish between business sustainability’s practices and supply base (Roy et al., 2018; Touboulic & Walker, 2015), where the issues in and failure of suppliers’ sustainability imitate directly on the business performance (Awasthi et al., 2018) and realization of business sustainability risk (Hajmohammad & Vachon, 2016). Therefore, Kähkönen et al. (2018) considered that SSM practices might present a broader viewpoint, which integrates the need to study social and environmental values, along with economic values. Giunipero et al. (2012) reported that such integration of values helps businesses attain their overall objectives sustainably and profitably. Thus, concentrating on SSM practices is a decent starting point for achieving business sustainability. Giunipero et al. (2012) referred to SSM as the degree to which businesses supply management practices of social, environmental, and economic values integrated with their supply base relating to the selection, evaluation, and management. Our study is based on this definition as we concentrate on organizational practices to ensure sustainability about the selection, evaluation, and management of suppliers.

Sustainability Performance

Gualandris et al. (2014) refer SP to as a “firm’s performance regarding environment and society” (p. 263). However, firm performance is traditionally defined as economic achievement measured by financial performance measures: return on investment, profit, and so on (Orlitzky et al., 2003). Also, Pagell and Wu (2009) referred to a sustainable supply chain of a firm that achieves both objectives of traditional measures of revenue and cost and extended performance conception, including environmental and social dimensions.

A necessary recent review of SSCM literature reveals that (Davis-Sramek et al., 2018; Ghadimi et al., 2019; Hong et al., 2018; Matthews et al., 2016; Touboulic & Walker, 2015) further research is called for more investigation and viewpoints beyond instrumental logic, where solely focal aim is to address economic and financial performance. Performance measured through these factors may create a paradox in the present organizational scenario, mainly since it might provoke tradeoff through giving priority to profit over society and assumes a firm-level context rather than studying their network or supply chain (Montabon et al., 2016). Primarily, management of SP is an essential component of performance management; however, little attention has been paid to the writings’ notion (Beske-Janssen et al., 2015; Maestrini et al., 2017).

Studies show that sustainable development can be stimulated in a certain period based on static abilities required in the supply chain (Kannan et al., 2014; Vanalle et al., 2017). Regarding SSM practices as a firms’ fundamental action about sustainable development of supply chain, researchers have synthesized their concepts based on sustainable theory and supply chain management (Ahi & Searcy, 2013; Carter & Rogers, 2008; Matthews et al., 2016) to examine firm performance and sustainability (Hong et al., 2018). In particular, Kähkönen et al. (2018) proposed a model of SSM practices, representing that a firm can gain higher SP by adopting these SSM practices. Furthermore, the resource-based view (RBV) basic assumptions are also applied since consistent with the RBV. Those resources that are non-substitutable, unique, rare, and more valuable are important to gain business competitiveness and value creation (Nason & Wiklund, 2018). As a result, if a business has distinct expertise and resources relating to SSM and is proficient in defining practices for managing effectively and gain sustainability in its supply and purchasing decisions, it can achieve a sustainable performance advantage compared with their competitors.

Nevertheless, since the market is turbulent, businesses are supposed to be proactively developed themselves in the perspective of sustainability (Beske-Janssen et al., 2015). Hence, extending the RBV context, the dynamic capability viewpoint is required to study (Kähkönen et al., 2018). RBV’s focus is on manipulating businesses’ existing resources; however, the dynamic capability also consists of strategies for evolving novel capabilities. It develops the business capabilities relating to SSM, and suppliers’ capabilities help enhance long-term sustainability’s performance. Therefore, this study is devised to address this crucial issue to study SSM practices and relate it to SP using a dynamic capability viewpoint as a theoretical underpinning.

Supply Chain Risk Management

Manuj and Mentzer (2008) refer SCRM to a process through which a firm can identify potential risk sources and then implement suitable approaches via a synchronized style between supply chain associates to minimize their vulnerability. In critical situations, a proactive and responsive approach regarding SCRM is the key concern to deal with supply chain risks (Sodhi et al., 2012). The approach adopted in SCRM should essentially be striving to recognize and holistically minimize supply chain risk by using partnership capabilities among supply chain members (Kilubi & Rogers, 2018). In a non-static environment marked by a higher degree of volatility and complexity, firms are required to manage their supply chain in a well-organized way to enhance their responsiveness and flexibility (Ho et al., 2015; Louis & Pagell, 2019; Yoon et al., 2018). Therefore, SCRM is considered an important dimension of business existence.

