UNIVERSITY OF EASTERN FINLAND Faculty of Social Sciences and Business Studies Business School
Drivers of Global Corporate Social Responsibility and its Effect on Global Brand Reputation
Master’s thesis Service Management Marika Laine (274622) 9.6.2018
ABSTRACT
UNIVERSITY OF EASTERN FINLAND Faculty
Faculty of Social Sciences and Business Studies
Department Business School Author
Marika Laine
Supervisor
Tommi Laukkanen Title
Drivers of Global Corporate Social Responsibility and its Effect on Global Brand Reputation.
Main subject
Service Management, Marketing
Level
Master’s thesis
Date 9.6.2018
Number of pages 117 + 4
Abstract
Nowadays companies cannot avoid their social and environmental responsibilities. Different social and environmental issues are increasing in number, thus companies have a chance to solve these problems instead of focusing only on economic responsibility of the business.
Consequently, the pressure towards better corporate social responsibility (CSR) activities is constantly increasing, and particularly when companies are acting inside global market, global CSR is required since global business brings a responsibility that is beyond local issues.
Additionally, CSR can be beneficial to the company itself due to outcomes of CSR activities, which only strengthens the vitality of CSR from both local and global angle.
The aim of this study is to research which are the possible drivers of global corporate social responsibility activity including both philanthropic and environmental CSR orientation, and how these two different GCSR dimensions impact on global brand reputation. Charitable and philanthropic activity and environmental sustainability are then investigated separately because of their specific characteristics. Global brand reputation angle brings extra value to this study referring to the outcomes of CSR.
The study is based on a ready-made survey that was targeted to Finnish export companies, hence data was collected beforehand by an external organization in cooperation with UEF. As a total 249 responses were included in the quantitative analysis. Structural equation modeling (SEM) was used as an analysis method so that multiple latent constructs and their relationships, whether independent or dependent, can be examined at the same time.
Previous research was reviewed in order to suggest the possible drivers of GCSR. Company characteristics and institutional factors were then selected as the main driver categories that consist of several separate drivers. Global brand reputation was identified as potential valuable outcome of GCSR that was also included in the before-made survey. Findings indicated that especially export companies’ relationships with different political institutions impact positively on both global philanthropic and environmental sustainability activity. Other interesting results were also provided. Moreover, global charitable and philanthropic activity can have a highly significant positive effect on global brand reputation, whereas rather surprisingly global environmental CSR did not show statistically significant results.
This research brings required direct results about drivers of GCSR and how it can affect global brand reputation. Therefore, both CSR and brand research can have novel insights and future suggestions which have not been researched earlier and which can also be put into practice.
Key words
Global corporate social responsibility, corporate philanthropy, environmental sustainability, global brand reputation, international business
TABLE OF CONTENTS
1 INTRODUCTION ... 1
1.1 Background ... 1
1.2 Objectives and research questions ... 4
1.3 Previous studies ... 6
1.4 Approach and limitation of the research ... 9
1.5 Key concepts ... 9
1.6 Structure ... 11
2 THEORETICAL FRAMEWORK AND HYPOTHESES DEVELOPMENT ... 12
2.1 CORPORATE SOCIAL RESPONSIBILITY (CSR) ... 12
2.1.1 Philanthropic and charitable activity ... 24
2.1.2 Environmental sustainability activity ... 29
2.1.3 Global Corporate Social Responsibility (GCSR) ... 33
2.2 COMPANY CHARACTERISTICS ... 35
2.2.1 Philanthropic CSRO ... 36
2.2.2 Environmental CSRO ... 37
2.2.3 Export customer orientation ... 38
2.2.4 Financial constraints ... 40
2.3 INSTITUTIONAL FACTORS ... 41
2.3.1 Institutional barriers ... 43
2.3.2 Political institutions ... 44
2.3.3 Local businesses and managers ... 46
2.3.4 Local communities ... 47
2.4 CSR AND GLOBAL BRAND REPUTATION ... 49
2.5 CONCEPTUAL FRAMEWORK ... 53
3 RESEARCH AND METHODOLOGY ... 58
3.1 Measurement of CSR ... 60
3.2 Sample and data collection ... 62
3.3 Multivariate data analysis ... 62
3.4 Structural Equation Modeling (SEM) ... 63
3.4.1 Assessment of the measurement model: reliability and validity ... 65
3.4.2 Assessment of the structural model ... 68
3.4.3 Defining the constructs of the model ... 69
4 RESULTS AND FINDINGS ... 70
4.1 Background information and results ... 70
4.2 Assessing the measurement model ... 76
4.3 Assessing the structural model ... 79
5 CONCLUSIONS ... 87
5.1 Main findings ... 87
5.2 Theoretical conclusions ... 88
5.3 Managerial implications ... 93
5.4 Limitations of the research and future suggestions ... 97
6 REFERENCES ... 103 APPENDICES
APPENDX 1: Questionnaire (selected parts of the ready-made survey design)
LIST OF FIGURES
Figure 1: Positioning the research between different business subjects. (p. 9) Figure 2: The structure of this research. (p. 11)
Figure 3: The Corporate Social Performance Model (Carroll 1979). (p. 15) Figure 4: The Pyramid of Corporate Social Responsibility (Carroll 1991). (p. 17) Figure 5: The Reoriented CSP model (Swanson 1995). (p. 19)
Figure 6: CSR as ongoing process. (p. 54)
Figure 7: Drivers of GCSR activities and their effect on global brand reputation. (p. 57) Figure 8: Path model. (p. 81)
LIST OF TABLES
Table 1: The CSP Model (Wartick & Cochran 1985). (p. 17)
Table 2: The Corporate Social Perfomance Model (Wood 1991). (p. 18) Table 3: Summary of the selected questions. (p. 75)
Table 4: Measurement model fit. (p. 77)
Table 5: Construct validity of the measurement model. (p. 78)
Table 6: Variance inflation factors and tolerance with CHAFOC and ENREFOC variables. (p. 80) Table 7: Variance inflation factors and tolerance with global brand reputation variable. (p. 80) Table 8: Paths, path coefficients and probabilities of the structural model. (p. 84)
1 INTRODUCTION
This thesis is part of a wider international research project of UEF Business School. The data collection was implemented by Taloustutkimus and the target group for the localized research was Finnish export companies. The ready-made questionnaire includes in the society and environment section representing CSR from philanthropic and environmental sustainability angle that is examined from global perspective in this particular research. Additionally, global brand reputation is added as a final perspective of this study.
