Purchasing social responsibility and firm performance

Abstract

PurposeThis paper aims to examine how socially responsible supply management activities, a term labeled purchasing social responsibility (PSR) in the extant literature, affect a firm's costs. There has been much debate, and mixed empirical findings, regarding whether socially responsible behavior on the part of companies improves or reduces firm performance.Design/methodology/approachA survey methodology and structural equation modeling are used to assess the relationship between PSR and supplier performance, including the mediating role of organizational learning. The theoretical scope is developed through an integration of literature from logistics, corporate social responsibility, the resource‐based view of the firm, and organizational learning.FindingsNo direct relationship is found between PSR and costs; however, organizational learning and supplier performance act as key, mediating variables between PSR and costs, with PSR leading to organizational learning, improved supplier performance, and ultimately reduced costs.Research limitations/implicationsThe significant mediating roles of organizational learning and supplier performance provide one possible explanation for the past, conflicting findings of studies that have investigated the direct relationship between corporate social responsibility and firm performance.Practical implicationsThe findings suggest that PSR not only is the “right thing to do”, but also can lead to significant improvements in supplier performance and costs.Originality/valueThis is the first study to suggest and test the possibility of mediation between social responsibility and firm performance. The research also extends the integration of organizational learning and supply chain management.