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Corporate responsibility practices and financial performance in Europe: a multilevel-pressures theory perspective

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This multilevel study investigated the effect of national institutional environments on the relationship between corporate responsibility practices and financial performance in multiple European countries, controlling for firmlevel predictors. By doing so, we demonstrate that neither institutional theory nor stakeholder theory is adequate to investigate results in a multilevel study, which is becoming the norm of the 21st century businessworld. As such, we develop the multilevel-pressures theory designed to handle the demands of multilevel analyses. It synthesises the essences of these two theories and expands upon them. To test our multilevel hypotheses, we conducted a survey of 2622 firms from 18 European countries representing different institutional contexts in terms of societal governance, European Union integration, and economic conditions. Hierarchical linear modelling results indicated that, consistent with multilevel-pressures theory, national institutional contexts exert multilevel moderating effects on the relationships between investor, local community and environmental corporate responsibility practices and firms’ financial performance.
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E
uropean J. International Management, Vol. X, No. Y, XXXX
Copyright © 200X Inderscience Enterprises Ltd.
Corporate responsibility practices and financial
performance in Europe: a multilevel-pressures
theory perspective
Olivier Furrer*
University of Fribourg,
Fribourg, Switzerland
Email: olivier.furrer@unifr.ch
*Corresponding author
David A. Ralston
University Fellows International Research Consortium,
Washington, D.C., USA
Email: dralston@ou.edu
Carolyn P. Egri
Simon Fraser University,
Vancouver, Canada
Email: egri@sfu.ca
Wade Danis
University of Victoria,
Victoria, Canada,
Email: wdanis@uvic.ca
Knud Sinding
University of Southern Denmark,
Copenhagen, Denmark
Email: ksi@sam.sdu.dk
Jean-Pascal Gond
City, University of London,
London, UK
Email: jean-pascal.gond.1@city.ac.uk
O. Furrer et al.
Nicola Berg
University of Hamburg,
Hamburg, Germany
Email: nicola.berg@uni-hamburg.de
Mario Molteni
Catholic University of Sacred Heart,
Milan, Italy
Email: mario.molteni@unicatt.it
Tomasz Ochinowski
Warsaw University,
Warsaw, Poland
Email: ochinto@mail.wz.uw.edu.pl
Francisco B. Castro
Universidade do Porto,
Porto, Portugal
Email: fcastro@fep.up.pt
Irina Naoumova
University of Hartford,
Hartford, Connecticut, USA
Email: naoumova@hartford.edu
Amandine Furrer-Perrinjaquet
Freelance Market Researcher,
Fribourg, Switzerland
Email: amandine.furrer@gmail.com
Tevfik Dalgic
University of Texas at Dallas,
Dallas, USA
Email: tdalgic@utdallas.edu
Ruth Alas
Deceased; formerly of: Estonian Business School
Corporate responsibility practices and financial performance in Europe
Marjo Siltaoja
University of Jyväskylä,
Jyväskylä, Finland
Email: marjo.siltaoja@jyu.fi
Marina Dabic
University of Zagreb,
Zagreb, Croatia
and
Nottingham Trent University,
Nottingham, UK
Email: mdabic@efzg.hr
Abstract: This multilevel study investigated the effect of national institutional
environments on the relationship between corporate responsibility practices
and financial performance in multiple European countries, controlling for firm-
level predictors. By doing so, we demonstrate that neither institutional theory
nor stakeholder theory is adequate to investigate results in a multilevel study,
which is becoming the norm of the 21st century businessworld. As such, we
develop the multilevel-pressures theory designed to handle the demands of
multilevel analyses. It synthesises the essences of these two theories and
expands upon them. To test our multilevel hypotheses, we conducted a survey
of 2622 firms from 18 European countries representing different institutional
contexts in terms of societal governance, European Union integration, and
economic conditions. Hierarchical linear modelling results indicated that,
consistent with multilevel-pressures theory, national institutional contexts exert
multilevel moderating effects on the relationships between investor, local
community and environmental corporate responsibility practices and firms’
financial performance.
Keywords: corporate responsibility; Europe, financial performance;
institutional theory; multilevel-pressures theory; stakeholder theory.
Reference to this paper should be made as follows: Furrer, O. Ralston, D.A.,
Egri, C.P., Danis, W., Sinding, K., Gond, J.-P., Berg, N., Molteni, M.,
Ochinowski, T., Castro, F.B., Naoumova, I., Furrer-Perrinjaquet, A., Dalgic,
T., Alas, R., Siltaoja, M. and Dabić, M. (xxxx) ‘Corporate responsibility
practices and financial performance in Europe: a multilevel-pressures
theory perspective’, European J. International Management, Vol. X, No. Y,
pp.xxx–xxx.
Biographical notes: Olivier Furrer (PhD from the University of Neuchâtel,
Switzerland) is Chaired Professor of Marketing at the University of Fribourg in
Switzerland. Previously, he held positions at the Radboud University Nijmegen
(The Netherlands), the University of Birmingham (UK), and the University of
Illinois at Urbana-Champaign (USA). His main research interests are in the
areas of cross-cultural and services marketing. He has published research
articles in such journals as Journal of International Business Studies, Journal
of Service Research, Management International Review, Journal of
International Management, and Journal of Business Ethics, among others.
David A. Ralston is Managing Director of the University Fellow International
Research Consortium (UFIRC). In 1969, he began his career with IBM. In
O. Furrer et al.
1981, he joined the University of Connecticut faculty. In 1999, he accepted the
Michael Price Chair in International Business at the University of Oklahoma.
He is the founder of the UFIRC research group. He served as guest editor for
Journal of International Business Studies, Academy of Management Review
and Journal of International Management. In 2007, he received the Academy
of International Business Decade Award. He has published over 70 articles.
He is a Fellow of the AIB.
Carolyn P. Egri is the William J.A. Rowe EMBA Alumni Professor and the
Associate Dean of Research and International in the Beedie School of Business
at Simon Fraser University, Canada. She received her PhD from the University
of British Columbia. Her research interests focus on corporate social and
environmental responsibility, and international management. Her work has
been published in leading journals such as the Academy of Management
Journal, Journal of International Business Studies, Strategic Management
Journal, Journal of World Business, and Journal of Business Ethics.
Wade Danis is an Associate Professor of Strategy and International Business at
the Peter B. Gustavson School of Business, University of Victoria, Canada. His
research centres on global strategic management, international comparative
management, and entrepreneurship, particularly in the context of emerging
economies.
Knud Sinding is Associate Professor of Business Economics at Department of
Sociology, Environment and Business Economics at University of Southern
Denmark. He received his PhD from the University of British Columbia. His
research interests focus on corporate responsibility, business strategy and
management of natural resources. His work has been published in journals such
as Resources Policy, Business Strategy and the Environment and Journal of
Cleaner Production. He is also the co-author, with Waldstrøm, Kreitner &
Kinecki, of Organisational Behaviour (McGraw-Hill).
Jean-Pascal Gond is a professor of corporate social responsibility (CSR) at The
Business School (formerly known as Cass) of City, University of London,
where he heads ETHOS – The Centre for Responsible Enterprise. His research
mobilises organisation theory, sociology, and psychology to investigate CSR
and sustainable finance. He has extensively published in the fields of corporate
responsibility, organisational behaviour, and organisation theory in leading
academic journals such as Academy of Management Review, Business Ethics
Quarterly, Business and Society, Human Relations, Journal of Management,
Journal of Management Studies, Organization Science, and Organization
Studies.
Nicola Berg holds the Chair of the Department of Strategic Management at the
University of Hamburg (Germany). She has a post-doctoral degree
(“Habilitation”) and a doctoral degree from the Technical University of
Dortmund (Germany). Her research interests include international
management, intercultural management, human resource management, and
public affairs management. She has published several articles in journals such
as International Business Review, Journal of Business Ethics, Management
International Review, Business Strategy and the Environment, Journal of East
European Management Studies, among others. He has made several research
trips to China, France, India, Russia, the USA, etc.
Mario Molteni is Full Professor of Corporate Strategy at the Catholic
University of the Sacred Heart (Milan, Italy). At Cattolica University he
founded ALTIS, the graduate school for sustainable businesses. He also
launched the CSR Manager Network, the Italian association of professionals in
Corporate responsibility practices and financial performance in Europe
sustainability in companies and consulting firms. He is CEO of E4Impact
Foundation, a University spin-off for fostering impact entrepreneurship in
Africa, that currently operates in 18 countries. For this initiative, in 2015 was
named Senior Ashoka Fellow. He is author of more the 150 books and articles
on Sustainability, Corporate strategy, Social and Corporate Entrepreneurship.
Tomasz Ochinowski, PhD in psychology, is Associate Professor in
Management, and former EC expert in local development. He was Visiting
Professor in Slovakia and in Taiwan. Head of Academic Subunit for
Organisational Sociology and Business History (Faculty of Management,
University of Warsaw, Poland) which was organised by him, as a first
academic centre devoted to business history in Central and East European
countries. Organiser and leading person of Warsaw Group for Organisational
Historiography, an independent international think tank associated with Polish
Branch of Humanistic Management Network. Public Administration Adviser in
Poland, currently HR and Compliance Partner in Institute of National
Remembrance.
Francisco B. Castro is on the faculty of CEMPRE at the Universidade do Porto.
Irina Naoumova’s research interests are focused on various aspects of
international business, firm performance, and good governance. She is an
author of multiple chapters in research monographs, and one solo scholarly
book. She published in Journal of International Business Studies, Journal of
World Business, Corporate Governance: International Review, Management
International Review, Asia Pacific Journal of Management, Thunderbird
International Business Review, and other journals. She serves in editorial
boards of several journals and reviews for top tier journals and research
foundations.
