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Shareholder value, stakeholder management, and social issues: What's the bottom line?
Abstract
We test the relationship between shareholder value, stakeholder management, and social issue participation. Building better relations with primary stakeholders like employees, customers, suppliers, and communities could lead to increased shareholder wealth by helping firms develop intangible, valuable assets which can be sources of competitive advantage. On the other hand, using corporate resources for social issues not related to primary stakeholders may not create value far shareholders. We test these propositions with data from S&P 500 firms and find evidence that stakeholder management leads to improved shareholder value, while social issue participation is negatively associated with shareholder value. Copyright (C) 2001 John Wiley & Sons, Ltd.
... Various studies have attempted to put corporate sustainability reporting activity in a theoretical context of decision-usefulness studies, economic theory studies and social and political theory studies. Consistent with the argument of Cormier et al. (2005), stating that sustainability disclosure is a complex phenomenon and thus it is difficult to be explained from the perspective of a single theory, the field has been simultaneously dominated by agency, legitimacy, stakeholder and signaling theories (Verrecchia, 1983;Patten, 1991;Hart, 1995;Russo and Fouts, 1997;Waddock and Graves, 1997;Hillman and Keim, 2001). While the frequency and intensity of environmental disclosure varies by institutional, industry, firm and time contexts (Gray et al., 2001;Cormier and Magnan, 2007), prior empirical studies show firm size (larger and more visible entities) and industry specifics (more environmental-sensitive industries 1 ) to be associated with higher frequencies of environmental disclosures (Hackston and Milne, 1996;Cormier and Magnan, 2003;Brammer and Pavelin, 2008;Gamerschlag et al., 2011). ...
... While economic (including accounting) studies assume the causality to run from profitability to sustainability disclosures, corporate social responsibility (CSR) literature, raises the concern that CSR activity is a driver of financial performance (and not vice-versa) (Waddock and Graves, 1997;Hillman and Keim, 2001). CSR literature utilizes the perspective of legitimacy theory, and argues that public and societal pressure leads to environmental and social disclosures that are targeted on gaining social legitimacy stemmed from the public (Patten, 1991;Hackston and Milne, 1996). ...
In a monumental sense, non-financial information is gaining an equal importance compared to financial information. Such a shift is conditioned by investors and stakeholders' gradually increasing demand on companies' impact on the environment and the society. The purpose of this study is to investigate the application levels, determinants and impact of sustainability reporting in emerging Georgia. In line with the Corporate Sustainability Reporting Directive, we build a novel scorecard covering environmental, social and governance aspects of sustainability disclosure. Based upon a unique, hand-collected sample of approximately 100 firm-year observations of Georgian publicly admitted entities from 2018 to 2020, we show that on average the level of sustainability reporting is limited (33%), with significant variations across sectors, but not in time. Among the three pillars of sustainability disclosure, reporting on the environment (climate change, resource use and circular economy, biodiversity and ecosystems) is the least popular. Consistent with resource-based theory, multivariate analysis shows that larger (more resourceful) entities, and those operating within the financial and construction (environment-sensitive) sectors, report more on sustainability issues. Once a sustainability reporting practice is adopted (e.g., a separation of waste), it is likely to remain/boilerplate across the next year(s). Finally, piecewise regression results confirm a significant and positive impact of sustainability reporting on firm performance (profitability) for the entities disclosing sustainability information and not subject to extremely large losses. The findings can encourage local entities to incorporate sustainability perspectives in annual reports thus building trust in capital markets and wider society, forming the basis of capital market development.
... CSR is widely recognized as a firm's voluntary commitment to improve social and environmental conditions, aimed at fulfilling stakeholder expectations [54,55]. This concept has been extensively studied, leading to a variety of interpretations [56]. ...
... The minimum wage system aims to protect the basic living standards of low-income workers, prevent over-exploitation and enhance social equity [66]. CSR, on the other hand, emphasizes that while pursuing economic benefits, enterprises also need to pay attention to social and environmental responsibilities to achieve sustainable development [54,55]. In addition to the above favorable effects on enterprise development, minimum wage may also bring negative impacts to enterprises. ...
Corporate social responsibility (CSR) has been widely discussed. However, the existing literature does not delve into the theoretical mechanism to show how companies adjust their CSR in the face of minimum wage increases. This may be due to the lack of a theoretical framework that clarifies the relationship between minimum wage increases and CSR adjustments. The objectives of this study is to fill this gap by investigating the impact of minimum wage increases on CSR, employing both cost stickiness and optimal distinctiveness theories. We use the data from the CSMAR database, the Human Resources and Social Security Administration, and Hexun rating system. The subject of this study is China’s A-share listed companies during 2010–2020. This study employs fixed-effects models for a panel data. The findings reveal that minimum wage increases are significantly associated with a reduction in both strategic CSR and responsive CSR. Notably, the decrease in responsive CSR outweighs that of strategic CSR. Furthermore, our results indicate that customer concentration or CSR sensitivity significantly moderates this relationship. More particularly, firms with higher customer concentration are less responsive to minimum wage increases in their CSR activities. Firms with higher sensitivity in CSR are more likely to mitigate the reducing effect of the minimum wage on CSR. By revealing how minimum wage increases affect CSR and its economic consequences, our study provides scientific recommendations for policymakers to measure the impact of minimum wage policies at the firm level.
... These studies focus only on the CSR as a whole without addressing the heterogeneity of its dimensions. Our research is based on the distinction between the CSR categories, which is similar to that of Hillman and Keim (2001) pointing out that engaging in the social dimension is not necessarily the same as that of environment. We should be attentive when using only one aggregate measure for the CSR (Wood, 1991;Jamali and Sidani, 2008). ...
... This is in line with the arguments of the Upper Echelons Theory, which argues that the personality characteristics of CEOs influence the strategic decisions of a firm (Hambrick and Mason, 1984). Unlike previous research, which primarily approaches the CSR engagement with a uniform conceptualization or by focusing on the overall CSR, this study contributes to the literature by following Hillman and Keim (2001) approach while individually distinguishing between each of the dimensions of CSR (Mohy-ud-Din and Raza, 2023). Drawing on established dimensions of the CSR (environment, governance and social) from the existing literature, this study identifies and empirically validates a completely heterogeneous set of CSR-related activities. ...
It is important to find out why corporations commit to socially responsible activities. Prior research have predominantly applied a uniform perception of corporate social responsibility CSR without paying particular attention to separate CSR activities. This outlook is surprising because firms meet social responsibility expectations through a unique CSR in spite of the stakeholder divergence. For addressing the limitation of these perspectives, this study develops the divergent dimensions of CSR (environment, governance and social). Afterwards, we look into the interdependencies between the different socio-demographic factors specific to the CEO (age, tenure; gender, and education level), accounting for the divergence in the CSR dimensions. Based on a sample of companies listed on the STOXX 600 index throughout the period ranging from 2018 to 2022, the results confirm that age, tenure and education level of the CEO are positively affect the CSR in governance dimension and social dimension. Nevertheless, the gender variable is negatively correlated with their dimensions.
... Одним із дієвих шляхів забезпечення стійкого розвитку є впровадження стейкхолдерно-орієнтованих стратегій управління [1]. Підхід, орієнтований на стейкхолдерів, забезпечує залучення різних зацікавлених сторін до процесу формування стратегій, що дозволяє підприємству краще адаптуватися до умов ринку та забезпечувати високий рівень задоволеності клієнтів [2]. ...
... Numerous techniques have been employed to quantify CSR in light of the literature and in accordance with the various studies addressing the link examined in this research. As a matter of fact, a number of authors have used environmental, social, and governance (ESG) factors as CSR measurement variables (Sharfman, 1993;Hillman & Keim, 2001;Van de Velde & al., 2005;Manescu, 2009;Choi & Wang, 2009;Jiao, 2010;Lev & al., 2010;Liu & al., 2011;Tebini et al., 2014;. ...
