What are the reasons for a company to (not) engage in CSR? : a literature review of CSR motives

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What are the reasons for a company to (not) engage in CSR?

A literature review of CSR motives

Amsterdam, June 30, 2015

Thesis seminar Business studies Name: Bart van Vliet (10423273) Supervisor: Dr. Carsten Gelhard Academic year: 2015-2016 Semester 2, Block 3

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1 Statement of originality

This document is written by Student Bart van Vliet who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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2 Contents

Statement of originality ... 1

Abstract ... 3

Introduction: ... 4

What are reasons for a Company to (not) engage in CSR activities? ... 5

2.0 Theory: ... 5

2.1 Definition of CSR ... 5

2.2Bibliometric approach: ... 7

2.3Data collection: ... 7

3 .2 Results and findings: ... 10

3.2.1 Customer: ... 10 3.2.2 Employee‘s performance: ... 13 3.2.3 Financial value: ... 16 3.2.4 Other results: ... 18 4.0 Theoretical Discussion ... 19 Conclusion ... 21 Limitations ... 22 References: ... 23 Appendix 1. ... 31

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3 Abstract

This study analyzes the reasons for a company to engage in Corporate Social Responsibility (CSR). By doing a literature review of 59 articles from high ranked journals, between 2005 and 2015, this study discussed engaging in CSR from a strategic point of view. The study is done to give managers an overview of reasons to engage in CSR and give them guidance in choosing the right reasons to engage in CSR or not. This study found that customer

evaluation, satisfaction and purchase intention can be improved by using CSR. Improving the Employee motivation and employee attachment to the form can be a motive to engage in CSR. From a financial perspective, CSR can be a way to increase financial performance of a company. Though the findings give allot of positive effects of CSR, managers need to have a solid CSR strategy to engage in the right areas of CSR and in the right way. If the CSR activities are perceives as unfitting by customers or employee the positive effects can be lost. More research on CSR on a micro level is suggested to gain insights on what does on in the mind of stakeholder and gain knowledge on how to make CSR more efficient.

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4 Introduction:

In the recent decade, the issue of CSR became increasingly more important for business all over the world. Its use is discussed in newspapers, journals, the internet etc. Its role in new products and business practices is still not clear (Carroll & Shabana, 2010). The Majority of Fortune 500 companies all engage in CSR and put great effort to communicate these efforts to their Stakeholders. (Bhattacharya et al, 2009). There are multiple theories why companies should engage in these CSR activities. The Stakeholder theory which says CSR creates value by enhancing the strength and endurance of a company‘s stakeholder relationship (Barnett, 2007). Jones (1995) also found that stakeholders are willing to devote more of their resources to companies who engage in CSR. Multiple studies have shown that customers are willing to buy more products from CSR companies and evaluate those companies better (Brown & Dacin, 1997; McDonald & Lai, 2011; Marin, Ruiz & Rubio, 2009). But when firm

performance was tested, there are studies like Margiolis & Walsh (2001) which found that there was no evidence for positive net effect of CSR investments.

Big companies of today are almost forced to act generous with their earned money. It

is expected from them to give a certain amount of their money to charity or to do something back for the society. Giving something back to society makes your company look good and therefor people will like the company more. Though companies give money or resources to charity, people always stay somewhat suspicious if there is another reason for the company to do such a kind thing. Some people are skeptical and state that companies do everything to earn more, and don‘t care about society. They just want to look good to get more customers. Charity events, and gifts of big companies are questioned by people and the question arises: Do these generous actions lead to more good or bad for Companies? (Bremner, 1988)

With all these studies and knowledge about CSR, a company in 2015 has a lot more

information to take into account when deciding if they want to engage in CSR. Managers may struggle with these large amounts of date. An overview for these managers answering the following question: ―What are reasons for a Company to engage in CSR activities?‖ would make decision making allot easier for them.

