Business case complexity and environmental sustainability: Nonlinearity and optimality from an efficiency...

Area of Science:

• Environmental Sustainability
• Business Strategy
• Airline Management

Background:

• The relationship between environmental sustainability and business competitiveness is debated, with no clear consensus.
• Stakeholder theory suggests environmental practices can enhance competitive advantage.
• This study examines the impact of sustainable practices on international airline competitiveness.

Purpose of the Study:

• To investigate the nonlinear relationship between environmental sustainability and airline competitiveness.
• To determine the optimal level of environmental investment for maximizing competitiveness.
• To provide insights for airline managers on balancing sustainability and profitability.

Main Methods:

• Dynamic network data envelopment analysis (DEA) to measure airline operational efficiency (competitiveness).
• Panel smooth transition regression (PSTR) model to analyze nonlinearities and regime-switching behaviors.
• Instrumental variable PSTR (IV-PSTR) model to address endogeneity bias.

Main Results:

• An inverted U-shaped relationship was found between environmental sustainability and competitiveness.
• Beyond an optimal threshold, increased investment in sustainability led to decreased competitiveness.
• Both very low and very high levels of environmental investment can negatively impact competitiveness.

Conclusions:

• Airline managers must carefully balance environmental investments to avoid diminishing returns.
• Optimal environmental sustainability strategies are crucial for enhancing, not hindering, airline competitiveness.
• Findings offer theoretical contributions and practical guidance for sustainable business practices in the aviation industry.