Amandine Furrer-Perrinjaquet is a freelance marketing consultant, working
mainly in pharma and in cosmetics, and helping small structures with their
social media. After having completed her PhD at the University of Lausanne
(Switzerland), she worked as a market researcher in the pharma and the food
areas. Her research interests include international management, cross-cultural
marketing, and human values. She has published several articles in journals
such as Journal of International Business Studies, Management International
Review, International Journal of Cross-Cultural Management, and Journal of
Research In Personality.
Tevfik Dalgic is at the Department of Organization, Strategy, and International
Management at the Naveen Jindal School of Management at the University of
Texas at Dallas (UTD) since 2000. His research interests focus on international
marketing, management, and information systems. He worked as consultant on
several projects in Nepal. Thailand, the Philippines, Saudi Arabia for the
United Nations Organization GATT/UNCTAD, presently World Trade
Organization. He worked at Trinity College Dublin and Technological
University of Dublin-Previously DIT, Henley Management College and the
University of Sheffield. His works have been published in JIBS, Journal of
International Marketing, Journal of World Business, Thunderbird Journal of
Business, Journal of Business Ethics, International Marketing Review,
European Management Review, International Business Review, Strategic
Management Review. He is the author, co-Author of several books in the field
of marketing. He served as the Editor-in-Chief of Strategic Management
Review and Journal of Marketing and Strategic Management. He is on the
editorial boards of several journals.
O. Furrer et al.
Ruth Alas held the positions of Vice-Rector for Scientific Affairs and Head of
The Department of Management at Estonian Business School (EBS). Prior to
joining EBS, she worked as a consultant. Her research involved change and
crisis management, focusing on employee attitudes, learning abilities,
organisational culture, innovation climate, leadership, values, ethics, and
corporate social responsibility.
Marjo Siltaojais an associate professor of management and leadership at
Jyväskylä University School of Business and Economics (JSBE). She has been
studying a range of phenomena under the umbrella of sustainability and
responsibility, such as how ‘sustainability markets’ are shaped by power
struggles, differences in organisational pathways to corporate responsibility,
how controversial organisational practices are legitimated and the moral order
in stakeholder relations. Her work has been published, among others,
inAcademy of Management Learning and Education, Journal of Business
Ethics, Organization, Organizations Studies, and Organization Theory.
Marina Dabić is Full Professor at University of Zagreb, Faculty of Economics
and Business, Croatia, and Nottingham Trent University, UK. Her papers
appear in a wide variety of journals, including the Journal of International
Business Studies, Journal of World Business, Journal of Business Research,
Technological Forecasting and Social Change, Small Business Economics,
International Business Review, International Journal of Human Resource
Management, Journal of Business Ethics, IEEE-TEM, International Marketing
Review, among many others. She is an Associate Editor of the Technological
Forecasting and Social Change and Technology in Society and Department
Editor for IEEE Transactions on Engineering Management.
This paper is a revised and expanded version of a paper entitled ‘Corporate
Social and Environmental Responsibility Practices and Performance in
Europe’ presented at the ‘2011 Academy of Management Annual Meeting’,
San Antonio, Texas, USA, 12–16 August 2011.
1 Introduction
In response to pressures from national and international institutions and various
stakeholder groups, firms increasingly integrate corporate social and environmental
responsibility into their corporate strategies (Waddock et al., 2002; Zheng et al., 2015)
and report publicly on their social and environmental performance (Junior et al., 2014;
Khan et al., 2020). Such Corporate Responsibility (CR) practices are clearly oriented and
communicated to reflect firms’ responsibility for wider societal and/or ecological good
(Matten and Moon, 2008). And, in the 21st century businessworld, ‘wider’ means global,
as business has truly become global and pressures on a firm may come from entities
anywhere in the global businessworld. Thus, as firms must realise that they may be
influenced by entities anywhere in the global economy, academic theories must likewise
be globally oriented to address this expanded environment of the firm.
Academic theories about the nature of CR practices and their stakeholder focus also
have proliferated (Brown and Forster, 2013; Kawai et al., 2018; Zhao et al., 2018), along
with substantial empirical research on the relationship between CR practices and firm
financial performance (Flammer, 2015; Margolis et al., 2009; Orlitzky et al., 2003; Wang
et al., 2016). Even so, significant questions remain regarding how the salience of
Corporate responsibility practices and financial performance in Europe
particular stakeholder groups affects the CR practices of a firm as well as the financial
performance consequences of implementing these practices. In particular, do firms from
countries with different macro-level (e.g., institutional) environments implement the
same CR practices? If so, do these practices have the same effects on firms’ financial
performance across countries? If not, are firms in different countries rewarded by
different meso-level factors (e.g., stakeholder groups) for implementing the CR practices
expected by these groups?
Both institutional and stakeholder theories have been used to study CR. However,
while relevant for the study of CR, each theory has demonstrated serious limitations in
being able to fully answer these questions. While scholars have suggested that
institutional and stakeholder theories could be fruitfully combined to better understand
cross-national variations in firms’ CR practices (e.g., Berg et al., 2018; Shnayder and
Van Rijnsoever, 2018; Siltaoja et al., 2020) and their financial performance implications
(e.g., Gallego-Álvarez and Ortas, 2017; Lee, 2011), it remains unclear as to how
institutional and stakeholder pressures interact in influencing firms’ CR practices and
their financial performance consequences.
We seek to address this gap in the literature by investigating the following three
questions: (1) Do national institutions influence firms’ implementation of CR practices?
(2) Does the implementation of specific CR practices influence firms’ financial
performance? And if so, (3) do national institutions moderate the relationships between
CR practices and firms’ financial performance? To answer these questions, we develop
the multilevel-pressures theory perspective. Multilevel-pressures theory acknowledges
that, in the global context, there are influences or pressures on the organisation to act or
not act that emanate simultaneously from both the macro level (e.g., national institutions)
and from the meso-level (e.g., firm-specific stakeholder groups). Consequently, to be
able to understand and appropriately analyse the impact of these macro- and meso-
influences/pressures on the firm, these pressures must be integrated and studied
concurrently. Studying pressures at one level without taking into account pressures at the
other level is likely to lead to biased results and to be of limited value. Thus, the
multilevel-pressures theory logic helps overcome two vexing limitations of previous
empirical studies on the relationship between CR and firm financial performance. First,
which of macro-level national institutions and meso-level stakeholder groups influences
most firms’ implementation of CR practices. Second, how the interplay between
macro- and meso-level pressures affects the financial performance consequences of
implementing CR practices.
To answer our research questions, we conducted a survey of top executives in 2622
firms from 18 European countries that represent different institutional contexts in terms
of societal governance, integration with the European Union (EU), and economic
environment. Given the paucity of large-scale, cross-country empirical CR research to
date (Aguinis and Glavas, 2012; Egri and Ralston, 2008; Holtbrügge and Dögl, 2012),
our study helps clarify country differences with regard to the antecedents and outcomes
of CR practices. Furthermore, because firms are nested in national institutional
environments, we used hierarchical linear modelling (Hox, 2010; Raudenbush and Bryk,
2002) to test hypotheses and simultaneously estimate relationships at firm and country
levels. As such, we respond to calls for more multilevel studies of the antecedents and
consequences of management practices in general (Hitt et al., 2007; Terpstra-Tong et al.,
2020; Treviño et al., 2020) and CR practices in particular (Aguinis and Glavas, 2012;
Hartman and Uhlenbruck, 2015; Oh et al., 2019).
O. Furrer et al.
In the remainder of this article, we begin by defining CR practices and review
literature on the relationship between CR and firm financial performance. Next, we
develop a theoretical foundation utilising arguments based upon the tenants of multilevel-
pressures theory and propose a set of hypotheses about the institutional antecedents and
financial outcome of CR practices, as well as about the cross-level moderating effects of
institutional factors on the relationship between CR practices and firm financial
performance. After reporting the study methodology and results, we conclude with a
discussion of study results, managerial implications, limitations and directions for further
research.
2 Corporate responsibility practices
The European Commission (2011a, p.6) specifies that CR means that firms should
‘integrate social, environmental, ethical, human rights and consumer concerns into their
business operations and core strategy in close collaboration with their stakeholders.’
Freeman (1984, p.46) defines stakeholders as ‘any group or individual who can affect or
is affected by the achievement of the organisation’s objectives.’ However, there is a long-
standing theoretical debate in the management literature concerning the nature of
corporate responsibility (e.g., Maignan and Ferrell, 2004; Rowley and Berman, 2000).
Some view corporate responsibility as an overall social obligation, according to which
firms are responsible to society as a whole (e.g., Carroll, 1979). Others advocate a
stakeholder view proposing that although businesses in general are responsible toward
society, an individual firm can only be responsible to its stakeholders (Donaldson and
Preston, 1995; Freeman, 1984). Clarkson (1995) argued that a societal level of analysis is
insufficient and abstract, because no individual firm can be held responsible for society at
large. Accordingly, we parsimoniously define CR as the responsibility of enterprises to
their stakeholders for their impacts on society.
Despite recognition of the multidimensional nature of CR, most empirical studies
have either used composite measures of CR to assess its relationship with financial
performance (e.g., González-Ramos et al., 2018; Surroca et al., 2010; Wood and Jones,
1995) or measures focused on single dimensions such as corporate philanthropy (e.g.,
Brammer and Millington, 2008; Lev et al., 2010) or environmental performance (e.g.,
Hartman and Uhlenbruck, 2015). As identified by Griffin and Mahon (1997), relying on
a single dimension may not reflect the full breadth of the CR construct. Further, this
approach creates generalisability and comparison issues because aggregating multiple
dimensions into a composite CR measure likely masks the meaning and richness of the
data (Rowley and Berman, 2000).
