A contingency view of the effects of sustainable shipping exploitation and exploration on business performance

Transport Policy 77 (2019) 90–103

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A contingency view of the effects of sustainable shipping exploitation and exploration on business performance

T

Kum Fai Yuena, Xueqin Wanga,∗, Yiik Diew Wonga, Fei Mab a b

School of Civil and Environmental Engineering, Nanyang Technological University, Singapore School of Economics and Management, Chang'an University, Xi'an, 710064, China

A R T I C LE I N FO

A B S T R A C T

Keywords: Resource-based view RBV Sustainable shipping Sustainability Contingency RBV Maritime transport

Anchored to the resource-based view, this study identifies the types of sustainable shipping capabilities that can be pursued and developed by shipping companies to enhance their business performance. The paper also examines internal and external contextual factors that moderate the relationship between the identified shipping capabilities and business performance. Survey data were collected from 225 shipping companies with business offices in Singapore and analysed using structural equation modelling and a multiple-sample approach. The results show that both sustainable shipping exploitation and exploration capabilities have positive effects on business performance. Organisational slack and environmental uncertainty negatively moderate the relationship between sustainable exploitation capability and business performance but positively moderate the relationship between sustainable exploration capability and business performance. The results imply that sustainable shipping should be viewed as a dynamic capability rather than a set of practices, which connote stasis. In addition, management policies to develop sustainable exploitation or exploration capabilities should depend on the internal and external environment of shipping companies. This paper introduces an alternative theoretical lens through which to manage and improve the allocation of organisational resources to enhance corporate sustainability and business performance of shipping companies.

1. Introduction

practices, which are defined as a set of organisational activities aimed at the integration of societal and environmental concerns with the business operations of shipping companies and in interactions with stakeholders on a voluntary basis. Corporate sustainability is thus receiving growing attention from the industry (Yuen and Thai, 2017; Yuen et al., 2018b). The reasons for practising these initiatives are often strategic, stemming from the impetus to reduce operating costs, improve stakeholders' satisfaction, or differentiate service offerings (Balci et al., 2018; Fafaliou and Aroni, 2016). In general, the business case for practising sustainability in maritime transport has been substantiated by existing research (Drobetz et al., 2014; Lu et al., 2009). In recent years, several theories have been introduced in the literature to strengthen the business case for implementing sustainable shipping in maritime transport, including stakeholder theory, institutional theory, contingency theory, path dependence theory, and cumulative capability theory. While the stakeholder and institutional theories posit that economic performance cannot be maximised without addressing the sustainability concerns of stakeholders (Chang and Yeh, 2017; Ha et al., 2019; Yang, 2017), the remaining theories suggest a more nuanced relationship whereby the

Maritime transport activities have numerous adverse effects on the environment, including greenhouse gas emissions resulting from the consumption of heavy fuel, and water pollution caused by accidents, ship recycling, and the discharge of ballast water containing invasive marine biological species (Andersson et al., 2016). In turn, these pollutants have negative societal impacts, affecting other economic activities ranging from fisheries to the quality of life of the local communities (Ellram and Murfield, 2017). To address these negative externalities, several international regulations, such as the Ballast Water Management Convention and MARPOL Annex V (which includes implementing the Energy Efficiency Design Index [EEDI] and the Ship Energy Efficiency Management Plan [SEEMP]) have been ratified and enforced by most flag states (Gong et al., 2018; Zavitsas et al., 2018). Beyond these mandatory requirements, many shipping companies are adopting market-driven, sustainable initiatives such as ISO 14000, ISO 26000, cold-ironing, slow-steaming, and using renewable energy and biocide-free, anti-fouling paints (Ballini and Bozzo, 2015; Lindstad et al., 2016). These initiatives are also known as sustainable shipping

∗

Corresponding author. E-mail address: [email protected] (X. Wang).

https://doi.org/10.1016/j.tranpol.2019.03.004 Received 4 September 2018; Received in revised form 9 March 2019; Accepted 11 March 2019 Available online 14 March 2019 0967-070X/ © 2019 Elsevier Ltd. All rights reserved.

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intangibles, which encompass capital, employees, knowledge, information technology and equipment (Formentini and Taticchi, 2016). According to the RBV, resources and capabilities must be valuable, rare, inimitable and exploitable by a company for it to gain a sustained competitive advantage over its competitors. Existing studies have attempted to link corporate sustainability to superior business performance using the RBV in the context of maritime transport (Lirn et al., 2014). Various studies suggest that corporate sustainability is a valuable resource or capability that can provide a sustainable competitive advantage for shipping companies. Thai et al. (2013) argued that, in light of the global seafarer shortage, corporate sustainability can be viewed as a capability that strengthens the reputation of a shipping company, allowing it to position itself as the employer of choice. Pawlik et al. (2012) suggested that corporate sustainability can be a source of competitive advantage for shipping companies to secure tenders, as shippers are increasingly scrutinising shipping companies' sustainability accreditations such as ISO 14000 or ISO 26000. Shin and Thai (2015) demonstrated that corporate sustainability can be viewed as a form of relationship-marketing capability which increases customers’ satisfaction, loyalty, positive word of mouth, repurchase intention and willingness to pay more for a service.

amount of benefits gained from practising corporate sustainability are dependent on the favourableness of environmental factors as well as the overall compatibility with shipping companies’ existing strategies, and internal capabilities (Yuen et al., 2016, 2017a). Although existing theoretical research on sustainable shipping has clarified some important questions as to why, when and how practising sustainable shipping leads to stronger business performance, two major gaps were observed therein. First, most studies modelled sustainable shipping as a regulatory- or market-driven practice (Chang and Danao, 2017; Fafaliou and Aroni, 2016; Pantouvakis et al., 2017) rather than a strategic capability despite the growing recognition that it confers shipping companies a competitive edge over their rivals (Lirn et al., 2014; Yuen et al., 2017a). In this context, sustainable shipping capability is defined as the capacity and ability of a shipping company to conduct sustainable shipping activities more efficiently or effectively than its competitors. While the term ‘efficient’ denotes productivity, that is, the production of more output given the same amount of resources, ‘effective’ suggests efficacy in meeting or satisfying the various sustainability needs and demands of a shipping company's stakeholders (Dyllick and Hockerts, 2002). Second, very few studies have probed the issue of trade-offs when developing sustainable shipping capabilities. Organisational resources are scarce. As a result, shipping companies are confronted with decisions to allocate resources to develop a sustainable shipping capability at the expense of others. At the current moment, the literature is lacking a framework that investigates the strategic alignment of sustainable shipping capabilities with organisational contexts and guides resource allocation decisions. By anchoring to the theoretical lens of the resource-based view (RBV), the current paper aims to contribute to the stream of literature on developing sustainable shipping capabilities and allocating resources for their development. First, based on the dynamic perspective of the theory of the RBV, the current paper argues that shipping companies can pursue the development of sustainable shipping capabilities on two fronts: (1) sustainable exploitation capability or (2) sustainable exploration capability. Further, the paper posits that both capabilities have positive influences on business performance. Second, drawing on theoretical insights from contingency RBV theory, which combines the RBV and contingency theories, this paper addresses the issue of tradeoff, that is, resource allocation concerning the development of both sustainable capabilities by considering internal and external contextual factors. Specifically, it argues that the allocation should be contingent on the level of organisational slack and environmental uncertainty faced by a shipping company. The rest of the paper is organised as follows. First, the concept of the RBV in relation to sustainable shipping is reviewed. Next, the dynamic perspective of the RBV is applied to identify the sustainable shipping capabilities that a shipping company can develop to enhance its competitiveness. Thereafter, contingency RBV theory is applied to identify contextual factors that augment or dampen the effects of sustainable shipping capabilities on the business performance of shipping companies. Subsequently, a survey questionnaire was developed and administered to shipping companies with business offices in Singapore. The data are then analysed, and the results presented and discussed. Finally, conclusions are drawn based on the results.

