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Improving Firm Competitiveness Through Diversified Production Strategy: The Moderating Role of ESG Performance

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  • Xiaochen Lin

    (International College, Krirk University, Bangkok 10220, Thailand)

  • Hai Long

    (International College, Krirk University, Bangkok 10220, Thailand
    School of International Economics, Anhui International Studies University, Hefei 231201, China)

Abstract

This study investigates the interactive mechanism among diversified production strategy, ESG performance, and long-term competitiveness using a sample of Chinese listed manufacturing firms over the period 2018–2024. Based on the Long-Term Strategic System Integration Model (LSSIM), agency theory, and the resource-based view, we construct a Diversification-Driven Sustainability (DDS) dual-loop model to examine the moderating roles of ESG and firm capabilities. The empirical results show that ESG positively moderates the relationship between diversified production and long-term competitiveness, with the governance dimension playing the dominant role. ESG also alleviates operational volatility and investment inefficiency induced by diversification. Furthermore, firm capabilities positively strengthen the impact of diversified production on ESG performance. Robustness tests including 1% winsorization, dynamic system GMM, and alternative core indicator measurements confirm the reliability of the conclusions. This study enriches the theoretical framework linking diversification and sustainable development, and provides targeted guidance for manufacturing firms, investors, and policymakers to promote high-quality transformation and upgrading.

Suggested Citation

  • Xiaochen Lin & Hai Long, 2026. "Improving Firm Competitiveness Through Diversified Production Strategy: The Moderating Role of ESG Performance," Sustainability, MDPI, vol. 18(13), pages 1-25, July.
    • Handle: RePEc:gam:jsusta:v:18:y:2026:i:13:p:6643-:d:1980223
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