Fundamentally, various CR practices may be differently motivated and have different
implications for firm financial performance (Brammer and Millington, 2008;
Hillman and Keim, 2001). Each practice may also reflect different stakeholder groups’
expectations and preferences, with a separately identifiable impact on firm financial
performance (Brammer and Pavelin, 2006; Wood and Jones, 1995). Supporting these
arguments, Orlitzky et al.’s (2003) meta-analysis found a weaker relationship for
corporate environmental responsibility activities with firm financial performance than for
other dimensions of CR and Jayachandran et al. (2013) found that product social
performance has a stronger positive impact on firm financial performance compared to
environmental social performance. Hence, we propose that a disaggregated examination
Corporate responsibility practices and financial performance in Europe
of individual components of CR is needed to understand the relationships of various CR
practices and firm financial performance.
3 Theoretical framework
Before proposing hypotheses, we first discuss how the multilevel-pressures theory
perspective addresses both macro- and meso-pressures on the firm.
3.1 Macro-pressures: the role national institutions
Institutional theory has been applied previously to analyse CR issues (Aggarwal and Jha,
2019; Berg et al., 2018; Demirbag et al., 2017; Furrer et al., 2010; Hartman and
Uhlenbruck, 2015; Siltaoja et al., 2020) because it emphasises the relevance at the
macro-level of social and political environmental pressures on firm behaviour and
outcomes (Aguinis and Glavas, 2012; Ioannou and Serafeim, 2012). CR studies grounded
in institutional theory (e.g., Aggarwal and Jha, 2019; Campbell, 2007; Kawai et al.,
2018) propose that macro-level institutional pressures influence firms to implement CR
practices to gain or increase their legitimacy (Scott, 2008; Siltaoja et al., 2020). For
example, Sine and Lee (2009) described how large-scale social movements influenced
the creation of new market opportunities which led to the emergence of the US wind
energy sector; and Delmas and Montes-Sancho (2011) explained how national
institutional factors affect the adoption of international environmental standards.
However, by focusing on the macro-level institutional mechanisms that pressured
firms to implement CR practices, these studies provide only a limited understanding of
the financial performance consequences of this implementation at the firm (meso) level
and cannot explain differences in firms’ financial performance within the same
institutional environment. While most institutional studies presume that implementing
such practices increases firms’ legitimacy, they do not assess the consequences of
legitimacy on firms’ financial performance (DiMaggio and Powell, 1983). Moreover,
with few exceptions, institutional studies focus on one type of CR practice at a time
neglecting the potential trade-offs at the meso-level that firms need to make between
alternative CR practices (Usunier et al., 2011). An exception is the study by Zheng et al.
(2015) who find that Chinese firms adopt different types of CR practices in response to
the pressure of different stakeholders. They found that firms emphasise philanthropy
when seeking legitimacy with outsider stakeholders and sustainability for insider
stakeholders. Finally, as identified by Aguinis and Glavas (2012), the institutional
literature is virtually silent about the cross-level mechanisms moderating the
relationships between CR practices and firm financial performance. Thus, for a
multilevel study with meso-variables, institutional theory is inadequate.
3.2 Meso-pressures: the role of stakeholders
In contrast, stakeholder theory (Freeman, 1984; McWilliams and Siegel, 2001) has
focused on the (meso) firm-level consequences of implementing CR practices. It explains
that, at the meso-level, stakeholder groups exert pressure upon firms to implement CR
practices related to their causes, rewarding the firms that respond to their pressures and
imposing costs for those that do not appropriately respond (Eesley and Lenox, 2006).
O. Furrer et al.
Thus, from an instrumental perspective (McWilliams and Siegel, 2001; Oh et al., 2019),
to increase legitimacy with meso-level stakeholder groups, firms implement CR practices
expected by these groups in order to improve their financial performance (Bansal and
Roth, 2000; Brown and Forster, 2013; Campbell, 2007; Siltaoja et al., 2020). For
example, firms might be pressured to implement investor CR practices to reduce their
costs of capital, local community CR practices to achieve a favourable corporate
reputation, and environmental CR practices to comply with governmental regulations or
to benefit from government incentive programs.
As firms have limited resources available (McWilliams and Siegel, 2001) and
different stakeholder groups issue conflicting claims, about which CR practices should be
implemented (Mitchell et al., 1997), firms must make trade-offs (Usunier et al., 2011).
Indeed, it is rarely possible for a firm to fully accommodate all stakeholder groups’
interests simultaneously. Environmental CR practices might involve financial support of
environmental initiatives that may be in conflict with investor CR practices designed to
provide investors with a competitive financial return. Thus, resource constraints and CR
practices incompatibilities force firms to develop priorities according to the expectations
of the most salient stakeholder groups (Eesley and Lenox, 2006; Hillman and Keim,
2001).
However, because stakeholder theory is focused on the meso-level, it is unconcerned
with explaining differences in stakeholder groups’ salience across countries. Accordingly,
most CR studies grounded in stakeholder theory neglect the macro-level institutional
environment in which firms and their stakeholders are embedded (Aguilera et al., 2007).
This is a critical issue because the perceived salience of stakeholder groups is socially
constructed and based on the perceptions of corporate decision makers who are
embedded at the macro-level in their national institutional environment (Mitchell et al.,
1997). For instance, Bansal and Roth (2000) found that Japanese managers focus their
attention on the priorities articulated by the Keidanren, the MITI, and their industry
association, which are salient stakeholder groups in Japan, and are less concerned by
customers’ and shareholders’ requirements. In contrast, they found that British managers
are more sensitive to local community concerns and the perceptions of shareholders,
which are salient stakeholder groups in the UK.
Consequently, despite insights stakeholder theory provides on managers’ motivations
to implement CR practices at the meso-level, it cannot alone account for international
variations at the macro-level in the salience of different stakeholder groups (Matten and
Moon, 2008). Thus, for a multilevel study with macro-variables, stakeholder theory is
inadequate.
4 Multilevel-pressures theory
The reality is that there are influences or ‘pressures’ emanating from both the meso- and
macro-levels and that these pressures are equally relevant in understanding the
phenomenon under investigation. Thus, we develop the multilevel-pressures theory to
simultaneously address the meso- and macro-pressures from the environment in a manner
that allows us to meet the needs of a multilevel analysis. With the multilevel-pressures
theory approach, we seek to predict cross-national variations in firms’ implementation of
CR practices and in the financial performance consequences of implementing these
practices. At the meso-level, multilevel-pressures theory contends that a firm implements
Corporate responsibility practices and financial performance in Europe
CR practices to better satisfy its more salient stakeholders (Berg et al., 2018; Campbell,
2007). At the macro-level, a firm’s national institutional environments influence the
salience of stakeholder groups (Aguilera et al., 2007; Gallego-Álvarez and Ortas, 2017;
Matten and Moon, 2008) and which CR practices are eventually implemented in a given
society (Campbell, 2007; Furrer et al., 2010). In addition, multilevel-pressures theory
proposes that the implementation of CR practices at the meso-level that address the
specific claims of a firm’s more salient stakeholder groups is likely to further improve its
financial performance (Ali et al., 2019), as more salient stakeholders have more power to
reward and punish the firm (Mitchell et al., 1997). Therefore, by legitimising at the
macro-level the power of certain stakeholder groups over others, national institutional
environments strengthen or weaken, at the meso-level, the effectiveness of CR practices
by influencing various stakeholders’ capacity to reward/punish firms. This, then explains
cross-national differences in the financial performance consequences of implementing
certain CR practices. Thus, the multilevel-pressures theory logic allows us to propose a
cross-level moderating effect of macro-level environmental factors on the relationships
among meso-level stakeholder-related CR practices and firms’ financial performance,
which has been previously overlooked in the literature (see Figure 1). As such, by
combining key tenets of institutional theory at the macro-level with key tenets of
stakeholder theory at the meso-level, multilevel-pressures theory provides a more
comprehensive explanation of firms’ implementation of CR practices and of the
performance implications than either of the two theories in isolation.
Figure 1 The multilevel-pressures theory
5 Hypothesis development
The nature of relevant stakeholders has been debated and may vary across firms and
industries (Mitchell et al., 1997). In a global economy, one might question whether
stakeholders are always meso-level entities. However, in our study, we focus on three
key meso-level stakeholder groups: investors, local communities, and the natural
environment. With investor CR practices, the firm seeks investor input on strategic
decisions, responds to investor needs and requests, and provides investors with a
competitive return on their investment (Maignan et al., 1999). Local community CR
practices demonstrate the firm’s voluntary commitment to improve the quality-of-life in
its local communities, such as giving resources to local charities or sponsoring
O. Furrer et al.
cultural/sports/educational programs (Brammer and Millington, 2008). Finally,
environmental CR practices are aimed at mitigating a firm’s impact on the natural
environment by integrating environmental sustainability into operations through
environmental performance objectives, measures, and initiatives (e.g., Buysse and
Verbeke, 2003; Graafland and Noorderhaven, 2018).
At the macro-level, we focus on European countries. In Europe, different national
institutional environments result from diverse political, legal and cultural traditions, as
well as from heterogeneous social and economic backgrounds. These different
institutional contexts have led to significant differences across European countries in
terms of implementation of CR practices (European Commission, 2011b; Furrer et al.,
2010). Consequently, these differences provide a fertile ground for testing hypotheses
emerging from multilevel-pressures theory regarding the antecedents and consequences
of implementing various CR practices.
5.1 Macro-level (institutional) pressures on CR practices
As, at the macro-level, institutional environments vary across countries, we expect the
stakeholder related, meso-level, CR practices implemented by European firms also to
vary across countries. We focus on three sets of macro-level institutions – societal
governance system, EU integration, and the economic environment – and their effects on
the implementation of CR practices.
Societal governance systems: These are regulative institutions (Martin et al., 2007)
that set rules about CR, monitor firms’ implementation of CR practices, and sanction
non-compliance (Scott, 2008). A country societal governance system is comprised of
multiple interrelated aspects relating to the institutions for the exercise of authority
(Ali et al., 2019; Kaufmann et al., 2009). Substantial differences in the effectiveness of
societal governance systems exist across European countries. Whereas some former
communist countries in Central and East Europe have rapidly developed effective
societal governance frameworks, others are lagging behind (Gillies et al., 2002;
Mickiewicz, 2009). Similarly, variability in quality of societal governance also exists
among Western market-based capitalistic economies (Kaufmann et al., 2009). There are
countries with hard regulations (e.g., Denmark and France) and others with soft
endorsing activities (e.g., the Netherlands) advanced by governments to influence firms
in their implementation of CR activities (Dentchev et al., 2017).
