UNDERSTANDING THE RELATIONSHIPS BETWEEN INTERNAL RESOURCES AND CAPABILITIES, SUSTAINABLE SUPPLY MANAGEMENT AND ORGANIZATIONAL SUSTAINABILITY*

• DOI: http://doi.org/10.1111/j.1745-493X.2010.03212.x
• Date: 01 January 2011
• Published date: 01 January 2011
• Author: ANTONY PAULRAJ

UNDERSTANDING THE RELATIONSHIPS BETWEEN

INTERNAL RESOURCES AND CAPABILITIES, SUSTAINABLE

SUPPLY MANAGEMENT AND ORGANIZATIONAL

SUSTAINABILITY



ANTONY PAULRAJ

University of North Florida

This study aspires to empirically evaluate the effect of firm-specific resources

and/or capabilities on sustainable supply management (SSM) and sustain-

ability performance. Specifically, enviropreneurship and strategic purchasing

are, respectively, recognized as firm-specific capabilities and resources that are

fundamental to pursuing sustainable supply practices. SSM is forwarded as a

key relational capability that can result in significant improvements in orga-

nizational sustainability. Using data collected from 145 U.S. firms and ad-

vanced structural equation modeling approaches, a number of direct,

mediation and moderation effects are hypothesized and tested. Five of the six

proposed hypotheses were found to be significant, providing strong support

for the significant role that internal resources/capabilities can play in man-

aging sustainable supply practices as well as organizational sustainability.

Surprisingly, the hypothesis suggesting that strategic purchasing could mod-

erate the relationship between enviropreneurship and SSM was found to be

insignificant.This result suggests that managers need to realize thata strategic

purchasing function alone cannot help in achieving the lofty goals of

sustainability. On thecontrary, the prime objective of firms must beto nurture

an enviropreneurial orientation within their organization. Further implica-

tions for future research and practice within SSM are offered.

Keywords: organizational sustainability; enviropreneurship; strategic purchasing; sustain-

able supply management; supplier selection; environmental collaboration; supplier evalua-

tion; performance

INTRODUCTION

Suppliers not only play a significant role in an organi-

zation’s overall value creation, but they also considerably

influence the total environmental impact of any firm

(Handfield and Nichols 2002; Darnall, Jolley and

Handfield 2008). Therefore, in order to attain the am-

bitions of sustainability, organizations must pay close

attention to their supply-side practices as well. Recog-

nizing its importance, several scholars have explored the

area of sustainable supply management (SSM) by iden-

tifying antecedents, practices and performance implica-

tions (e.g., Bowen, Cousins, Lamming and Faruk 2001;

Zhu and Sarkis 2004; Preuss 2005; Vachon and Klassen

2006; Lee 2008; Paulraj 2009). But research on SSM is

still in its infancy and needs much closer attention. For

instance, while evaluating antecedents to SSM, extant

research has focused mainly on external stakeholder

pressures (e.g., Preuss 2005; Lee 2008; Paulraj 2009).

However, given that SSM is a significant source of com-

petitive advantage, it is also imperative to consider the

impact of firm-specific strategic resources and capabili-

ties. Unfortunately, Bowen et al. (2001) is the only em-

pirical study that has focused on the impact of such

resources and capabilities on SSM. Therefore, the main

ambition of this study is to advance theory building

within supply management by developing a model

linking firm-specific antecedents, SSM and sustainability

performance.

When considering firm-specific antecedents, the one

most researchedis the environmental proclivityprevalent



The authorwould like to thank the Universityof North Florida and

the Institute for Supply Management (ISM) for their financial and/

or administrative support of this research.

January 2011 19

within firms (e.g., Sharma and Vredenburg 1998; Bowen

et al. 2001). A strong environmental stance can, in turn,

enable firms to develop superior environmental capa-

bilities that are essential for achieving organizational

sustainability. The second widely acknowledged ante-

cedent is top management sensitivity (Menon and

Menon 1997). This is due to the fact that the ideals and

values of top management can directlyaffect the scope of

a firm’s sustainability practices. But, fortunately or un-

fortunately, firms can meet the current requirements of

sustainability performance through initiatives that are

focused within their organizational boundary. And even

organization-wide certifications do not require the en-

gagement of suppliers in environmental initiatives.