2.2. Dynamic resource-based view of sustainable shipping Although many studies have alluded to the RBV and its potential application to explaining the positive link between corporate sustainability and business performance, most studies have viewed corporate sustainability as a set of practices rather than as a capability. In addition, there is presently a lack of understanding with respect to the facets defining sustainable shipping capabilities. The current paper attempts to address this gap in comprehension by drawing on dynamic RBV theory. A central aspect of the RBV concerns developing dynamic capabilities (Yang and Lirn, 2017). The term ‘dynamic’ suggests that employees should constantly adjust or improve resource allocation and create new knowledge (Sarkis et al., 2010). Dynamic capabilities are a subgroup of resources which ensure that the company's strategies and operations are coherent and remain relevant in view of the everchanging competitive landscape (Kozlenkova et al., 2014). The development of dynamic capabilities centres on employees and their ability to adapt to changes in the environment as well as to apply a deeply embedded set of skills and knowledge that are acquired or accumulated through learning (Day, 2014). The dynamic perspective of developing capabilities strongly resonates with organisational or market learning, which opposes the notion of stasis and involves the continuous process of creating, retaining, transferring and applying knowledge within an organisation. Accordingly, organisational learning can be targeted at two areas: (1) exploitation of existing knowledge or (2) exploration of new knowledge (Grigoriou and Rothaermel, 2017). 2.2.1. Sustainability exploitation capability Exploitation of existing knowledge focuses on the application and development of capabilities that are already known (Maletič et al., 2014). Usually short-term oriented and scheduled, it involves performing continuous, incremental activities, minor extensions, recombination, modification and refinement to improve the efficiency of current systems, processes, operations and strategies. In general, exploitation of existing knowledge results in moderate but certain, immediate returns to a company. Theoretical arguments support the idea that exploitation capabilities can be applied to the context of corporate sustainability in maritime transport. Such arguments are rooted in stakeholder and institutional theories. Both theories suggest that shipping companies cannot maximise their economic performance without addressing the social and environmental needs of stakeholders such as shareholders, customers, employees, partners, local authorities, regulators and

2. Literature review 2.1. Resource-based view of sustainable shipping Resource-based view (RBV) theory has been commonly applied in the business strategy literature to manage and organise resources. The theory adopts an inside-out approach which concerns acquiring and using organisational resources efficiently (Day, 2011). The RBV assesses the resources and capabilities of a company that can allow it to generate net positive financial returns, satisfy customers, and create a sustainable competitive advantage. These resources can be tangibles or 91

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innovation. Sustainable exploration capability generally involves the alignment of technical and managerial activities. Technology (or technical knowhow) by itself will not confer much advantage to a shipping company without input from management to provide a holistic and integrative perspective of the technology with the operations (Kyvik and Gjosaeter, 2017). Some examples of recent innovations resulting from sustainable exploration capability include the alignment of technical and managerial activities concerning the adoption of slow steaming, cold ironing, information communication technology applications, ballast water systems and ships’ engines that allow the consumption of renewable energy. In general, previous studies in the logistics and maritime transport literature have suggested that innovations, which are the outcomes of developing sustainable exploration capabilities, have positive effects on business performance (Ho and Chang, 2015). The outcomes from exploring new knowledge can result in the revitalisation of a company's competitive advantage and generate new approaches to satisfying stakeholders or managing businesses. This result translates to the positive business performance of shipping companies. Therefore, the following hypothesis is proposed:

society at large (Yang, 2017). In general, stakeholders hold valuable resources that are required by shipping companies to produce services (Yuen et al., 2017b). These resources confer stakeholders the power to exert mimetic, coercive or normative pressure on shipping companies to practise corporate sustainability (Lai et al., 2013; Zhu and Sarkis, 2007). To gain access to these valuable resources, which are instrumental in boosting shipping companies' economic performance, shipping companies are required to integrate stakeholders' demands into their strategies and operations. Whilst such demands could be categorised into (1) present or (2) future or unrealised demands, the process of addressing stakeholders’ present sustainability demands can be viewed as a form of sustainability exploitation. Based on the dynamic RBV framework, this study defines sustainable shipping exploitation capability as a shipping company's ability and capacity to exercise incremental, planned, continuous improvement on its sustainability processes and outcomes. This improvement can include a shipping company's capability to constantly (1) scan and capture feedback from stakeholders; (2) reflect, respond to and integrate stakeholders' sustainability needs and demands into current strategies and operations and (3) measure, evaluate and implement sustainability performance improvements with tools, techniques and key performance indicators (Maletič et al., 2014, 2015). The cycle of an incremental and continuous process of aligning current sustainability practices with the changing needs and demands of stakeholders portrays the image that a shipping company is committed to and proactive in its cause towards good citizenship. This image could result in greater satisfaction and buy-in from stakeholders and, subsequently, stronger business performance (Vejvar et al., 2017; Yuen et al., 2016). Therefore, the following hypothesis is proposed:

H2. Sustainable shipping exploration capability has a positive effect on the business performance of shipping companies. 2.3. Contingency resource-based view of sustainable shipping As discussed earlier, dynamic RBV theory stresses the importance of being adaptive and agile in meeting the current and future sustainability needs of shipping companies and their stakeholders. This adaptability can be achieved through developing dynamic capabilities which can be categorised into sustainable shipping exploitation and exploration capabilities. There are indications that both capabilities are positioned at both ends of a continuum, which results in trade-offs (Gupta et al., 2006). For instance, exploiting current knowledge reduces transaction cost and therefore expedites decision-making, implementation and control. However, these effects decrease variation in organisational routines and impairs a company's capacity for exploratory learning (Özsomer and Gençtürk, 2003). Similarly, enhancing the exploration of new knowledge at the expense of exploitation may cause a company to suffer from the cost of experimentation without gaining its benefits due to the uncertainties involved. Increasingly, proponents of RBV are recognising the above limitation and have called for the inclusion of a contingency perspective in assessing the competitive value of organisational resources and capabilities. Contingency theory argues against the notion of universalism, that is, a single, effective approach to compete in a market (Freeman, 2015). Instead, the effectiveness of an approach is underpinned by its fit with or favourableness of a company's internal value chain activities, configuration and strategies as well as the external environment. Integrating the perspectives of contingency theory and resourcebased view theory, contingency RBV theory suggests that the effectiveness of a resource or capability is determined by its fit with the exogeneous characteristics of a company, such as its internal configuration (or structure) or external environment (Aragon-Correa and Sharma, 2003). Contingency RBV theory guides resource allocation decisions, as more organisational resources can be invested in developing capabilities that yield greater outputs or benefits for a company. Applying the theory to this context, this study argues that a shipping company's decision to develop sustainable shipping exploitation or exploration capability should be contingent on its level of organisational slack and environmental uncertainty. Accordingly, organisational slack and environmental uncertainty represent the internal structure and external environment of a shipping company. The subsequent sub-sections argue that the relationship between sustainable

H1. Sustainable shipping exploitation capability has a positive effect on the business performance of shipping companies. 2.2.2. Sustainability exploration capability Contrary to exploiting existing knowledge, exploring new knowledge focuses on the pursuit of capabilities or alternatives that are distant, uncertain or unknown. Exploration capability is oriented to the long term, which often involves breakthroughs, radical changes or improvements (Khanagha et al., 2017). Exploring new knowledge is often linked to concepts such as innovation. In addition, exploration requires a unique set of skills and abilities which include experimentation and divergent thinking (March, 1991) and often results in potentially high but uncertain returns to a company. The motivation for exploring new knowledge to improve corporate sustainability is also grounded on stakeholder and institutional theories; that is, it focuses on satisfying stakeholders' demands or addressing stakeholders’ pressure to maximise economic performance. However, unlike sustainability exploitation capability, sustainability exploration capability involves identifying and meeting the future or unrealised demands of stakeholders (Yalcinkaya et al., 2007) and also encompasses creating substantially new value propositions to stakeholders (Wang and Bansal, 2012). In this context, sustainable shipping exploration capability is defined as the capacity and ability of a shipping company to adopt new, innovative systems, processes, products, services and technologies which are substantially different from those used in the past. Stemming from previous studies on organisational learning and sustainability-related innovation, sustainable shipping exploration capability can be categorised into (1) process or service innovation and (2) sustainability-oriented learning (Maletič et al., 2015; Photis, 2006; Wijnolst and Wergeland, 2009). Process or service innovation may encompass major technological advancements or business process reengineering that can considerably improve the sustainability performance of shipping companies, whereas sustainability-oriented learning focuses on training and fostering an environment that enables 92

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organisational slack than for those possessing more organisational slack.

shipping capabilities and business performance is contingent on the level of organisational slack possessed and environmental uncertainty faced by shipping companies.