Because why would a company engage in CSR? Should companies do it out of financial reasons? Though there is mixed evidence for CSR to improve firm-performance (Margiolis & Walsh, 2001; Orlitzky, Schmidt, and Rynes, 2003; Margolis & James, 2003). Or are they force to because the competition does so either, in fear they lose customers?

In this thesis we will try to get as close to the reasons as we can. By doing systematic theoretical research and reviewing exciting article we will try to get an overview of the main

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reasons for engaging in CSRand see who these reasons can work out for the companies. We

will do this by trying to get the answer to the question:

What are reasons for a Company to (not) engage in CSR activities?

As shown above, CSR is a subject that has been the central of lots of articles. It is still a subject that has mixed results. The need for reviewing the articles on CSR effects, could lead to a clear view on the reasons to engage in CSR. It could lead to patterns in the

relationship between reasons of recent studies, might introduce relationships unknown before and reveal gaps in the literature.

We will do this by first define the concept of CSR, followed by a systematic

theoretical research to review past studies concerning the influence of CSR on important aspects of the company. We will compare the studies done on the effects of CSR, de vide these effects in different categories and come up with a small sub conclusion per category. We will than summarize these sub conclusions and discuss these in the discussion section. Than we will summarize these findings into one main conclusion and try to answer the research question. With this study we will give managers an overview of valid reasons and advice for engage in CSR and conclude this with the limitations of the study and ideas for further research.

2.0 Theory:

The theoretic framework will consist out of five paragraphs concerning the most important stakeholder and motives to engage in CSR. We will first introduce CSR by defining it. This will be follow up with the customer related effects of CSR in the second paragraph. The third paragraph will consist of employee based effects. The fourth paragraph we will discuss the financial motives of engaging in CSR and the final paragraph will discuss the non-categories effects of CSR and other interesting findings.

2.1 Definition of CSR

Before we can continue to study the concept of CSR we first need to know the definition of CSR. The basic idea of CSR is that the organization and the company go hand in hand (Wood, 1991; Moir, 2001). Within the society, the customers of a company are the most important stakeholders. Stakeholder expects a company to take social responsibility for their actions and not only focus on getting more profit on the short run. (Mohr, 1996; Mohr, Webb & Harris, 2001)

Different theories and studies have tried to define the definition of corporate social responsibility, but a clear definition remains difficult to come up with. There is no single

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6 simple definition that defines all the practices a company can do that is related to CSR.

Dunfee (2003) shows that having one single definition of CSR is problematic. There is a lack of consistency between companies to judge if a company can be seen as socially responsible or not. For example: A pharmacy company can be seen as socially responsible because of the medicine they provide, giving these to sick people to heal them and make them feel better again. Though, the same company also needs to research these medicines on animals, which can be seen as unethical. So it‘s not that simple so say that a company is socially responsible. Comparing companies is also a difficult thing to do, for example: A Nike factory in India producing clothes have a lot of different social norms than a car factory by BMW in

Germany. The culture of the country, the law and social norms of that country, and the origin of the work etc., all these factors influence if a company can be seen as socially responsible.

In this thesis we will define CSR with the Key Figure of Archie B Carroll (1991).

This is called ―the pyramid of Corporate Social Responsibility‖. It contains 4 levels of responsibilities a company holds: Economic, Legal, Ethical and Discretionary. This pyramid is seen as the basic to many studies and

theories concerning CSR.

The first Component is economic

responsibility. Every company needs to be profitable to survive. It is the most important motivation for an entrepreneur to start a company. Making profit is the basis foundation on which a company is built (Carroll, 1991).

The second Component is the legal

responsibility. This component is formed out of the legal laws a company has to apply to. It‘s the responsibility of a company to play

by the rules of the game while still making profit. These rules are mostly the national and international laws. Not breaking the law is a responsible everyone expects a company to fulfill (Carroll, 1991).

The third component is ethical responsibility. This layer is based on the norms of the company. Do they threat their employees well, are their products responsibly made and are all the stakeholders threated ‗fair‘ by the company (Carroll, 1991). The big difference between ethical and legal responsibility is that a company cannot be punished legally is they do not

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7 apply to these norms. It can only change the way people feel and see the company, as long as the company does not break any law.