The above argument is well supported by social capital theory, one of the most rapidly developing notion of a network study. Consistent with the viewpoint of Nahapiet and Ghoshal (1998), we think that social capital theory is the aggregated potential and existing resources rooted within, accessible though, and resulting from the network of links owned by a social unit or an individual in a society. Consist of the social capital theory proposition, SCRM is a constant process that needs lasting dedication and commitment involving all supply chain members (Kilubi & Rogers, 2018; Wu & Chiu, 2018).

Strategically the important firm capability is to restrain external risks and devise countermeasures in networks within the supply chain (Carnovale et al., 2019). The study at hand theorizes that those businesses that assume SSM practices are better at managing supply chain risks. Likewise, SCRM actions to attain or enhance business sustainability may become futile or have a surprisingly negative influence when a firm does not adopt SSM practices.

Network Capability

NC referred to capabilities that a firm has in a relational context on shared competitive advantage (Dyer & Singh, 1998; Wang & Rajagopalan, 2015), and the ability to successfully devise and handle many interfirm networks (Yeung & Coe, 2015). When two or more businesses’ combined actions are well coordinated, the supplier capabilities and performance increased, and supply-side hazards are decreased (J. Chen et al., 2013). A high degree of responsiveness may be attained through supply chains with ironic relational resources, enhancing value creation across the supply chain (Hong et al., 2018).

Social capital portrays the advantages of partnerships ties and networks in which actors of these ties underpins (Harper, 2015). The focal rationale of this point of view is demonstrated through an organization that structures partnerships ties of relations with another company that is essential assets for that organization, for example, a contract of purchasing (Ahuja et al., 2012). Relational allies are framed with stakeholders (such as competitors, unions, government departments, and suppliers) as a portion of the relational asset. The current varieties as a component of the relational asset are viewed as an expected result of the supply chain competition (Kim et al., 2011). The network capability assists in overhauling various relationships and it improves correspondence with various contacts at different dimensions (for example, managerial and technical). Network capability also improves multiple functions at business operations, such as sales, engineering, and quality, allow the creation of a social structure that string-pulling the two side of the network (Hearnshaw & Wilson, 2013) in the context of responsiveness and flexibility. Notwithstanding, contending supply chains recognize more notable increases through coordinated effort and exploit nearer connections that leave space for joint improvement possibilities (Kanda & Deshmukh, 2008). Consequently, we propose that NC mediates the relationship between SSM practices and SP.

Firm Size

SSM practices are considered to be dispersed through the enterprise and the network or chain to get the maximum influence. As expressed before, businesses are unfit to put on wholly SSM practices due to various practices and constrained capital. The quantity of SSM practices is large when all measurements are considered. In this way, firms must perceive which practice is highly significant and persuasive in SSM as the firm size is also considered as a primary factor affecting a business supply risk management (Kumar et al., 2018) and network resources (Huggins & Johnston, 2010) since large firms are found to have better data conveyance and perform better in utilizing information (Ellegaard, 2008), as compared with small enterprises (Raza et al., 2019; Raza & Majid, 2016). Therefore, this study argument grounded in the conception that SSM practices can amplify SCRM and NC linked with firm size, which, in turn, strengthens the path between SSM practices and SP.

Research Model and Hypotheses

Various organizational dynamic capabilities have been identified that may drive the sustainable performance of a business. However, the organizational capabilities influence sustainable performance depending on the extent of mechanisms to which these influences occur. This study considers the two most broadly studied notions that may be probable mechanisms are SCRM and NC between the relationship of SSM practices and SP. Firm size used as a necessary boundary condition in the above mention mediating mechanisms. All the hypothesize linkages are shown in Figure 1.

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Figure 1.

The conceptual framework showing hypothesized relationships.

