Firm network and financial performance: the mediating role of corporate sustainability

In the current fast-paced, interconnected global landscape, firms’ networks have emerged as crucial relational assets for establishing a competitive advantage. Previous research has underscored the vital function of the board of directors in generating these networks through board interlocks, which provide access to external resources and boost the firm’s financial performance. However, the underlying mechanisms explaining how firms’ networks affect financial performance remain ambiguous. In this study, we propose corporate sustainability as an influential factor in this relationship by empirically examining its mediating effect on a sample of 958 European public firms. First, we conduct a social network analysis of board interlocks to obtain four network centrality measures. Second, we applied a structural equation model to perform the mediation analysis. Our results show that corporate sustainability partially explains the relationship between the firm’s network and financial performance, suggesting that it serves as a legitimizing factor that allows companies to capitalize on their inter-organizational networks.