1.1 Background
How to manage the relationship between business and society has been one of the main questions among academic and business literature (Michelini & Florentino 2012). The popularity can refer to the perception that many organizations see corporate social responsibility (CSR) as a significant part of the strategic policy in today’s business (Isa 2012). From the beginning of corporate social responsibility thinking the future researches of CSR have been strongly emphasized: the need for future implications (for both academics and managers) has been significant. In the last years CSR is still a growing source of concern to both researchers and practitioners (Mousiolis & Bourletidis 2015: Zbuchea & Pinzaru 2017), also particularly in a marketing field it is increasingly important (Kemper, Schilke, Reimann, Wang & Brettel 2013).
The importance behind CSR as a topic comes from the complex discussion of what is the role of business in a society and whether companies are responsible to the society or not, which also refers to a definitive problem of CSR that has been modifying the purpose of the construct during the years. In the early stage of CSR theory some professionals, such as Friedman (1962; 1970) or Davis (1973), even questioned this role. Nonetheless, a majority then and now cannot ignore the social responsibility of business whether the content of this responsibility might vary. It is clear that companies’ actions can influence its environment and society, thus business should and can do its best to enhance both societal and environmental issues (e.g. Aguinis & Glavas 2012; Campbell 2007; Sprinkle & Maines 2010) by contributing CSR activities among its stakeholders. That is to say, it should create value together with society and focus on other responsibilities than just only the economic ones (e.g. Freeman, Martin & Parmar 2007; Porter & Kramer 2006; 2011) while fighting against corporate social irresponsibilities (Lin-Hi & Müller 2013).
This research has noticed the previous research and their vital characteristics. However, since today’s business is typically connected to other countries at least in some levels (Altuntas & Turker 2015) and this global interest is booming in CSR thinking and practice (Arevalo & Aravind 2017;
Garcia, Mendes-Da-Silva, & Orsato 2017) the international perspective is chosen. This specific angle is significant because global business means global corporate social responsibility, in which the stakeholders, too, have recognized this growing need to expand CSR to international level (van den Heuvel, Soeters & Gössling 2014). Nevertheless, there is still confusion concerning the drivers of global CSR activities. That is why this research focuses especially on these drivers in order to enhance CSR research and practitioner’s work.
Philanthropic and environmental CSR orientations are chosen as specific CSR orientations that together will lead a company’s CSR to another level, hence drivers of global CSR activities will focus on these two dimensions of CSR. It is also stated that CSR indeed highlights corporate behavior that focuses on these social and environmental issues (Kitzmueller & Shimsshack 2012), hence philanthropy focusing on social issues and and environmental CSR as bringing the environmental sustainability perspective are relevant research angles of CSR.
Moreover, there is also other beneficial side of CSR that can validate its permament role in business: it can be very useful to a company’s business as well. This perspective has been under wide examination when the research work has focused on the outcomes of CSR, including for example better reputation, stakeholder relationships and then better performance creating a competitive advantage, referring to e.g Chojnacka and Wisniewska (2016), Fernández Sánchez, Luna Sotorrio and Baraibar Diez (2015), Waddock, Bodwell and Graves (2002), Walsh, Mitchel, Jackson and Beatty (2009), Wang and Berens (2015), and Zhang, Ma, Su and Zhang (2014).
Therefore, the outcome perspective of CSR is also included in this research that deals with global brand reputation approach, in which CSR can be perceived as a mandatory part of global brands (Polonsky & Jevons 2009).
Validations from the perspective of business practice
From the marketing practice perspective there can be identified many factors that support the importance of CSR theory in Finland and within an international level of business. For example, Fairtrade Finland, as a member of well-known Fairtrade International, can be categorized as one of
the top actors inside responsibility within trade and business. Fair trade is an alternative approach of regular trade standing for a partnership between producers and traders, businesses and consumers (Fairtrade 2017). The importance and popularity of Fairtrade in Finland can be supported by the actual numbers: sales of the Fairtrade products is increasing every year, for instance in 2015 the growth was 6,9 % hence the value of sales was 173,6 million euros (Reilukauppa 2017). Fairtrade Finland (Reilukauppa 2017) states that consumers value transparency in production chain, ethics, green and environmental-friendly solutions, and the social benefits to the farmers and to the whole community due to the Fairtrade.
Secondly, as Finland is part of European Union (EU), European Commission’s (2017) view has influence on how Finland ought to respond to CSR guidelines and activities. The European Commission (2017) have discussed about CSR in EU and explained it as actions made by companies that go beyond the law but take account into the social and environmental objectives in their daily based business. CSR can refer to Europe 2020 strategy where particularly new skills and jobs, youth, and local development are emphasized, while it also deals with business and human rights, CSR reporting and socially responsible public procurement (European Commission 2017).
The European Commission (2017) encourages companies to follow fair employment practices that respect human rights, especially if the companies handle products from outside of EU.
The European Commission ran the latest peer review of Member States’ policies and activities on CSR in 2013-2014 where Finland was one of the participatory countries. Shortly, in Finland’s Peer Review Report it is stated that Finland could be seen as a forerunner in the field of CSR; for example the Ministry of Employement and the Economy is responsible for government’s CSR policy and it cooperates closely with other departments, such as Ministries of Foreign Affairs and the Environment, and the goal is to achieve a global level (European Commission 2013). Working with stakeholders and a need for new approaches are identified as the main topics of the CSR policies in Finland – a Committee on CSR and The Corporate Reponsibility Network ’FIBS’
enhance this coordination with stakeholders, which improves CSR policies within different organizations (European Commission 2013). Referring to the need of new approaches, European Commission (2013) highlighted the relation between CSR and SMEs: many Finnish companies are SMEs with probably smaller resources, and even though there are tools and resources available for SMEs, approaches need to be more tailored based on the invididual needs of SMEs. In more comprehensive level CSR is seen as positive influencer on Europe’s competitiveness while also increasing consumers’ trust (European Commission 2013).
Furthermore, Agenda 2030 by United Nations (UN) contains new sustainable development goals which are perceived as a plan of action from perspectives of people, planet, prosperity, peace and partnership. The Agenda involves 17 Sustainable Development Goals, SDGs, and 169 targets to show its ambition as a new universal Agenda that concerns all countries and stakeholders (United Nations 2015). All the goals are intertwined and harmonized within the three dimensions of sustainable development – economic, social and environmental (United Nations 2015), which are also current and absolute in CSR thinking. Companies participate by determining the goals and ensuring that they can be achieved via corporate innovations, and economic and technological investments (United Nations 2015; FIBS 2017). The state has a main responsibility but firms represent strong actors in this strategy because they can make difference in business and society by delivering benefits of the goals, e.g. better economic and social conditions or resources availability in future (United Nations 2015; FIBS 2017). Also according to UN (2017), this is an opportunity to develop the business and enhance the growth. It is clear that Agenda 2030 and its several SDGs have already impacted companies among different countries including Finland. And as an international project it highlights the global focus of CSR and its importance as a topic.
