Vol.:(0123456789) 1 3 Journal of Business Ethics https://doi.org/10.1007/s10551-018-3917-z ORIGINAL PAPER Business Group Afliation and Corporate Sustainability Strategies of Firms: An Investigation of Firms in India Sougata Ray 1  · Bikramjit Ray Chaudhuri 1 Received: 19 December 2016 / Accepted: 3 May 2018 © Springer Science+Business Media B.V., part of Springer Nature 2018 Abstract In spite of an overwhelming importance of business groups (BG) in the economic development of many countries, systematic inquiry on how the BGs and their afliated frms approach and contribute to shared value creation and sustainable develop- ment is rare. In this paper we address this research gap by investigating two related questions—do BG-afliated frms difer from non-BG frms in their corporate sustainability strategy (CSS) and how does BG afliation infuence the relationship between stock of fungible resources and CSS of frms? Drawing from the BG literature we theorize that BG-afliated frms tend to adopt of both environmental and social sustainability strategies more than non-BG frms. We also argue that although according to resource-based view, the stock of fungible resources of frms positively infuences CSS, BG afliation nega- tively moderates the relationship between stock of fungible resources and CSS of frms. Stock of fungible resources matters less for BG-afliated frms in undertaking CSS as they have access to resources of the BG network. We test our theoretical predictions using a proprietary data set of 163 Indian publicly listed frms, out of which 76 are BG-afliated frms belonging to 74 BGs. The data for corporate environmental and social sustainability strategies have been obtained by administering a survey instrument among the top level executives of the participating frms. We fnd support for our theoretical predictions that signify that BGs and their afliates make important contributions to shared value creation and sustainable development in emerging economies like India. Keywords Business group afliation · Corporate sustainability strategy · Resource-based view Introduction Diversifed business groups (BGs) are an important feature of the organizational landscape in many economies (Khanna and Yafeh 2007; Granovetter 2005a), particularly the emerg- ing economies (Yiu et al. 2007; Khanna and Rivkin 2001). The extant research on BGs and their afliates have pri- marily focused on their economic value creation strategies and fnancial performance (e.g. Mahmood et al. 2017; Gaur et al. 2014; Carney et al. 2011; Almeida and Wolfenzon 2006; Claessens et al. 2006; Khanna and Yafeh 2005; Ber- trand et al. 2002; Khanna and Rivkin 2001). Consequently, we have made signifcant progress in understanding the economic value creation of BGs through a plethora of research on BGs. However, our understanding of whether BGs contribute to shared value creation for the society (Crane et al. 2014; Beschorner 2013; Porter and Kramer 2011, 2006) and to sustainable development (Bansal and DesJardine 2014; Bansal et al. 2014; Gao and Bansal 2013; Nidumolu et al. 2009; Bansal 2005; Hart and Milstein 2003; Elkington 1998) remains limited and ambiguous. It is argued that while BGs sometimes play a decisive role by making noticeable financial, organizational, and technological investments in preserving the environment and supporting the social requirement of the communities in the regions where they operate (Khanna and Yafeh 2007; Granovet- ter 2005a), they can also be detrimental to social welfare because of the potential abuse of monopoly power and rent- seeking behaviour (Khanna and Yafeh 2007). Our study tries to partially address this ambiguity by systematically examining the impact of BG afliation on the corporate sustainability strategies (CSS) of frms in an emerging economy. Being theoretically grounded in the * Sougata Ray sougata@iimcal.ac.in Bikramjit Ray Chaudhuri bikramjitr12@iimcal.ac.in 1 Indian Institute of Management Calcutta, Joka, Kolkata, India