H3b. Sustainable shipping exploration capability has a larger, positive effect on business performance for shipping companies possessing more organisational slack than for those possessing less organisational slack.

2.3.1. The contingency effect of organisational slack on sustainable shipping capabilities and business performance Organisational slack can be defined as the excess capacity maintained by an organisation either intentionally or unintentionally (Marlin and Geiger, 2015). It exists when resources such as capital, employees or assets, including machinery and equipment, are either not completely utilised or exceed the amount required to produce a given level of output. The availability of organisational slack is likely to dominate companies’ allocation of resources to develop sustainable shipping exploitation or exploration capabilities. Increased slack could foster the exploration of new knowledge, experimentation or innovation for the following reasons. First, exploring new knowledge requires a large outlay of financial investments and spans a long period (Mousa and Chowdhury, 2014). In addition, exploring new knowledge is a risky activity that often results in negative returns. In this regard, slack resources serve as a buffer to compensate for the discontinuities and losses caused by such uncertainties and risks. The buffer allows employees to take risks without fear of jeopardising a shipping company's ability to make normal profits in the market (Tyler and Caner, 2016). Furthermore, organisational slack insulates against cash flow volatility, which allows consistent investment in research and development. Consistency is crucial to enabling organisational learning or innovation. Second, the creation of new knowledge or ideas is often unplanned (Troilo et al., 2014). The availability of organisational slack allows employees to experiment and deviate from their planned routine and improvise when ambiguity emerges from the internal and external environment. Third, exploring new knowledge involves the process of integrating acquired external knowledge with a company's existing knowledge base for new knowledge combinations with commercial potential (Cohen and Levinthal, 1990), which is resource-consuming (Wang et al., 2017). A shipping company with more organisational slack will be less constrained by resources and will therefore enjoy greater success in integrating and combining knowledge for practical usage. In the context where shipping companies possess limited organisational slack, they might be better off exploiting existing knowledge rather than exploring new knowledge. Shipping companies with little slack resources will have less manoeuvrability with respect to the experimentation with and search for new knowledge due to resource constraints. Exploitation of existing knowledge will be a better option since it is generally less costly and provides moderate but certain immediate returns to shipping companies (Vermeulen, 2009). These returns allow shipping companies to maximise their business performance by investing their limited slack resources in less risky, incremental sustainability improvements. According to Yuen et al. (2016), given a fixed amount of resources, shipping companies employing a relatively gradual and regular pace of sustainability improvement, which resonates with the exploitation of existing knowledge, receive more economic benefits than those employing a relatively fast and irregular pace of sustainability improvement, which resonates with the exploration of new knowledge (Hodges and Gill, 2014). Similar findings can be seen in the manufacturing context. Freel (2005) observed that to maximise business performance in a competitive environment with minimal organisation slack, firms participated in process improvements (i.e., exploitation of existing knowledge) rather than innovations (i.e., exploration of new knowledge), which require a considerable amount of up-front investments. Based on the above arguments and observations, the following hypotheses are proposed:

2.3.2. The contingency effect of environmental uncertainty on sustainable shipping capabilities and business performance Environmental uncertainty refers to managerial perceptions of the general business environment as being unpredictable (Aragon-Correa and Sharma, 2003). In relation to corporate sustainability, uncertainty can arise from the unpredictability of the direction and viability of future environmental technologies; stakeholder expectations and preferences for sustainable behaviour, products or services; or changes in regulations or legislation (Manzanares et al., 2008). Based on prospect theory, the current paper posits that shipping companies facing a greater level of environmental uncertainty receive more benefits from developing sustainable exploration capability than sustainable exploitation capability. The argument is that a highly uncertain environment erodes companies' competitive advantage at a fast pace. Hence, there is less value for shipping companies to invest in exploitation capability due to its weakness in responding to environmental uncertainties, since it leaves a company's strategic position largely unchanged (Voss et al., 2008). On the other hand, there is more value for companies to invest in exploration capability. For instance, the tightened regulations (e.g., SEEMP and EEDI) with the flexibility to adopt any approach to meet the environmental or social requirements present a high level of uncertainties for shipping companies. The diversity in the approaches to meet the environmental and social requirements presents risks but also creates opportunities and incentives for shipping companies to explore new knowledge or approaches by communicating with their stakeholders in order to anticipate future trends, identify opportunities, establish collaborative relationships with stakeholders, and conduct R&D or facilitate experimentation based on innovative approaches (Skovgaard, 2014). Furthermore, highly uncertain environments warrant shipping companies' agility, which facilitates the ‘unlearning’ of routines, which enable exploration of knowledge or innovation (Oke et al., 2012). Thus, highly uncertain environments favour the adoption and implementation of a distal search of knowledge and innovative strategies to tap potential sustainability opportunities, resulting in increased business performance. On the contrary, there are more incentives for shipping companies to engage in exploiting existing knowledge on sustainability if the environment is stable. Prospect theory suggests that shipping companies operating in low-uncertainty environments should be risk-averse, lowering investments in risky ventures and relying instead on existing competencies as a sufficient response (Voss et al., 2008). Without compelling motivation, shipping companies operating in a stable, predictable environment should not disrupt their own operations or strategies by deviating from known competencies. For instance, when the social and environmental expectations from stakeholders are predictable or when regulations specify concrete methods that companies must adopt, there is less necessity or autonomy for shipping companies to search for new knowledge to improve their sustainability performance. Such circumstances would favour a structured or planned approach to managing corporate sustainability. In other words, it might be more beneficial for shipping companies to engage in routine, continuous improvement through exploitation of existing knowledge via eliciting and meeting the sustainability requirements specified by stakeholders or regulations. Therefore, the following hypotheses are proposed: H4a. Sustainable shipping exploitation capability has a larger, positive effect on business performance for shipping companies experiencing low environmental uncertainties than for those experiencing high environmental uncertainties.

H3a. Sustainable shipping exploitation capability has a larger, positive effect on business performance for shipping companies possessing less 93

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Fig. 1. The research model.

H4b. Sustainable shipping exploration capability has a larger, positive effect on business performance for shipping companies experiencing high environmental uncertainties than for those experiencing low environmental uncertainties.

response anchors, measurement items and citation sources. Despite the growing number of studies that have investigated the exploration and exploitation of knowledge in the quality management or organisational learning literature, the existing literature lacks wellestablished measurement items that operationalise exploration and exploitation as organisational capabilities. In addition, very limited research has applied either capability to the context of sustainability, much less so in shipping. This study draws on several articles related to organisational learning, sustainable shipping practices and strategic capabilities to operationalise sustainable shipping exploitation and exploration capabilities (Maletič et al., 2015; Troilo et al., 2014; Uotila et al., 2009; Voss et al., 2008; Zhang et al., 2012). The measurement items were further validated upon interviewing six senior managers working in shipping companies located in Singapore. With reference to Table 1, six measurement items were used to measure sustainable shipping exploitation capability. A 7-point scale with 1 being ‘strongly disagree’ and 7 being ‘strongly agree’ was adopted. The first two items (SEP1 and SEP2) reflect a shipping company's orientation towards its stakeholders through identifying and responding to their existing needs in a regular or systematic fashion. The next two items (SEP3 and SEP4) reflect a shipping company's incremental improvement, refinement and integration of corporate sustainability with existing business processes, strategies, services and operations of a shipping company. The remaining two items (SEP5 and SEP6) reflect the control and measurement aspects of sustainability performance, which are crucial to managing and improving corporate sustainability. These aspects include adopting management tools and techniques as well as establishing key performance indicators to evaluate the sustainability goals and objectives of a shipping company. To operationalise sustainable shipping exploration capability, six measurement items were used. A 7-point scale with 1 being ‘strongly disagree’ and 7 being ‘strongly agree’ was employed. The first four measurement items refer to radical or innovative methods pursued by a shipping company to enhance the sustainability of its services, operations and processes. The methods include inventing new approaches to managing sustainability (SER1), exploring innovating ideas, environmental-friendly technologies and management know-how with external sources of knowledge (e.g., partners, customers and research institutions) (SER2), investing in or acquiring environmentally friendly technologies (SER3) and undertaking regular business process re-engineering with a focus on sustainability (SER4). The remaining two