The final component of the pyramid is the discretionary responsibilities of a company.

These are responsibilities a company takes on itself to help or improve the quality of life without they need to do it. This makes the company do good things for society, building a positive form of corporate citizenship. Corporate Citizenship is defined by Maignan & Ferrell (2000) as the degree of which a company meets the responsibilities of these four levels of Carroll (1991).

It is expected of a Company to meet the expectations of all 4 layers simultaneous. A company should strive for good corporate citizenship. If a company meets these expectations and are willing to care there weight for the society, it should give Companies a Competitive

advantage (Lindgreen & Swaen, 2010). Because of this there is an advantage for both parties, it is both beneficial for the company, and for society for companies to engage in CSR

(Lindgreen & Swaen, 2010). If these expectations are met all life of society should benefit from this. (Carroll, 1991)

2.2Bibliometric approach:

Now that we have a better view of the definition of CSR, we will now continue with finding the reasons for a company to engage in CSR. We will do this by reviewing and analyzing studies concerning CSR motives, the effect of CSR on the company and the effect of CSR on important stakeholders.

2.3Data collection:

At the beginning of May 2015 the initial search term of CSR and Corporate social responsibility was searched using Sciencedirect.com. Considering the work of van Raan (1996) to have a relevant snapshot of the literature 5 years of studies is not enough. Therefor a period of 10 years of literature was reviewed. The initial search criteria were CSR and

Corporate Social responsibility. These key words were searched in the title, abstract or as keyword of an article. This resulted in a data pool of 2.101 articles. Because of the nature of this study, only articles from a business point of view are relevant. To do so only article from the following subject areas were used: Business, management, and accounting; economics, econometrics and finance; psychology and social science. These subject areas allows is to get articles related to CSR from a business point of view, and not an environmental, or health perspective. This reduced the data pool to 2.099.

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8 area that are relevant for this study. Journals will be used studying the subject area of

business, strategy, sociology, marketing and likewise areas. The ranking of these journals are based on the rating list of Harzing (2015) and SCImago (2007). For this study only journals with a top rating will be used, this includes an ABS ratings of 2 or higher. Only journals that were listed on these ranking lists were included to make sure the journals are of high quality. This will increase the validity of this research and will reduce the amount of unrelated literature. The search criteria will include following ranking Journals: Journal of Business research; Scandinavian Journal of Economics; European management journal International Business Review; and the International Journal of Production Economics

CSR is a widely studied concept, with lots of studies concerning different aspects of CSR. By addressing certain key words in our search for literature the amount of literature will be reduces, and the relevance of the literature will be increase. To find the key words that will give the best literature, the key words used will be constantly adapted to findings in the literature that is studied. This way we can narrow the key words to a combination that will give us the most literature that is relevant for this study.

The key words used in this study are: CSR in combinations with: Corporate social

Responsibility, Employee, Customer and Financial Performance. To increase the relevance of articles, certain topics were added to the search criteria. These topics were: Social

responsibility, Business, Sustainability and Corporate social, including synonyms for these topics. This resulted in a data pool of 35 articles from the Journal of business research, 11 articles from the International journal of production economics, 7 articles from the

Scandinavian journal of economics and 6 journals from the European management journal. This makes a total of 59 articles reviewing the influences of CSR in a business perspective.

Table 1. Ranking of journals in the subject area‘s considering Business between 2005 and 2015

Rank Journal Number of articles

3 Journal of business research 35

3 Scandinavian journal of economic 7

3 International journal of production

economics

11

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9 The data pool of articles will be systematically analyzed for relationship between CSR and firm performance, and relationship between CSR and Stakeholders. From the data there was a very clear categorization of results. To have an overview of the results, we created categories, and assigned articles to these categories based on their findings. These categories consist of 3 main categories of results, and one category for other results. The three main categories include Employee, Customer and Financial performance. The articles will be categorized in one of these 3 categories, (Table 2.) or be placed in the fourth category of other findings considering CSR. In appendix 1, Table 2 can be seen with all the results.