Firms in countries with more effective societal governance frameworks experience
greater institutional pressures to be responsible corporate citizens. Countries with more
effective legal protection of investor rights have been shown to exert greater pressures on
firms to respond to investor stakeholder demands (La Porta et al., 2000). Countries with
higher societal governance levels tend to set rules about participatory democracy and
freedom of public expression for citizens who demand that firms respond to their local
concerns (Kaufmann et al., 2009). Environmental management practices are also
expected to be more likely implemented in countries with effective regulatory systems
that can monitor and assign responsibility to firms for their environmental impacts
(Vogel, 2000). Thus, we propose:
Hypothesis 1: Societal governance effectiveness is positively related to the
implementation of investor, local community, and environmental CR practices.
Corporate responsibility practices and financial performance in Europe
European Union: The EU is a multinational institution that encourages firms to
implement CR practices (European Commission, 2011a). Through its various policies,
the EU creates pressures on firms’ behaviour across European countries. However, the
pressure is likely to be stronger in countries that are more integrated within the EU,
because legitimacy would be more important for firms in these countries.
Within the EU, corporate social responsibility emerged in the official discourse in
2000 (De Schutter, 2008). Since then, the European Commission has played an active
role in the development of CR in Europe. In 2002, the European Commission released a
communication on CR that explored ambitious policy options to increase the
transparency and convergence of CR across Europe (Matten and Moon, 2008; Steurer,
2010). In this way, the EU is exercising institutional pressure on European national
governments and firms for European-wide CR standards (Aßländer and Curbach, 2017;
European Commission, 2011b; Dentchev et al., 2017).
Two important characteristics of the EU’s CR policy affect the strength of the macro-
level pressure on firms to implement CR practices across countries. First, the voluntary
basis for implementing CR practices affects the speed of convergence across countries
(European Commission, 2011a). Although national formal regulations should be adapted
to EU standards before joining the EU or soon after accession, voluntary CR standards
may take more time to be implemented in new EU member countries, as their
internalisation is dependent on the goodwill of national governments and businesses. As
a consequence, implementation of CR standards in the EU is likely to be at different
stages depending on a country’s level of integration within the EU.
Second, the European Commission promotes a multi-stakeholder approach (Steurer,
2010). The principles and guidelines promoted by the EU recommend that CR at least
covers issues such as human rights, labour and employment practices, environmental
practices, combating bribery and corruption, local community involvement, and
consumer interests (European Commission, 2011a). As such, the EU is not prioritising
any particular stakeholder group (Eberhard-Harribey, 2006). In sum, we expect that as a
result of the EU promoting a multi-stakeholder approach for European-wide
standardisation of CR practices on a voluntary basis, firms in countries that are more
integrated in the EU are more likely to have systematically implemented CR practices.
Thus, we propose:
Hypothesis 2: In countries more closely integrated in the EU, firms have more
systematically implemented investor, local community, and environmental CR practices.
Economic environment: The economic environment is a critical element, at the macro-
level, of a country institutional environment that imposes pressures on firms by affecting
the amount of resources available to them (Ali et al., 2019; Campbell, 2007). We focus
on three aspects of national economic environments: economic wealth, economic growth,
and economic uncertainty. In respect to economic wealth, McWilliams and Siegel (2001)
suggested that the demand for CR practices is higher and the pressure on firms to meet
their stakeholders’ expectations is stronger in wealthier countries. Cross-country studies
have also shown that country wealth has a positive impact on firms’ implementation of
CR practices (Egri et al., 2004; Furrer et al., 2010). Campbell (2007) argued that firms
operating in unhealthy economic environments – where inflation is high, economic
growth is low, or consumer confidence is low – are less likely to implement CR practices
because they face strong pressures to generate short-term profits. In such unhealthy
economic environments, managers might perceive a greater necessity to make scarce
O. Furrer et al.
resource allocation trade-offs between CR activities in favour of other investments in the
firms’ business operations (Usunier et al., 2011). In contrast, positive economic growth is
associated with more healthy institutional environments (Georgas et al., 2004) where
firms have more resources to utilise for CR activities (Kemmelmeier et al., 2002).
Economic uncertainty lowers the predictability and valuation of outcomes of future
economic activities and shifts managerial focus from the uncertain future to the present
(Goel and Ram, 2013). Consequently, economic uncertainty might be negatively
associated with CR practices implementation.
Thus, in relatively economically healthy countries, firms are likely to have more
slack resources and are likely to face less economic uncertainty (Aguilera-Caracuel et al.,
2015). In contrast, firms in countries with low economic growth are likely to have fewer
resources to invest in CR (Campbell, 2007; Waddock and Graves, 1997). An unhealthy
economic environment creates uncertainties and resource scarcity that are likely to result
in pressures on firms to neglect investor, local community and environmental CR. Hence,
we propose:
Hypothesis 3: Firms in countries with relatively healthier economic conditions (high
economic wealth, high economic growth, low economic uncertainty) are more likely to
have systematically implemented investor, local community, and environmental CR
practices.
5.2 Meso-level- (stakeholder) related CR practices and financial
performance of firms
From an instrumental stakeholder perspective, at the meso-level, firms invest in CR
practices primarily to improve their financial performance (Godfrey et al., 2009;
McWilliams and Siegel, 2001; Oh et al., 2019). Firms implement CR practices
expected by salient stakeholder groups, as these groups can reward them for such an
implementation or punish them when they do not (Brammer and Millington, 2008;
Hillman and Keim, 2001). Different stakeholders expect and reward firms for the
implementation of different CR practices. For example, regarding investors, higher levels
of voluntary disclosures are associated with reduced cost of equity capital (Poshakwale
and Courtis, 2005), and enhanced shareholder engagement is associated with better
access to finance (Cheng et al., 2014). Other meso-level studies suggest that for local
community stakeholders, good community relations can help firms improve their
financial performance through tax advantages, a decreased regulatory burden, and
improvement in the quality of local labour (Waddock and Graves, 1997) and revenue
growth (Lev et al., 2010). Further relation to environment-focused stakeholders, the
adoption of environmental standards is positively related to firms’ market value (Dowell
et al., 2000), and environmental management has a positive impact on firms’ financial
performance (Dixon-Fowler et al., 2013). Thus, we propose that, at the meso-level, each
type of CR practice has, when supported by a stakeholder group, a positive but separate
effect on firms’ financial performance.
Hypothesis 4: The implementation of investor, local community, and environmental CR
practices are positively related to financial performance.
Corporate responsibility practices and financial performance in Europe
5.3 Moderating effects of macro-level (institutional) environment on financial
performance of firms
As different stakeholder groups, at the meso-level, might have conflicting claims about
which CR practices should be implemented (Mitchell et al., 1997) and firms have limited
resources (McWilliams and Siegel, 2001), it is rarely possible for firms to accommodate
all interests. Thus, although CR practices have the potential to be profitable the strategic
value of these practices is likely to be affected by the salience of stakeholder groups
(Brammer and Millington, 2008; Brammer and Pavlin, 2006).
The salience of stakeholder groups varies across countries as a result of different
macro-level institutional pressures (Jackson and Apostolakou, 2010; Wang et al., 2016).
Therefore, our multilevel-pressures theory proposes that the strength of the relationships
between CR practices and their financial outcomes at the meso-level depends on the
moderating effect of macro-level institutional pressures. Firms that implement CR
practices which correspond to the expectations of the most salient stakeholder groups in
their institutional environment are more likely to achieve better financial outcomes, as
these groups have the ability to reward or punish them.
Different elements of national institutions influence stakeholder groups’ salience
(Campbell, 2007; Wang et al., 2016). Societal governance affects stakeholder action by
providing access to information about firm’s CR practices and insuring higher level of
transparency. The EU affects stakeholders’ salience and action by setting a CR agenda
and providing clear criteria facilitating the evaluation of firm’s CR practices. The
economic environment affects stakeholder actions by setting their expectations about
firm’s CR practices.
Societal governance. To reward firms for their CR practices, stakeholder groups need
to have information regarding the firms’ practices (Wang and Qian, 2011). Macro-level
institutional environments with more effective societal governance systems encourage a
higher level of transparency about firm’s CR practices (Wang et al., 2016). By providing
stakeholder groups with more transparent information about meso-level firms’ investor,
local community, and environmental CR practices, an effective societal governance
system provides more salience to these stakeholder groups and more power to reward
firms for their behaviour. Hence, the relationship between CR and financial performance
is likely to be stronger in institutional environments with more effective societal
governance systems in contrast to less effective societal governance systems in which
stakeholder groups do not have accurate information about firms’ CR practices, and
therefore cannot take efficient action (Xie et al., 2017). Thus, we propose a cross-level
moderating effect hypothesis:
Hypothesis 5: The positive relationships between financial performance and CR
practices (investor, local community, environmental) are stronger in countries with more
effective societal governance than in countries with less effective societal governance.
European Union: By setting CR priorities at the macro-level, the EU provides legitimacy
and salience to stakeholder groups concerned by these priorities and also establishes
criteria to guide these groups’ evaluation and reaction to firms’ CR practices at the meso-
level. The multi-stakeholder approach promoted by the European Commission (2011a)
provides legitimacy and salience to stakeholder groups to reward firms for their CR
practices. Moreover, these standards and targets also represent criteria against which
stakeholder can evaluate firms’ behaviours. Stakeholder groups in countries that are more
O. Furrer et al.
integrated within the EU have more legitimacy and power to reward/punish firms for
implementing investor, local community, and environment practices than stakeholder
groups in countries less integrated with the EU. Therefore, we propose the following
cross-level moderating hypothesis:
Hypothesis 6: The positive relationships between financial performance and CR
practices (investor, local community, environmental) are stronger in countries that are
more integrated in the EU than in countries that are less integrated.
