Non-linear impacts of productive capacity on organizational sustainability: an analysis of Next-11 countries with ESG moderation

Purpose This study aims to test the non-linear impact of overall productive capacity on organizational sustainability for the Next-11 countries. It also includes the moderating role of environmental, social and governance (ESG). Design/methodology/approach The panel auto regressive distributed lag (ARDL) method with pooled mean group (PMG) specification is applied to analyze the relationship between productive capacity and organizational sustainability for the period 2000 to 2023. Findings The study finds an inverted U-shaped relationship between productive capacity and organizational sustainability, where increased capacity initially boosts sustainability but decreases it beyond an optimal point. ESG’s role is beneficial, moderating the impact from an inverted U-shaped relationship to a U-shaped relationship. The official exchange rate (OER) and energy transition (ENTR) show a negative impact on organizational sustainability. Research limitations/implications Some of the weaknesses of this study might be hinged on the fact that the study targeted Next-11 countries only. This can be extended for other emerging economies. Second, the directional impacts are partial and monotone, but the U-shaped and inverted U-shaped impacts indicate the more complicated tendency of regional development, which needs further examination. Originality/value The research delivers innovative insights into how ESG moderates the quadratic relationship between productive capacity and organizational sustainability for N-11 countries. Further, this study has also considered how OER and ENTR determine organizational sustainability.