Therefore, even though these antecedents are crucial for

firm-level sustainability practices, it is not unreasonable

to counter their appropriateness in promotingSSM given

firms’ focus on creating economic wealth for their

shareholders (Carroll 1999). Accordingly, it is important

to consider an antecedent that would not only signal the

presence of environmental proclivity and top manage-

ment sensitivity, but will also enable firms to go beyond

the confines of their firm boundaries and identify supply

management capabilities that could lead to broader

sustainability performance. With this ambition in mind,

this study forwards enviropreneurship

1

— an entrepre-

neurial orientation that accommodates the needs of the

environment and society — as the first key antecedent to

SSM and organizational sustainability.

2

Research also suggests that the presence of relational

capabilities could facilitate SSM (Bowen et al. 2001). The

underlying logic is that it would be easy to pursue SSM

practices if a firm has already established long-term col-

laborative relationships characterized by strong interor-

ganizational interactions. But, as noted by numerous

researchers, strategic purchasing is a strong precursor to

developing such superior supply management capabili-

ties (e.g., Chen, Paulraj and Lado 2004). Therefore, this

research appropriately considers strategic purchasing as

the second key firm-specific antecedent and evaluates its

direct and moderating effects. SSM is proposed as a re-

lational capability, and following past research is defined

to simultaneously consider the entire process — selec-

tion, environmental collaborationand evaluation — of a

supply function. It is also considered to favorably me-

diate the relationship between strategic antecedents and

sustainability.

This study makes several compelling contributions to

current research. An entrepreneurial orientation is often

related to superior organizational behavior and perfor-

mance. And, given that strategic purchasing is a key

boundary-spanning resource, it could also be envisioned

to have a positive impact on SSM. But, at the same time,

past research strongly suggests that firms can meet, and

far exceed, the current sustainability requirements

through superior firm-level initiatives alone. Therefore,

though enviropreneurship and strategic purchasing are

conducive to such behavior, they need not necessarily

signal supply-widesustainable practices. Accordingly,it is

pertinent to comprehensively test the effect of these key

antecedents on SSM and sustainability. Understanding

such a necessity, this study first provides the much re-

quired empiricalvalidation for these antecedents. And, in

doing so, it also makes a significant contribution to an

area that has received limited attention from supply

management scholars (Bowen et al. 2001). Second, in

contrast to most of the past studies, it recognizes the

importance of internal resources and capabilities; and,

following the resource-based and resource advantage

views, it rightly argues that firms can pursue superior

supply-related sustainable practices if they possess valu-

able, rare, inimitable and nonsubstitutable firm-specific

resources/capabilities. Third,in light of the current ‘‘low’’

requirements of sustainability, researchers have long

questioned the relative importance of sustainable supply

chain practices due to their infinitesimal impact on end

customers’ purchasing decisions (Preuss 2005; Darnall

et al. 2008). The manuscript addresses this question by

(1) proposing SSM as a relational capability that is his-

torically dependent and hard to imitate and (2) empiri-

cally validating the significant direct and mediating

effects of SSM on sustainability performance. Finally, and

most importantly, by considering firm-level as well as

relational capabilities in conjunction, this studydevelops

an integrative model that theoretically establishes and

empirically tests (1) the relationship between firm-level

and relational capabilities and (2) their combined effect

on organizational sustainability.

The rest of the paper is structured as follows. The next

section develops the theoretical rationale for the pro-

posed hypotheses by drawing on related research. The

following section explains the research methodology

including data collection procedure, construct opera-

1

Given its entrepreneurial nature, an enviropreneurial orientation

can be considered a fundamental behavior of firms thatwill enable

them to not just look at the minimum requirements, but rather to

exploit wide-ranging opportunities presented by supply-wide

sustainability initiatives (Ireland, Hitt, Camp and Sexton 2001).

And, as Schumpeter(1939) points out, enviropreneurship is a ‘‘pro-

cess of creative destruction’’ that can address broader sustainability

concerns through a ‘‘disequilibriating force’’ that constantly chal-

lenges the status quo. Accordingly, enviropreneurship can serve as a

much stronger force that clearly signals the presence of environ-

mental proclivity and top management sensitivity within firms.

And, given its very nature, it can help firms to reach out to their

suppliersand develop relational capabilitiesthat can eventually lead

to a broader sustainability performance.

2

Other terms such as performance, sustainability performance, and

sustainability are also used in the manuscript. All these outcome-

related terms refer to organizational sustainability. And, as organi-

zational sustainability can be achieved only at the intersection of

economic, environmental, and societal considerations, it is mea-

sured along these three dimensions (Carter and Rogers 2008).

Journal of Supply Chain Management

Volume 47, Number 120