CSR ‘sustainability’ practices and firm performance in an emerging economy

Abstract

In this paper we seek to understand the impact of corporate social responsibility (CSR) environmental and supplier sustainability practices on firm performance within the manufacturing industry in India. We also investigate the moderating effect of an important internal factor – plant capability – that is likely to affect sustainability practices of a firm. Employing the Global Manufacturing Research Group’s survey instrument, data was collected from manufacturing companies in India and then a structural equation modelling (SEM) was performed to arrive at the findings. A rigorous reliability and validity of the scales was ensured. The firms’ size, industry type and export percentage were taken as control variables for the study and the performance of the firms was assessed based on financial and marketing measures. The study determined that environmental sustainability had a direct impact on firm performance, whereas the impact of supplier sustainability on firm performance was found to be positively moderated by plant capability. The justification for the findings is based on the institutional context and pragmatic concerns linked to market logics that shape the strategic choices made by the companies. Thus, the paper ends by proposing that dominant CSR theories in developed western countries, such as political corporate social responsibility (PCSR) and corporate political activity (CPA), may not be best suited as theoretical lenses to understand CSR actions in an emerging economy. Alternatives to these can be provided by institutional and strategic perspectives to CSR, which may offer deeper insights in an emerging economy context.