This study analyzed how environmental, social, and governance (ESG) performance affected the corporate performance of 36 drugs and biotechnology companies belonging to the Forbes Global 2000. A two-stage dynamic network slacks-based measure (DNSBM) was used to assess their innovation and profitability efficiencies from 2016 to 2021. This study revealed a two-fold benefit of strong ESG performance. More specifically, higher social pillar scores result in greater innovation and profitability efficiency. Furthermore, this study suggests that cultural factors influence how ESG performance translates into a company’s overall success. Companies operating in cultures characterized by high individualism and long-term orientation will reap the benefits of higher innovation efficiency by improving their social pillar scores. On the other hand, companies operating in cultures characterized by collectivism and short-term orientation will reap the benefits of higher innovation efficiency by improving their governance pillar scores. As the drugs and biotechnology industry is highly competitive, this study recommends that companies take a strategic approach to their ESG activities, while considering cultural factors in their planning and implementation to ensure long-term success and sustainability.