1.2 Objectives and research questions
The key objective of this research is to find results on what drives companies’ global CSR activities while focusing on both philanthropic and charitable activity and environmental sustainability activity. In addition to the drivers, it is researched whether global corporate social responsibility (GCSR) activities impact on global brand reputation. Both philanthropic and environmental GCSR activities are examined separately.
Govindan, Kannan and Shankar (2014) have referred to drivers as factors affecting and compelling companies to implement CSR activities. Even though there are no direct researches concentrating on drivers of GCSR, several researches have focused on motives and motivations to engage in CSR activities which can be related to the social irresponsibilities that companies want to prevent (e.g.
Lin-Hi & Müller 2013) or to the key strategy that companies are using to accelerate and improve sustainability (Kemper, Schilke, Reimann, Wang & Brettel 2013). Motives to engage in CSR activities can come from external rationales (Basu & Palazzo 2008; Govindan et al. 2014). For instance, companies want achieve different outcomes of the CSR, such as better reputation (Fernández Sánchez et al. 2015; Maden et al. 2012), enhanced risk management (Chojnacka &
Wisniewska 2016; Husted 2005), increased financial performance (Chen Chen, Feldmann & Tang 2015; Flammer 2015; Wang & Berens 2015) and customer loyalty (Yeh 2015). Companies might also want to prevent legal penalties (Parker 2002) or react to actions of non-governmental organizations (Spar & La Mure 2003). Therefore, various stakeholders can be the main drivers for companies to implement CSR initiatives (Govindan et al. 2014).
Moreover, institutional drivers for CSR in an emerging economy have been researched recently (Yin 2017), and similarly Hanim Mohamad Zailani, Eltayeb, Hsu and Choon Tan’s (2012) research has focused on institutional drivers but from environmental performance perspective. Especially these studies have inspired to research how different institutional factors, informal or formal institutions, can influence GCSR.
Consequentely, in this study the suggested drivers of GCSR are then rather concrete and based on clear theoretical findings and arguments. Also not all possible drivers can be included in this research, since the questionnaire does not investigate them from the required viewpoint and also the topic is very extensive, hence more research is required that would focus on other possible drivers of GCSR.
The main research question:
• What are the drivers of global corporate social responsibility activities and how do they influence global brand reputation?
Sub-problems via theoretical review:
• How to determine CSR and GCSR?
• What are the roles of philanthropic and charitable activity, and environmental sustainability activity in CSR thinking?
• Which factors can be the drivers of GCSR that focuses on philanthropic and environmental dimensions of CSR?
• What is the relationship between GCSR and global brand reputation?
Sub-problems via empirical study:
• Does philanthropic CSR orientation affect positively the global focus of an export company’s engagement with charities and philanthropic activity?
• Does environmental CSR orientation affect positively the global focus of an export company’s engagement with environmental sustainability activity?
• Does export customer orientation influence positively an export company’s global focus of charitable and philanthropic activity, and/or on environmental sustainability activity?
• Do financial constraints impact negatively on philanthropic and/or environmental GCSR?
• How do different institutional factors including institutional barriers as formal institutions and an export company’s relationships with different institutional groups as informal institutions influence GCSR?
• Does GCSR (philanthropic and/or environmental GCSR) impact positively on global brand reputation?
Novelty value comes from the lack of research that would focus on global corporate social responsibility and its drivers. Furthermore, global brand reputation as an outcome brings interesting angle which is is not researched from GCSR’s drivers’ perspective, and it can bring a real value for international marketing and brand management research and also if thinking about the importance of GCSR in the future. Above all, the importance of this study comes from the general meaning of CSR, since companies cannot ignore their social and environmental responsibilities in a modern world. Additionally, these social and environmental issues are not decreased, instead they can be expanding in the future while the issues are also truly global, thus international actions from companies are needed even more. Also, there are limited studies focusing on how organizations make CSR implementation decisions (Cantrell et al. 2015), hence these drivers can partially answer to that question and help practitioners/managers in their work.
1.3 Previous studies
Global corporate social responsibility (GCSR) as a concept can be driven from the growth of globalization which increases global business while it brings different pressures towards CSR due to global responsibility of international companies (Panapanaan & Linnanen 2009, 78; van den Heuvel et al. 2014; Yin 2017). It is then studied that these pressures can be drivers towards GCSR (Panapanaan & Linnanen 2009, 78; Yin 2017). Additionally, Lim and Tsutsui (2012) have studied earlier that global institutional pressures might influence the global corporate social responsibility endorsement and activity. Consequentely, there are results that companies have invested more in international charitable targets than earlier (Meijer, Bakker, Smith & Schuyt 2006), while the increase of GCSR activity can be linked to the effectiveness of CSR management when effective
CSR includes global activity since CSR issues themselves are global (Crane & Matten 2010, 465;
Husten & Allen 2006). However, exact studies of the concrete drivers of GCSR are lacking.
Referring to the previous studies of philanthropic and charitable activity the amount of studies has been rather high, which can be partially explained by the pressures from business environment and its stakeholders (Brammer, Pavelin & Porter 2009). For instance, it has been studied how philanthropic activity can affect on corporate reputation, and the results have shown that a positive effect of corporate philanthropy on corporate reputation exists (e.g. Brammer & Millington 2005; Jo
& Na 2012; Szőcs, Schlegelmilch, Rusch & Shamma 2016). Research has also focused on relationship with employees and corporate philanthropy that has brought up contradictory findings, but even though it can be seen non-significant (Brammer & Millington 2005; Chen, Patten &
Roberts 2008) there are evidence indicating the positive effects of corporate philanthropy on employee relationships, such as enhanced internal motivation (e.g. Cantrell, Kyriazis & Noble 2015; Lee, Kim, Lee & Li 2012).
Furthermore, philanthropic activities have been studied from rational egoism theory and managerial moral perspectives (Huang & Tsai 2015; Miska, Hilbe & Mayer 2013; van Kranenburg & Zoet- Wissink), and from a consumer participation angle as well (e.g. Gneezy, Gneezy, Nelson & Brown 2010; Mattila & Hanks 2012). Other important academic work inside philanthropic CSR is its strategic approach: when corporate philanthropy is a truly startegic it can bring actual social benefits and competitive advantage to the companies (Porter & Kramer 2002). Nonetheless, the research focus has been still on a domestic charitable giving (Cowan, Huang & Padmanabhan 2016), and the concrete drivers towards global philanthropic and charitable activity are not directly researched.
