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Examining the link between supplier diversification and ESG practices: An opportunity-motivation-ability perspective

Author

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  • Ren, Jia
  • Shan, Shuo
  • Liu, Fuzhen
  • Lai, Kee-hung

Abstract

Supplier diversification can help firms reduce risk and increase resilience with a better ability to drive sustainable business actions for ESG practices. However, research examining the significance of supplier diversification in fostering ESG practices remains scant. Drawing on the opportunity, motivation, and ability (OMA) framework, this study investigates the impact of supplier diversification (as an opportunity-enhancing factor) as well as its interaction effects with financial constraint (as a motivation-constraining factor) and digital transformation (as an ability-enhancing factor) on ESG practices. Based on the two-way fixed effects model on a dataset comprising 2417 firm-year observations from 2011 to 2022, we find a positive association between supplier diversification and ESG practices. Moreover, financial constraint weakens the positive influence of supplier diversification on ESG practices, whereas digital transformation strengthens this positive effect. The additional analyses suggest that the diversification-ESG effect varies from transparency-oriented and stakeholder-oriented ESG practices to operations-oriented ESG practices. This study enriches supplier management and ESG literature by underscoring the interplay of supplier diversification with financial constraint and digital transformation in affecting ESG practices from the OMA perspective. These insights offer invaluable guidance for managers and policymakers striving to achieve sustainability through diversifying external supplier partnerships.

Suggested Citation

  • Ren, Jia & Shan, Shuo & Liu, Fuzhen & Lai, Kee-hung, 2026. "Examining the link between supplier diversification and ESG practices: An opportunity-motivation-ability perspective," International Journal of Production Economics, Elsevier, vol. 299(C).
    • Handle: RePEc:eee:proeco:v:299:y:2026:i:c:s0925527326001532
    DOI: 10.1016/j.ijpe.2026.110062
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