Effect of Sustainable Procurement Orientation and Institutional Isomorphism on Firm Performance. Mediating Effect of Organisational Capabilities
This study, conducted in Ghana, demonstrates that organizational capabilities significantly mediate the positive relationships between sustainable procurement orientation and institutional isomorphism on firm performance, suggesting that managers should leverage these capabilities and governments should integrate sustainable elements into procurement policies to enhance business outcomes.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
In the modern business world, the old rule of "profit at all costs" is slowly giving way to a more balanced approach. Companies are increasingly expected to care not just about their bank accounts, but also about the people they employ and the planet they operate on. This shift is often called the triple bottom line, a framework that measures success by three pillars: people, planet, and profit. To make this happen, many organizations are turning to sustainable procurement. This is simply the practice of buying goods and services in a way that considers environmental and social impacts alongside the price tag. However, having a good policy on paper does not always mean a company will succeed. In many developing nations, firms struggle to turn these green intentions into real financial results. The question remains: why do some companies thrive when they buy sustainably, while others struggle? The answer may lie not just in what they buy, but in how capable they are of managing those complex decisions.
A team of researchers from Ghana set out to solve this puzzle by looking at hundreds of companies across their country. They wanted to understand the specific link between a company's commitment to sustainable buying and its overall performance. But they suspected the relationship was not direct. They hypothesized that a company's internal skills and resources—what they call organizational capabilities—act as the crucial bridge. Think of these capabilities as the engine of a car; the sustainable procurement strategy is the fuel, but without a well-tuned engine, that fuel cannot move the vehicle forward. The researchers also examined how outside pressures, such as government rules or the desire to copy successful competitors, influence this process. They gathered data from 353 top managers in various industries, asking detailed questions about their buying habits, their internal skills, and their financial and operational results.
The study revealed a clear and positive connection: companies that deeply integrate sustainability into their purchasing decisions tend to perform better financially and operationally. However, the researchers found that this success is not automatic. The most significant discovery was that a company's internal capabilities act as a powerful mediator. In plain terms, sustainable buying practices only lead to better performance when the company has the right skills, training, and systems in place to execute them. When a firm invests in sustainable procurement, it simultaneously builds up its internal muscle—improving how it manages suppliers, innovates, and coordinates its teams. It is this strengthened internal capacity that actually drives the improved financial results. Without these capabilities, the benefits of sustainable buying remain out of reach, no matter how strong the policy might be.
The researchers also looked at the different types of pressure that push companies toward sustainability. They found that strict government regulations and the urge to imitate successful competitors were the most effective drivers for building these internal capabilities. When a company feels a legal requirement to change or sees a rival succeeding with green practices, it is more likely to develop the necessary skills to adapt. Interestingly, pressure from social norms or general public opinion did not show the same strong effect on building these capabilities in this context. This suggests that in the Ghanaian business environment, clear rules and competitive examples are more powerful motivators for change than abstract social expectations.
Ultimately, the study concludes that sustainable procurement is a powerful tool, but it is not a magic bullet. The path to better performance is paved by the company's ability to learn, adapt, and build its own internal strengths. For managers, the lesson is clear: adopting a green policy is only the first step. To truly succeed, they must also invest heavily in training their staff, upgrading their systems, and developing the specific skills needed to manage complex, sustainable supply chains. For policymakers, the findings suggest that creating clear regulations and encouraging industry benchmarking can be highly effective in helping businesses build the capabilities they need to thrive in a sustainable economy. The research confirms that when companies align their buying habits with their internal strengths, they do not just help the planet; they build stronger, more profitable businesses.
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