3. Methodology 3.1. Research model Fig. 1 depicts the research model comprising the six hypotheses presented in the literature review section. Anchored to the dynamic RBV theory, this study suggests that sustainable shipping exploitation and exploration capabilities have positive effects on business performance. Accordingly, the two capabilities are reflected by H1 and H2. Grounded on contingency RBV theory, this study further argues that the effectiveness of the exploitation and exploration capability is dependent on a shipping company's organisational slack (H3a and H3b) and environmental uncertainty (H4a and H4b). The central tenet of contingency RBV theory concerns achieving fit between a company's capabilities and its internal or external environment. The assessment of fit is commonly linked to the study of moderation or interaction effects. In general, there is good fit between a company's capabilities and its environment when their interaction is positive, suggesting positive interaction effects or synergistic effects (e.g., H3b and H4b). On the other hand, there is poor fit when their interaction is negative, suggesting negative interaction effects or compensatory effects (e.g., H3a and H4a). This study employs the multiple-sample analysis approach, which is a method based on structural equation modelling to test moderation effects. The approach is viewed as most suitable for this study given that it involves analysing moderation effects of latent constructs. The multiple-sample analysis approach is noted to be superior than interaction regression analysis, another popular method used to test moderation effects. The multiple-sample analysis approach also accounts for measurement errors, which considerably improves the reliability and accuracy of the results. 3.2. Measurement items Since this study involves analysing and comparing the relationships between latent constructs, measurement items were developed for each construct. Table 1 lists the constructs and shows their corresponding 94

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Table 1 Constructs, response anchors and measurement items. Construct

Response Anchors & Measurement Items

Source

Sustainable Shipping Exploitation Capability (SEP)

Strongly disagree (1)/Strongly agree (7) SEP1. My company constantly scans its environment to uncover sustainability issues that are important to stakeholders. SEP2. My company responds to stakeholders' concerns in a regular and systematic way. SEP3. My company refines its business processes to be flexible and responsive towards the needs and demands of its stakeholders. SEP4. My company integrates sustainability requirements of stakeholders in its strategies, services and operations. SEP5. My company implements appropriate management tools and techniques to improve its sustainability performance. SEP6. My company establishes key performance indicators to measure and evaluate its sustainability goals and objectives. Strongly disagree (1)/Strongly agree (7) SER1. My company invents new approaches to improve the sustainability of its services and operations. SER2. My company explores innovative ideas, technologies and management know-how on sustainability with partners, customers, and research institutions. SER3. My company invests in or acquires innovative environmentally friendly technologies. SER4. My company regularly undertakes business process re-engineering with a focus on sustainability. SER5. My company fosters a learning culture, stimulating innovation for sustainability. SER6. My company uses examples of best practices in sustainability to train and upgrade employees' current knowledge and skills. Strongly disagree (1)/Strongly agree (7) OGS1. My company has a sufficient amount of retained earnings. OGS2. My company has a large amount of uncommitted resources (e.g., time, manpower and money) that can be used on a discretionary basis. OGS3. My company has no problem sourcing or obtaining resources at a short notice to support new initiatives. Strongly disagree (1)/Strongly agree (7) ENV1. Stakeholders' sustainability needs and expectations are dynamic and changing rapidly. ENV2. My company experiences difficulties predicting changes in stakeholders' sustainability needs and expectations. ENV3. The direction and viability of future environmentally friendly technologies are uncertain. ENV4. The direction of the political or regulatory environment concerning sustainability is uncertain. ENV5. Sustainable approaches and practices adopted by competitors are unpredictable. Strongly disagree (1)/Strongly agree (7) BPE1. Customer satisfaction BPE2. Employee satisfaction Much worse (1)/Much better (7) BPE3. Return on investment BPE4. Sales BPE5. Profit

Maletic et al. (2015) Zhang et al. (2012) Uotila et al. (2009) Voss et al. (2008)

Sustainable Shipping Exploration Capability (SER)

Organisational Slack (OGS)

Environmental Uncertainty (ENV)

Business performance (BPE)

Maletic et al. (2015) Zhang et al. (2012) Uotila et al. (2009) Voss et al. (2008) Troilo et al. (2014)

Liu et al. (2014) Troilo et al. (2014)

Manzanares et al. (2008) Oke et al. (2012) Troilo et al. (2014)

Lu et al. (2009) Ortega (2010) Brik et al. (2011)

Note: Stakeholders comprise customers, shareholders, business partners, employees, societies, regulators and the environment.

sustainability (SS4) and sustainable approaches and practices adopted by competitors (ENV5) (Manzanares et al., 2008; Oke et al., 2012; Troilo et al., 2014). A 7-point scale with 1 being ‘strongly disagree’ and 7 being ‘strongly agree’ was adopted. Finally, measures were adopted from Lu et al. (2009), Ortega (2010), and Brik et al. (2011) to operationalise business performance. The first two measures (BPE1 and BPE2) reflect the leading performance indicators of a firm, namely, customer satisfaction and employee satisfaction. A 7-point scale with 1 being ‘strongly disagree’ and 7 being ‘strongly agree’ was adopted. The remaining three measures (BPE3, BPE4 and BPE5) reflect the lagging indicators, that is, the financial performance of a firm. A 7-point scale with 1 being ‘much worse’ and 7 being ‘much better’ was employed to evaluate a firm's financial performance against its major competitors over the past three years. Using competitors as references in the evaluation minimises self-evaluation bias, while stipulating a time frame of three years reduces short-term variation in evaluating the financial performance of the firm (Brik et al., 2011; Ortega, 2010). To provide evidence that the self-reported measures of business performance were valid, a sample size of 30 shipping companies was randomly selected from the 102 companies which participated in the survey and published their financial records in the public domain. Their return on investment (ROI), profit growth and sales growth for the past three years were calculated. Subsequently, the correlations of these

measurement items (SER5 and SER6) relate to a shipping company's orientation towards sustainability-related innovation such as fostering a learning culture and training of employees using recent best practices in sustainability that are adopted by the industry. In general, there are two categories of organisational slack: absorbed and unabsorbed (Liu et al., 2014; Troilo et al., 2014). Absorbed slack refers to committed resources (e.g., sunk cost) that are difficult to be redeployed. It usually refers to the engineered or productive capacity of equipment or machineries not being utilised. These excess capacities cannot be transferred to serve other purposes or activities such as developing strategic capabilities. Therefore, absorbed slack is not measured in this study. On the contrary, unabsorbed slack refers to resources (e.g., capital and manpower) that are uncommitted and can be redeployed for other purposes. In this study, unabsorbed slack is measured based on a shipping company's (1) liquidity (i.e., retained earnings), (2) availability of uncommitted resources that can be used on a discretionary basis and (3) ease of obtaining additional resources to support new initiatives. A 7-point scale with 1 being ‘strongly disagree’ and 7 being ‘strongly agree’ was utilised. Environmental uncertainty is measured based on a shipping company's perception of the rate of change and predictability of its stakeholders' needs and expectations concerning sustainability (ENV1 and ENV2), uncertainties in the future technological environment on sustainability (ENV3), political or regulatory environment concerning 95

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background information about corporate sustainability in shipping and also stipulated its research objectives, namely, to investigate the shipping company's allocation of resources to the development of sustainable capabilities and examine their effects on business performance. As the survey questions required respondents to have a holistic understanding of their companies' corporate sustainability and business performance, a request to forward the survey to a suitable candidate in the company was stated. The candidate would preferably have been managing the company's sustainable activities, possessed several years of experience working in the company, held a managerial position, and had knowledge of the company's performance and financial situation. The survey also assured participants' anonymity and their affiliations to elicit truthful, unbiased responses. The second section of the survey comprised the measurement items presented in Table 1. Participants were requested to rate each measure in accordance with the given scale or response anchor. To minimise common method variance, which is a response bias resulting from the use of a single instrument for data collection, a time lag of at least one month was introduced between the completion of the exogenous (i.e., sustainability exploration, exploitation, environmental uncertainty and organisational slack) and endogenous measures (i.e., business performance). This temporal separation of data collection has been noted to considerably correct for common method bias (Podsakoff et al., 2012). The third section encompassed questions pertaining to the respondent and the associated shipping company. Information such as the respondent's present designation, department, years of experience in the company and e-mail address was collected. In addition, information on the respondent's company such as the firm's age, size and sector (bulk or container) was also obtained. Data collection for this study began on 1 October 2016 and ended on 15 June 2017. The survey invitation and questionnaire were sent via e-mail to the correspondent of each shipping company with the request to forward the survey to a suitable candidate in the company. Survey respondents were required to first complete phase one of the survey, which included the exogenous measures in the second section of the survey as well as all the questions in the third section of survey. Then, a month after completing phase one of the survey, an e-mail was sent to respondents to complete phase two, which comprised the endogenous measures in the survey. Respondents were also given the option to update their particulars. Monthly reminders to complete the survey were sent to respondents. In the event that the survey was not completed after three months, the e-mail address and/or correspondent of the shipping company was updated, and another invitation to participate was sent to the shipping company.