Purpose: Recently, there has been a greater emphasis placed on the value of the social dimension and its contribution to the growth of businesses, particularly their financial and economic aspects. Stakeholders view social responsibility as being of particular importance because it will increase the profitability and profitability of their businesses without endangering society. This study intends to investigate the connection between corporate social responsibility (CSR) and financial performance (FP), two ideas that, despite first appearances, are strongly related from both an academic and practical standpoint. We used the (ESG) criterion to measure CSR variables, and the financial ratio Return On Assets (ROA) to measure FP. These chosen variables have been extensively used in earlier research, which has supported their potential impact on businesses’ financial performance. Methodology: A quantitative methodology based on the analysis of extra-financial (ESG) data from the “Covalence” database and the financial information of 97 companies listed on the London FTSE 100 is used to perform the study. However, the scientific development environment Spyder 4.2.5 for Python was utilized to do the descriptive statistics and statistical modeling analyses utilizing multiple regression. Finding : The findings of the statistical tests conducted to determine whether the sub-hypotheses given in support of the main hypothesis (H1) were valid revealed that social (S) and governance (G) practices have a favorable and appreciable influence on CSR. On the other hand, they noted the absence of any linear or complicated link between Environmental (E) practices and EFP that was statistically significant. Implication: The study concluded that there is a positive and statistically significant link between CSR and financial success, proving that social enterprise may be profitable. This empirical study’s findings provide proof that social policies improve financial performance. Because of the financial gain it brings to the business entity. The study advises that corporations be encouraged to step up their efforts and incorporate social issues into their short- and long-term objectives.
... For instance, it offers information on firms' long-term development initiatives and social behaviours that are valuable in building long-term connections with various stakeholders (financial, societal, and business). This impacts firms' ability to outperform their rivals or preserve their competitive advantage (Hillman and Keim, 2001;Porter and Kramer, 2006). Thus, CSR performance can serve as an insurance premium for the protection of stakeholders to mitigate risks like default risk (Godfrey, 2005;Singh, 2024) and reduce the cost of high leverage that arises because of conflicts between relevant stakeholders like customers and competitors (Bae et al., 2018). ...
Purpose
This study aims to investigate the association between corporate social responsibility (CSR) performance and the cost of debt financing (CODF) in Malaysia. It further explores whether the potential impact of CSR performance on debt pricing is moderated by the females’ representation on board and female directors’ foreign experience.
Design/methodology/approach
The authors use a sample of 845 firm-year observations from 2017 to 2021 and apply various regression techniques, including the pooled ordinary least squares (POLS), the Heckman two-stage self-selection model, propensity score matching (PSM) and quantile regression, to test the study’s hypotheses.
Findings
The results show that socially responsible firms incur lower costs of debt. Similarly, female directors and female directors with foreign exposure are negatively associated with CODF. However, their impact becomes positive when these two variables are interacted with CSR performance. The study findings are robust across alternative measures of board gender diversity, different model specifications and approaches addressing the endogeneity problem. In additional analyses, we find that the positive implication of CSR on CODF is more pronounced for firms with higher CSR performance and less financial constraint. Nevertheless, the results reveal that only firms with lower CSR performance but a high proportion of female directors and female directors with foreign experience exhibit lower CODF. This underscores the likelihood that female directors and their foreign exposure may substitute CSR practices in mitigating the cost of debt.
Originality/value
Existing literature generally emphasises the importance of CSR performance to corporate financing decisions, often neglecting the role of female directors and their attributes in financial institutions’ creditworthiness evaluation. This study is among the first to address this gap by examining the moderating effect of female directors and their characteristics on CSR–CODF relationship within an emerging economy context. The findings contribute to the literature on CSR and board gender diversity, indicating that CSR performance and board gender diversity function more as substitutes than complements. Despite the unexpected consequences of interacting with female directors and their foreign experience with CSR, the study affirms the significance of CSR practices and board gender diversity in shaping borrowers’ financial decisions.
... Another theoretical framework that supports this link is stakeholder theory, which emphasises the need of balancing the interests of diverse stakeholders, including those who care about sustainability results (Freeman, 1984). When short-term institutional investors control a company's ownership structure, managers may prioritise their expectations above those arguing for long-term ESG commitments (Hillman & Keim, 2001). Flammer (2013) found that corporations under pressure from short-term institutional investors are more likely to cut back on ecologically and socially responsible activities, resulting in deteriorating ESG ratings. ...
This chapter explores how institutional investors and managerial engagement influence sustainability assurance, using ESG ratings as a proxy. Based on stakeholder and agency theories, it examines the effects of long-term and short-term investors on sustainability practices and how managerial engagement, measured by managerial shareholdings, moderates these impacts. Data from China's A-share market (2013-2022) with fixed-effects panel analysis was utilized, with robustness checks using Bloomberg ESG ratings confirming the findings. Heterogeneity analysis by firm characteristics and pollution intensity further supports the hypotheses. Results highlight managerial engagement's role in aligning corporate practices with investor expectations, offering insights to enhance sustainability assurance.
... They said that CSR is a procedure capable of enhancing the competitive standing of organisations and favorably impacting their operations as well as financial success. The conclusions of Porter and Kramer (2006) were substantiated by the results of Hillman and Keim (2001). Performance in social settings is categorized into two segments: management of stakeholders, which includes key stakeholders like as workers, customers, and shareholders, and the engagement with social issues, which addresses the allocation of corporate resources to mitigate societal problems. ...
The debate on the economic benefits of adopting environmentally friendly practices continues. This study does not aim to resolve the argument; instead, it alleviates it by enhancing the notion of "when it is advantageous to be environmentally conscious". This research study focusses on the shortcomings of current literature review by focusing the influence of environmental sustainability on financial performance of Malaysian firms for the period of 2014-2023. The data is collected from Thomson Reuter DataStream. In general, environmental sustainability and financial performance holds an optimistic relationship. The empirical result shows that the outcome of environmental sustainability on financial performance is positive. Institutional and legitimacy criteria serve as an effective foundation for establishing environmental sustainability. Policymakers and investors must consider these results when formulating economic policies and investment strategies, while enterprises in emerging nations such as Malaysia should recognize the potential implications of these elements and seek appropriate management strategies.
... Studies by Hillman and Keim (2001) and Donaldson and Preston (1995) showed that firms engaging in stakeholder management often perform better financially and ethically. Academically, the theory has evolved with contributions from Freeman, Wicks, and Parmar (2004), and Agle, Mitchell, and Sonnenfeld (1999). ...
The COVID-19 pandemic presented unprecedented challenges to businesses worldwide, including cooperatives in Nueva Ecija, Philippines. These organizations faced unique trials due to their distinct structure and operations. This study aims to understand the crisis management strategies employed by these cooperatives during the pandemic. Utilizing Mitroff's (1994) five stages of crisis, resilience theory, and stakeholder theory, the research provides a comprehensive view of how cooperatives navigated each stage of the crisis. Data analysis reveals that these cooperatives not only survived but also implemented multifaceted strategies to thrive amidst the challenges. Significant findings include their initial reactions, emergency planning, mitigation efforts, resumption of operations, and resilience building. The study underscores the importance of resilience and stakeholder engagement in effective crisis management, contributing to the academic discourse on cooperative management in crisis scenarios and offering practical guidance for cooperative leaders and policymakers. The study concludes that crisis management of cooperatives in Nueva Ecija was aligned with stakeholder theory, resilience theory, and Mitroff’s five stages of crisis management. Initially unprepared, they quickly adapted by implementing emergency planning, digital communication, safety protocols, workforce management, and financial support. As operations cautiously resumed, they balanced economic recovery with health concerns. This research highlights that the cooperatives in Nueva Ecija effectively navigated the COVID-19 crisis, adhering to crisis management principles and providing valuable insights for similar organizations in managing future crises.
... Estudios recientes evidencian que la adopción de estrategias sostenibles no solo mejora los resultados financieros, como incrementos en ingresos y utilidades, sino que también fortalece la reputación corporativa y la eficiencia operativa [4,5]. Estrategias como la reducción en el consumo de recursos, la inversión en tecnologías limpias y la implementación de políticas de responsabilidad social se destacan como prácticas clave para construir organizaciones resilientes [6,7]. ...
