Corporate Social Responsibility as a Course of Competitive Advantage. The Mediating Role of Social Capital and Reputational Capital

Abstract

The purpose of this research was to extend the literature of corporate social responsibility by linking two academic streams of Human Resource Management & Strategic Management. The research undertook a strategic management model based upon Resource Based view to determine the strategic benefits of CSR for a company and its performance. The Objective was to establish a mediating mechanism for which a mediated model was developed by using social capital and reputational capital, considered as important resources to translate the company's CSR efforts into its performance leading to a competitive advantage. The study presented CSR in its two dimensions i.e. Internal & External CSR where both lead to the development of intangible resources for organizations such as social capital and reputational capital respectively. The theoretical framework integrated stakeholder perspective and resource based perspective within the theory of corporate social responsibility for strategic management of organizations. The underlying rationale of the proposed framework was that organizations investment into socially responsible activities develop positive stakeholder perceptions which can be strategically significant for the organization for its long-term sustainability and survival. Thus, companies with more prevalence of CSR were more likely to establish a better connected and harmonious stakeholder group as well as they enjoy better reputations from consumers' perspective. The study was based upon a sample response of 524 respondents from different industries of the manufacturing sector. Data was collected from manufacturing companies across Punjab through questionnaires of adaptive measures for which reliability and validity was re tested through Factor Loadings, Cronbach's Alpha, Average Variance Extracted and Confirmatory Factor Analysis. To test the direct and indirect mediation, Hayes 2013's mediation process was followed. The results of data analysis revealed CSR as an important determinant of firm performance. Study found that internal CSR practices were not directly related to perceived organizational performance whereas the external CSR practices were linked directly and significantly with Organizational performance. Both the dimensions of CSR had significant impact on Social and reputational capital as proposed in the research model. The social capital and reputational capital were found to be strong mediators as evident by the result of mediation analysis. From a developing country's perspective, it was deduced that few companies have made CSR an ingredient of their corporate strategy. Such companies have increased the firm competition and firm value perpetually. Therefore, it is important for organizations to recognize that CSR serves as the fountainhead of competitiveness and the vision and strategy of CSR is necessary for firm's sustainability. As a final point, the managerial, contextual and theoretical contribution of study is established alongside the present study's limitations. Also, future research directions are suggested.