Corporate Sustainability and Financial Performance of Tourism Firms in Tanzania: The Mediating Role of Firm Capabilities

Abstract

This study examines the mediating role of firms’ capabilities on the effect of sustainability initiatives on financial performance of tourism firms in Tanzania. Data was collected using a questionnaire administered to managers of tour operators and accommodation firms operating in Tanzania and structural equation modelling was used to analyse the structural model. The results show that strategic proactivity capability mediates the effect of corporate sustainability initiatives (community, economy, and eco-efficiency) and firm financial performance while the mediation effect of collaboration capability is not supported. The results mean corporate sustainability initiatives with immediate benefits to the local communities enhances firms’ financial performance with or without the development of strategic proactivity capability. However, corporate sustainability initiatives with little immediate benefits to local communities may only enhance firms’ financial performance when strategic proactivity capability is developed. The results suggest that firms need to prioritize corporate sustainability initiatives with immediate benefits to the external community; while developing and applying a strategic proactive stance for implementation of corporate sustainability initiatives with little immediate benefits to the external community.

Key Words - Corporate Sustainability, Financial Performance, Firm Capabilities, Tourism, Tanzania, Sub Saharan Africa