Este artículo explora cómo las estrategias de gestión financiera y administrativa alineadas con criterios ESG (ambientales, sociales y de gobernanza) fomentan la sostenibilidad empresarial. Utilizando metodología mixta, se combinó revisión de literatura, análisis de datos financieros de empresas colombianas como Grupo Sura, Nutresa y Davivienda, y encuestas aplicadas a 351 líderes empresariales. Los resultados destacan que la integración de prácticas ESG optimiza recursos, reduce costos operativos y mejora la competitividad, evidenciado en un crecimiento del 13,3% en ingresos y un aumento del 26,3% en ganancias operativas. Sin embargo, se identificaron desafíos significativos, como la falta de métricas claras y recursos financieros limitados. Las empresas que adoptan estas estrategias logran fortalecer su resiliencia organizacional, mejorar su desempeño económico y consolidar ventajas competitivas sostenibles. El articulo concluye que la sostenibilidad empresarial no solo es un imperativo ético, sino también una oportunidad para equilibrar el crecimiento económico con la responsabilidad social y ambiental.
... In general, companies that remain committed to their social responsibilities tend to desire lower levels of acceptable risk because they possess higher social capital and prioritize the interests of shareholders, investors, and customers (Cheung, 2016;Hillman & Keim, 2001). ...
This study investigates the relationship between financial risk management, corporate social responsibility (CSR), and sustainable development within the petrochemical industry. The research aims to explore the impact of financial risk management practices on CSR initiatives and to assess how these factors collectively contribute to the long-term sustainability of petrochemical companies. A key focus of the study is the role that CSR plays in advancing sustainable development, particularly in sectors facing significant financial and operational risks. The research is applied in nature, offering practical insights for improving risk management strategies in petrochemical corporations. The study sample consisted of 130 experienced managers from the petrochemical industry, selected based on the number of items in the survey questionnaire. The measurement tool used was a researcher-developed questionnaire, which was designed following an extensive review of relevant literature and consultations with subject matter experts. To ensure the validity of the instrument, content validity was assessed, and reliability was confirmed through the calculation of Cronbach's alpha coefficient. Data were analyzed using Partial Least Squares (PLS) software, which revealed significant findings regarding the influence of financial risk management on CSR and sustainable development. The results underscore the crucial role of effective financial risk management in facilitating CSR initiatives and enhancing the sustainability of petrochemical companies. Additionally, CSR was found to positively affect sustainable development, with a particular emphasis on the integration of social activities, product and service innovation, and human resource management practices. It is concluded that prioritizing CSR, along with strategic financial risk management, is essential for achieving long-term sustainability in the petrochemical sector. These findings offer valuable insights for both academic research and industry practice, contributing to the development of more effective risk management frameworks in the context of sustainable development.
A key discussion in the current management literature is how businesses react to and can contribute to solving societal challenges while meeting the needs of their shareholders and their broader set of stakeholders. Most extant research focuses on corporate social responsibility (CSR) issues in large for‐profit corporations, but social enterprises are also critical given their ability to promote financial inclusion and focus on stakeholders' needs. This study explores the mediating role of total factor productivity (TFP) in the relationship between CSR and financial performance within social enterprises, using a sample of microfinance institutions (MFIs) from Latin America. Our analysis demonstrates TFP's critical role in translating CSR initiatives into sustainable financial outcomes and enhancing both economic and social objectives. Thus, our results may provide insights to regulators, policymakers, and practitioners, allowing them to better understand best practices and actions that foster stakeholders' trust and expectations, with the potential outcome of improving MFIs overall sustainability goals. Our findings are robust due to the use of a variety of methodological approaches to address possible endogeneity problems and alternative specifications of financial performance.
This paper examines how local/global CSR activity induced local/remote ownership affects firm performance. The results show that local CSR activity generates positive externality to local owners, who in turn increase their ownership, and hence, also their monitoring role in local firms. Global CSR activity builds public image, and thus attract remote investors to local firms, which increases diversification and hence, liquidity of firm stock. The shift in local ownership increases firm value more for global CSR activities that target a broader group of stakeholders. Thus, some monitoring by local owners is necessary to prevent overinvestment in CSR that might lead to the manifestation of agency problems. In the short-run stock returns increase more for positive news on global CSR activities, partly, because of overreaction. In the long-run there is a return reversal, however, stock returns are still positive, indicating that CSR activities not only generate overreaction but also influence firm fundamentals.
We examine and test the environmental performance of family firms across 22 European countries and find that they exhibit better environmental performance than nonfamily firms. This result confirms prior research conducted in the United States. More specifically, we conclude that family firms engage in more substantive environmental actions than nonfamily firms. Furthermore, we hypothesize and confirm that family firms do not pay a financial price for lower emissions, which should facilitate the voluntary, non-instrumental adoption of pollution control practices. Finally, we also find that the relationship between substantive environmental activities and financial returns is stronger among family firms that have family members on the board and are under the influence of the first generation.
Women directors' role in addressing climate change is the source of increasing scholarly interest. We study the impact of women directors on greenhouse gas (GHG) emissions worldwide using a dataset of 2758 firms listed in 36 countries between 2002 and 2019 and reveal a significantly negative association between women board directors and GHG emissions, including direct as well as indirect GHG emissions. In recent years, many countries have enacted board gender quotas, leading to a marked rise in women's board representation. Our findings indicate that the marginal effect of women directors on GHG emissions after implementing gender quotas also remains negative and highly significant. We also note that the impact of women directors on GHG emissions is significant when the board has two or more women and is mainly influenced by independent rather than executive women directors. Moreover, industry nature and climate change action-oriented compensation policies drive the relationship between women directors and GHG emissions. The results remain robust to alternate proxies, various subsample analyses, and alternative specifications and offer significant research and managerial implications. This study contributes to the emergent literature on the role of women directors and board gender quotas in tackling the global issue of climate change.
This scoping review examines the applicability and evolution of corporate social responsibility (CSR) theories, which focus on voluntary corporate actions, during global transformational events. Additionally, the study explores the relevance of broader sustainability management (SUSM) theories, which provide comprehensive frameworks for integrating sustainability into corporate strategies, to assess their adaptability under such abnormal operating conditions. We identify and review 10 key theories pertinent to SUSM during normal and abnormal operating periods: Agency Theory, Cognitive Theory, Ecological Modernization, Institutional Theory, Leadership Theory, Legitimacy Theory, Neoclassical Theory, Shareholder Theory, Socio‐Ecological Systems Theory, and Stakeholder Theory. Our findings reveal that these theories are dynamic, evolving in response to global crises, thereby influencing and being influenced by corporate behaviors. This study contributes to the academic literature by highlighting the interplay between theoretical evolution and real‐world applications of CSR and SUSM. For managers, the study offers insights into building corporate resilience and adaptability, while policymakers are provided with guidance on fostering regulatory environments that support sustainable corporate practices during periods of disruption. These contributions underscore the importance of refining SUSM frameworks to guide corporate decision‐making in increasingly volatile environments.
Purpose
This study aims to investigate the perspective of corporate philanthropy during the coronavirus disease 2019 (COVID-19) in China for firms with various levels of corporate social responsibility (CSR). Specifically, the study appraises the impact of the COVID-19 pandemic on the stock returns and sustainable development of Chinese-listed companies and determines the likelihood of paying donations vis-à-vis firm reputation.
Design/methodology/approach
The study used data from 117 Chinese-listed firms engaged in philanthropy during the COVID-19 pandemic. The authors also utilized the stock returns and cash donation data, and owing to the cross-sectional data and continuous nature of dependent variables, they employed the ordinary least squares regression to test the research hypotheses.
Findings
The results show that irresponsible actions have a positive relationship with donations. The study particularly reveals that irresponsible firms have significant negative abnormal returns during the first wave of the COVID-19 pandemic.
Originality/value
To the best of our knowledge, this is the first empirical study to explore the perspective of corporate philanthropy during the COVID-19 pandemic for companies with different CSR levels. This study contributes to the empirical research on CSR and provides insights for managerial-cum-financial decisions to encourage managers of irresponsible firms to pursue philanthropic behaviors after crisis events.
We surveyed 249 Polish and 159 Romanian firms about their nonmarket strategies (NMS). The results revealed similar links among relative firm size, market strategies, NMS, and firm performance. Firm size did not influence market orientation, but it influenced political and social NMS. Firm performance was influenced primarily by global growth and differentiation, not cost leadership. Social NMS, but not political NMS, was a significant performance driver in both countries. Relative firm size was significantly associated with firm performance in Romania but not Poland. Our findings suggest that firms in Central and Eastern Europe (CEE) can integrate market and NMS to drive performance, but NMS creates more value in the social realm than in the political sphere.