Companies have noticed environmental responsibility for decades but instead of focusing on how to prevent environmental problems they are focused more on the current solutions to the problems, which ignores the future perspective (Bortree, Ahern, Smith & Dou 2013). But according to Bortree et al. (2013), these topics of environmental issues differ and they are time dependent, hence not all companies are acting similarly or at least they can change their environmental sustainability activity. Yet, there are previous researches indicating that demands from different stakeholder groups put pressures on companies to act more environmentally friendly (e.g. Flammer 2013;
Buchholt & Carroll 2009; Halldorsson & Kovacs 2010; Khojastehpour & Johns 2014). There is also a negative side of CER orientation since companies can try to greenwash their actions by several
behavior tactics, e.g. a research evidence from Chinese companies revealed that corporate philanthropy can be significantly connected with corporate environmental responsibility weaknesses (Du, Chang, Zeng, Du & Pei 2016).
Environmental sustainability has been also linked to different concepts, such as triple bottom line (TBL) approach by John Elkington that communicates about sustainability of economic, social and environmental responsibilities (Crane & Matten 2010). Or it can be related to eco-design which concentrates on the development of internal eco-design capabilities (Sprinkle & Maines 2010), which might decrease the harmful environmental impact of the production while also decreasing the the costs and improving marketability (Hu & Hsu 2010). Therefore, it has been showed that environmental CSR can be defined as a value driver for companies because of its several benefits (Babiak & Trendafilova 2011). Prior research has focused for example on the the following outcomes: improved financial performance, competitive advatange, and better reputation among different stakeholders (Agan, Kuzey, Acar & Acikgöz 2016; Babiak & Trendafilova 2011; Cordeiro
& Tewari 2015). But the current situation is still similar than in philanthropic and charitable orientation: there is a little understanding of international companies’ concrete drivers towards global environmental sustainability responsibility. Additionally, environmental CSR should be researched more from multi country perspective (Holtbrügge & Dögl 2012).
CSR and its relations to different brand concepts have been researched earlier from several viewpoints, but particularly global brands can be strongly associated with CSR. Holt, Quelch and Taylor (2004) have investigated that people believe global companies need to contribute better CSR regardless of their countries’ development status. In addition, they found that a consumer group of truly global citizens are concerned about how responsible companies are in terms of social and environmental issues, which increases the importance of this research. Torres, Bijmolt, Tribó and Verhoef’s (2012) research continues this global topic and it highlighted that CSR despite of industry and country characteristics has positive effect on global brand equity. They also have recommended that more research of CSR and global brands should be implemented.
In line with Torres et al. (2012), Lai, Chiu, Yang and Pai (2010) found similar positive effect of CSR on industrial brand equity. Whereas, Hur, Kim and Woo’s (2014) analysis has showed that corporate brand credibility and corporate reputation can be the mediators in the relationship between CSR and corporate brand equity. Additionally, Melo and Gala (2010) have stated earlier that CSR has a positive effect on brand value. Regarding the exact brand reputation concept, there
are findings indicating that social irresponsibilities would affect negatively the changes in brand reputation (Harjoto & Salas 2017). There are still no direct researches about the influence of GCSR on global brand reputation, and especially from the philanthropic and environmental CSR perspective.
1.4 Approach and limitation of the research
This research focuses on the drivers of global corporate social responsibility (GCSR) and its effect on global brand reputation, which combines different fields from business research (See Figure 1).
GCSR as a concept belongs to business ethics but also to international business management (IBM) research. Thus, it is a very extensive concept, hence 1) philanthropic and charitable activity and 2) environmental sustainability activity are chosen as specific CSR orientations that are examined from global viewpoint.
Philanthropic and environmental CSR dimensions are both very vital when thinking about the global CSR activity, in which corporate philanthropy can fall into social issues field and environmental CSR into green management field, but there are transparency between these issues as well. Moreover, global brand reputation angle adds greater international marketing and global brand management perspective to this research, while it brings extra value to the research of global corporate social responsibility.
1.5 Key concepts
Corporate social responsibility (CSR) can be part of different fields and perspectives including e.g. philosophy, marketing, management and finance (Zbuchea & Pinzaru 2017). The research of CSR has practically focused on a relationship between business and society (Michelini & Florentino 2012). It can be defined as a company behavior that supports social and environmental
GCSR research IBM
International marketing
Global brand mgmt
Society Environment
Business Ethics
Figure 1: Positioning the research between different business subjects.
responsibilities when the responsibilities of companies go beyond the legal and regulatory conditions (Kitzmueller & Shimsshack 2012), while CSR can also consist of a combination of responsibilities that is based on economic, legal, ethical and philanthropic/discreationary orientations (e.g. Carroll 1979; 1991). But CSR is still a complex concept that can vary by time, company, stakeholder or researcher, and its various definitions and perspectives have complicated its theoretical development and measurement (Siegel & Wright 2006; Hillenbrand, Money &
Pavelin 2012).
Global corporate social responsibility (GCSR) concentrates on the standards that all societies have instead of focusing only on local community angle (Husted & Allen 2006). CSR thinking and practice is then not limited to local and domestic activities, but it can or it should take account of global issues. CSR issues themselves can be global in nature, such as climate change, pollution or human rights (Crane & Matten 2010, 465), which strengthens the vitality of GCSR. Also, for multinational companies, GCSR can be perceived automatically as a requirement due to their international business around several operating countries and global responsibility (Andersen &
Skjoett-Larsen 2009; Maloni & Brown 2006).
Philanthropic CSR goes beyond ethical CSR orientation and concentrates on how to develop society and improve people’s life via corporate actions and charity (Caroll 1979; 1991). In practice corporate philanthropy can be defined as charitable actions in form of monetary donations or as community involvement by donating time of the company and its talents (Buchholtz & Carroll 2009, 620). If philanthropic activity is part of corporate strategy, philanthropy and its charitable actions can create actual social impact while also the company will benefit (Hess, Rogovsky &
Dunfee 2002; Porter & Kramer 2002). These benefits can perceived from corporate reputation perspective when philanthropic activity can enhance and protect corporate reputation (Brammer &
Millington 2005) and/or it can improve company performance (Dijk & Holmén 2017).
Environmental sustainability activity/Corporate environmental responsibility (CER) can be seen as an extension of CSR while also driving many social issues (Karassin & Bar-Haim 2016).
CER has focused on pollution prevention, waste minimisation, energy conservation, and recycling (Crane, Matten & Spence 2014, 349). A green production and eco-design are some accurate examples of companies contributing CER (Sprinkle & Maines 2010). Additionally, nowadays environmental responsibilities include also major global issues such as climate change, biodiversity and resource scarcity while they are important factors in environmental CSR research (Crane,
Matten & Spence 2014, 349; Khojastehpour & Johns 2014). Environmental sustainability belongs equally to companies than governments (Buchholtz and Carroll 2009, 613). Furthermore, it should be noticed in the beginning that sustainability alone includes environmental responsibilities, but also social and economic responsibilities referring to Elkington’s TBL approach (Crane & Matten 2010, 34). Environmental sustainability is important component of sustainability and CSR.