On overview will be made in the form of a table (appendix 1). Of each article the authors, year will be places in column 1, the second column will include the topic, focus or question of the article, the third column will include the research method, the fourth column will have a summary of the findings in that article. And the last columns five to eight will be used to assign the article to a category.

Table 2: Number of articles per category

Category: Number of articles:

Customer 20

Employee 11

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10 3 .2 Results and findings:

3.2.1 Customer:

Corporate social responsibility is very large concept. It includes many different things as discussed previously with Carroll (1991) pyramid. For a company the customers are the most important stakeholder and are one of the drivers for companies to engage in CSR (Ageron, B., et al., 2012). Companies engage in local social events provide extra services or make sure their way of working is socially responsible. Customers who see these things are affected by it. (Scheinbaum, et al., 2015). Companies sell their goods or services to them and they need them to do their purchases at their company to increase profit. If CSR cannot seem to increase the purchase intention, it might not be able to be financially profitable to engage in CSR activities. For CSR to be helpful in this manner, CSR has to increase the purchase intention of the customer.

To do this CSR activities have to directly or

indirectly have a positive relationship with variables that increase the customer‘s purchase intention. This can be done by CSR in a couple of ways; one of those ways found in the literature is described by Ko et al. (2003). Ko et al. (2003) study shows that if a company engages in CSR, it has multiple ways of helping the company. Ko et al. (2003) shows that an investment in the

environmental side of CSR, named green marketing, can lead to an improvement of the

corporate image. The customer is positively affected by seeing a company act in environmental activities, this makes them evaluate the company‘s image higher than

companies who to not invest in environmental CSR activities. An increase in the evaluation of a company‘s image could than lead to an increase of the customer‘s purchase intention. The customer is being more intended to buy products or services from a company that has a better corporate image. The same relationship between corporate image and the customers purchase intention is found by Roper and Parker (2013). They found the same effect in a slightly

different way, a decrease in corporate image by seeing litter from that company has a negative effect on customer‘s purchase intention. Ko et al. (2013) also found a positive relationship between the corporate reputation and the customer purchase intention. If the corporate

Figure: 2. Purchase intention Ko et al. (2003)

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11 Figure 3. Direct and indirect relationship of CSR and Firm performance. Saedi et al. (2015) reputation is increased, the customer is also intended to purchase sooner from this company. CSR activities can have a positive effect on the corporate reputation and so indirectly increase the customer purchase intention. CSR does this via a couple of methods. CSR activity can lead to customers being more satisfied with the company and increase the customer‘s loyalty to the company. (Saeidi et al., 2015). If the customer satisfaction is higher, they are likely to evaluate the company better, increasing the corporate reputation (Saeidi et al., 2015) and so increase the customer purchase intention.

(Ko et al., 2003; Saeidi et al., 2015). Ko et al. (2003) also found that green marketing has a positive effect of the product image. This means that customers evaluate the products of higher quality and are more satisfied with the product. This also leads to an increase in purchase intention. The same outcome is concluded by Grimmer et al. (2013) Companies who invest in

environmental activities are likely to have a higher Perceived environmental performance (PEP) by the customer. Grimmer et al. (2013) found that customers have a higher purchase intention for companies with a high PEP, than companies who have a low PEP. This effect is especially high for relative low priced products. Grimmer et al (2013) also found that

customers with a high environmental involvement are extra vulnerable for this effect. The final relationship found between CSR activity and the customer purchase intention is the affect brand relationship has on the customer purchase intention. Huber et al (2010) and found a positive effect between CSR activities and brand relationship.