This research investigates the potential effects of companies' commitments to disclose their anti‐corruption efforts on their sustainability performance. Additionally, we aim to analyze whether the existence of a sustainability committee influences this relationship. To achieve these objectives, we gathered data from 5344 firm‐year observations of companies listed on the FTSE 350 index from 2008 to 2023. Our findings provide strong empirical support for a positive relationship between companies' anti‐corruption disclosures and their sustainability performance. Furthermore, our evidence suggests that the presence of a sustainability committee acts as a viable complement to anti‐corruption disclosures, driving improved sustainability performance. Our study highlights practical implications for organizations, regulators, and policymakers, and it opens avenues for future research.
There is a dearth of empirical research to examine how a firm's internal corporate governance mechanisms would impact eco‐innovation practices under distinctive nation‐level institutions. Therefore, we conducted this study to examine the individual roles of board size, board diversity (i.e., female directors' presence) and board independence in motivating a firm's eco‐innovation practices in an extended cross‐country setting. Furthermore, we examine whether nation‐level institutions moderate our primary study associations. By employing the system generalized method of moment (SGMM) method for panel data of 19 countries from 2010 to 2021, we find a positive impact of board diversity and independence, whereas board size has a significant negative influence on a firm's eco‐innovation practices. However, the political and cultural systems moderate negatively, whereas the education and labour systems and financial systems strengthen our primary findings. The results remain strong even after using additional measurements for dependent variables, addressing endogeneity concerns and using multiple estimating methods to account for bias from omitted variables. Regulators and policymakers can use these findings to formulate stringent institutional policies in regard to nation‐level eco‐innovation.
ESG can be described as the environmental, social, and governance practices institutionalized by companies over time. Much of the previous literature in this area cites these “pro-social” corporate restructuring, re-branding, or policy changes as emerging from scrutiny, or pressures from a company's stakeholders, shareholders, peers, and the public to incorporate more transparency, equity, environmental protection, and social responsibility in its management and operations. We combine theoretical frames from the sociology of organizations, specifically the theory of organized hypocrisy, the sociology of human rights, and the World Society approach. We articulate how social, political, and economic pressures, both internal and external to a company, as well as its current position in society (such as its characteristics like assets, size, stakeholders, etc.), influence its location and trajectory vis-a-vis ESG. We use two-way fixed-effects analysis of over 3,600 US-based firms from 1991 to 2016. Our research suggests that there is an ESG “onramp,” which we argue signals a shift from organized hypocrisy to a progressively expansive normative practice.
Research Summary
This study examines whether U.S. corporate executives would adopt a stronger stakeholder orientation if constraints imposed by shareholder litigation risk were relaxed. Leveraging the staggered adoption of Universal Demand (UD) laws across states as a quasi‐experimental setting, we test whether reduced litigation risk leads to managers prioritizing broader stakeholder initiatives. We find that firms increase stakeholder‐focused efforts following UD law adoption, with this shift more pronounced in firms with weaker shareholder governance provisions and lower levels of outside director ownership. Our study advances corporate governance and stakeholder theory by demonstrating how shareholder litigation risk acts as a governance mechanism that shapes managerial priorities. Additionally, we identify key boundary conditions moderating the relationship between governance constraints and stakeholder engagement.
Managerial Summary
What happens when corporate executives feel less constrained by the risk of shareholder litigation? This study examines how reducing litigation risk leads to managers shifting their focus toward initiatives that benefit broader stakeholder groups, including employees, communities, and the environment. Using state‐level legal changes as a natural experiment, we find that firms adopt a more stakeholder‐oriented approach when shareholder litigation risk decreases—particularly in firms with weaker governance mechanisms tied to shareholder oversight. These findings highlight the critical role of legal frameworks and governance structures in shaping how executives balance shareholder and stakeholder priorities. For practitioners, this underscores the function of governance systems in influencing a firm's stakeholder strategy.
This study investigates the determinants of corporate social responsibility (CSR) in the Korea Composite Stock Price Index (KOSPI) listed firms based on the theoretical arguments of trait-based imitation in uncertainty. This study assumes that an organization’s decision-making occurs under bounded rationality and acquires social legitimacy by past behavior or by imitating other organizations to reduce uncertainty. We used an unbalanced panel data of 6,364 observations from 464 firms from 2000 to 2019 using KIS Value, TS2000, and disclosed business reports to test our research hypotheses. The fixed-effects model results for the unbalanced panel data are as follows:
Firms that had been active in CSR in the past tended to participate more actively in CSR. Also, firms execute CSR more actively if other firms with similar status show a high level of CSR. These results reveal that firms imitate corporate decision-making in their experience or similar-status firms’ activities. In addition, corporate image advertising positively moderates the relationship between the organization’s CSR and those of companies in similar positions.
This study has significance in that it further expanded the scope of theoretical explanation by introducing the theoretical argument that CSR is an act of decision-making in uncertainties and trait-based imitation made under bounded rationality. Furthermore, this study provides an empirical basis for further research on CSR by determining the variables that induce CSR.
This research study investigates whether corporate social performance influences the firm value of Malaysian firms. This research study focuses on the shortcomings of current literature review by focusing the influence of corporate social performance on firm value of Malaysian firms for the period of 2012-2021. The data is collected from Thomson Reuter Datasteram. In general, corporate social performance and firm value holds an optimistic relationship. The empirical result shows that the outcome of corporate social performance on firm value is positive. Institutional and legitimacy theories criteria serve as an effective foundation for establishing social sustainability. Policymakers and investors must consider these results when formulating economic policies and investment strategies, while enterprises in emerging nations such as Malaysia should recognize the potential implications of these elements and seek appropriate management strategies.
This article makes two related contributions to stakeholder theory and corporate governance theory. First, the authors seek to advance firm-level characterization of the emerging stakeholder model of corporate governance by analyzing two relevant dimensions of this model: the corporate social responsibility (CSR) function at the board level and stakeholder engagement. Second, the authors intend to examine the relationship between conformance to the stakeholder model of corporate governance and firm financial performance, taking into account the differences between countries, by using an international sample of large companies. The findings suggest that the traditional distinction between shareholder-centered and stakeholder-centered corporate governance systems also has importance for the CSR strategy.
In recent years, extensive research has focused on the relationship between corporate social responsibility (CSR) and financial performance. While past studies have explored this connection, they often faced challenges in quantitatively assessing the effectiveness of CSR initiatives. However, advancements in research methodologies and the development of Environmental, Social, and Governance (ESG) measurement dimensions have led to the creation of more robust evaluation criteria. These criteria use ESG scores as primary reference indicators for assessing the effectiveness of CSR activities. This study aims to utilize ESG indicators from the ESG InfoHub website of the Taiwan Stock Exchange Corporation (TSEC) as benchmarks, comprising 15 items from the environmental (E), social (S), and governance (G) dimensions to form the CSR effectiveness indicators and predict financial performance. The data cover the years 2021–2022 for listed companies, using return on assets (ROA) and return on equity (ROE) as measures of financial performance. With the rapid development of artificial intelligence in recent years, the applications of machine learning and deep learning (DL) have proliferated across many fields. However, the use of machine learning to analyze ESG data remains rare. Therefore, this study employs machine learning models to predict financial performance based on ESG performance, utilizing both classification and regression approaches. Numerical results indicate that two deep learning models, Long Short-Term Memory (LSTM) and Convolutional Neural Network (CNN), outperform other models in regression and classification tasks, respectively. Consequently, deep learning techniques prove to be feasible, effective, and efficient alternatives for predicting corporations’ financial performance based on ESG metrics.
Purpose
This study aims to examine why executives increase investments in corporate social responsibility (CSR) as a strategic action to protect their firms’ reputation from the possibility of a contagion effect following CSR-related corporate misconduct in the industry by drawing on an impression management perspective. This study also examines internal and external governance mechanisms as boundary conditions.
Design/methodology/approach
The sample includes panel data of firms listed in the S&P 500 index from 2009 to 2013. The authors used firm fixed-effects models to test the hypotheses.
Findings
The results show that recent CSR-related corporate misconduct occurred in other firms, inducing executives to increase investments in CSR. Moreover, internal and external governance mechanisms, which are CEO incentives and institutional ownership, moderated the relationship.