Table 2 Profile of respondents and companies. Profile information

Number of respondents (n = 225)

Percentage (%)

72 135 18

32 60 8

86 73 27 39

38 32 12 17

Experience in the company (years) > 10 5–10 <5

78 108 39

35 48 17

Sector Bulk (1) Container (0)

129 96

57 43

Firm's size (number of employees) > 200 (1) ≤200 (0)

106 119

47 53

Firm's age (years) < 10 10–20 > 20

50 69 106

23 31 47

Job designation Director and above Manager Non-management or specialist Department Commercial (e.g., sales or marketing) Technical (e.g., operations or logistics) Finance Others (e.g., sustainability, HSSE, strategy or administration)

Note: Sector is a dichotomous variable with ‘0’ equal to container shipping and ‘1’ equal to bulk shipping. Firm's size is a dichotomous variable with ‘0’ equal to ‘less than or equal to 200 employees’ and ‘1’ equal to ‘more than 200 employees’ (Tordesillas, 2011).

objective financial indicators with their equivalent self-reported measures were estimated (0.62, 0.65 and 0.68) and were found to be positive and significant (p < .05). Therefore, the null hypothesis of independence between the variables was rejected at a confidence level of 95%. Bootstrapping of the aggregated financial measures was also conducted. The bias-corrected and accelerated confidence interval was between 0.32 and 0.81, indicating that the self-reported measures are reasonable substitutes for objective financial measures in this study (Ortega, 2010; Spanos and Lioukas, 2001). 3.3. Sampling frame The targeted population of this study consisted of shipping companies located in Singapore. In this study, we defined a shipping company as a commercial entity that operates ships for the transport of commodities. Excluded from the definition were non-vessel operating common carriers and freight forwarders that do not operate ships. In addition, the scope of this study was limited to two broad categories of shipping companies: bulk and container shipping companies. Specialised-cargo and passenger shipping companies were excluded from this study. The sampling frame of this study was developed from combining three online directories: Lloyd's List, the GreenBook Directory and the Singapore Maritime Industry, Products and Services Directory. After combining the list of shipping companies found in all directories and discarding repetitive shipping companies, a total of 1583 shipping companies in Singapore. Information including the name and e-mail address of the correspondent from each shipping company was recorded.

3.5. Sample statistics A total of 225 completed responses were received at the end of the data collection period. The profile of the respondents and their companies is summarised in Table 2. As shown in Table 2, about 92% of the respondents held the designation of manager or above. In addition, approximately 83% of them had worked for their company for at least five years, suggesting that the respondents were equipped with sufficient knowledge and experience about their companies to answer the survey questions reliably and accurately. It was also noted that most of the respondents who possessed knowledge about their firms' sustainable activities worked in the commercial or technical department. Collectively, they represented 70% of the total respondents. This finding suggests that the management and development of sustainable shipping activities and capabilities are tied to a shipping company's commercial or technical functions. Presently, a limited number of shipping companies have a department dedicated to managing corporate sustainability.

3.4. Survey design and administration The survey comprised three sections. The first section provided 96

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Table 3 Confirmatory factor analysis results. Construct (j)

Measure (i)

Standardised Factor Loadings (λi)

t-value (ti)

Average Variance Extracted (AVEj)

Composite Reliability (CRj)

Sustainable Shipping Exploitation Capability (SEP)

SEP1 SEP2 SEP3 SEP4 SEP5 SEP6 SER1 SER2 SER3 SER4 SER5 SER6 OGS1 OGS2 OGS3 ENV1 ENV2 ENV3 ENV4 ENV5 BPE1 BPE2 BPE3 BPE4 BPE5

0.79 0.77 0.84 0.83 0.81 0.75 0.77 0.79 0.79 0.78 0.78 0.82 0.74 0.81 0.74 0.70 0.73 0.73 0.77 0.84 0.75 0.77 0.75 0.81 0.84

– 12.40 13.84 13.72 13.34 11.98 – 12.55 12.50 12.47 12.35 13.18 – 10.31 9.75 – 9.85 9.83 10.33 11.07 – 11.59 11.32 12.29 12.72

0.64

0.91

0.62

0.91

0.58

0.81

0.57

0.87

0.62

0.89

Sustainable Shipping Exploration Capability (SER)

Organisational Slack (OGS)

Environmental Uncertainty (ENV)

Business Performance (BPE)

Note: Model fit indices: χ2 = 390.77 (p < .05, df = 265); CFI = 0.98; TLI = 0.98; RMSEA = 0.035; SRMR = 0.030.

3.6. Non-response bias and common method bias test

4.1. Confirmatory factor analysis

A response rate of approximately 14% was achieved. To test nonresponse bias, the current study employed an approach which involves comparing the responses between fast and slow respondents. The notion is that subjects who responded less readily (or late) were more likely non-respondents. Under this approach, the means of the measures were compared between the first 50% and last 50% of the respondents using t-tests. No significant differences were found between both groups, which suggests the absence of non-response bias. In addition, given that all data were collected from a single source, common method bias could affect the validity of the results. To test for common method bias, the fit indices of the measurement model (see footnotes of Table 3) were compared with those of a one-factor model where all 27 measures were loaded on a single factor. The fit indices of the one-factor model are χ2 = 2047.93 (p < .05, df = 275), CFI = 0.78; TLI = 0.76; RMSEA = 0.24; SRMR = 0.17. The indices were considerably worse than those of the measurement model. Therefore, common method bias was not a major issue in this study.

A confirmatory factor analysis was conducted to examine the goodness-of-fit of the measurement model as well as the reliability and validity of the measurement items. Table 3 shows the standardised factor loadings (λ), t-values of the loadings (t), average variance extracted (AVE) and composite reliability (CR) of the constructs. With reference to the fit indices presented at the bottom of Table 3, the chi-square fit index (χ2) of the measurement model is 390.77 with 265 degrees of freedom (df). The measurement model is significant (p < .05), indicating a significant difference between the theoretically specified measurement model and the data-driven measurement model. However, it was stated that the chi-square fit index is sensitive to sample size and should not be used as a yardstick for accepting or rejecting a model (Vandenberg, 2006). Accordingly, the remaining fit indices, the comparative fit index (CFI), Tucker-Lewis index (TLI), root mean square error of approximation (RMSEA) and standardised root mean square residual (SRMR), are 0.98, 0.98, 0.035 and 0.030. All values are within the threshold recommended by Hu and Bentler (1999), indicating good model fit. All standardised factor loadings and composite reliabilities are above the recommended value of 0.70, suggesting that the measurement items are reliable (Hair et al., 2010). In addition, the AVEs of the constructs are above 0.50, suggesting convergent validity. Lastly, to examine discriminant validity, the AVEs of the constructs were compared with their respective squared correlations. The results are presented in Table 4. In general, the squared correlations of the constructs are less than their AVEs, a result that supports discriminant validity.

4. Results and discussion This section is divided into four parts. The first sub-section examines issues associated with the developed measures. The investigation includes evaluating the goodness-of-fit of the measurement model and the reliability and validity of the measurement items. The second sub-section examines the effects of sustainable shipping capabilities on business performance, which relate to H1 and H2 of this study. The third sub-section analyses the moderating effects of organisational slack on the relationship between sustainable shipping capabilities and business performance, which concern H3a and H3b of this study. The last subsection investigates the moderating effects of environmental uncertainty on the relationship between sustainable shipping capabilities and business performance, which relate to H4a and H4b of this study.

