The impact of outside-in capabilities on ESG activities and sales performance: evidence from US manufacturing firms

Abstract

This study addresses three underexplored areas in environmental, social and governance (ESG) performance research: (1) how outside-in capabilities (i.e. market-sensing, absorptive and adaptive) enable stakeholder pressures into implementable ESG strategies and execution, (2) the limitations of symmetric regression models in identifying causal asymmetry and equifinal pathways and (3) the lack of investigation into short-term, customer-facing outcomes such as sales performance, despite their growing managerial relevance in ESG assessment. A dual-method approach integrates hierarchical regression and fuzzy-set qualitative comparative analysis (FsQCA) using survey data from 497 US manufacturing firms. This design captures both average effects and configurational patterns, offering a nuanced understanding of ESG-capability interactions on sales performance. Regression results show that environmental and social activities positively affect sales performance, whereas governance activities alone have a negative effect that turns positive when coupled with strong outside-in capabilities. FsQCA identifies five distinct ESG-capability configurations, revealing multiple equifinal paths to high sales performance across different resource and market contexts. This study contributes to the ESG literature by proposing an ESG-outside-in capabilities interaction model and revealing various pathways through which ESG activities impact short-term performance combined with outside-in capabilities. This study provides actionable guidance for firms aligning ESG initiatives with strategic capabilities to optimize sales outcomes.