Economic environment: In countries characterised at the macro-level by healthier
economic conditions (higher economic wealth, higher economic growth, lower economic
uncertainty), firms are less focused on short-term profit and might have spare resources
to spend on CR activities (Waddock and Graves, 1997). Thus, in a healthier economic
environment, stakeholders expect firms at the meso-level to implement CR activities and
will punish the firms that do not implement those activities (McWilliams and Siegel,
2001). Further, in healthier economic environments, firms may be more concerned with
preserving their reputation to maintain continued business success (Aggarwal and Jha,
2019; Campbell, 2007). In contrast, in unhealthier economic environments, stakeholders
are more tolerant of firms focusing on short-term profitability at the expense of their CR
because their economic survival might be at stake (Wang and Qian, 2011). Therefore, we
propose the following cross-level moderating hypothesis:
Hypothesis 7: The positive relationships between financial performance and CR
practices (investor, local community, environmental) are stronger in countries with
relatively healthier economic conditions.
6 Method
6.1 Sample
2622 firms in 18 countries participated in a survey administered over three iterations:
2002–2003 (France, Spain, UK); 2006–2009 (Czech Republic, Denmark, Estonia,
Germany, Hungary, Italy, the Netherlands, Poland, Portugal, Russia, Switzerland,
Turkey); and 2011–2014 (Croatia, Finland, Latvia). Our motivation for selecting these
countries was to obtain diversity in terms of institutional environments. The study sample
was identified from the Dun & Bradstreet Global Million Dollar database and
comparable national-level company databases. The sampling frame comprised of a cross-
section of firms with 50 or more employees, with surveys sent to a random sample of
1000 firms in the first survey iteration and 1500 firms in later survey iterations in a
country. Surveys, with cover letter and self-addressed return envelope, were addressed to
the most senior corporate executive (e.g., CEO, president). To increase response rates
while preserving anonymity, respondents interested in receiving a summary of the study
results could send their business cards in a separate envelope. A reminder mailing was
sent to firms two to four weeks after the first mailing.
The country sample sizes are: 123 Croatia, 173 Czech Republic, 201 Denmark, 106
Estonia, 182 Finland, 102 France, 138 Germany, 117 Hungary, 77 Italy, 87 Latvia, 180
the Netherlands, 107 Poland, 197 Portugal, 166 Russia, 137 Spain, 244 Switzerland, 124
Turkey, and 164 UK. After accounting for undeliverable surveys, the response rates
(average 12%, range 7–18%) are consistent with those for other surveys of senior
Corporate responsibility practices and financial performance in Europe
executives (Cycyota and Harrison, 2006). Regarding potential sample response bias,
there is no significant differences between early and later respondents. Comparisons
between the country respondent samples and the mailing samples showed that on average
across countries, the respondent sample is larger and has a similar proportion of
manufacturing firms but a higher proportion of resource-based and lower proportion of
service sector firms. Hence, we controlled for firm size and industry sectors in analyses.
6.2 Survey questionnaire development
The survey questionnaire was initially developed in English and standard translation-
back-translation procedures were followed to create the native-language questionnaires
(Brislin, 1986). Survey questionnaires were also pretested with 15–30 managers in each
country.
Corporate responsibility practices. Five investor CR and six local community CR
practices items were adapted from previous instruments (e.g., Aupperle et al., 1985;
Clarkson, 1995; Maignan et al., 1999). Five environmental CR practices items were
adapted from measures of proactive corporate environmental practices (e.g., Branzei and
Vertinsky, 2002; Egri and Hornal, 2002). Respondents indicated the extent to which
their firm has systematically adopted each CR practice, using a 9-point Likert scale
(1 = strongly disagree, 9 = strongly agree). The complete list of items is presented in
Appendix I.
Financial performance: To measure financial performance, we used four items
developed by Samiee and Roth (1992) related to the extent a firm’s return on assets,
return on investment, profit growth, and sales growth were substantially greater than
those of their most relevant competitors during the past three years (see Appendix I).
Responses were on the same 9-point Likert scale.
Country-level variables: To assess the effect of institutional factors, we constructed
indicators to measure country levels of societal governance, EU integration, and
economic conditions. Our measure of societal governance was based on the World
Bank’s Worldwide Governance Indicators (www.worldbank.org/wbi/governance). We
used the factor score of the four governance dimensions of voice and accountability,
regulatory quality, rule of law, and control of corruption (Cronbach’s α = 0.96) for the
year in which we collected each country’s data. Level of EU integration of a country was
measured by the proportion of total trade (goods and services) with EU27 countries
(United Nations Conference on Trade and Development; http://unctadstat.unctad.org). To
address potential endogeneity and individual year variation issues, the proportion of
EU27 trade variable was the average of the three years previous to a country’s data
collection.
Economic conditions measures were derived from the World Bank’s World
Development Indicators Database (http://data.worldbank.org/data-catalog/world-
development-indicators). Economic growth was measured as the annual percentage
growth rate of GDP per capita for the three years prior to a country’s data collection.
Goel and Ram (2013), economic uncertainty was the 3-year standard deviation of
inflation (annual percentage growth rate of the GDP deflator) for the three years prior to
a country’s data collection. Economic wealth was measured as the GDP per capita at
purchasing power parity for the year of a country’s data collection. The logarithm of the
economic uncertainty and economic wealth measures were used in analyses.
Covariates: We controlled for factors that might influence CR practices and business
outcomes or provide alternative explanations for our hypotheses. At the firm (meso)
O. Furrer et al.
level, we controlled for firms’ multinational status, ownership form, size, and industry.
Compared to purely national firms, multinational corporations operate in multiple
institutional environments which may influence their CR practices and financial
performance (Aguilera et al., 2007; Aguilera-Caracuel et al., 2015). In that publicly
traded companies are more visible and accountable to more varied constituencies, they
may have a stronger incentive to take actions to ensure their legitimacy than privately
held firms (e.g., Wang and Qian, 2011). Similarly, larger firms tend to receive greater
scrutiny from various stakeholders (Godfrey et al., 2009) and encourage them to develop
more CR practices (Jackson and Apostolakou, 2010). Larger firms also have more
discretionary resources to allocate to CR practices (Bowen, 2007; Surroca et al., 2010).
Thus, we controlled for firm size using the number of employees. This also provided
comparability across countries and addressed limitations associated with privately held
firms that rarely report revenues, sales, or income data. The nature of CR issues and
practices may vary systematically across industry sectors (e.g., Surroca et al., 2010).
Those industries that involve either the exploitation of natural resources or heavy
manufacturing can harm entire local communities or destabilise local ecosystems
(Rowley and Berman, 2000). Hence, we included two dummy variables for industry,
manufacturing and resource-based (agriculture, forestry, mining, oil and gas) with
services as the reference category.
6.3 Analyses
Prior to testing our hypotheses, we ran a series of test to verify that these data were
appropriate for this analysis. These tests can be found in Appendix II. Given that our
dependent and control variables were measured at the individual firm level, and that
several of the independent and moderating variables (macro-level institutions) were
measured at the country level, our hypothesis testing necessitated hierarchical or cross-
level techniques (Parboteeah et al., 2008; Peterson et al., 2012). Conventional single-
level regression techniques are inadequate to test nested hierarchical data and can result
in aggregation bias, misestimated precision and levels of analysis problems (Raudenbush
and Bryk, 2002). Thus, to test our hypotheses, we used Hierarchical Linear Modelling
(HLM) intercepts – and slopes-as-outcomes procedures (Raudenbush and Bryk, 2002).
HLM is an appropriate regression-based analytic approach for hierarchical data structures
(firms nested within countries) as well as for simultaneously investigating relationships
within and across hierarchical levels (e.g., Hofmann, 1997). HLM is superior to single-
level regression models and able to provide more accurate estimates, as the latter ignores
the nested structure of the data and wrongly assumes independence of the observations
and randomness of errors (Parboteeah et al., 2008; Terpstra-Tong et al., 2020). Moreover,
HLM allows avoiding misestimation problems derived from sampling fluctuations and a
small number of observations through higher levels of analysis (Duncan and Jones,
2000). Thus, with HLM, the unbalanced nature of the data set will not produce biased
estimates and standard errors, which enhances the results’ robustness (Ortas et al., 2020).
The intraclass correlation coefficients for the null models (three CR practices and
financial performance) indicated sufficient between-group variance to proceed with HLM
analyses (all
2 significant at p < 0.001) (Hox, 2010). Therefore, following Raudenbush
and Bryk (2002), intercepts-as-outcomes HLM models were conducted to test
Hypotheses 1 to 3 and slopes-as-outcomes HLM models were conducted to test
Hypotheses 4 to 7. Additional intercepts – and slopes-as-outcomes HLM models for each
societal-level predictor produced results similar to the slopes-as-outcomes models.
Corporate responsibility practices and financial performance in Europe
Given country-level sample size considerations, HLM analyses were conducted
separately for two sets of country-level predictors: societal governance and EU
integration (Model 1, regulatory/normative institutions); and economic wealth, economic
growth, and economic uncertainty (Model 2, economic environment). This procedure
was recommended by Raudenbush and Bryk (2002) and was used in Parboteeah et al.’s
(2008) HLM analyses with 14 and 19 countries. Each HLM analysis included the four
firm-level covariates (group mean-centred), and societal-level variables were grand
mean-centred. Regression collinearity diagnostic tests showed that multicollinearity was
not an issue for these level-2 models (range of VIF statistics was 1.013 to 2.063). To
illustrate significant cross-level moderating results, we plotted relationships at high and
low (+/– 1 SD) levels of variables (Cohen et al., 2003). Because survey data were
collected in three waves, we conducted HLMs with year of data collection as a level-2
variable. No significant linear time effects were found (t-values from –1.27 to 1.09), so
year was not included in subsequent analyses.
