Exploring the direct impact of environmental, social and governance (ESG) factors on organisational innovation output and institutional isomorphism: a study in the context of multinational life sciences organisations

Purpose The purpose of this study was to investigate potential direct impact of environmental, social and governance factors (ESG) on organisational innovation and their role as isomorphic factors in multinational life sciences organisations. Design/methodology/approach The authors applied necessary condition analysis (NCA), using the R statistical tool to determine the direct impact of environmental (E), social (S), governance(G) and composite ESG factors on innovation, represented by research and development (R&D) expenditure across a sample of 86 multinational life sciences companies. Findings The study established that ESG factors have a positive impact on the innovation output of multinational firms in the life sciences industry. Further, the study also established that ESG factors act as isomorphic factors in the organisation of multinational life sciences firms in implementing sustainability practices. Originality/value This empirical research study was a novel attempt to establish a direct impact of ESG factors on innovation output of multinational life sciences firms. This was one of the first empirical studies to integrate the institutional theory with the resource-based view and thereby demonstrate that ESG factors had a significant role in contributing to institutional isomorphic behaviour, in the form of sustainable innovation as a strategy. This study established the importance of ESG factors in defining the sustainability agenda of multinational life sciences organisations. Lastly, the study elucidates the benefits of the integration of sustainability as a strategy in multinational life sciences corporations.