Originality/value
This study contributes to prior literature on the factors influencing CSR at the multilevel of analysis by examining how recent CSR-related corporate misconduct in the industry interacts with corporate governance mechanisms as boundary conditions to influence firm commitment to CSR.
Banks have faced increasing attention regarding their ability to balance Corporate Social Responsibility (CSR) initiatives, operational efficiency, and credit risk management, particularly in the wake of global financial challenges. This study examines the interplay between CSR, efficiency, and credit risk in 131 US banks from 2010 to 2018. Using the Choquet integral, two-step Data Envelopment Analysis, and a dynamic panel with the Generalized Method of Moments, the findings reveal a virtuous circle between CSR and credit risk, where CSR enhances credit risk profiles. Similarly, efficiency and risk exhibit mutual reinforcement. However, a vicious circle is identified between CSR and efficiency, indicating trade-offs between CSR objectives and operational efficiency. These insights guide policymakers and bank managers in optimizing this balance.
Purpose
This study aims to analyse the inconsistencies found in previous research regarding the impact of environmental, social and governance (ESG) factors on real estate investment trusts’ (REITs) performance. By identifying the individual contributions of each ESG pillar, the research seeks to clarify ESG’s role in determining REIT outcomes.
Design/methodology/approach
The study conducts a meta-analysis of 26 selected studies from a pool of over 300 academic papers that investigate the relationship between ESG factors and REIT performance. The meta-analysis aggregates regression findings from these studies, and logistic regression models are used to examine the distinct effects of each ESG factor on REIT performance.
Findings
The results indicate that the environmental and social pillars significantly influence the relationship between ESG and REITs performance. The social factor consistently shows a positive and significant effect, while the environmental factor is significant but with an unclear direction of influence. The governance factor does not show a significant impact, suggesting that under the current REITs regulatory framework, governance is less influential. The results address the distinct contribution of ESG factors in shaping REIT outcomes across different market contexts and time periods. Moreover, the positive impact of the social pillar aligns with Freeman’s (1984) social impact hypothesis, which suggests that business practices associated with stakeholders’ interests positively affect financial performance.
Originality/value
This study enhances the understanding of ESG factors’ impact on REITs by being the first to systematically analyse the underlying reasons for the varied outcomes in previous research. It is also the first attempt to employ meta-analysis in exploring the theoretical foundations of ESG effects within the real estate and construction sectors. The findings assist investors in making more informed decisions based on ESG components and offer guidance for policymakers in crafting regulations that better reflect the influence of ESG factors.
Using a unique dataset of deceased certified public accountants (CPAs) in China, we document that auditors who have experienced the death of a peer CPA from the same office are less likely to issue modified audit opinions, indicating impaired audit quality. Accordingly, we argue that heightened death awareness and corporate social responsibility (CSR) awareness, triggered by the death of a work peer, lead to death anxiety, intrinsic-value pursuit, and reduced commitment to the employer, thereby hindering both work ability and work commitment during the audit process. Moreover, the power of peer death is amplified by both self-relevance and self-exposure to deaths perceived by living auditors. Since most of the deceased CPAs in our sample are not signing CPAs who lead audit projects, our results illustrate the significant negative impact of peer death on work performance at the rank-and-file employee level. As employee deaths are frequently linked to the prevalent burnout culture and show a growing trend in recent years, our findings timely reveal the economic costs of the toxic workplace environment. This practically implies the critical importance of promoting a safe and healthy working environment ex ante and providing appropriate bereavement support for employees affected by a colleague’s death ex post.
Should we still use the concept of political corporate social responsibility (PCSR) in management research? In response to recent and significant challenges in the management literature regarding the relevance of PCSR as a concept, we conduct a review of the literature in the field. We combine a bibliometric analysis and a qualitative content analysis to assess the use of the concept of PCSR between 2005 and 2022. We contribute to the PCSR literature in four ways: First, we map the field of PCSR in order to develop an objective understanding of the concept. Second, we demonstrate that PCSR exhibits the features of a concept, and that current research has begun to address some of the significant challenges that question its relevance. Third, we identify the four pillars at the base of the concept and uncover a fifth pillar: the dynamic perspective of PCSR. Last, we propose research directions to strengthen the PCSR concept and enrich its contributions to theory and practice.
This study examined scientific articles that link the themes of marketing and corporate social responsibility (CSR) with the following objectives: first, to create a map of the intellectual structures that support marketing research in association with CSR; second, to discover the possibilities for future research by identifying new research fronts. A scientific mapping was performed using VosViewer software through a semi-systematic literature review, which utilized co-citation analysis and bibliographic coupling. Research opportunities were identified based on a qualitative analysis of the future research sections of the articles. The results demonstrate a vast scientific production that associates marketing with CSR. The analysis of the studies shows a movement away from topics such as financial performance to a focus on topics such as consumer behavior and relationships with stakeholders. Opportunities for theoretical, methodological, and empirical studies are presented, facilitating the development of new research and the filling of gaps identified by researchers.
Almost all companies are starting to pay attention to the impact of environment, social, and governance (ESG) & and prosperity disclosure. This research aims to analyze empirical evidence of the Exploring the Financial Performance from ESG And Prosperity Disclosure Score. The research was conducted using causality design, while the samples of 84 companies listed on the IDX-IC (Indonesian Stock Exchange) for the 2019 – 2021 period were selected using certain criteria. Data analysis was carried out with balanced panel data regression. The results show that aggregate ESG & prosperity disclosure impaired the increasing returns on company assets. Individually, environmental and prosperity disclosure did not affect financial performance, while social and governance disclosures affect financial performance. The ESG and prosperity disclosures can undermine financial performance, in part because a focus on ESG initiatives can divert management’s attention from short-term financial goals to long- term sustainability goals. This causes management to prioritize goals aligned with sustainability and social responsibility over short-term financial gains. In this study, financial performance is measured using ROA. This ratio has a weakness in its use, namely that it does not take into account differences in the company’s capital structure, and depreciated fixed assets can affect ROA, providing a less accurate picture of actual financial performance.
Entities such as the natural environment and future human generations, among others, broadly qualify as stakeholders, albeit non-traditional ones. Yet due to ambiguous identification and inconsistent representation by human proxies, non-traditional stakeholders' interests are often disregarded by organizations. Said differently, despite theoretically qualifying as stakeholders, non-traditional stakeholders suffer low legitimacy, power, and urgency-that is, low salience. However, recent advances in the concept of personhood alongside developments in agentic technologies provide the basis for non-traditional stakeholders to gain salience and secure their "own voice" at the table. Herein, we refer to non-traditional stakeholders with some level of acknowledged personhood coupled with some degree of agentic technology representation as synthetic stakeholders. We theoretically examine how variation in the acknowledged personhood of a non-traditional stakeholder (based on the aspects of recognition and boundedness) as well as variation in the technological design scope of its agentic representative (based on the aspects of participation and permissibility) affect the synthetic stakeholder's salience. We further discuss how these dimensions impact stakeholder management and organizational governance more broadly.
Corporate social responsibility (CSR) has been recognized as a determining factor in articulating business strategy in relation to a company’s social and ethical policies and their impact on organizational process performance and shared value. This study analyzes the relationship between corporate social responsibility and internal organizational processes (IOPs) to create value. According to the conceptual framework, a structural equation model was applied to the analysis of data from 152 large- and medium-sized enterprises in the Colombian competitive landscape. The findings indicate that CSR practices have a direct impact on IOPs, and that both have a positive and significant impact on generating shared value. Furthermore, by taking CSR actions, firms improve the creation of social and internal value, along with stakeholders’ adaptability in a competitive environment. This study is one of the earliest empirical studies to evaluate the impact of CSR on IOPs in Latin America within four industrial contexts; therefore, it contributes to the development of extant literature on management strategy and suggests managerial and social implications and future research territories.
