<scp>ESG</scp> as a Context‐Contingent Capability: Competitive Intensity, Internationalization, and Efficiency in the Global Clothing Industry

ABSTRACT This study examines Environmental, Social, and Governance (ESG) performance as a context‐contingent strategic capability, whose efficiency payoffs depend on market rivalry and internationalization. Drawing on the Resource‐Based View and Stakeholder Theory, we investigate how competitive intensity (CI) and degree of internationalization (DOI) jointly shape the ESG–efficiency relationship in the global clothing industry. Using a two‐stage network data envelopment analysis (NDEA) on 280 firm‐year observations from 56 listed apparel firms between 2019 and 2023, we assess operational eco‐efficiency (OE) and profitability efficiency (PE). The results indicate that ESG is associated with stronger efficiency gains under intense market rivalry, but exhibits diminishing returns as internationalization increases, amplifying disclosure and legitimacy pressures without proportional operational improvements. This pattern reveals a legitimacy–efficiency gap in highly internationalized contexts. Further analysis shows that ESG delivers its strongest efficiency benefits when it is deeply embedded within firms and aligned with both competitive and global institutional conditions. Overall, the findings advance a context‐dependent capability view of ESG and provide strategic guidance for aligning sustainability investments with competitive and institutional environments to enhance operational and financial performance.