4.2. The effect of sustainable shipping capabilities on business performance The purpose of this sub-section is to examine H1 and H2, which suggest positive relationships between sustainable shipping capabilities and business performance. Fig. 2 illustrates the effects of sustainable shipping exploitation and exploration capabilities on business performance. ‘Firm size’ and ‘Sector’ were used as control variables and were reported to significantly influence business performance (Drobetz et al., 97

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Consequently, strengthening commitment from stakeholders can reduce transaction costs and improve the shipping company's efficiency, which translates to positive business returns. Sustainable shipping exploration capabilities are long-term–oriented, involving experimentation with breakthrough technologies, institutional reform, new business models and innovative processes or management techniques embedded in the strategic, tactical or operational level of a shipping company. Whilst the outcomes of exploring new approaches to improve a shipping company's sustainable performance are often uncertain and resource-consuming, building such capabilities are crucial for its long-term competitiveness. From a technological perspective, developing or installing advanced systems that can treat ballast water more efficiently than their competitors can will confer a shipping company a significant long-term cost advantage in the long-run. In a similar vein, since bunker cost represents at least 30% of a shipping company's operating cost, researching and developing ships' engines that can consume fuel more efficiently or harness renewable sources of energy could provide a shipping company a long-term cost advantage. In addition, such activities could allow shipping companies to differentiate their services by being green and socially responsible, which are attributes that are of growing importance to stakeholders. Hence, sustainable shipping exploration capability and business performance enjoy a positive relationship.

Table 4 Discriminant validity analysis.

SEP SER OGS ENV BPE

SEP

SER

OGS

ENV

BPE

0.64 0.08 0.35 0.33 0.54

0.01 0.62 0.51 0.54 0.65

0.12 0.26 0.58 0.09 0.55

0.11 0.29 0.01 0.57 0.24

0.29 0.42 0.30 0.06 0.62

Note: SEP refers to Sustainable Shipping Exploitation Capability, SER refers to Sustainable Shipping Exploration Capability, OGS refers to Organisational Slack, ENV refers to Environmental Uncertainty, BPE refers to Business Performance. Emboldened values along the main diagonal are AVEs, values below main diagonal are correlations and values above the main diagonal are squared correlations.

2014; Lu et al., 2009). Omitting the variables could potentially distort the estimation of the effects of sustainability shipping capabilities on business performance. As shown in Fig. 2, both sustainability exploitation and exploration capabilities have significant, positive effects on the business performance of a shipping company after controlling for the effects of firm size and sector. Accordingly, their standardised effects are 0.49 and 0.62. Therefore, both H1 and H2 are accepted. In general, the finding supports the dynamic RBV, which suggests that corporate sustainability can be viewed as a dynamic capability. Shipping companies which are oriented towards learning and change in their sustainability programmes experience positive business performance. Being dynamic allows a shipping company's strategies and operations to be coherent and remain relevant in view of the everchanging competitive landscape (Kozlenkova et al., 2014). Sustainable shipping exploitation capabilities are short-term–oriented and focused on seeking incremental, routine improvements to the operations, systems, processes and outcomes based on the existing sustainability needs and expectations of the shipping company's stakeholders. Sustainability needs and expectations of stakeholders are constantly evolving with respect to changes in the competitive landscape (e.g., political, technological, societal, economic, environmental and legal changes). A shipping company's sustainable exploitation capability creates a virtuous cycle of constant scanning, learning and reflecting stakeholders' needs and demands in its current operations. This process allows the shipping company to consistently align their operations and systems with respect to stakeholders' sustainability needs. In turn, the shipping company portrays an image of commitment to corporate sustainability, which improves stakeholder satisfaction and garners their loyalty and commitment to the shipping company.

4.3. The moderating effect of organisational slack on sustainable shipping capabilities and business performance The purpose of this sub-section is to analyse H3a and H3b, which posit that the relationships between sustainable shipping capabilities and business performance are moderated by organisational slack. In this study, the multiple-sample analysis approach proposed by Vandenberg and Lance (2000) was employed to test the moderating effect of organisational slack on the relationship between sustainable shipping capabilities and business performance (Yuen et al., 2018a). This approach involves the creation of several models to systematically test configural, measurement, structural and partial structural invariance or equivalence (Table 5). The samples (n = 225) were first divided into two groups based on the mean value of organisational slack. For shipping companies with scores less than the mean value (observation score < mean score), samples were categorised as ‘low organisational slack’. For shipping companies with scores greater than the mean value (observation score > mean score), samples were classified as ‘high organisational slack’. Subsequently, the theoretical model presented in Fig. 2 was estimated simultaneously for both groups, forming the baseline model

Fig. 2. The aggregated effects of sustainable shipping capabilities on business performance. 98

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Table 5 Results of invariance tests (OGS). Models

χ2

df

χ2/df

TLI

CFI

Nested Models

Δχ2

Δdf

χ2 difference test

Low Organisational Slack

High Organisational Slack

Hypotheses

Configural Invariance M1. Baseline

642.49

300

2.14

0.96

0.97

–

–

–

–

–

–

–

Measurement Invariance M2. Equal loadings

655.33

314

2.09

0.97

0.97

2–1

12.84

14

P > .05

–

–

–

669.15

316

2.12

0.96

0.97

3–2

13.82

2

p < .05

–

–

–

660.13 665.21

315 315

2.10 2.11

0.97 0.96

0.97 0.97

3a-2 3b-2

4.80 9.88

1 1

p < .05 p < .05

0.53a (8.87*) 0.48a (8.21*)

0.37a (7.19*) 0.71a (11.00*)

H3a accepted H3b accepted

Structural Invariance M3. Equal loadings & structural path Partial Structural Invariance M3a. SEP → BPE M3b. SER→ BPE

Note: firm's size and sector are used as control variables t-values are in parentheses. *p < .05. a Standardised path estimates.

(M1). As shown in Table 5, the fit indices of M1 are adequate (χ2 = 642.49, df = 300, χ2/df = 2.14, TLI = 0.96, CFI = 0.97), suggesting good model fit and configural invariance. This finding warrants the test of measurement invariance. To test measurement invariance, equality constraints were added to the factor loadings of M1, which resulted in the creation of M2. In this regard, equality constraints refer to specifying the factor loading estimates to be equal in both groups. Comparing M2 with M1, the χ2 difference test shows that the more constrained model, M2, did not result in significant deterioration of model fit (χ2M2 – χ2M1 = 12.84 with 14 degrees of freedom, p > .05). The result suggests equivalence in the conceptual meanings of the constructs in Fig. 2 between both sample groups. Therefore, measurement invariance is supported, which warrants the test of structural invariance. To test structural invariance, equality constraints were added to the two structural paths of M2 (refer to H1 and H2 in Fig. 2), which resulted in the creation of M3. This test explains the difference in two degrees of freedom between M2 and M3. In this regard, equality constraints refer to specifying the structural path estimate to be equal in both groups. The χ2 difference test reveals a significant loss of model fit (χ2M3 – χ2M2 = 13.82 with 2 degrees of freedom, p > .05). This finding indicates significant differences in at least one of the structural path estimates between shipping companies with low and high organisational slack. A systematic search procedure was then employed to identify the structural paths that are significantly different between the two sample groups. First, an equality constraint was added to the path emanating from sustainable shipping exploitation capability to business performance in M2, which forms M3a. Comparing both models, the χ2 difference test shows a significant deterioration of model fit indicating that the structural path estimate is not equal in both sample groups (χ2M3a – χ2M2 = 4.80 with 1 degree of freedom, p > .05). For shipping companies with low organisational slack, the standardised effect of sustainable shipping exploitation capability on business performance is 0.53 (t = 8.87), whereas for shipping companies with high organisational slack, the effect is 0.37 (t = 7.19). The effect is significant larger for shipping companies with low organisational slack than for those with high organisational slack. Therefore, H3a is accepted. Second, an equality constraint was added to the path emanating from sustainable shipping exploration capability to business performance in M2, which represents M3b. Again, the χ2 difference test shows a significant loss of model fit when the equality constraint is added (χ2M3b – χ2M2 = 9.88 with 1 degree of freedom, p > .05). For shipping companies with low organisational slack, the standardised effect of sustainable shipping exploration capability on business performance is 0.48 (t = 8.21), whereas for shipping companies with high organisational slack, the effect is 0.71 (t = 11.00). The effect is significant larger

