The effect of corporate social responsibility on banks’ competitive advantage: Evidence from Ethiopian lion international bank S.C

Abstract

Due to globalization and technological change, the current business environment in a developing country is competitive, which requires a firm’s engagement in CSR to remain competitive. Therefore, this study examined the linkage between different dimensions of CSR engagement (customer, employee, community & environmental) with the banking industry’s competitive advantage strategy and ranked the contribution of these stakeholders of CSR to their competitive advantage. The study used a cross-sectional data of 28 branches of Lion International bank of Ethiopia and analyzed using confirmatory factor analysis and structural equation model. The results showed that separate stakeholders of CSR implementation (customer, community, employee, and environment) had a positive influence on the bank’s attached elements of competitive advantage. Explicitly, the banks are more concerned about customer-based CSR and are considered the most vital factor for their competitive advantage. Conversely, banks gave the least emphasis on environment-related CSR. Hence, the bank managers should give more stress on environment-related CSR and integrating it with the firm’s business operation that might have a high impact on the firm’s competitive advantage, helping them to ensure sustainable development.