Drawing on stakeholder and transaction cost theory, we empirically investigate how managerial efforts to engage five different key stakeholder groups affect firm financial performance. Building upon the existing literature on stakeholder heterogeneity, we propose a framework that highlights inter‐stakeholder differences to empirically test whether the commonly used overarching stakeholder groupings are sufficient. This approach allows us to hypothesize about the financial value creation and value destruction potential of integrating each stakeholder individually. Our propositions are tested using a panel dataset consisting of 4926 multinational companies from 2005 to 2020. The results show that the integration of minority shareholders and communities negatively affects financial performance. Conversely, integrating customers and suppliers has a positive impact on financial performance in the long run, while integrating employees has a positive impact in the short run. These findings underscore the particularities of each stakeholder group, pointing to the need to consider heterogeneity in future stakeholder research.
Globally, the essentials of adhering to ESG (Environmental, Social, and Governance) frameworks has grown manifold across sectors and regions due to their multifaceted impact on businesses, investors, and society at large. In recent times the alignment between ESG and Corporate Financial performance (CFP) is gaining significant interest. The influence of the relationship between ESG factors and CFP differs depending on the specific characteristics of nations and their institutional frameworks. The primary objective of this study is to examine the reciprocal causality and autoregression (AR) impacts between ESG performance and the financial performance of BRICS firms through the analysis of data utilizing a five-wave cross-lagged panel structural equation modelling approach. The overall and individual ESG scores of BRICS listed companies from the Refinitiv Eikon database between 2018 and 2022 has been used. The results of research are beneficial for a variety of stakeholders including investors and policymakers.
In this study, we hypothesize that institutions invest more heavily in companies with strong corporate social performance. Analysis indicated a significant, positive relationship between social performance and the number of institutions holding the shares of a company and a positive but insignificant relationship between social performance and the percentage of shares held by institutions. We conclude that improving a company's corporate social performance invokes no penalty in institutional ownership.
Stakeholder theory has been a popular heuristic for describing the management environment for years, but it has not attained full theoretical status. Our aim in this article is to contribute to a theory of stakeholder identification and salience based on stakeholders possessing one or more of three relationship attributes: power, legitimacy, and urgency. By combining these attributes, we generate a typology of stakeholders, propositions concerning their salience to managers of the firm, and research and management implications.
This article examines the developmental process of cooperative interorganizational relationships (IORs) that entail transaction-specific investments in deals that cannot be fully specified or controlled by the parties in advance of their execution. A process framework is introduced that focuses on formal, legal, and informal social-psychological processes by which organizational parties jointly negotiate, commit to, and execute their relationship in ways that achieve efficient and equitable outcomes and internal solutions to conflicts when they arise. The framework is elaborated with a set of propositions that explain how and why cooperative IORs emerge, evolve. and dissolve. The propositions have academic implications for enriching interorganizational relationships, transaction cost economics. agency theories, and practical implications for managing the relationship journey.
We build on an emerging strategy literature that views the firm as a bundle of resources and capabilities, and examine conditions that contribute to the realization of sustainable economic rents. Because of (1) resource-market imperfections and (2) discretionary managerial decisions about resource development and deployment, we expect firms to differ (in and out of equilibrium) in the resources and capabilities they control. This asymmetry in turn can be a source of sustainable economic rent. The paper focuses on the linkages between the industry analysis framework, the resource-based view of the firm, behavioral decision biases and organizational implementation issues. It connects the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the firm level. Organizational rent is shown to stem from imperfect and discretionary decisions to develop and deploy selected resources and capabilities, made by boundedly rational managers facing high uncertainty, complexity, and intrafirm conflict.
Evaluating organizations according to an efficiency criterion would make it possible to predict the form organizations will take under certain conditions. Organization theory has not developed such a criterion because it has lacked a conceptual scheme capable of describing organizational efficiency in sufficiently microsopic terms. The transactions cost approach provides such a framework because it allows us to identify the conditions which give rise to the costs of mediating exchanges between individuals: goal incongruence and performance ambiguity. Different combinations of these causes distinguish three basic mechanisms of mediation or control: markets, which are efficient when performance ambiguity is low and goal incongruence is high; bureaucracies, which are efficient when both goal incongruence and performance ambiguity are moderately high; and clans, which are efficient when goal incongruence is low and performance ambiguity is high.
This article extends earlier research concerning the relationship between corporate social performance and corporate financial performance, with particular emphasis on methodological inconsistencies. Research in this area is extended in three critical areas. First, it focuses on a particular industry, the chemical industry. Second, it uses multiple sources of data-two that are perceptual based (KLD Index and Fortune reputation survey), and two that are performance based (TRI database and corporate philanthropy) in order to triangulate toward assessing corporate social performance. Third, it uses the five most commonly applied accounting measures in the corporate social performance and corporate financial performance (CSP/CFP) literature to assess corporate financial performance. The results indicate that the a priori use of measures may actually predetermine the CSP/CFP relationship outcome. Surprisingly, Fortune and KLD indices very closely track one another, whereas TRI and corporate philanthropy differentiate between high and low social performers and do not correlate to the firm's financial performance.
Offered here is a conceptual model that comprehensively describes essential aspects of corporate social performance. The three aspects of the model address major questions of concern to academics and managers alike: (1) What is included in corporate social responsibility? (2) What are the social issues the organization must address? and (3) What is the organization's philosophy or mode of social responsiveness?
This article presents an integrative conceptual framework for linking corporate social performance, stakeholders, and quality of management, then tests this framework empirically. Results provide strong support for the hypothesis that perceived quality of management can be explained by the quality of performance with respect to specific primary stakeholders: owners, employees, customers, and (marginally) communities, but treatment of ecological environmental considera- tions is not a significant factor.
Knowledge is too problematic a concept to make the task of building a dynamic knowledge-based theory of the firm easy. We must also distinguish the theory from the resource-based and evolutionary views. The paper begins with a multitype epistemology which admits both the pre- and subconscious modes of human knowing and, reframing the concept of the cognizing individual, the collective knowledge of social groups. While both Nelson and Winter, and Nonaka and Takeuchi, successfully sketch theories of the dynamic interactions of these types of organizational knowledge, neither indicates how they are to be contained. Callon and Latour suggest knowledge itself is dynamic and contained within actor networks, so moving us from knowledge as a resource toward knowledge as a process. To simplify this approach, we revisit sociotechnical systems theory, adopt three heuristics from the social constructionist literature, and make a distinction between the systemic and component attributes of the actor network. The result is a very different mode of theorizing, less an objective statement about the nature of firms ‘out there’ than a tool to help managers discover their place in the firm as a dynamic knowledge-based activity system.
Alliances and similar cooperative efforts are receiving increased attention in the strategic management literature. These relationships differ in significant ways from those governed by markets or hierarchies, and pose very different issues for researchers and managers. In this paper we address alternative forms of governance in cases where multiple organizations repeatedly cooperate. We explore their characteristics and follow this with a discussion of criteria which we believe bear on the choice of governance: risk and reliance on trust. We offer propositions on relationships between these criteria and the choice of governance mechanisms. In the concluding section of the paper we explore the implications of our analysis for managers and scholars.
Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.
It is generally assumed that common stock investors are exclusively interested in earning the highest level of future cash-flow for a given amount of risk. This view suggests that investors select a well-diversified portfolio of securities to achieve this goal. Accordingly, it is often assumed that investors are unwilling to pay a premium for corporate behavior which can be described as socially-responsible.Recently, this view has been under increasing attack. According to the Social Investment Forum, at least 538 institutional investors now allocate funds using social screens or criteria. In addition, Alice Tepper Marlin, president of the New York-based Council on Economic Priorities has recently estimated that about $600 billion of invested funds are socially-screened (1992).
This article identifies two major theoretical orientations in the business and society field. The corporate social performance (CSP) model illustrates their lack of integration and the problems posed for theory development. The model is reoriented so that it can be used to explore a synthesis of the two perspectives based on reframed principles of corporate social responsibility, processes of corporate social responsiveness, and outcomes of corporate behavior.
Stakeholder theory has been a popular heuristic for describing the management environment for years, but it has not attained full theoretical status. Our aim in this article is to contribute to a theory of stakeholder identification and salience based on stakeholders possessing one or more of three relationship attributes: power, legitimacy, and urgency. By combining these attributes, we generate a typology of stakeholders, propositions concerning their salience to managers of the firm, and research and management implications.
The increasing liberalization of markets coupled with the creation of new markets for intermediate products is stripping firm-level competitive advantage back to its fundamental core: difficult to create and difficult to imitate intangible assets. This article explores these developments and elucidates implications for the management of intellectual capital inside firms.