7 Results
Table 1 contains the descriptive statistics for the firm-level and country-level variables.
Table 2 provides the HLM results for hypotheses regarding the influence of societal
context on the implementation of CR practices.
Table 1 Descriptive statistics: means, standard deviations, and correlations
Firm-level
variablesa Mean s.d. 1 2 3 4 5 6 7
1. Investor CR 6.70 1.08
2. Local
community CR 5.51 1.09 0.25
3. Environmental
CR 5.66 1.32 0.19 0.45
4. Financial
performance 6.14 1.13 0.21 0.13 0.13
5. Multinational 0.51 0.50 0.08 0.01 0.08 0.05
6. Publicly traded 0.21 0.41 0.07 0.05 0.12 0.12 0.24
7. Firm size 2.04 0.77 0.11 0.09 0.15 0.11 0.31 0.35
8. Industry:
manufacturing 0.42 0.49 –0.08 –0.02 0.07 0.02 0.11 0.01 0.05
9. Industry:
resource-based 0.14 0.35 0.01 0.07 0.08 –0.03 0.01 0.02 –0.02
Societal-level
variablesb Mean s.d. 1 2 3 4 5 6 7 8
1. Investor CR 6.70 0.22
2. Local
community CR 5.51 0.38 0.17
3. Environmental
CR 5.66 0.34 0.24 0.78
O. Furrer et al.
Table 1 Descriptive statistics: means, standard deviations, and correlations (continued)
Societal-level
variablesb Mean s.d. 1 2 3 4 5 6 7 8
4. Financial
performance 6.14 0.26 –0.11 –0.50 –0.21
5. Societal
governance 0.00 1.00 0.11 0.30 0.40 0.44
6. EU integration 0.67 0.09 –0.01 0.11 0.35 0.18 0.28
7. Economic
wealth (log) 10.09 0.34 0.08 0.08 0.15 0.48 0.82 0.07
8. Economic
growth 0.05 0.04 –0.24 –0.61 –0.58 0.21 –0.40 –0.15 –0.27
9. Economic
uncertainty (log) –0.02 0.44 –0.56 0.04 –0.04 –0.47 –0.46 –0.02 –0.63 0.11
Notes: a
For firm-level variables (N = 2622), country samples counterweighted to be
equal size. Correlations r > |0.05| significant at p < 0.01 level, and r > |0.07| at
p < 0.001. Categorical variables coded as follows: multinational: 1 = operating
in two or more countries, 0 = domestic-only operations; publicly traded = 1,
other = 0; firm size: 1 = less than 100 employees; 2 = 100 to 999 employees;
3 = 1000 or more employees; industry sector variables dummy coded with
services as reference group.
b
For societal-level variables (N = 18), Correlations r > |0.40| significant at
p < 0.10 level, and r > |0.47| at p < 0.05.
Table 2 Societal influences on CR practices
Investor CR Local community CR Environmental CR
Coefficient s.e. Coefficient s.e. Coefficient s.e.
Intercept γ 00 6.700*** 0.050 5.507*** 0.088 5.663*** 0.078
Multinational
corporation γ 10 0.073 0.057 –0.161** 0.046 –0.029 0.075
Publicly traded γ 20 –0.075 0.065 –0.030 0.054 0.003 0.084
Firm size γ 30 0.094** 0.029 0.135*** 0.019 0.199*** 0.035
Industry:
manufacturing γ 40 –0.124*** 0.032 0.016 0.051 0.285** 0.090
Industry: resource-
based γ 50 –0.056 0.077 0.157* 0.065 0.427*** 0.105
Model 1. Regulatory/
normative institutions
Societal governance γ 01 0.035 0.027 0.040 0.087 0.057 0.044
EU integration γ 02 0.311 0.364 0.653 0.800 1.628* 0.457
Model 2. Economic
environment
Economic wealth γ 01 0.361** 0.105 –0.138 0.241 0.067 0.142
Economic growth γ 02 –1.067 0.555 –5.641* 2.062 –4.631*** 0.801
Economic uncertainty γ 03 0.421*** 0.051 0.122 0.180 0.021 0.101
Note: *p < 0.05; **p < 0.01; ***p < 0.001.
Corporate responsibility practices and financial performance in Europe
7.1 Implementation of CR practices
Inconsistent with H1, societal governance effectiveness is not significantly related to the
implementation of investor, local community, and environmental CR (all p > 0.05,
Model 1). Consistent with H2, EU integration is positively related to environmental CR
(
02 = 1.628, p < 0.05), but inconsistent with H2, EU integration is not significantly
related to investor (
02 = 0.311, n.s.) and local community (
02 = 0.653, n.s.) CR. In sum,
these results provide no support for the influence of societal governance institutions and
partial support for the influence of EU integration on the implementation of CR practices.
Regarding the influence of economic environment on implementation of CR
practices, consistent with H3, economic wealth is positively related to investor CR
(
01 = 0.361, p < 0.01). Contrary to H3, economic growth is negatively (rather than
positively) related to local community (
02 = –5.641, p < 0.05) and environmental
(
02 = –4.631, p < 0.001) CR. Also contrary to H3, economic uncertainty is positively
(rather than negatively) related to investor CR (
03 = 0.421, p < 0.001). There are no other
significant relationships between various aspects of economic environments and CR
practices implementation. In sum, H3 is substantially not supported.
Several results for the control variables are noteworthy. MNCs are less likely to
implement local community CR (
10 = –0.161, p < 0.01), compared to domestic-only
firms. Larger firms are more likely to implement the three types of CR (investor:
30 = 0.094, p < 0.01; local community:
30 = 0.135, p < 0.001; environmental:
30 = 0.199,
p < 0.001). Regarding industry differences, compared to firms in the service sector,
manufacturing firms are less likely to implement investor CR (
40 = –0.124, p < 0.001)
and more likely to implement environmental CR (
40 = 0.285, p < 0.01), whereas firms in
resource-based industries are more likely to implement local community (
50 = 0.157,
p < 0.05) and environmental (
50 = 0.427, p < 0.001) CR.
7.2 Moderating effects on relationships between CR practices and
financial performance
Table 3 presents the HLM results testing Hypotheses 4 to 7 regarding the relationships
between CR practices and firm financial performance. In full support of H4, financial
performance is positively related to the implementation of investor (
60 = 0.224,
p < 0.001, Model 1), local community (
60 = 0.226, p < 0.001), and environmental
(
60 = 0.131, p < 0.01) CR.
We proposed that the positive relationship between CR practices and financial
performance would be positively moderated by societal governance effectiveness (H5),
EU integration (H6), and positive economic environments (H7). H5 is supported, as
societal governance has a positive moderating effect on the relationship between investor
CR and financial performance (
61 = 0.039, p < 0.05). As shown in Figure 2, the positive
relationship between investor CR and financial performance is stronger in high societal
governance contexts than in low societal governance contexts. However, societal
governance is not a significant moderator for the relationships of local community and
environmental CR with financial performance. Inconsistent with H6, EU integration does
not have a significant moderating effect on the relationships between CR practices and
financial performance.
O. Furrer et al.
Table 3 Financial performance, CR practices, and societal moderating influences
Financial performance
Investor
CR
Local community
CR
Environmental
CR
Coefficient s.e. Coefficient s.e. Coefficient s.e.
Model 1. Regulative/
normative institutions
CR practice γ60 0.224*** 0.020 0.226*** 0.050 0.131** 0.035
Societal governance
CR practice γ61 0.039* 0.017 0.015 0.041 0.005 0.027
EU integration CR
practice γ62 –0.143 0.167 0.465 0.527 0.407 0.323
Model 2. Economic
environment
CR practice γ60 0.219*** 0.023 0.229*** 0.048 0.128** 0.033
Economic wealth CR
practice γ61 0.078 0.050 –0.053 0.130 0.074 0.115
Economic growth CR
practice γ62 1.080* 0.496 2.871** 0.965 2.125** 0.600
Economic uncertainty
CR practice γ63 –0.115* 0.052 –0.371** 0.108 –0.142 0.086
Notes: Level-1 baseline model results for financial performance: Intercept γ00 = 6.145,
p < 0.001; Multinational corporation γ10 = 0.051, n.s.; Publicly traded
γ20 = 0.127, p < 0.05; Firm size γ30 = 0.044, n.s.; Industry: manufacturing
γ40 = 0.039, n.s.; Industry: resource-based γ50 = –0.109, n.s.; *
p < 0.05;
**p < 0.01; ***p < 0.001.
Figure 2 Financial performance, investor CR, and societal governance
Regarding the moderating effect of economic environments, H7 is supported, as
economic growth has a positive moderating effect on the relationships between financial
performance and investor (
62 = 1.080, p < 0.05), local community (
62 = 2.871, p < 0.01),
Corporate responsibility practices and financial performance in Europe
and environmental (
62 = 2.125, p < 0.01) CR. We illustrate these similar cross-level
moderating effects in Figure 3, which shows that firms with high levels of CR practices
have higher financial performance than firms with low levels of CR practice irrespective
of country economic growth rate. Consistent with H7, implementing high levels of CR
practices yields greater financial benefits in high economic growth environments than in
low economic growth environments. In contrast, firms with a low level of CR practices
have similar lower levels of financial performance in high and low economic growth
environments.
Figure 3 Financial performance, environmental CR and economic growth
Figure 4 Financial performance, local community CR, and economic uncertainty
Economic uncertainty has a significant moderating effect on the relationships between
investor CR and financial performance (
63 = –0.115, p < 0.05) and between local
community CR and financial performance (
63 = –0.371, p < 0.01). As shown in Figure 4,
which illustrates this result for local community CR, and consistent with H7, there is a
positive relationship between local community CR and financial performance in low
economic uncertainty contexts. However, in high economic uncertainty contexts, local
community CR is not significantly related to financial performance. In sum, these results
O. Furrer et al.
provide moderate support for H7 regarding the influence of economic environment
(particularly economic growth rate) on the CR practices – financial performance
relationship. Table 4 provides an overview of the hypothesis tests.