Company who engage in CSR activities can do this in numerous ways. The way a company chooses to operate is very important to the customer. A company should align their activities to align their strategy, their image, and most important fit their company. (Karen et al., 2006; Lee et al., 2013). A high fit increases the perception of CSR activities by customers, and has a positive effect on both consumer loyalty and consumer company identification. A low fit can cause a negative impact on consumer‘s belief, attitude and intention no matter what the motives are of the company to engage in those activities. The activities have to fit the

company and make sense for the customer. Otherwise the customer might lower the belief in the company. It is important for the customer to have the belief the company does not have egoistic or stake holder related motives for their CSR activities. If so Prasad, et al. (2013)

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12 warns retailer that people are likely to have a decreased resistance to negative information about the retailers, and will stimulate bad word of mouth.

In conclusion it can be said that CSR influences the customer in numerous ways that can help the company sell more products to them, this can be a reason a company wants to engage in CSR. (Table 4)

Table 4. Summary of findings Customer

Variable Relationship is positive/negative outcome

CSR activity positive Customer loyalty

Customer satisfaction Brand relationship Social responsibility Corporate image Corporate reputation High environmental perception

positive Customer purchase intention

CSR skepticism Litter with brand name

negative Customer purchase intention

Litter with brand name negative Corporate reputation

CSR skepticism negative CSR activity

Customer satisfaction Corporate image

CSR FIT Positive/negative CSR activity

Corporate reputation Competitive advantage Customer satisfaction CSR

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13 Figure 4. Employee right protection. Lee et al. (2013)

3.2.2 Employee’s performance: Employee:

The findings in the literature review also reveal the effect of CSR on Employee. Employees can be one of the motives to engage in CSR activities to boost the company‘s financial performance (Ageron, B., et al., (2012). And as Öberseder et al. (2013) found customers are even concerned about the conditions of the employee. CSR can influence employee in different ways to increase the corporate performance. An increase in corporate performance will than hopefully increase the financial performances of the company. Lee et al. (2013) found such a relationship. Lee et al. (2013)

says an increase in employee buyer‘s rights protection has a positive effect on buyer‘s corporate reputation, buyers‘ financial performance and supplier‘s employee rights protection. An increase in supplier‘s

employee rights protection and buyer‘s corporate reputation both also had a positive effect on the supplier‘s financial

performance. And finally they found a positive relationship with the buyer‘s corporate reputation and supplier‘s

financial performance, towards the buyer‘s financial performance (Figure 4.). CSR activities that protect the employee right can lead to an increase in financial

performance. Just like with the customers, employee are also affected by the Fit

between the CSR activity and the company. Lee, Park and Lee (2013) studied the

influence of the CSR fit with the corporate culture, the perceived CSR capability to the employee perception of CSR activities. They then studied the influence of the employee perception of CSR activities to the employee attachment and perceived corporate

performance. They found positive relationships between all these factors (figure 5.).

Employees do difference in what affects them the most. Farooq et al. (2014) did a study about the different type of CSR activities and the effect on the employee. This study came to the

Figure 5. Employee perception CSR activities.Lee, Park and Lee (2013)

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14 conclusion that CSR actions are received different between collective and individual

employee. The Asian market has more collective employees and is more effected by activities concerning the, employee, community and consumer. They are mostly concerned about internal CSR activities. This affects the organizational identification and knowledge sharing behavior of the employee. The individual employees are more sensitive for external CSR activities. These concern environmental and community oriented activities. For collectivist regions such as Asia, the focus should be employee-related CSR, whereas for individualist regions such as North America and Europe, the CSR strategy should center on community and environmental issues Farooq et al (2014). This difference in perception of CSR activity is also measured by Kuznetsov (2009). Kuznetsov (2009) studied the difference between

western theories and the behavior of Russian executive and concluded that Russian executive do not react in line with the western theories about CSR. But CSR can also have its negative effects on the company. As Helin et al. (2011) concluded in their study. CSR includes many different areas, some are consumer based, some are focused on the quality of employee condition and some are concerned about environmental purposes. In some companies ethic codes are installed to guard the quality of employee‘s work conditions. These ethic codes however were found by Helin et al (2011) to also have its downside. Ethic codes can be used to gain dominants over the employees by the manager, if exploited. These ethic codes and ethic programs mostly do good but can in the hand of the wrong manager do harm to the employee.

