Enhancing Strategic Performance Through Sustainable Practices: The Nexus of Social Responsibility Practice and Competitive Advantage—Moderating Role of Business Ownership Type

Abstract

Integrating sustainable business practices is crucial for long‐term strategic success in today's ever‐changing corporate environment. This research examines the relationship between social responsibility practices and competitive advantage in the banking industry, with the focus on how these activities might improve a bank's strategic performance. Furthermore, the study investigates the moderating role of business ownership type in the relationship between social responsibility and competitive advantage. This study employed a quantitative research design. The survey questionnaire was used to collect data. Data were collected from 385 customers of selected commercial banks in Ethiopia. The study used Partial Least Square Modeling (PLS‐SEM) to test relationships between variables. Social responsibility practice is measured from the perspectives of banks' philanthropic, economic, legal, and ethical activities. Bank ownership type was considered a moderating variable. The study findings show that social responsibility practices significantly influence the bank's competitive advantage. Similarly, including the moderating variable, bank ownership type, did not significantly change the relationship between social responsibility practices and competitive advantage. The results provide useful insights for business executives and practitioners who want to include sustainability into their strategy frameworks, fostering economic, social, and environmental well‐being. This study emphasizes the need to use sustainable business practices to gain a competitive edge and achieve sustainable business performance. It shows that responsible corporate behavior may result in greater strategic performance.