Table 4 Overview results of the hypothesis tests
Hypotheses Relationship (sign)1
Test results
H1: Societal governance
effectiveness is positively
related to the implementation
of investor, local community,
and environmental CR
practices
Societal governance – Investor CR
(n.s.)
Societal governance – Local
community CR (n.s.)
Societal governance – Environmental
CR (n.s.)
Not supported
Not supported
Not supported
H2: In countries more integrated
in the EU, firms have more
systematically implemented
investor, local community,
and environmental CR
practices
EU integration – Investor CR (n.s.)
EU integration – Local community
CR (n.s.)
EU integration – Environmental CR
(+)
Not supported
Not supported
Supported
H3: Firms in countries with
relatively healthier economic
conditions (high economic
wealth, high economic
growth, low economic
uncertainty) are more likely to
have systematically
implemented investor, local
community, and
environmental CR practices
Economic wealth – Investor CR (+)
Economic wealth – Local community
CR (n.s.)
Economic wealth – Environmental
CR (n.s.)
Economic growth – Investor CR (n.s.)
Economic growth – Local community
CR (–)
Economic growth – Environmental
CR (–)
Economic uncertainty – Investor CR
(+)
Economic uncertainty –
Local community CR (n.s.)
Economic uncertainty –
Environmental CR (n.s.)
Supported
Not supported
Not supported
Not supported
Not supported
Not supported
Not supported
Not supported
Not supported
H4: The implementation of
investor, local community,
and environmental CR
practices are positively related
to financial performance
Investor CR –
Financial performance (+)
Local community CR – Financial
performance (+)
Environmental CR – Financial
performance (+)
Supported
Supported
Supported
H5: The positive relationships
between financial
performance and CR practices
(investor, local community,
environmental) are stronger in
countries with more effective
societal governance than in
countries with less effective
societal governance
Societal governance
Investor CR (+)
Societal governance Local
community CR (n.s.)
Societal governance Environmental
CR (n.s.)
Supported
Not supported
Not supported
Corporate responsibility practices and financial performance in Europe
Table 4 Overview results of the hypothesis tests (continued)
Hypotheses Relationship (sign)1
Test results
H6: The positive relationships
between financial
performance and CR practices
(investor, local community,
environmental) are stronger in
countries that are more
integrated in the EU than in
countries that are less
integrated
EU integration Investor CR (n.s.)
EU integration Local community
CR (n.s.)
EU integration Environmental CR
(n.s.)
Not supported
Not supported
Not supported
H7: The positive relationships
between financial
performance and CR practices
(investor, local community,
environmental) are stronger in
countries with relatively
healthier economic conditions
(high economic wealth, high
economic growth, low
economic uncertainty)
Economic wealth Investor CR (n.s.)
Economic wealth Local community
CR (n.s.)
Economic wealth Environmental
CR (n.s.)
Economic growth Investor CR (+)
Economic growth Local community
CR (+)
Economic growth Environmental
CR (+)
Economic uncertainty
Investor CR (–)
Economic uncertainty
Local community CR (–)
Economic uncertainty
Environmental CR (n.s.)
Not supported
Not supported
Not supported
Supported
Supported
Supported
Supported
Supported
Not supported
Notes: 1 (+) = positive; (–) = negative; (n.s.) = non-significant
8 Discussion and conclusions
8.1 Interpretation of the results
We began this paper by posing three questions to address a gap in the literature that we
had identified. This study starts to provide answers to each of these questions.
(1) Do national institutions influence firms’ implementation of CR practices?
As illustrated in Table 4, the direct effect results reported in Hypotheses 1–3 were
virtually non-existent. From a practical perspective, the positive takeaway is that there is
a fundamental consistency across all of the EU countries in our sample. National
institutions do not appear to have an impact on the implementation of CR practices by
firms in Europe. From the research perspective, non-significant results use to be the ‘kiss
of death’ in research (Aguinis et al., 2017; Meyer et al., 2017). However, Hambrick
(2007) and Pfeffer (2007) shown that non-significant results can make a valuable
contribution to the literature. Two reasons might explain these non-significant results:
O. Furrer et al.
firm-level characteristics and global-institutional factors might be more prominent than
national-level institutional factors and the message sent by national institutional
environments might not be clear and unambiguous.
Firm-level characteristics, such as multinational status, size, and industry, seem to be
far more important than national institutions in the implementation of CR practices. We
found that larger firms implement the three types of CR practices more than smaller ones,
multinationals implement less local community CR than purely national firms, and
manufacturing firms implement less investor and more environmental CR than service
firms, whereas resource-based firms implement more local community and
environmental CR practices than service firms, irrespectively of the country in which
they are operating.
In addition, as discussed by Furrer et al. (2010), the proliferation of transnational
initiatives, such as the UN Global Compact and the Global Reporting Initiative, has
increased institutional pressures for global integration and consistency in corporate
responsibility, which might have overshadowed the pressures of national-level
institutions. The financial and reputational benefits of global (or at least of European-
wide) standardisation might be perceived by firms as more important than those that
might results from national adaptation. This calls for more research to disentangle the
impact of institutional pressures across levels, and as previously noted, cross-level
research has been woefully lacking.
Another possible explanation for these non-significant results might be that the
message sent by national institutions is not as clear and unambiguous as we thought, and
as such, provides firms with some latitude in their implementation of CR practices. As
discussed in our hypothesis development section, social governance systems in Europe,
the EU’s CR policies, and the economic environment, all call for a multiple stakeholder
approach, which requires firms to attend the claims of all of their stakeholders. In a
situation of resource constraints, when all stakeholders’ groups are perceived as equally
salient, firms might feel free to choose which stakeholders’ group to prioritise based on
other criteria, such as firm-level or global-level factors. Future research might seek to
better understand how firms perceive national institutional pressures and how they react
to them.
(2) Does the implementation of specific CR practices influence firms’ financial
performance?
As illustrated in Table 4, the direct effect results reported in Hypothesis 4 identify full
support for this hypothesis. Thus, while we do not find national institutions influencing
CR practices, we do find that CR practices impacting financial performance.
We see two possible interpretations for these results: One, as suggested earlier, CR is
a multidimensional concept, which dimensions are independent. This means that every
stakeholder’s group independently rewards firms for implementing CR practices related
to its cause. Alternatively, these results might also suggest that the rewarding power of
stakeholders’ groups might be stronger than the punishing power of competing
stakeholders’ groups. For example, firms might be proportionally more rewarded by
environmentalist groups for implementing environmental CR practices, than they are
punished by investors for implementing these environmental CR practices and not
investors CR practices. Future research might seek to disentangle these two possible
explanations.
Corporate responsibility practices and financial performance in Europe
(3) Do national institutions moderate the relationships between CR practices and firms’
financial performance?
Even if the pressures of national institutions are not clearly perceived by firms’
managers, the impact of the pressures of some of these institutions on performance are
felt. The moderators (see Table 4) of financial performance do not include societal
governance or EU integration. They do include the financial (money-oriented) factors
economic growth and economic uncertainty. Interestingly economic wealth is not a
moderator, which makes it an interesting topic for future research to explore.
As suggested previously, the moderating effect of societal governance systems in
Europe and EU’s CR policies might be overshadowed by transnational initiatives at the
global level and firms’ level differences. This might even be exacerbated by an
ambiguous multiple-stakeholder approach of these institutions, which dilutes the impact
of their pressure. In countries with stricter governance systems, as well as those that are
more integrated in the EU, there is no significant financial advantage to satisfying the
interests of any specific stakeholders’ group, when compared to countries with weaker
governance systems or those less integrated in the EU. Future research might seek to
understand if the effects of these country-level institutions are reduced by global- and/or
firm-level factors.
Unlike low economic growth and high economic uncertainty, national economic
wealth is not an excuse not to act responsibly; even firms in poorer European countries
are expected to implement CR practices. However, in countries with higher economic
growth and lower economic uncertainty, firms are expected and rewarded more for
taking care of their investors, the local communities in which they operate, and the
natural environment, than are firms in less healthy economic environments. Future
research might focus on understanding why the pressure of some institutions have a
financial impact on firms, while others do not.
8.2 Theoretical contributions
Our study makes several contributions to the international CR literature. To date, the
literature has not identified a clear pattern of relationships between CR practices and
firms’ financial performance as well as not providing clear explanations for cross-
national differences in these relationships. We suggest that a likely source of ambiguity is
the moderating effect of firms’ macro-level institutional contexts. By simultaneously
taking into account the effects of macro-level and meso-level factors, multilevel-pressure
theory offers a more comprehensive understanding of the determinants of the financial
outcomes of firms’ implementation of CR practices across countries. Whereas,
institutional and stakeholder theories, due to their single-level focus, only provide a
partial explanation, multilevel-pressures theory integrates the different mechanisms
through which institutions and stakeholder groups affect CR practices and their financial
performance consequences. That is, by influencing the salience of certain meso-level
stakeholder groups, macro-level institutions moderate their impact on the financial
performance consequences of implementing CR practices. Overall, our study helps
advance current understanding of the relationship between corporate responsibility and
financial performance across countries.
O. Furrer et al.
8.3 Limitations and future research
We have identified four limitations to our study. All of these might serve as jumping-off
points for future research endeavours.
First, firm-level actions, including those relevant to CR practices, are also products of
managerial discretion at the micro-level. In our study, we focused on the meso- and
macro-levels and their interactions. However, Crossland and Hambrick (2011) have
demonstrated that managerial discretion at the micro-level is influenced by national
institutions at the macro-level and varies across countries. Therefore, future research
should investigate the effect of micro-level (individual) managerial values and their
interactions with meso- (firm) and macro-level (country) factors.
