“It Fits My Business”: Corporate Social Responsibility Activities of Companies on the Route to Gain Competitive Advantage

“It Fits My Business”: Corporate Social Responsibility Activities of Companies on the Route to Gain Competitive Advantage

Burak Çapraz (Ege University, Turkey)
DOI: 10.4018/978-1-7998-2193-9.ch012

Abstract

For many years, companies have tried to keep the public as close partners. In this bilateral relationship, financial gains of the companies have raised public views on the distribution of these gains. Likewise, regulations and standards determined by supranational institutions such as the United Nations forced companies to give higher priority on CSR activities. The primary purpose of this research is to explain the relation between CSR activities and the preferability of these activities among companies. Summative content analysis is conducted on data collected from the websites of the top 100 companies in the Turkish BIST 100 Stock Index. Findings show that CSR activity choices differ among industries, and these choices unveil related and unrelated differentiation in CSR activities.
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Introduction

Since the 1950s, what corporate social responsibility (CSR) is and how CSR should be considered as a management tool is progressively being debated among scholars. These debates have given birth to various definitions and different views on CSR. From a broader perspective, it can easily be seen that applications of CSR head for a continuum in which corporate benefits stand on one side and public benefits on another side. Even if it is the benefit of the public or the firm, CSR activities are known to influence different stakeholders. Thus, CSR can be considered as a tool to gain competitive advantage. Whatever the direction of CSR is, in its life cycle, a firm faces the problem of ensuring profit sustainability. Higher budget need and the difficulty of predicting the financial return of CSR activities make CSR a contradictory topic about the real gains from CSR activities. Financial gains that do not meet expectations on CSR investments may cause senior management teams to have a more skeptical view about CSR activities. It is difficult to reveal the real impact of CSR on the financial performance of firms. Thus, determining the gains from the CSR activities cannot exactly be measured, which means it is not very sufficient to explain how firms can gain competitive advantage through CSR activities. But the effect of CSR on reputation (Smith, 2007; El-Garaihy et al., 2014; Saeidi et al., 2015), brand (Melo and Galan, 2011; Hsu, 2012), financial performance (Surroca et al., 2010), etc. support its effect on competitive advantage. The importance companies give to CSR activities in developing countries may dissociate negatively when compared to developed countries. This situation may cause the expectations of the enterprises operating in the markets of developing countries to be more oriented towards financial gains in terms of CSR activities.

Studies in the USA, such as Cochran and Wood (1984, p. 43) states there is weak evidence of a positive correlation between CSR and financial performance. In another study, Nelling and Webb (2009, p. 201) have found almost no correlation between corporate social responsibility and financial performance (ROI, Stock Return, Sales, Assets, Financial Leverage) in USA.

In emerging financial market examples, Yang et al. (2010, p. 409) found almost no correlation between return on assets and previous corporate social performance of firms. Tang et al. (2012, p. 1288) in their study found ROA (return on assets) has a low positive relationship with CSR. In another Taiwanese study, Huang and Lien’s (2012, p. 268) findings show that CSR dimensions are positively correlated with financial performance. Findings from Cheung et al. (2010, p. 408) in Vietnamese companies only show evidence on a negative very low correlation between corporate social responsibility score and current asset ratio. Rodrigez-Fernandez (2016, p. 138) pays attention that most of the findings on CSR-Financial performance relation is generally positive, but the results are not shown homogeneity.

This situation creates an environment in which the significant part of CSR activities of firms in developing countries is expected to have an impact on the financial results of the enterprises and indirectly it is aimed to gain competitive advantage against their rivals. Porter and Kramer (2006, p. 83) point out how corporate social agenda can mitigate harm by reinforcing corporate strategy. Also, Weber (2008, p. 250) in her CSR impact model argues the effect of CSR on competitiveness with the moderating effect of monetary and non-monetary benefits.

Key Terms in this Chapter

Intangible Asset: Assets that are not physically perceived.

Philanthropy: Organizing activities to raise the economic and social standards of others.

CSR Activity: Activities that are carried out for corporate social responsibility.

Reputation: Being valuable, respected, and familiar in the eyes of the audience.

Profit-Focused Management: Management approach considering financial gains in priority.

Corporate Value: Creating value by responding the expectations of stakeholders.

Marginal Investor: Investors that search for short-term gains by trading stocks.

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