for shipping companies with high organisational slack than for those with low organisational slack. Therefore, H3b is accepted. The results indicate that the effectiveness of sustainable shipping capabilities is moderated by the amount of organisational slack possessed by a shipping company. This finding is consistent with contingency RBV theory, which suggests that the effectiveness of a resource or capability is dependent on a company's internal configuration, which is reflected by its organisational slack. For shipping companies possessing low organisational slack, there are slightly greater benefits for them to develop sustainable shipping exploitation capability (β = 0.53) over exploration capability (β = 0.48). Since developing the latter often requires a huge investment of resources, which are in short supply for shipping companies with low organisational slack, the companies would be better off investing in less risky, incremental sustainability improvements. An incremental, consistent approach to improving corporate sustainability allows shipping companies to overcome time compression diseconomies which state that the more quickly a firm develops the resource, the higher the development cost. The approach allows shipping companies to maximise the utility of their remaining slack resources. Therefore, the effect of sustainable shipping exploitation capability on business performance is larger than the effect of sustainable shipping exploration capability for shipping companies which possess low organisational slack. By contrast, for shipping companies possessing high organisational slack, there are more benefits for them to develop sustainable shipping exploration capability (β = 0.71) as compared to exploitation capability (β = 0.37). Developing the former requires a huge amount of resources. Shipping companies with a large amount of organisational slack can deviate from their planned routines, which are generally activities that produce stable positive cash flows, and experiment with riskier sustainability projects with the potential of generating a higher ROI. Such actions also allow them to integrate and combine new knowledge with their existing knowledge base for commercial applications. The availability of slack resources also insulates against shortterm volatility in cash flows due to such investments, without disrupting or preventing shipping companies from running their daily operations. In addition, the availability of slack resources ensures consistent investments during good or bad times. This regularity facilitates innovation or organisational learning which is crucial to developing sustainable shipping exploration capabilities. Hence, the effect of sustainable shipping exploration capability on business performance is larger than the effect of sustainable shipping exploitation capability for shipping companies which possess high organisational slack.

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Table 6 Results of invariance tests (ENV). Models

χ2

df

χ2/df

TLI

CFI

Nested Models

Δχ2

Δdf

χ2 difference test

Low Environmental Uncertainty

High Environmental Uncertainty

Hypotheses

Configural invariance M1. Baseline

471.74

300

1.57

0.98

0.98

–

–

–

–

–

–

–

Measurement Invariance M2. Equal loadings

480.60

314

1.53

0.98

0.98

2–1

8.86

14

p > .05

–

–

–

489.31

316

1.54

0.98

0.98

3–2

8.71

2

p < .05

–

–

–

484.60 486.43

315 315

1.54 1.54

0.98 0.98

0.98 0.98

3a-2 3b-2

4.00 5.83

1 1

p < .05 p < .05

0.52a (8.11*) 0.42a (6.64*)

0.36a (5.75*) 0.68a (9.72*)

H4a accepted H4b accepted

Structural Invariance M3. Equal loadings & structural paths Partial Structural Invariance M3a. SEP → BPE M3b. SER→ BPE

Note: firm's size and sector are used as control variables t-values are in parentheses. *p < .05. a Standardised path estimates.

environmental uncertainty. For shipping companies which perceive low environmental uncertainty, there is a greater benefit for them to develop sustainable exploitation capability (β = 0.52, p < .05) than exploration capability (β = 0.42, p < .05). This result corroborates prospect theory, which suggests that shipping companies operating in a low-uncertainty environment should be risk-averse, that is, lowering investments in risky ventures and relying on existing competencies as a sufficient response (Voss et al., 2008). In this regard, developing sustainable shipping exploitation capability can be viewed as a low-risk (i.e., low-uncertainty), moderate-return investment, as it involves only routine, minor, incremental changes to existing processes, systems and outcomes concerning sustainability. Developing sustainable shipping exploration capability can be viewed as a high-risk (i.e., high-uncertainty), high-return investment, as it constitutes innovation, breakthroughs in technologies, and major changes in systems and processes which may not always be successful and may even disrupt the existing operations of shipping companies. Moreover, when the competitive (e.g., technological, political, environmental, societal, legal, economic) environment concerning sustainability or stakeholders’ sustainability needs and expectations are predictable, there is less impetus or freedom for shipping companies to explore new knowledge, or innovate, to improve corporate sustainability. It may be more beneficial for shipping companies to exploit existing knowledge by improving their sustainability based on concrete (i.e., predictable) requirements specified by the competitive environment or stakeholders. As a result, the effect of sustainable shipping exploitation capability on business performance is larger than the effect of sustainable shipping exploration capability for shipping companies which perceive low environmental uncertainty. For shipping companies which perceive high environmental uncertainty, it will be more beneficial for them to develop sustainable exploration capability (β = 0.71, p < .05) than exploitation capability (β = 0.37, p < .05). This finding also aligns with prospect theory, suggesting there are greater benefits for shipping companies to take risks (i.e., exploring new knowledge on sustainability) in a highly uncertain environment. A highly uncertain environment suggests that the competitive landscape of sustainability is constantly changing at a fast pace. This mutability quickly erodes any existing sources of competitive advantage possessed by a shipping company. As a result, there is less benefit for shipping companies to develop sustainable exploitation capability, which mainly seeks to improve the efficiency of existing systems, processes and outcomes related to corporate sustainability. On the contrary, developing sustainable exploration capability enables shipping companies to tap opportunities that result from uncertainties in the environment and to create new or innovative approaches to manage stakeholders and to cope with the uncertain, competitive environment. In addition, a highly uncertain environment requires

4.4. The moderating effect of environmental uncertainty on sustainable shipping capabilities and business performance This subsection analyses H4a and H4b, which suggest that environmental uncertainty moderates the relationship between sustainable shipping capabilities and business performance. The sample (n = 225) was first divided into two groups based on the mean value of their perceived environmental uncertainty. Samples with an observed score less than the mean value were categorised as shipping companies with low environmental uncertainty. On the other hand, samples with an observed score greater than the mean value were categorised as shipping companies with high environmental uncertainty. Calculated using the same procedure mentioned in Section 4.3, the multiple-sample analysis results are presented in Table 6. As shown in Table 6, both configural and measurement invariance are supported (p > .05). However, structural invariance is not supported (p < .05). This result indicates a significant difference in at least one of the two structural path estimates (depicted by H1 and H2 in Fig. 2) between shipping companies experiencing low and high environmental uncertainty. Proceeding with the partial invariance test, an equality constraint was added to the path emanating from sustainable shipping exploitation capability to business performance (M3a). The result is significant (χ2M3a – χ2M2 = 4.00 with 1 degree of freedom, p < .05), indicating that the path estimate differs significantly between shipping companies with low and high environmental uncertainty. For shipping companies experiencing low environmental uncertainty, the standardised effect is 0.52 (p < .05); for those experiencing high environmental uncertainty, the effect is 0.36 (p < .05). The effect is significantly larger for shipping companies with low environmental uncertainty than for those with high environmental uncertainty. Therefore, H4a is accepted. Subsequently, an equality constraint was added to the path emanating from sustainable shipping exploration capability to business performance (M3b). The result is significant (χ2M3a – χ2M2 = 5.83 with 1 degree of freedom, p < .05). This result suggests a significant difference in the path estimate for shipping companies with low and high environmental uncertainty. For shipping companies experiencing low environmental uncertainty, the standardised effect is 0.42 (p < .05); for those experiencing high environmental uncertainty, the effect is 0.68 (p < .05). The effect is significantly larger for shipping companies with high environmental uncertainty than for those with low environmental uncertainty. Therefore, H4b is accepted. The results show that the effects of sustainable shipping capabilities on business performance are moderated by environmental uncertainty. Again, this finding is consistent with contingency RBV theory, which posits that the effectiveness of a capability is contingent or dependent on a company's external environment, which can be reflected by 100

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shipping companies to be flexible and respond to any changes in the environment concerning corporate sustainability. Developing sustainable exploration capabilities facilitates the unlearning of routines, which is crucial to enhancing the flexibility and innovation of shipping companies. As a result, the effect of sustainable shipping exploration capability on business performance is larger than the effect of sustainable shipping exploitation capability for shipping companies that perceive high environmental uncertainty.

