Sustainable Paths to Growth and Profitability - An Empirical Study of Norwegian Manufacturing SMEs
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Internationalized small and medium-sized manufacturers are facing increasing expectations regarding their accountability and performance on environmental and social sustainability in the globalized marketplace, at the same time as striving to stay competitive. Understanding how these requirements may be joined together to create shared value is of great importance for resource-constrained small and medium sized enterprises (SMEs), as well as for the society at whole. The aim of this study is to increase our understanding of the mechanisms involved in the relationship between sustainability performance and financial performance on firm level, by investigating associations between sustainable practices in Norwegian internationalized SMEs, the managers perceptions of value creation in three different dimensions, and firm financial performance. The study employs a quantitative research strategy with cross-sectional data, making use of new survey data from 450 Norwegian internationalized manufacturing SMEs. The sample is representative for the entire population of Norwegian internationalized manufacturing SMEs. The data is analyzed through factor analysis and structural equation modeling to answer the research questions of the study. Environmental and social practices in this sample of Norwegian manufacturing SMEs created value in three dimensions, namely through the manager s perception of reduced business risk, reduced operating costs and through increased ability to introduce new products and services. However, this value is hard to capture as increased financial performance, as the processes that leads to firm financial performance are complex. Firm performance in terms of sales growth is predominantly captured through the increased ability to introduce new products and services in this sample. This study is a contribution to the ongoing research on the ways through which sustainability pays. The study bring new insights through analyzing possible pathways from sustainability performance to financial performance in Norwegian internationalized manufacturing SMEs. The insights gained from this study show that sustainable manufacturing is a strategy that is value increasing, especially through an increased ability to introduce new products and services. Sustainable practices may thus be valuable tools for managers to create value both for the company and for their stakeholders.