Abstract
The rising importance of CSR over the last few decades has stirred the interest of academia and corporate on the subject. CSR attracted attention in the Indian context with the implementation of the Companies Bill, 2013, which mandated firms to invest 2 per cent of their net profits in social activities. The linkages between CSR and profitability using factors such as corporate reputation, competition intensity, and advertising have been tested in the developed countries. These linkages have sparsely been tested in emerging economies such as India, which motivated me to conduct this study. Neville et al. (2005) proposed a theoretical model integrating stakeholders, and internal and external factors influencing the CSR-FP relationship. This study modified and used Neville’s et al. (2005) model to test the proposed linkage in the Indian context. Structural Equation Modeling revealed a significant relationship between CSR Intensity and corporate reputation; significant role of social initiative and corporate strategy fit in enhancing the corporate reputation of a firm; and a significant role of advertising and promotion in enhancing corporate reputation. Other variables such as competitive intensity, supplier power, customer power and employee power were found to have no significant role on the proposed relationships.
Highlights
Liberalization and globalization, presence of MNCs in Asian markets, rising consumer expectations from businesses, and emergence of pressure groups have augmented the cause of Corporate social responsibility (CSR) in the Asian sub-continent
Path Analysis using SEM was run to find the influence of CSR Intensity on Corporate Reputation and Firm Performance measured by Net Profit (NP), Price-to- Book Ratio (PBR) and role of CI in the CR-FP (ROCE)
Though the results suggest a positive relationship, we cannot conclude that an increase in corporate reputation of a firm, performance tends to improve
Summary
Liberalization and globalization, presence of MNCs in Asian markets, rising consumer expectations from businesses, and emergence of pressure groups have augmented the cause of CSR in the Asian sub-continent. The Companies Bill, 2013, India, which aimed at bringing the management of the corporate sector in line with global norms, directed companies to invest in social and ethical causes. Given this statutory requirement, companies need to invest in CSR activities that have an impact on firm performance and ensure that the CSR expenditure undertaken on their part is beneficial to them in the long run. Neville et al (2005: 1190) proposed a theoretical model integrating stakeholders, internal factors (Reputation Management Capability; Social Initiative and Corporate Strategy Fit) and external factors (Stakeholder Power; Competitive Intensity) that affect the link between CSR and FP. Previous research (Rose and Thomsen 2004)
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