The Effect of Corporate Sustainability Initiatives on the Financial Performance of Tourism Firms in Tanzania

Abstract

This study investigated the effect of corporate sustainability initiatives on the financial performance of tourism firms in Tanzania. The data was collected from 304 firms comprising of tour operators and hotels operating in Tanzania. The data was analysed using structural equation modelling (SEM) technique. The results indicated that involvement in the community, economy, and eco-efficiency initiatives leads to higher financial performance of tourism firms. Specifically, involvement in community initiatives had the highest predictive power on financial performance while eco-efficiency initiatives had the lowest. The results imply that the influence of corporate sustainability initiatives on firm performance, in the study context, increases with increasing firm involvement in initiatives that have immediate benefits on community interests and little immediate benefits to firm interests – i.e. no quid pro quo. Conversely, the influence of firm corporate sustainability initiatives on firm financial performance is reduced with increased firm involvement in initiatives that have immediate benefits to firms’ self-interest and little immediate benefits to community interests. This study is one of the early attempts to examine the effect of corporate sustainability dimensions in the tourism industry in a Sub Saharan African (SSA) context. The study identifies important characteristics of corporate sustainability initiatives which determine the extent of initiatives’ influence on firm financial performance. The findings imply that firm managers in the SSA context need to design their corporate sustainability initiatives with a higher orientation towards initiatives that serves community interests more than firms’ self-interests.