Corporate social responsibility, business strategy and governance performance

Moataz Elmassri, Cemil Kuzey, Ali Uyar, Abdullah S. Karaman

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

Purpose: This study aims to examine the effect of corporate social responsibility (CSR) adoption on differentiation and cost leadership strategies and how governance structure moderates this CSR–strategy relationship. Design/methodology/approach: The study data were retrieved from Thomson Reuters for non-financial firms between 2013 and 2019, and a fixed-effects panel regression analysis was executed. Findings: The results indicate that CSR fosters cost leadership strategy but weakens differentiation strategy. This result supports the value generation school for cost leaders but also confirms the agency theory perspective for differentiators. Moreover, the governance structure does not moderate the relationship between a firm's CSR engagement and its business strategy, which implies a lack of corporate policies that concurrently consider both its CSR investment and strategies. Research limitations/implications: The findings of this study imply that cost leaders can integrate CSR practices into their business strategy and use their CSR engagement to increase their competitive position by stimulating cost efficiency and creating greater turnover. On the contrary, for differentiators, there is a trade-off between environmental and social engagement and business strategies. Thus, they are advised to enrich their unique product development abilities through the integration of environmental and social practices and reinforce their competitive position by addressing stakeholders' interests. The practical implication of the moderation analysis is that there is no rooted corporate policy behind the connection between CSR and firm strategy for both cost leaders and differentiators, which constitutes a missing link. Originality/value: The findings of this study are of critical importance for firms, offering justification for the integration of two vital perspectives: social and environmental sustainability and financial sustainability. The moderating effect of governance performance tests the upper echelon's role in maintaining both sustainability perspectives concurrently and strengthening the legitimacy of the firms in society. Although maintaining a business strategy is important for shareholders' interests, pursuing a social and environmental sustainability strategy is crucial for meeting the expectations of all stakeholders.

Original languageEnglish
Pages (from-to)3106-3143
Number of pages38
JournalManagement Decision
Volume61
Issue number10
DOIs
Publication statusPublished - Oct 24 2023

Keywords

  • Corporate governance
  • Cost leadership
  • CSR
  • Differentiation
  • Firm strategy
  • Management structure

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Management Science and Operations Research

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