Does Stakeholder Perception of Firm’s Corporate Social Responsibility Affect Firm Performance?

Abstract

In the present-day business landscape characterised by global competition, demanding customers and depleting natural resources, Corporate Social Responsibility (CSR) has become an important strategy for corporations for creating competitive advantage. CSR involves a corporation’s commitment to align performance (revenue growth and profit) motives with fulfillment of social, ethical, community and environmental obligations. Researchers have found a positive correlation between stakeholder perceptions of firm’s CSR performance and financial performance, assuming other factors as constant. This paper, based on analysis of Wal-Mart’s performance from 2001 to 2011, found, seemingly significant negative perceptions of CSR activities of corporations result in lower performance. Once formed, changing negative perceptions is often difficult and the effort involves considerable amount of resources with questionable outcomes. This study has come to the conclusion that being a good ‘Corporate Citizen’ and creating positive stakeholder perceptions is a better strategic approach for firm’s continuing success.