This paper traces the evolution of the corporate social performance model by focusing on three challenges to the concept of corporate social responsibility: economic responsibility, public responsibility, and social responsiveness. It also examines social issues management as a dimension of corporate social performance. It concludes that the corporate social performance model is valuable for business and society study and that it provides the beginnings of a paradigm for the field.
This paper investigates empirically the competing predictions of three perspectives on the determinants of organizational isomorphism-population ecology, institutionalization, and strategic choice-through a collective strategy framework, which categorizes organizations in an interorganizational field by their relationships with one another. The methodological approach, based on a network analysis of multiple organizational relations in a population of voluntary social service organizations, operationalizes the collective strategy typology and links homogeneity among organizations to their location in the organizational field. The results of the investigation offer strongest support for a strategic choice perspective and suggest that the environment is not highly deterministic in shaping organizational characteristics.
Drawing on the theoretical insights from the resource-based view of strategic management, this article explores the potential of human resource systems to facilitate or inhibit the development and utilization of organizational competencies. These competencies-managerial, input-based, transformational, and output-based-are presumed to yield sustained competitive advantage for a firm. The competency-based perspective, by focusing attention on the HR activities, functions, and processes that enhance or impede competency accumulation and exploitation, complements the behavioral perspective (Schuler & Jackson, 1987) and, thus, potentially enhances the understanding of strategic human resource management.
Three types of trust in economic exchanges are identified: weak form trust, semi-strong form trust, and strong form trust. It is shown that weak form trust can only be a source of competitive advantage when competitors invest in unnecessary and expensive governance mechanisms. Semi-strong form trust can be a source of competitive advantage when competitors have differential exchange governance skills and abilities, and when these skills and abilities are costly to imitate. The conditions under which strong form trust can be a source of competitive advantage are also identified. Implications of this analysis for theoretical and empirical work in strategic management are discussed.
Historically. management theory has ignored the constraints imposed by the biophysical (natural) environment. Building upon resource-based theory, this article attempts to fill this void by proposing a natural-resource-based view of the firm-a theory of competitive advantage based upon the firm's relationship to the natural environment. It is composed of three interconnected strategies: pollution prevention, product stewardship, and sustainable development. Propositions are advanced for each of these strategies regarding key resource requirements and their contributions to sustained competitive advantage.
The stakeholder theory has been advanced and justified in the man- agement literature on the basis of its descriptive accuracy, instrumen- tal power, and normative validity. These three aspects of the theory, although interrelated, are quite distinct; they involve different types of evidence and argument and have different implications. In this article, we examine these three aspects of the theory and critique and integrate important contributions to the literature related to each. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental. If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the man- agers of the unit are fiduciaries for it and not merely for its individual members, that they are . . . trustees for an institu- tion (with multiple constituents) rather than attorneys for the stockholders.
Taking agency theory and stakeholder theory as points of departure, this article proposes a paradigm that helps explain the following: (1) certain aspects of a firm's strategic behaviour; (2) the structure of management-stakeholder contracts; (3) the form taken by the institutional structures that monitor and enforce contracts between managers and other stakeholders; and (4) the evolutionary process that shapes both management-stakeholder contracts and the institutional structures that police those contracts.
Regardless of the specific tools and methods a firm adopts or what quality experts an organization follows, managing for quality and competitive advantage means a firm must become customer oriented. Unfortunately, many quality-management programs and efforts to enhance competitiveness take a rather limited view of potential customer involvement in the process. This article first examines familiar roles that customers play in both manufacturing and service organizations. Then, insights from organization theory, services marketing, strategic management, and total quality concepts are integrated to develop both a conceptual model and 10 propositions based on a more complex view of potential customer contributions to competitive quality. Both a research agenda and ideas for improved organizational practice are discussed.
This article defines corporate social performance (CSP) and reformulates the CSP model to build a coherent, integrative framework for business and society research. Principles of social responsibility are framed at the institutional, organizational, and individual levels; processes of social responsiveness are shown to be environmental assessment, stakeholder management, and issues management; and outcomes of CSP are posed as social impacts, programs, and policies. Rethinking CSP in this manner points to vital research questions that have not yet been addressed.
This article presents conclusions from a 10-year research program, the purpose of which has been to develop a framework and methodology, grounded in the reality of corporate behavior, for analyzing and evaluating corporate social performance. There are three principal sections: (a) a summary of the approaches, models, and methodologies used in conducting more than 70 field studies of corporate social performance from 1983-1993; (b) a discussion of the principal conclusions derived from the data that (1) corporations manage relationships with stakeholder groups rather than with society as a whole, (2) it is important to distinguish between social issues and stakeholder issues, and (3) it is necessary to identify the appropriate level of analysis in order to evaluate CSP; and (c) a discussion of propositions and areas for further research.
Four research issues are identified that highlight the contrasting perspectives of strategic management and finance on event-study methodology. These issues then are used to evaluate five finance procedures used to calculate market-based performance measures. In each case, alternative procedures are recommended to make these measures more relevant both conceptually and statistically, for strategic management research.
The weakening of the traditional management hierarchy, the hollowing out of corporations, and an increasing management emphasis on boundarylessness have created a new mind set concerning external stakeholders. Increasingly, organizations are moving beyong traditional stakeholder management techniques to partnering tactics that lead to the achievement of common goals. In spite of these trends, there has been very little effort in the management literature to tie stakeholder management and partnering tactics. This article demonstrates how successful partnerships with stakeholders create such valued benefits as increased product success rates, increased manufacturing efficiency, the development of distinctive competencies arising from partnerships with local communities or government agencies, reduced unfavorable litigation, reduced levels of negative publicity, and favorable regulatory policies.
This article is intended to enhance the position of stakeholder theory as an integrating theme for the business and society field. It offers an instrumental theory of stakeholder management based on a synthesis of the stakeholder concept, economic theory, behavioral science, and ethics. The core theory-that a subset of ethical principles (trust, trustworthiness, and cooperativeness) can result in significant com- petitive advantage-is supplemented by nine research propositions along with some research and policy implications. Even before Preston (1975) issued an intellectual call-to-arms, schol- ars in the field of inquiry called business and society sought a paradigm or an integrating framework for topics thought to be central to the disci- pline. Various models-corporate social performance, social control of business, and stakeholder-have been advanced as part of this search. This article attempts to advance the case for using the stakeholder model as an integrating theme for the field by proposing a formal instrumental theory of stakeholder management. The theory represents a synthesis of the stakeholder concept, economic theory, insights from behavioral sci- ence, and ethics. The argument begins with a brief history of the search for a paradigm in the business and society field followed by a discussion of the stakeholder model as theory. Assumptions that underlie the theory are then offered along with discussions of the nature of contracting, effi- cient contracting, and the role of ethics in efficient contracting. An argu- ment is presented for corporate morality as an analog to individual mo- rality. At this point, the instrumental stakeholder theory is formally presented, followed by several research propositions. Implications and extensions of the theory and a brief conclusion complete the article. THE QUEST FOR A BUSINESS AND SOCIETY PARADIGM Although the business and society field has had at least a nominal presence at numerous business schools for over two decades and has experienced considerable growth since then in terms of faculty member- ship in academic organizations and numbers of outlets for scholarly ar-
We use X-ray and neutron reflectivity to probe sodium dodecyl sulfate surfactant monolayers on the silicon oxide/silicon surface as deposited from a receding solution and hydrated in precursing thin films. The deposited monolayers are dry and have their head groups adjacent to the substrate. Despite the solubility of the surfactant, the deposition process is similar to a Langmuir-Blodgett deposition. X-ray reflectivity measurements of the dry monolayer show the density of the tail regions to be similar to that observed for liquid hydrocarbons. Further, we detect a lower density outer tail region which is compatible with molecular dynamics calculations. Placing the monolayers in contact with bulk surfactant solutions in a vapor-sealed environment causes them to hydrate and to become precursing films. These precursing films are made up of a water core and a surfactant monolayer at the liquid/vapor interface of the film. We monitor the structural evolution of the monolayers as the films equilibrate over days. The concentration of the bulk surfactant solution influences the self-assembly of the surfactant monolayer at the liquid/vapor interface in the film. Further, the area per surfactant molecule in the monolayer increases with film thickness due to decreasing compression of the counterion distribution and reduction in the screening of the intralayer head group repulsion.