Global brand reputation discusses about brands reputational status from global perspective.
Reputation in general is a socially shared impression, belief or attitude based on a degree of common interest and social interaction (Bromley 2002). Brand reputation requires a constant work, because it is earned over time and built on the people’s assessment of the brands (Veloutsou &
Moutinho 2009). It is based on the produced marketing signals and organizational tactics supporting these signals (Herbig & Milewicz 1993), thus it can be comprehended as an output of the brand identity that companies introduce, the company actions based on the brand promises, and the extent of consumer experience regarding the promises (Veloutsou & Moutinho 2009).
1.6 Structure
This research structure consists in four major chapters after Introduction (See Figure 2). Chapter 2 concentrates on theoretical framework and hypotheses development. It includes in basic theory of corporate social responsibility (CSR) that is separated into three chapters that creates the theory basis of the dependent variables of GCSR. Then Chapters 2.2 and 2.3 focus on the drivers of GCSR, hence their theoretical basis can be found from those chapters. After that Chapter 2.4 discusses about global brand reputation within CSR viewpoint that deals with global CSR as well.
Finally, Chapter 2.5 will present a conceptual framework as a conclusion of the CSR theory and the hypothesized drivers of GCSR and its effect on global brand reputation.
Chapter 3 will continue into a research and methodology part of this research, when the selected research method is introduced. Then Chapter 4 will show actual research results and findings. And lastly, main findings, theoretical conclusions, managerial implications and limitations of the research and future suggestions are presented in Chapter 5 (Conclusions).
Figure 2: The structure of this research.
1. Theoretical framework and
hypotheses development 2. Research and
methodology 3. Results and
findings 4. Conclusions
2 THEORETICAL FRAMEWORK AND HYPOTHESES DEVELOPMENT
Theoretical framework starts with the umbrella concept corporate social responsibility (CSR). The definition of CSR has been under vivid discussions for decades, hence it is reasonable to start with the sort of beginning of the CSR in order to understand the concept as a whole. Then the more current theoretical findings are discussed and after deepening the knowledge of the current research situation, philanthropic and charitable activity following environmental sustainability activity are clarified. Moreover, since the case companies are Finnish export companies and the research problem aims to answer to the question of what the drivers of global corporate social responsibility are, the status of global CSR must be reviewed.
After examining the previous theory basis of GCSR the probable drivers of GCSR activities and their hypotheses are suggested based on theoretical findings and other justifications. In general, drivers can be defined as factors that affect and compel implementation of CSR activities in a company (Govindan et al. 2014). They are sort of conditions that influence CSR and explain why companies are doing CSR activities (Campbell 2007). Lastly, relation between CSR (in general and from global angle) and global brand reputation is discussed and final hypotheses are developed.
Thus, the effect of GCSR on global brand reputation is the final dependent variable in this research, which brings more value from both the academic and the managerial perspective.
2.1 CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate social responsibility (abbreviated usually as CSR) is one of the most discussed topics inside the academic and professional business field and literature (Mousiolis & Bourletidis 2015;
Zbuchea & Pinzaru 2017) – it can be examined from many perspectives between philosophy to marketing, management and financial impact (Zbuchea & Pinzaru 2017). In practice, CSR research has concentrated on managing the relationship between business and society (Michelini &
Florentino 2012). However, CSR as a concept can be really complex due to its different definitions over time while the debates have been vivid. Many scholars from the beginning of CSR until now have dealed with this definition problem and suggested their perspectives or models as enhanced starting points (e.g. Carroll 1979; Freeman 1984; Davis 1973; McWilliams, Siegel & Wright 2006;
Porter & Kramer 2011; Swanson 1995; Wartick & Cochran 1985; Wood 1991).
Consequently, a consensus of the CSR definition is lacking (Husted & Allen 2006). McWilliams, Siegel and Wright (2006) have underlined that various definitions and perspectives complicate the theoretical development and measurement of CSR. Hillenbrand, Money and Pavelin (2012) have admitted the yet existing definition problem: corporate responsibility can be comprehended differently depending on time, company, stakeholder and also researcher, which makes it problematic as a scholarship. Okoye (2009) has even stated that a universal definition of CSR is unnecessary because it is an essentially contested concept.
Shortly, corporate social responsibility can be perceived as a company behavior that especially emphasizes social and environmental responsibilities, thus these responsibilities go beyond the legal or regulatory requirements of a business (e.g. Kitzmueller & Shimsshack 2012; Davis 1973). There are other arguments that highlight both economic and legal responsibilities as either equally valuable when discussing about CSR (e.g. Chan, Chou & Lo 2017; Swanson 1995) or they are seen as greater or the only responsibility of businesses (e.g. Carroll 1991; Friedman 1962). Next the theory of CSR is opened more carefully in order to understand the complexity of this construct.
A sort of forefather of CSR and the modern area of social responsibility might be Howard R.
Bowen that created a first definitive book of CSR, Social Responsibilities of the Businessman, in 1953. For instance, the later pioneers of CSR, Carroll (1979) and Wartick and Cochran (1985), have highlighted Bowen’s (1953) work as a beginning of the CSR theory. Bowen (1953) was concerned with the role of businessmen inside the society. He studied many questions; what responsibility businessmen are expected to follow, what tangible benefits could rise up after social implications, amd what are the steps needed for emphasizing broader social aspects of business decisions (Bowen 1953). New edition of the book has been published in 2013. According to Jean-Pascal Gond (2013), one main reason behind the re-publication is to spread Bowen’s words to a new generation of scholars so that CSR theory and practice could be driven forward.
In addition to Bowen (1953), Kaysen (1957) started the early discussion about CSR. He recognized three characteristic features of behavior that are strongly linked to growth and disappeared ownership: the emphasis on new scientific tools and ways of management, the growth and technical progress measuring achievement, and the wide responsibility of managers inside the modern corporation aka CSR. Kaysen (1957) already referred to stakeholder perspective of CSR and sustainable management including philanthropic activities that are still one of the top topics in
current research and practice. He said that management is responsible to stockholders, employees (e.g. via appropriate wages, insurance, healthcare and good working conditions), customers (via improved and fair products/services), the general public (e.g. enhancing the local charitable enterprises, implementing sustainable factories and supporting education/science) and the firm itself (via long-run position and sustained and rapid growth).
While Kaysen (1957) stated that seeking the maximum return on investment is not the only priority to the modern company, Friedman later (1962) represented a neoclassical economics claiming that the only social responsibility of business is to increase profits for its shareholders and follow the rules that promote an open and free competition where deception is not accepted. Friedman (1970) agreed that the basic rules of society are conformed whether they are legal or ethical, and offering certain services can be sometimes the first objective instead of money profit, such as hospitals, but using corporate funds to charity should not be permitted since stockholders should decide how to dispose their funds. Additionally, he highlighted the contradictions of businessmen as civil servants:
they cannot know what kind of other social responsibility should be recognized, and even if they could name it, they cannot justify an appropriate cost (Friedman 1962; 1970).
