Could CSR improve the financial performance of developing countries’ firms? Analyses of mediating effect of intangible resources

Abstract

PurposeThis paper aims to examine the link between corporate social responsibility (CSR) and financial performance in the context of developing countries. More specifically, the mediating role of a firm’s competitive advantage and intangible resources, namely, human capital and reputation are studied.Design/methodology/approachThe study considered a sample of 100 Tunisian firms. The analysis makes use of the structural equation modelling method to explore the relationship between CSR and financial performance, by including mediator variables.FindingsThe results confirm that CSR has no significant direct effect on financial performance. In particular, they indicate that the social dimension of CSR has a negative impact on performance. However, CSR does have a positive impact on competitive advantage via the two intangible resources considered, human capital and company reputation.Research limitations/implicationsThe research fills a gap that occurred in the previous literature. In effect, previous studies focussed only on the direct link between CSR and financial performance. In addition, it enriches the limited literature on CSR strategies in the context of developing countries. However, further studies should explore the opposite relationship, i.e. the impact of financial performance on CSR strategy. In addition, the authors believe that amongst other potential research avenues, it would be interesting to study the moderating role of the activity sector.Practical implicationsFrom a practical point of view, this study suggests new applications with respect to the link between CSR and financial performance. To enhance their company’s financial performance, managers need to ensure that intangible resources are managed efficiently.Originality/valueThe paper contributes to the literature by examining how a firm’s intangible resources mediate between CSR and competitive advantage and how competitive advantage mediates between intangible resources and financial performance. Second originality is related to the study of the link between CSR and the financial performance of business organisations in the context of a developing country.