Supply chain sustainability practices and governance for mitigating sustainability risk and improving market performance: A Dynamic capability Perspective

Abstract There is a genuine lack of a theoretically justified and empirically validated integrative scale for supply chain sustainability (SCS) in the extant literature. Further, literature is also void on the study of the interaction effect of SCS and governance in affecting SC performance through reducing risk. This research addresses these two significant research gaps. Drawing on dynamic capability view (DCV) and taking mixed methods research design approach this study develops and validates an instrument for measuring supply chain sustainability (SCS) in the context of apparel industry of a developing country. It then investigates the conditional direct and indirect effect of supply chain sustainability on performance through reducing sustainability risks at different levels of sustainability governance. Our findings suggest that SCS is a multidimensional construct consisting of four dimensions: social, environmental, economic (financial) and economic (production). The measurement instrument of SCS also satisfactorily correlates to the “technical” and “evolutionary” criteria of DCV. The findings also affirms that the conditional indirect effect of SCS on market performance via reducing sustainability risk is significant at higher levels of sustainability governance. This study contributes significantly to the body of knowledge by developing and validating a multidimensional scale of supply chain sustainability (SCS) and investigating its impact on market performance through a mediated-moderated modelling approach. In practice, the supply chain managers will be able to adopt appropriate SCS practices and governance mechanism to reduce sustainability risks and improve market performance. Implications of the study are highlighted.