Also, Davis (1973) have presented arguments against CSR that dealt with social involvement costs, lack of social skills and profit maximization as a business’s primary purpose as Friedman (1962) had stated. However, Davis (1973) admitted that a firm must evaluate CSR in its decision-making process and understand its influence on social systems and how to bring social benefits – CSR is beyond the law and the firm should go further and not follow the minimum law or profit requirements. He recognized the value of CSR due to a long-run self-interest of business, an enhanced public image, increased stockholder earnings and a concept of The Iron Law of Responsibility meaning that if a company does not use its power in obeying social responsibility, it will lose it. Sethi (1975) joined the CSR discussion and underlined that CSR can vary by time, situation and culture or it can even be irresponsible. He defined CSR as a corporate behavior that can be understood as social obligation based on economic and legal criteria which is similar to Friedman (1962; 1970) (proscriptive in nature). Alternatively, CSR can be defined as social responsibility embodying the current social norms, values and expectations towards performance (prescriptive in nature), or as social responsiveness representing a company’s long-term role in a dynamic society (anticipatory and preventine in nature) (Sethi 1975; 1979).
Moreover, Corporate Social Performance (CSP) models have also modified significantly the theory of CSR, e.g. Carroll’s (1979; 1991), Wartick and Cochran’s (1985), Wood’s (1991) and Swanson’s (1995) models. The difference between CSR and CSP, relies on the last words responsibility and performance, where the latter one communicates about results of the CSR activities. CSP focuses on the outcomes of firms commited social responsibility while it is concerned of corporate actions and achievements, how firms create and implement their social goals and programs without forgetting an ethical sensitivity, whereas CSR includes all the policies, thinking and activities that build the company’s core of CSR (Carroll 1991; Ioannou & Serafeim 2012). Consequently, CSP is depended on the action element otherwise it does not exist (Wood 1991). Basically these two concepts are an entity, there is no big difference (Carroll 1991) – a company’s CSR strategy can be measured resulting in positive or negative CSP (Wood 1991).
Carroll’s (1979) first remarkable publication focused on a three-dimensional conceptual model of corporate performance (See Figure 3). It suggested that a company’s social responsibility should include four basic dimensions: economic, legal, ethical and discreationary responsibility.
The four categories in Figure 3 are not mutually exclusive or a continuum, and besides the categories, the model requires the components of social issues and social responsiveness that refers to Sethi (1975) (Carroll 1979). The social issues are variable within different industries; hence
Figure 3: The Corporate Social Performance Model (Carroll 1979).
business should identify the relevant social issues and react accordingly to them (Carroll 1979). The social responsiveness of business can differ from no response to a proactive response, while excluding moral and ethical meanings, but the concern is on the processes and management response (Carroll 1979).
Later Carroll (1991) redeveloped the model into pyramid model of CSR toward moral management of organizational stakeholders (See Figure 4). He still highlighted the importance of social responsiveness and actions by the company including also stakeholder perspective, which is crucial when analysing what CSR orientation is used with certain stakeholders and what are the strategies, actions or decisions concerning them (Carroll 1991). And even though the significance of the performance concept is clearly recognized, CSR was used as a terminology.
The pyramid model includes the original four components by Carroll (1979). The first component, economic responsibility, is perceived as a leading social responsibility underlining that business as an institution has to produce profitably what is desired (Carroll 1979). It makes the other CSR components relevant since without profits they are tricky to implement (Carroll 1991). Whereas, legal responsibility refers to the laws and regulations that a succesful business must follow and fair operations are reflected from (Carroll 1979; Carroll 1991).
Ethical responsibility can vary a lot depending on what is seen as an ethical behavior and what are the expectations of society (Carroll 1979), hence it may complicate how firms shoud deal with these ethical expectations (Carroll 1991). Thus, ethical components bring fairness and justice to the stakeholders when law ends by embodying the standards, norms or expectations while following the moral rights (Carroll 1991). Instead, discretionary responsibility is clearly voluntary and business’s discretion where social roles have societal expectations (Carroll 1979.) Philanthropic components (same as discreationary) are based on corporate actions that come from the society’s expectation, i.e. what is considered as a good corporate citizen that enhances human well-being or benevolence (Carroll 1991). The main difference between ethical and philanthropic responsibility is that philanthropic orientation is not expected from the ethical perspective: firms are not considered to be unethical if they are not doing philanthropy (Carroll 1991).
Wartick and Cochran (1985) researched the first CSP model by Carroll (1979) and suggested their version of CSP model (See Table 1). By integrating social responsibilities, social responsiveness and social issues, the CSP model can be seen as a valuable framework for analysing business and society generally (Wartick & Cochran 1985). According to Wartick & Cochran (1985), two basic premises of CSR are the social contract and moral agency: business must operate within the rules of society and it acts as a moral agent when reflecting and reinforcing certain values.
Principles Processes Policies
Corporate Social Responsibilities Corporate Social Responsiveness Social Issues Management
1) Economic 1) Reactive 1) Issues Identification
2) Legal 2) Defensive 2) Issues Analysis
3) Ethical 4) Discretionary
3) Accommodative 4) Proactive
3) Response Development
Directed at: Directed at: Directed at:
1) The Social Contract of Business 1) The Capacity to Respond to Changing Societal Conditions
1) Minimizing "Surprises"
2) Business as a Moral Agent 2) Managerial Approaches to Developing Responses
2) Determining Effective Corporate Social Policies
Philosophical Orientation Institutional Orientation Organizational Orientation Table 1: The CSP Model (Wartick & Cochran 1985).
PHILANTHROPIC Responsibilities Be a good corporate citizen.
Contribute resources to the community; improve quality of
life
ETHICAL Responsibilities Be ethical.
Obligation to do what is right, just and fair. Avoid harm.
LEGAL Responsibilities Obey the law.
Law is society's codification of right and wrong. Play by the rules of the game.
ECONOMIC Responsibilities Be profitable.
The foundation upon which all others rest.
Figure 4: The Pyramid of Corporate Social Responsibility (Carroll 1991).
The model shows again the complexity of CSR including different characteristics and levels, whereupon CSR requires thinking from several angles. Moreover, Wartick and Cochran (1985) discussed about challenge of economic responsibility, referring to Friedman (1962, 1970), but they already thought in those days that it is unrealistic and myopic to include only economic responsibility in CSR within a modern company. The Iron Law of Responsibility (Davis 1973) was also mentioned: even though a company might be socially responsive, the Iron Law of Responsibility can be threatened in the long term, because responsiveness is not always same as responsibility (Wartick & Cochran 1985).
