Leadership Styles and Corporate Social Performance: The Mediatory Role of CSR Based on Stakeholders Approach

Abstract

Firms that we're able to develop competitive advantages in CSR using proactive environmental and social strategies, achieve superior social and economic performance. However, the big challenge is to recognize the factors that are shaping organizational strategies towards CSR. In particular, we attempt to answer, how leadership styles influences CSR based strategies, and how these strategies inurn affect social and environmental performance. For this, we proposed a theoretical framework that explained different leadership styles (Transformational, Ethical, and Servant) that have a different effect on corporate social and environmental performance through adopting CSR strategies targeted to different stakeholders. We also explored, which stakeholder targeted CSR leads to better social or environmental performance. For this, we modified Shaukat et. al. (2016) model to incorporate different leadership styles. We used Spiller's (2000) manifestation of Stakeholder theory to classify CSR into (i) community, (ii) environment, (iii) employees, (iv) customers, (v) suppliers, (vi) shareholders dimensions. Empirical validity was established by conducting a survey using a close-ended questionnaire. Data was collected from 289employees of various firms and analyzed using confirmatory factor analysis and structured equation modeling. The results suggested that Ethical and Transformational leadership have a significant and positive effect on Customers and Employees directed CSR. Ethical, Servant and Transformational leadership also seem to positively and significantly affect Environment, Shareholders, and Suppliers directed CSR respectively. However, Ethical and Servant leadership negatively and significantly affect Shareholders, and Customers directed CSR respectively. Among CSR activities, Community, Environment, Shareholders, and Suppliers directed CSR have a positive and significant effect on both social and Environmental Performance. Interestingly, Employees directed CSR have a significant negative effect on both social and Environmental Performance, moreover, customer directed CSR also inversely impact Environmental Performance.