Second, we focus on CR practices related to three important stakeholder groups:
investors, local community, and the natural environment. Other stakeholder groups might
also exert pressure on firms. CR practices oriented toward customers, employees,
suppliers, distributors, NGOs, or governments may also influence firms’ financial
performance (Donaldson and Preston, 1995). Future research should investigate how the
influence of these CR practices on firms’ financial performance might be moderated by
differences in institutional environments.
Third, we measured CR practices using a survey of senior executives, which creates
the possibility of common method bias. To reduce this potential, we took preventive
measures, as recommended by Podsakoff et al. (2012), and our assessment of the
likelihood of common method variance indicated this was not an issue. While our
approach was similar to those utilised in other studies, the use of self-reported
performance indicators can raise concerns about subjectivity bias (e.g., Samiee and Roth,
1992). However, also this concern could be allayed by Dixon-Fowler et al.’s (2013)
meta-analysis finding of non-significant differences in the relationships between
environmental CR and firm financial performance across studies using self-reported
measures versus archival data. Additional research should measure CR practices using
surveys of other types of participants to directly address common method bias issues.
Finally, our results are based on a cross-sectional survey of 18 countries, which took
place between 2002 and 2014. However, even though we did not find any significant
time effects in our analyses, national institutions and firms’ CR practices may change
over time. Future research could revisit the countries we studied a decade or more after
our data collections to create a second-wave, longitudinal research design. Future studies
might also explore a larger number of countries in different regions of the world to
extend the reach and the validity of the multilevel-pressures theory.
8.4 Concluding thoughts
In today’s global business environment, multilevel studies are becoming the norm in
order to take into consideration the influences which come to bear from the macro-,
meso- and sometimes micro-levels. This new, multilevel perspective, from which we
must now approach global business research, invalidates the traditional, now archaic,
institutional and stakeholder theory approaches, as they are, at best, incomplete to
address the demands of a multilevel global business study. In their place, we proposed
the multilevel-pressures theory approach. As we discussed, it integrates the essences of
these two traditional approaches and expands upon them to develop a theory that is
Corporate responsibility practices and financial performance in Europe
competent to address the demands of the multilevel analyses required for global business
research. Accordingly, a theoretical contribution of this paper is to provide this
foundational theory upon which future multilevel research might be based.
Acknowledgements
The authors would like to acknowledge the financial support provided by the Social
Sciences and Humanities Research Council of Canada.
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1 Appendix I
1 Corporate responsibility practices
To what extent your organisation adopts specific practices. My organisation systematically:
[9-point Likert-type scale, 1 = strongly disagree to 9 = strongly agree]
Investor CR:
Incorporates the interests of all our investors in business decisions.
Meets the information needs and requests of all our investors.
Provides all investors with a competitive return on investment.
Provides all investors with timely and accurate financial information about the
organisation.
Seeks the input of all our investors regarding strategic decisions.
Local community CR:
Communicates with local communities about business decisions that they are
affected by.
Financially supports community activities (e.g., arts, culture, sports).
Financially supports education in the communities where we operate.
Gives money to charities in the communities where we operate.
Helps improve the quality of life in the communities where we operate.
Stimulates the economic development in the communities where we operate.
Environmental CR:
Conducts environmental life-cycle and risk assessments of all organisational
activities.
Financially supports environmental initiatives.*
Incorporates environmental performance objectives in organisational plans.
Measures the organisation’s environmental performance.
Voluntarily exceeds government environmental regulations.
2 Financial performance
Over the past three years, relative to our most relevant competitors:
[9-point Likert-type scale, 1 = strongly disagree to 9 = strongly agree]
Our profit growth has been substantially better.
Our return on assets has been substantially better.
Corporate responsibility practices and financial performance in Europe
Our return on investment has been substantially better.
Our sales growth has been substantially better.
Note: * item not retained
2 Appendix II
1 Data testing
Prior to testing our hypotheses, we ran a series of test to verify that these data were
appropriate for this analysis. The first step in assessing the convergent and discriminant
validity of the three CR practices and financial performance measures involved
conducting a Confirmatory Factor Analysis (CFA) of the combined sample of
respondents, with country samples counterweighted to be of equal sample size. Chi-
square test statistics are sensitive to sample sizes and Type II errors for larger sample
sizes (Cheung and Rensvold, 2002), so we focused on other model fit indices. The initial
CFA model (four factors, 20 items) had an acceptable fit (χ2(164) = 1780.99, CFI = 0.957,
NNFI = 0.950, RMSEA = 0.071) but also revealed significant cross-loadings for one
environmental CR item. Removing this item resulted in a somewhat improved fit for the
four-factor, 19-item model (CFI = 0.008, χ2(146) = 1207.45, CFI = 0.965, NNFI = 0.959,
RMSEA = 0.061). Regarding discriminant validity (per Fornell and Larcker 1981), the
square root of the Average Variance Extracted (AVE) for each construct (0.69–0.78) was
greater than the shared variance estimates between any two constructs (variable
correlations were r = 0.13–0.45).
To address the potential issue of common method bias, we took several preventive
measures such as guaranteeing anonymity and the confidentiality of the responses to
study participants, using different question formats, and adopting measures previously
shown to be valid and reliable (Podsakoff et al., 2012). We also conducted additional
CFAs to assess the potential biasing effect of common method variance. Cheung and
Rensvold (2002) advised that a CFI change of 0.010 or less indicates a non-significant
difference in model fit. Compared to the results for the revised measurement model, the
CFA results with an additional unmeasured latent method common factor showed a non-
significant change in model fit (CFI = +0.007), and the results for the Harman one-
factor test also had a significantly poorer model fit (CFI = –0.215). Therefore, these
analyses suggest that common method variance was not a significant issue for our data.
We conducted multi-group CFAs to determine the cross-national validity of the
measurement model (Steenkamp and Baumgartner 1998). The baseline configural model
for the 19 items loading on to their respective five factors had an acceptable model fit,
considering the many countries included (χ2(2610) = 5092.74, CFI = 0.929, NNFI = 0.916,
RMSEA = 0.086). The CFA model with partial factor loading invariance (one loading
unconstrained) showed a non-significant change in model fit (CFI = –0.010). The
partial scalar invariance CFA model with 9 unconstrained intercepts revealed a
significant change in model fit (CFI = –0.027), which could be attributed to cross-
cultural differences in scale response styles. Therefore, we used Hanges’ (2004) within-
subject standardized procedure to adjust scores for analyses. The adjusted country means,
standard deviations, and scale composite reliabilities (Raykov’s ρ; Raykov, 1997) for the
O. Furrer et al.
three CR practices and financial performance measures appear in Table A. For the
18 countries, the composite reliabilities for the four measures were at an acceptable level:
investor CR ρ = 0.70–0.90; local community CR ρ = 0.77–0.94; environmental CR
ρ = 0.72–0.89; and financial performance ρ = 0.70–0.91.
Table A CR practices and business outcomes: means, standard deviations, and scale
reliabilities (Raykov’s rho)
Investor
CR
Local
community CR
Environmental
CR
Financial
performance
Mean (s.d.) ρ Mean (s.d.) ρ Mea
n (s.d.) ρ Mean (s.d.) ρ
Czech Rep. 6.79 (0.96) 0.84 5.44 (1.03) 0.79 5.69 (1.52) 0.85 5.97 (1.19) 0.81
Croatia 6.60 (1.02) 0.84 6.06 (1.03) 0.90 6.08 (1.21) 0.80 5.69 (1.34) 0.91
Denmark 7.01 (0.69) 0.79 5.67 (0.60) 0.85 5.85 (0.72) 0.81 6.66 (0.75) 0.83
Estonia 6.99 (0.85) 0.77 5.24 (1.30) 0.77 5.51 (1.17) 0.72 5.99 (1.34) 0.83
Finland 6.90 (1.21) 0.83 6.28 (1.07) 0.81 5.91 (1.66) 0.85 5.80 (1.25) 0.87
France 6.62 (0.76) 0.70 5.32 (0.63) 0.84 5.32 (1.08) 0.87 6.11 (0.93) 0.80
Germany 6.53 (1.05) 0.80 5.13 (1.20) 0.83 5.40 (1.43) 0.80 6.34 (1.17) 0.89
Hungary 6.74 (0.95) 0.80 5.93 (0.64) 0.77 6.08 (0.89) 0.85 6.05 (0.99) 0.80
Italy 6.70 (0.96) 0.77 5.53 (0.96) 0.86 5.81 (1.05) 0.84 5.99 (1.10) 0.84
Latvia 7.15 (0.96) 0.88 5.91 (1.32) 0.88 6.07 (1.37) 0.87 5.86 (1.23) 0.88
Netherlands 6.80 (0.99) 0.82 5.45 (0.85) 0.86 5.75 (0.98) 0.77 6.35 (1.21) 0.85
Poland 6.39 (0.83) 0.74 5.47 (1.03) 0.80 5.69 (1.22) 0.76 6.20 (1.07) 0.80
Portugal 6.31 (1.76) 0.88 5.44 (0.92) 0.80 5.55 (1.21) 0.80 6.26 (1.03) 0.84
Russia 6.82 (1.28) 0.90 4.56 (1.67) 0.94 4.73 (1.92) 0.89 6.28 (0.62) 0.70
Spain 6.66 (0.93) 0.76 5.34 (0.88) 0.90 6.04 (0.85) 0.89 6.43 (0.97) 0.88
Switzerland 6.45 (1.04) 0.83 5.47 (0.96) 0.81 5.49 (1.07) 0.81 6.40 (0.90) 0.86
Turkey 6.50 (1.32) 0.81 5.58 (0.91) 0.87 5.35 (1.85) 0.83 5.82 (1.51) 0.89
UK 6.72 (1.12) 0.74 5.34 (0.87) 0.84 5.70 (1.02) 0.85 6.36 (0.95) 0.86
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