Wood (1991) also reformulated the CSP model (See Table 2) where different levels are not competing with each other. She defined corporate social performance as: ”a business organization's configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships” (Wood 1991, 693). The model perceives the differences between companies and their relationships; emphasizing a company’s own configuration of CSR and relation to the company’s societal relationships. Later the outcomes are redefined as ”internal stakeholder effects, external stakeholder effects, and external institutional effects” because it specifies better the stakeholder implications of CSR (Wood
& Jones 1995, 230).
Furthermore, Swanson (1995) reviewed Wood’s (1991) principles later and claimed that these principles lacked of normative development, since they confine corporate economic activity with
Principles of corporate social responsibility
Institutional principle: legitimacy
Organizational principle: public responsibility
Individual principle: managerial discretion
Processes of corporate social responsiveness
Environmental assessment Stakeholder management Issues management
Outcomes of corporate behavior Social impacts
Social programs
Social policies
Table 2: The Corporate Social Perfomance Model (Wood 1991).
social control that is not defined in a normative way. The principles interpreted corporate’s positive duty as something voluntary: optional altruism or philanthropy (Swanson 1995). Based on the criticism she created a reoriented model of CSP (See Figure 5). The model consists of individual, organizational and societal level of decision making that takes account in the ethical and value processes, but it is not hierarchical.
Although these two models have differences there are interesting similarities. Wood (1991) has defined CSR principles as analytical forms that are affected by certain values linked to the certain culture and organizational context that has its own political and symbolic processes. Swanson (1995) has emphasized this cultural aspect in particular, and corporate culture is seen as one of the main topics due to its influence on executive decision making. Another example concerns corporate social responsiveness. In Swanson’s (1995) model it is part of the corporate culture where executive decision making is interrelated to managerial and employee decision making. According to Swanson (1995), social responsiveness is formed via economizing, ecologizing and power seeking followed by environmental assessment, stakeholder management (similar to Carroll (1991)) and issues management (referring to Wartick and Cochran (1985)) that are also the main processes in Wood’s (1991) model.
Current perceptions of CSR theory
When focusing on the more current status of corporate social responsibility the debate over the aim
Figure 5: The Reoriented CSP model (Swanson 1995).
of CSR has been active (Basu & Palazzo 2008). Both practitioners and academics of business are increasingly concerned about CSR and how the actions of corporations impact on the environment and society (Aguinis & Glavas 2012; Campbell 2007; Sprinkle & Maines 2010). Strategic implications of CSR have been noticed (McWilliams, Siegel & Wright 2006) and especially in a marketing field CSR is increasingly important concept (Kemper et al. 2013). Environmental and social issues have caused attention to potential CSR activities, in which both the government and entrepreneurs are required to build a better world by responsible business while not forgetting to make profits (Chan et al. 2017).
The traditional narratives of capitalism and financial theory have ignored ethical analysis, they have seen humans too simplistically by concentrating on capturing the value instead of creating the value together (Freeman et al. 2007). Freeman et al. (2007) brought that up: due to capitalism and market, rich and poor are even further from each other at both the national and international level, and also people’s actions based on new innovations have impacted on the environment and society resulting in global warming and financial crises, for example. It is still valid to agree with Freeman et al.
(2007) that business should be determined as creating the best together not avoiding the worst. In the other words, companies might generate positive social change because of CSR actions (Aguilera, Ganapathi, Rupp & Williams 2007), which justifies CSR’s role as significant in business.
CSR types vary between companies (Basu & Palazzo 2008). Some people do not separate social responsibility from corporation’s actions due to profit and shareholders’ perspective, hence their actions can be socially irresponsible in order to maximize the profits and shareholder value (Campbell 2007). But it is generally accepted that because CSR is seen as companies doing good, avoiding bad should be added in their responsibilties too, because it prevents corporate social irresponsibilities, e.g. dishonest customer relationships, neglected human rights or environmental damages (Lin-Hi & Müller 2013). Surprisingly these different kinds of corporate irresponsibilities have caused criticism towards CSR theory (Basu & Palazzo 2008). But many companies are not following this critical view: instead they are contributing CSR in various ways, e.g. via charity givings, supports to communities, decent treatment of company’s stakeholders, obeying law, and generally they are known for honesty and integrity (Campbell 2007; Sen & Bhattacharya 2001).
These different CSR programs can improve diversity, concentrate on recycling projects or use of green materials (Sen & Bhattacharya 2001) and so forth.
Corporate citizenship has been also linked to CSR theory to communicate about the role that a company has in society (Crane & Matten 2010, 73). Carroll (1991) has discussed corporate citizenship from ethical viewpoint. If a company’s actions meet the expectations of what is morally or ethically accepted, it can be described as a good corporate citizenship (Carroll 1991). This refers to alturistic intentions stating that companies believe their CSR efforts represent a good global citizenship (Sprinkle & Maines 2010). According to Sison (2010), corporate citizenship can be categorized into a liberal-minimalistic viewpoint (as the neoclassical point of view focusing on shareholders) and a communitarian perspective (involving sociopolitical actions focusing on different stakeholders and a common good), where stakeholder groups can be seen as potential citizens of the company. Moon, Crane and Matten (2005) have claimed that if companies can act like they are citizens and engage with society, then the companies must comprehend specific conditions, criteria and obligations of the society. Also, being a good corporate citizen does not suffice as a strategic CSR: it requires the decision of the involved social issues, because companies are not responsible for all the societal problems and neither their resources last (Porter & Kramer 2006.) Hence, companies should prioritize the social issues they can engage in, but still they cannot involve in all CSR activities, which is only realistic and effective.
Furthermore, Porter & Kramer (2011) have presented a somewhat alternative approach of CSR. It focuses on creating shared value (CSV), where social value plus economic value creates the purpose of the business. They have already brought up the principle of shared value when stating that business decisions and social policies have to comply the shared value, which creates a symbiotic relationship (Porter & Kramer 2006). Porter and Kramer (2011) have claimed that shared value is not understood as a ”just” social responsibility, philanthropy or sustainability because they might focus only on the periphery of societal issues.
Nevertheless, Porter and Kramer’s (2011) CSR ”criticism” is not quite absolute, since CSV is more like a new name for a concept that handles the old CSR challenges. Orr and Sarni (2015) have shared this thinking that the idea itself is not necessarily a new one, and similar concepts are promoting same things under different names. According to Crane, Palazzo, Spence and Matten (2014), CSV is not an innovation, since several academics have stated that economic value is not the only purpose of the business. For instance, stakeholder theory is representing the multi-purpose of corporations, hence CSV is more like a promise that adds some value by contributing the emergence of socially beneficial business practices because companies cannot ignore social impacts anymore (Crane et al. 2014). And also, Freeman et al. (2007) have highlighted the shared value.