This paper demonstrates the inadequacy of traditional measures, that are based on a firm's profitability, for evaluating its strategic performance. Two other measures, one that attempts to assess the quality of a firm's transformations (and not merely its outcomes) and the other that attempts to measure the satisfaction of all of the firm's stakeholders (and not merely its stockholders), are shown here to be important discriminators of strategic performance. The performances of seven ‘excellent’ firms from the computer industry, featured in the recent book by Peters and Waterman, are contrasted with that of seven ‘non-excellent’ firms from the same industry, to develop a framework for measuring strategic performance.
Strategic managers are consistently faced with the decision of how to allocate scarce corporate resources in an environment that is placing more and more pressures on them. Recent scholarship in strategic management suggests that many of these pressures come directly from sources associated with social issues in management, rather than traditional arenas of strategic management. Using a greatly improved source of data on corporate social performance, this paper reports the results of a rigorous study of the empirical linkages between financial and social performance. Corporate social performance (CSP) is found to be positively associated with prior financial performance, supporting the theory that slack resource availability and CSP are positively related. CSP is also found to be positively associated with future financial performance, supporting the theory that good management and CSP are positively related.© 1997 by John Wiley & Sons, Ltd
The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
Despite widespread agreement among organizational researchers that intangible resources underlie performance differences among organizations, little empirical evidence exists in the literature. Building on the idea that reputation is socially constructed, this paper depicts reputation as the outcome of the process of legitimation. It observes that organizational researchers have overlooked how certification contests legitimate organizations, generate status orderings, and create favorable reputations. This paper suggests that victories in certification contests are credentials that enable firms to acquire a reputation for competence. It predicts that cumulative victories improve the survival of organizations and better the life chances of startup organizations more than those of lateral entries. These predictions are analyzed in the American auto industry during 1895–1912 when special-purpose product rating agencies were absent and reliability and speed contests served as credentialing devices. The results show that cumulative victories in contests extend the life chances of winning organizations but there is no evidence that new startup organizations benefit more than lateral entries. These findings underscore the significance of intangible assets and point to the need for an institutionally informed theory of competences.
Stock market reactions to a sample of customer service changes reported during 1981-91 were investigated. Customer service increases (decreases) were positively (negatively) valued. Stock market reactions varied depending on specific customer service actions and, therefore, on the four customer service objectives pursued.
We compare buyer'supplier links established by pairs of Japanese-owned automobile assemblers and component manufacturers operating in Japan and in North America during 1989-90. Eight assemblers and more than 170 Japanese component manufacturers had established North American manufacturing facilities. In total, Japanese automobile assembly organizations operating in North America had recreated about a quarter of their Japanese supply links. The suppliers that set up North American facilities had recreated almost 60 percent of their links with traditional buyers and formed more than 16 percent of the possible extension links with new assembler partners. We identify several economic and organizational factors that influence whether an existing buyer'supplier link will be recreated in a new location and whether firms that do not have a buyer'supplier relationship at home will form an extension link in the new location. We find that the presence of a long-term buyer'supplier relationship, buyer and supplier entry timing to the new location, the joint venture status of the buyer, supplier size, and the breadth of a supplier's sales base in the home market influence the likelihood that links will be recreated and extension links will be formed.
Given incomplete factor markets, appropriate time paths of flow variables must be chosen to build required stocks of assets. That is, critical resources are accumulated rather than acquired in "strategic factor markets" (Barney [Barney, J. 1986. Strategic factor markets: Expectations, luck, and business strategy. Management Sci. (October) 1231--1241.]). Sustainability of a firm's asset position hinges on how easily assets can be substituted or imitated. Imitability is linked to the characteristics of the asset accumulation process: time compression diseconomies, asset mass efficiencies, inter-connectedness, asset erosion and causal ambiguity.
Orientation to the diverse interests of stakeholder groups is central to strategic planning, and failure to address the interests of multiple stakeholder groups may be detrimental to company performance. However, some companies may be unable to address all these interests, owing to a scarcity of resources, and the impact of multiple stakeholder orientation may be influenced by the environment. Despite calls by leading writers in the literature, there is no empirical evidence about the potential association of orientation to multiple stakeholders with company performance.
The results of a study of UK companies designed to elucidate this association are reported in this paper. Although the results give some support to the proposition that orientation to multiple stakeholders is positively associated with performance, such associations are contingent on the external environment, as they are moderated by competitive hostility, after controlling for the intervening effects of market growth.
Most definitions of the concept of stakeholder include only human entities. This paper advances the argument that the non-human natural environment can be integrated into the stakeholder management concept. This argument includes the observations that the natural environment is finally becoming recognized as a vital component of the business environment, that the stakeholder concept is more than a human political/economic one, and that non-human nature currently is not adequately represented by other stakeholder groups. In addition, this paper asserts that any of several stakeholder management processes can readily include the natural environment as one or more stakeholders of organizations. Finally, the point is made that this integration would provide a more holistic, value-oriented, focused and strategic approach to stakeholder management, potentially benefitting both nature and organizations.
Carroll (1991) encouraged researchers in Social Issues Management (SIM) to continue to measure Corporate Social Performance (CSP) from a variety of different perspectives utilizing a variety of different measures. In addition, Wolfe and Aupperle (1991) (and others) have asserted that there is no, single best way to measure CSP and that multiple measures and perspectives help develop the field. However, Pfeffer (1993) suggest that a lack of consistent measurement has constrained organization studies (and by implication, the field of social issues management,) in its development as a field. It may be in the best interest of social issues management researchers to try to development a common body of measures and data. Recently, Kinder, Lydenberg and Domini & Co. (KLD — a social choice investment advisory firm) has made available their social performance database. The KLD data have potential to become a widely accepted set of CSP measures. The purpose of this paper is to present a construct validity study comparing the KLD data to other measures of CSP.
A frequent problem for companies is attempting to address the diverse interests of their stakeholder groups. Both the scarcity of resources and capabilities, and the increasing complexity engendered by networks of strategic alliances exacerbate this difficulty. However, there is no empirical evidence about the relative attention that companies give to these diverse needs. Here we report empirical evidence from a sample of U.K. companies, based on five stakeholder groups: consumers, competitors, employees, shareholders, and unions. Associations were identified between orientations to the groups, with consumer orientation being a predictor of competitor and employee orientation. Although consumer orientation emerged as the most important group, this may be partly due to perceptions of such causal effects. However, consumer orientation does not seem to be associated with measures of the market environment, such as market growth rate. The results elucidate the relative attention that companies give to their stakeholders in addressing their diverse interests.
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable overtime this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage—value, rareness, imitability, and substitutability—are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.ABSTRACT FROM AUTHOR
Causal ambiguity inherent in the creation of productive processes is modeled by attaching an irreducible ex ante uncertainty to the level of firm efficiency that is achieved by sequential entrants. Without recourse to scale economies or market power, the model generates equilibria in which there are stable interfirm differences in profitability, an above-normal industry rate of return, and a lack of entry even when firms are atomistic price-takers. The free-entry equilibrium for rational noncollusive firms is characterized for atomistic firms and for firms of fixed size, and some analytic results are obtained for the more realistic case in which firms have an arbitrary cost function. Numerical results for the associations implied between concentration, industry profitability, fixed entry costs, and the dispersion of firm profitabilities are obtained for selected cases.
The rate of return on invested capital is a widely used concept in both regulated and unregulated sectors of the economy. It provides a measure of actual performance as well as required or expected performance (the latter is often termed the "cost of capital"). In the utility field, regulatory agencies often focus on the rate of return as a major instrument for assessing and controlling the performance of firms under their jurisdictions. Unfortunately, two altogether distinct units are employed for measuring rate of return: (1) book rate units and (2) discounted cash flow units. Rarely will the two produce the same result, and the use of one measure as a surrogate for the other may prove highly misleading. This paper indicates the relationship between the two measures and shows the impact of some variations in depreciation and expensing procedures, growth rate, etc. The object is to point out the potential hazards associated with the use of measures of different things in a context that requires the use of measures of the same thing.
- Donaldson
- Clarkson
- Mudambi