Data and Sample

The data were collected from supply management professionals of manufacturing and logistics companies in China. The respondent’s companies clustered into six key industries: food; logistics services; wood, paper, and chemical; manufacture of equipment and machinery (such as electronic, plastic, metal, and nonmetal products); construction; and other industries. We hired 12 research assistants from the EMBA (Executive Master of Business Administration) class to find potential respondents. Only those firms considered a study population whose complete record of postal addresses, phone numbers, and email addresses were available on the online business dictionary. So, they can quickly contact data collection. The study might have a higher response rate. The data were collected through personal visits to postal addresses of businesses and email addresses by sending a soft copy of the questionnaire. These research assistants sent emails to randomly selected supply management professionals working in manufacturing and logistics companies across China to participate in this survey, explaining the research’s purpose. Also, supply management professionals of these organizations contacted telephonically. As a result of these efforts, the 544 companies ensured their participation in filling the survey instrument.

Next, we divided the 12 research assistants into two groups; one group (six members) was responsible for collecting data from large companies. The second group (six members) was responsible for small-to-medium enterprises. Subsequently, the selected respondents were trained about filling survey instruments, and the aim of the research also clarified to them. We get 436 responses back in a useful form, providing a response rate of 80.15% (436/544). Out of 436 responses, 211 (48.39%) responses were from large companies, and 225 (51.61%) were from on small and medium-sized enterprises (SMEs). The average firm age of the respondents was 19.79 years. Out of 436 respondents, 51.83% (226) were female; 34.63% (151) were single. Each response was given a unique number as proof of identity and kept on a protected drive to ensure the respondent’s data privacy. The survey lasts about 50 days. The appendix indicates the items of the constructs.

Measurements

SSM practices measures concern whether processes of supply management of respondent organizations incorporated these practices. SSM practices (α = 0.96) were measured using 18 items construct with seven response options (Kähkönen et al., 2018), which contained six items for guidelines dimension, six items for reporting dimension, three items for SCM upstream dimension, and three items for SCM downstream dimension.

Supply Chain Risk Management (SCRM) scale measuring developments driving supply chain risks developed by Thun and Hoenig (2011) was adapted for this study. Eight items were used to measured SCRM (α = .91). SCRM measures concern whether certain organizational developments contribute to a rise or decline of risk within the company supply chain.

Networking Capability (NC) (α = .95) construct was measured using 19 items construct with seven response options (Walter et al., 2006), which contained six items for coordination dimension, four items for each relational skill, partner knowledge dimensions individually, and five-item for internal communication.

Sustainability Performance—A seven-item SP scale used in Kähkönen et al. (2018) was adapted for our study to measure SP (α = .89). SP measures concern the evaluation of how respondents (supply management professionals) well assumed their company has successfully attained sustainability in the context of communication, strategy, organizing, and reporting.

Firm Size—The firm was divided into two groups, that is, small-to-medium enterprises (SMEs) and larger enterprises. SMEs were differentiated from large companies based on the most cited definition of SMEs provided by American SBA (Small Business Administration) (J. W. Lu & Beamish, 2001), signifying that SMEs are enterprises with less than 500 working employment sizes. A recent study applied this definition to measure the SMEs’ corporate performance relationship in China (Guo et al., 2019). Hence, our study also follows the same criteria to measure firm size: Firms with less than 500 employment sizes were considered SMEs, and firms with higher employment size than 500 were considered large enterprises.

Our study accounted for the influence of firm age and firm type. These variables control for their impacts on the SP.

Theoretical Contributions

First, our article enriches the knowledge of the linkage between SSM practices and performance outcomes of a business in the context of supply management professionals. This article has examined the role of SSM practices in increasing SP. The findings demonstrate that SSM practices have a positive influence on SP in the context of supply management professionals. This finding lends empirical evidence to recent theoretical arguments that highlighted the significance of examining SSM practices’ effect on a business’s performance (Golicic & Smith, 2013; Hong et al., 2018; Kähkönen et al., 2018; Kumar et al., 2018).

Second, the current article’s significant contribution is to reveal the two crucial underlying mediating mechanisms (SCRM and NC) by which SSM practices influence SP, echoing a recent call by Kähkönen et al. (2018). A stream of current research has focused on the mediating relationship between SSCM practices and various performance outcomes, such as SSCM practices and social, environmental, and economic performance through dynamic capabilities as a mediator (Hong et al., 2018). In additon, the relationship between stakeholder pressure and the SP of a firm has been also explored through SSCM as a mediator (Wolf, 2014). However, we know little relating to SSM practices and SP relationships and underlying mechanisms. Our findings show that the influence of SSM practices on SP is fully mediated by SCRM and NC simultaneously and individually, which advocates that dynamic SSM practices of business develop both SCRM and NC, which improves SP. The findings of these underlying mechanisms of SCRM and NC are in line with the RBV assumptions and dynamic compatibility perspectives, and together with SSM practices, businesses must develop approaches for creating novel capabilities, such as SCRM and NC, and accordingly to achieve SP.