The outcomes of Corporate Social Responsibility
To validate a still existing importance and benefits of CSR, many researches have focused on different elements of the results of CSR. Social strategy can be identified as a necessary factor in organization’s success (Fernández Sánchez, Luna Sotorrio & Baraibar Diez 2015), and according to Waddock, Bodwell and Graves (2002, 133), ”total responsibility management can be a significant source of competitive advantage for those companies taking the lead.”. For instance, a research of Polish companies indicated that enhanced corporate image and reputation, better relations with stakeholders, improved employee motivation and internal communication, and more effective management are identified as the most crucial benefits of CSR engagement in corporations (Chojnacka & Wisniewska 2016).
The relation between CSR and corporate reputation has been one of the main topics inside business scholars and it is one concrete example of the outcomes of CSR. Corporate reputation refers to a position of a company that is perceived by internal and external stakeholders within competitive and institutional environment: reputation is a socially shared impression, belief or attitude which is based on a degree of common interest and social interaction (Bromley 2002). Corporate reputation can be conceptualized as trust, positive emotion and esteem that are assessed among stakeholders, and it can differ between groups, hence reputation is an evaluative concept of positive to negative (Hillendbrand et al. 2012; Walsh et al. 2009).
Customers might have the most significant role as a stakeholder particularly in terms of corporate reputation. Walsh et al. (2009) argue that they can significantly impact on each other: a company’s reputation due to word of mouth is more effective than the company’s advertisement or PR, and this impact is even stronger because of online communications. Additionally, customers’ perceptions of a company and its CSR activity affect the overall reputation, e.g. if customers like the company and its offerings it affects on the business result (Walsh et al. 2009). And CSR can determine the final decisions of consumers when similar products have same price and quality, since consumers buy more likely from the company that has a good reputation in CSR (Arli & Lasmono 2010). In addition to the importance of external stakeholders, also internal stakeholders value corporate reputation and it is a critical in cases where employees are the creators and remarkable actors in CSR giving (Cantrell et al. 2015).
However, some stakeholders can appreciate more or less CSR than the others, thus if company’s stakeholders do not assess it as a significant part of reputation, a low CSR does not affect negatively the corporate reputation (Hillenbrand et al. 2012). But companies still have to meet the expectations of several stakeholders inside the competitive market environment in which stakeholders’ decisions are based on companies’ reputation (Maden, Arikan, Telci & Kantur 2012). Related to this, it is important to design the CSR messages based on the understanding of how the stakeholders perceive CSR (Shim & Yang 2016). Also, a new way to utilize social media from CSR viewpoint is reasonable, since a dialogic social media perspective can assist the company to deal with new areas of CSR and different perceptions of stakeholders (Kent & Taylor 2016).
Additionally, Öberseder, Schlegelmilch and Murphy (2013) have indicated that companies should avoid making CSR as a marketing trick. For instance, companies can do little from CSR aspect but they are still communicating about it, thus it can be connected with image polishing because that amount of money could have spent into actual social issues (Öberseder et al. 2013). The communication should highlight genuineness and sincerity and not just share the outcomes, such as award winnings (Shim & Yang 2016). At worst CSR can be used as an excuse to gather more profits or to cover up some problems of companies instead of honesty (Öberseder et al. 2013). The marketing trick dilemma can also arise from situation when a company has CSR activities that are contradictory against the company’s core business reflecting that the CSR initiatives are contrived (Öberseder et al. 2013). All things considered, a company’s credibility is endagered if CSR engagement is false (Öberseder et al. 2013) and people perceive it as a hypocrisy (Shim & Yang 2016). The well-communicated CSR activities can create beneficial customer attitudes and enhance the customer relationships, so honesty is the key factor in CSR (Arslanagic-Kalajdzic & Zabkar 2017).
The relationship between corporate social performance and economic performance has been also one of the main interests and topics when discussing the outcomes of CSR (Moura-Leite, Padgett &
Galan 2012) and it is closely related to the corporate reputation perspective. Market measurement has previously proved that there is a relation between social and financial performance, but it is not expressed positively but due to negative perspective: bad social performance affects negatively the company’s economic performance, hence more theory about good social performance enhancing the corporate performance should be formed (Wood & Jones 1995).
The interest has stayed on the questions of how CSR affects a company’s performance, e.g. the
questions of how firms do well by doing good (McWilliams et al. 2006), how does CSR affect the financial outcomes of the company, such as its market value (Luo & Bhattacharya 2006), how does CSR affect the service innovation on customer loyalty (Yeh 2015), what is the relationship between disclosure of CSP and financial performance (Chen et al. 2015), whether and how CSR can create a favorable corporate reputation or competitive advantage and resulting in as an enhanced financial performance (Saeidi, Sofian, Saeidi, Saeidi & Saaeidi 2015; Wang & Berens 2015), and does CSR lead to superior financial perfomance (Flammer 2015). Results of these researches have indicated the existence of positive effect of CSR on corporate performance or customer relationships which mediates to performance. Also, Melo and Galan (2010) have emphasized the long-term nature of the significant influence of CSR activities on corporate performance.
All in all, CSR is valuable for both business and society. It can be seen as an opportunity, innovation and competitive advantage, if it is seen from the same perspective that guides the core business choices and operations (Khojastehpour & Johns 2014; Porter & Kramer 2006). Also, society can benefit from CSR strategy if it is using a company’s resources, expertise and insight in a way that it builds a social progress (Porter & Kramer 2006). CSR is a crictical business function that represents also a valuable intangible competitive advantage (Melo & Galan 2010). These demonstrated different outcomes of CSR can justify its importance, specifically through the discussed positive effects, such as the effect on reputation, stakeholder relationships, economic benefits (Zhang et al. 2014) and/or competitiveness (Marin, Rubio, & Ruiz de Maya 2012).
2.1.1 Philanthropic and charitable activity
As Carroll (1979; 1991) included philanthropic/discreationary component as part of his CSR models, he determined philanthropic orientation as corporate actions that are based on the perception how society defines a good corporate citizenship where resources are contributed to the community and a life quality is enhanced. Philanthropic initiatives are not linked to ethical or moral matters but they are more like desired extra contributions to CSR – they can be defined as an extensions of CSR (Carroll 1979; Carroll 1991). Briefly, economic and legal responsibility is required by society, whereas ethical responsibility is expected by society, and philanthropic responsibility is desired by society (Crane & Matten 2010, 53). Philanthropy as an English word means love of humankind; ”the disposition of effort to promote the happiness and well-being of one’s fellow people or practical benevolence” (Brown 1993, 2185), hence it refers to actions that enhances different social issues in particularly. In practice, philanthropy can be undestrood as