aligning them with existing sustainable systems, processes and outcomes. On the other hand, sustainable shipping exploitation capability focuses on achieving long-term sustainability effectiveness, primarily through innovation such as the development or deployment of breakthrough technologies, combined with the adoption of revolutionary management practices, processes or services. While the objectives and approaches for developing both types of sustainable capabilities may differ, both highlight the importance of dynamism, whereby shipping companies should constantly seek improvement in sustainability either incrementally or radically to remain responsive and relevant in their competitive landscape. The results also imply that both capabilities have unique influences on the business performance of shipping companies. Most importantly, the current study has enriched the literature by demonstrating that the effects of sustainable shipping capabilities on business performance are dependent on the internal and external environment of a shipping company through the theoretical lens of contingency RBV theory. A general limitation of RBV theory is due to its inside-out approach, whereby resources and capabilities are evaluated with limited reference to contextual factors. Contingency RBV theory overcomes this limitation by considering exogeneous variables which are related to a company's internal environment (e.g., structure, strategies and configuration) as well as its external environment (e.g., competitive landscape). Accordingly, the results imply that the effectiveness of sustainable shipping exploitation and exploration capabilities is contextual and moderated by the amount of organisational slack possessed as well as the level of environmental uncertainty perceived by a shipping company. This contextuality stresses the importance of achieving fit between the sustainable capabilities and resources of a shipping company and its internal and external environment.

5. Conclusion 5.1. Summary of findings This study aims to analyse the effects of sustainable shipping capabilities on business performance through the theoretical lens of dynamic RBV theory. In addition, based on contingency RBV theory, it examines the moderating effects of organisational slack and environmental uncertainty on the relationship between sustainable shipping capabilities and business performance. A survey was conducted on 225 shipping companies located in Singapore. The collected data were analysed using structural equation modelling and a multiple-sample analysis approach. The results indicate that both sustainable shipping exploitation and exploration capabilities have positive effects on business performance. Furthermore, the results reveal that, for shipping companies possessing high organisational slack, the effect of sustainable shipping exploitation is significantly weaker while the effect of sustainable shipping exploration is significantly stronger than shipping companies possessing low organisational slack. Similarly, for shipping companies experiencing high environmental uncertainty, the effect of sustainable shipping exploitation is significantly weaker while the effect of sustainable shipping exploration is significantly stronger than shipping companies possessing low environmental uncertainty.

5.3. Policy implications 5.2. Theoretical contributions This study draws important implications for distributive policy making concerning the allocation and distribution of organisational resources to develop shipping companies’ sustainable shipping capabilities. Organisational resources are scarce. Consequently, policies should be crafted to guide decisions regarding the allocation of resources in order to develop sustainable shipping exploitation or exploration capabilities such that the business performance of shipping companies may be optimised. In particular, more resources should be dedicated to developing sustainable shipping exploitation capabilities when a shipping company has limited slack resources or when its environment is perceived to be stable or predictable. On the other hand, more resources should be invested in developing sustainable shipping exploration capabilities when a shipping company has an abundance of slack resources or when its environment is perceived to be volatile or uncertain. This study also implies that corporate sustainability should be viewed as a valuable capability that can confer a sustained competitive advantage to a shipping company. In this light, shipping companies should focus on building sustainable capabilities by developing organisational-level skills embedded in people, processes and technologies. In addition, the results suggest the need to foster a dynamic learning environment or culture aimed at managing corporate sustainability. A dynamic learning environment can be fostered by developing sustainable shipping exploitation and exploration capabilities. The former can be developed by organising a cross-functional team that regularly surveys and interviews key stakeholders to obtain feedback concerning their expectations and evaluation of a shipping company's current involvement in sustainability on several dimensions (e.g., environment, community involvement and treatment of employees). Alternatively, sustainability performance indicators can be developed, which would allow the team to learn and improve by identifying areas where they are under- or over-performing. Consequently, the team can

The current study has made several contributions to theory. This study offers an alternative theoretical lens through which to analyse the effects of corporate sustainability on business performance. Specifically, it introduces the RBV theory in order to frame corporate sustainability as a set of capabilities rather than a set of practices, as has been commonly adopted by the existing literature. There are several advantages to viewing corporate sustainability as a set of capabilities. Firstly, adopting the term ‘capabilities’ explicitly stresses the positive relationship between corporate sustainability and a shipping company's competitiveness. From the RBV perspective, corporate sustainability can be a valuable resource or capability when managed strategically and can confer a sustained competitive advantage in the shipping market. This view complements contemporary theoretical research anchored to stakeholder or institutional theory, which supports the business case of corporate sustainability. Secondly, adopting the term ‘capabilities’ instead of ‘practices’ reflects the ability or capacity of a shipping company to continually assimilate, deploy, combine, reconfigure and integrate resources, assets (including technologies), routines and knowledge to improve its sustainability performance. This ability is to be contrasted with measuring corporate sustainability using a predetermined set of sustainable practices which are usually static and non-exhaustive and may be irrelevant or even obsolete with respect to the current competitive landscape of sustainability in shipping. Next, this study has also drawn on theoretical insights from dynamic RBV and organisational learning theories to identify and characterise two types of sustainable shipping capabilities that shipping companies can pursue: sustainable exploitation and exploration capability. The former focuses on achieving short-term efficiency through continuous improvement of existing sustainable systems, processes and outcomes. This advancement is achieved by participating in a cycle of obtaining feedback on the requirements and expectations of stakeholders and 101

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Foundation of China [18BGL258], the Humanities and Social Science Foundation of the Ministry of Education of China [17YJCZH125] and the Basic Research Foundation of Central Universities of China [300102239663].

focus on improving the under-performing areas. To develop sustainable shipping exploration capability, shipping companies can improve their ability to innovate through training and sharing best sustainability practices with management and employees. Shipping companies can also organise meetings or seminars that serve as outlets for employees to suggest or invent new ideas or approaches to managing sustainability. Companies can also extend such outlets to their partners and customers, or even research institutions, to identify new, green technologies for research and development or innovative sustainable management approaches for adoption. Shipping companies can also undertake regular business process re-engineering to redesign and radically improve their current sustainability processes. Finally, despite their strategic importance, it has been suggested that both sustainable capabilities exist at both ends of a continuum; that is, the development of one capability may result in the deterioration of the other. Therefore, it is paramount that shipping companies seek a balance in the development of both capabilities that results in the least trade-offs. In this regard, the balance is influenced by the amount of organisational slack possessed and the level of environmental uncertainty perceived by a shipping company. Shipping companies should prioritise more resources to developing sustainable exploitation capability when they possess low organisational slack or perceive low environmental uncertainty. On the other hand, shipping companies should invest more resources in developing sustainable exploration capability when they possess high organisational slack or perceive high environmental uncertainty.

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5.4. Limitations and recommendations Despite the contributions of this study, there are a few limitations. First, the results may only be applicable to the context of Singapore. Future research can consider cross-validating the model with samples collected from other countries to extend the generalisability of the results. Another limitation of this study concerns the use of perceptual financial measures to operationalise the business performance of shipping companies, primarily due to the limited, objective financial data used. Of the 225 samples collected, objective financial data for 102 (45%) of them were available. The remaining 123 (55%) shipping companies did not publicly publish their balance sheet or financial records. To avoid a considerable amount of missing data, which could affect the reliability of the results, objective financial measures were not used to operationalise business performance. However, a post-hoc correlational analysis was conducted on perceptual and objective financial data, suggesting significant relationships (refer to Section 3.2, Measurement Items). Future studies could consider using objective financial measures, if available, to improve the accuracy or reliability of their analyses. Next, this study used firm size and sector as control variables to control for their effects on the business performance of shipping companies. Firm size and sector could moderate the relationships between sustainable shipping capabilities and business performance. Future research could examine the moderation effects to draw more managerial implications. Lastly, having established that the relationship between sustainable shipping capabilities and business performance is moderated by organisational slack and environmental uncertainty, the current study recommends additional research be performed to identify and examine other potential moderators of the relationship. Further investigation should provide stronger managerial implications for shipping companies in their decision to develop sustainable shipping exploitation or exploration capability. Acknowledgements This study was partially supported by the National Social Science 102

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