Third, the SCRM literature identifies that firm size might be the critical factor influencing risk management capabilities (Kumar et al., 2018) and network resources (Huggins & Johnston, 2010). As SSM practices are considered to be dispersed all through the enterprise and the network or chain to get the maximum influence (Hallikas & Lintukangas, 2016), therefore, large firms are considered to have better data conveyance and perform better in utilizing information (Ellegaard, 2008), as compared with small enterprises. Our article extends this knowledge stream by considering firm size as an essential boundary condition and explores how firm size differentially moderates the influence of SSM practices on SCRM and NC to enhance SP further.

The exploration of the impact of the two different types of firm size, namely, SMEs and larger enterprises on the hypothesized model, indicates crucial and unexplored findings. With respect to SMEs, the greater value was given to SP resulted from SSM practices and SCRM. In this regard, SME owners in China focus on the guidelines, reporting, SCM upstream, SCM downstream, and SCRM to achieve sustainable performance. Furthermore, owners of SMEs in China also give importance to SSM practices and SCRM to attain sustainable performance. These findings are novel and noteworthy for theoretical progression relating to SMEs. The results about Chinese larger enterprises are identical to SMEs about SSM practices and SP, and SCRM. However, larger enterprises give less importance to SCRM to achieve sustainability as compared with SMEs. In addition, the results also indicate that larger enterprises in China mainly focus on NC to attain sustainable performance and on SSM practices to achieve NC, which are noteworthy findings of this article. Largely, these findings offer fresh insight into how to tie the appropriate dynamic capabilities mechanisms with performance and sustainability outcome of a business in the SSCM context (Hallikas & Lintukangas, 2016; Hong et al., 2018; Kumar et al., 2018) that highlight the essence of Chinese supply management professionals’ dynamic capabilities in SSCM context.

Managerial Implications

As an emerging market, China offers higher growth opportunities and makes a business adopt pervasive opportunistic behaviors (Sheng et al., 2018) and gain competitive advantage through enhancing performance (Hong et al., 2018). Our research presents several substantial managerial implications. First, SSCM practitioners and policymakers should be aware and adhere to SSM practices within their businesses as SSM practices of supply management professionals may enable the SP. Second, managers should recognize that SCRM and NC fully mediate the influence of SSM practices on SP. Hence, in businesses with sound SSM practices, managers should focus on developing and adopting the dynamic capabilities of SCRM and NC to achieve SP. Finally, our study suggests that organizational characteristic such as firm size is important to understand how supply management professionals react to SSM practices. Thus, firm size as a crucial organizational characteristic in SSM practices is essential to realize. Our findings establish that SSM practices’ effects weakened at a lower firm size level, that is, SMEs about NC. Therefore, SSM practitioners and policymakers should focus more on SMEs NC as compared with large businesses supply management practices to achieve sustainability in their businesses. However, larger enterprises pay less attention to SCRM as compared with SMEs. These findings have important implications for managers.

Limitations and Future Studies

This article is subject to various limitations. First, the target population was based on only supply management professionals from China; businesses in emerging economies vary in their resources and growth rate, so special care should consider while generalizing the findings to other contexts. Future studies could examine and validate our conceptual model in other developing markets. Second, a longitudinal design is highly recommended for future studies to know about the levels of technological capabilities. Third, there are different approaches to defining SSM related practices in literature besides SSM practices. Future research is recommended to examine another integration mechanism, for example, process coordination and system integration. Third, future studies may also follow to associate the integrating mechanisms considering other mediating mechanisms and boundary conditions.

Our study verifies the influence of SSM practices on SP. Furthermore, this article also extends the dynamic capability perspective of RBV by examining how SCRM, NC, and firm size influence the linkage between SSM practices and SP. Our results suggested that SSM practices have a crucial direct and indirect impact on SP through SCRM and NC, revealing that both SCRM and NC fully mediated the linkage between SSM practices and SP. Our findings also emphasized that the firm size (SMEs and larger enterprises) is an essential organizational characteristic that moderates the hypothesized model.