In conclusion CSR has its influence towards employee and could be a reason to

engage in CSR. If used in a correct way, CSR can boost the employee commitment, employee attachment, knowledge sharing, and corporate financial performance. But can also have negative effects, if used incorrectly, being active in activities that do not fit the corporate culture can cancel the positive effects of CSR. A summary of the findings can be found in table 5.

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15 Table 5. Summarized of findings Employee

Variable Relationship is Positive /negative Outcome

Firm size positive Amount of voluntarism by

employee Community, employee

and consumer oriented CSR activity

positive Employee organizational

identification ; Knowledge sharing. (difference between individual and collective employees)

Corporate codes of ethic and ethical programs

Positive/negative Could be used by managers

to dominate employees

Buyer‘s employee rights Positive Supplier‘s employee rights

Buyer‘s corporate reputation Buyer‘s financial

performance

Supplier employee rights Positive Buyer‘s corporate

reputation;

Supplier‘s financial performance

Buyer‘s corporate reputation

Positive Supplier‘s financial

performance; Buyer‘s financial performance Supplier financial

performance

Positive Buyer‘s financial

performance Perceived fit between

Corporate culture and CSR activity

Perceived CSR capability

Positive Employee perception of

CSR activity

Employee perception of CSR activity

Positive Employee attachment;

Perceived corporate performance

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16 3.2.3 Financial value:

If we look at the literature from a financial performance perspective; the findings also suggest CSR can have advantages from a financial, or a competitive perspective. As concluded before, employees and customers are influenced by the CSR activities the company engages in. These effects also have financial meaning. As already discussed in the findings concerning the employees; an increase in CSR activity can results in increased financial performances via the employees (Lee et al., 2013; Lee, Park and Lee, 2013). And as concluded in the previous section about customers can boost the purchase intentions of customers, and evaluation of the company by customers in multiple ways (Grimmer, et al. 2013; Holmqvist, 2009; Ko et al., 2013; Saeidi et al., 2015).

Beside these findings, the data also provides results concerning other positive effects of CSR to increase firm‘s performance. Wang et al. (2015) found that CSR has a positive effect on the brand equity, and an increase in brand equity has a positive effect on the firm‘s performance. CSR can also boost other factors in the company as can be concluded from the study of Kemper et al. (2013). Kemper et al. (2013) studied the influence of CSR on the marketing capability of a company. From this study they concluded that in a high competitive market, CSR can increase the marketing capability of a firm significantly. Companies within the same industry had a significant different marketing capacity depending on their amount of CSR activity. CSR can also contribute to other factors that improve the firm‘s performance. As another study by Menguc & Ozanne (2005) showed. They studied the influence on natural resource based view and the positive effect on profit. They found a positive effect. Because CSR can a tool in the Natural resources based view, it could indirectly be profitable via this method. Because CSR is a broad concept, Crifo et al. (2014) studied the best possible combination of CSR activities to maximize the firm‘s performance, from the following

categories: Supplier, Customer, HR, and Green marketing. Crifo et al. (2014) concluded that a combination of CSR activities concerning HR and Green marketing were found to have the most positive effect on firm‘s performances. Any other combination could be improved by adding or subtracting a CSR activity. Though CSR is proven to have effect on firms, it can variant between firms, as the study by van Wijk et al (2006) suggest. Van Wijk et al. (2006) did a study concerning sustainable performances of tour operators and their market powers, and concluded its effect is weaker in this sector than others. The effect was found to be bigger for larger firms than small or medium firms. CSR has different effects on different industries.

If a company is engaged in CSR it gains certain advantages, though Bechetti et

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17 financial performances of exiting companies from the Domoni 400 Social index. This index ranks companies based on their Social responsibility. The results from this study by Bechetti et al. (2012) found that an exiting company had a decrease in abnormal returns. This means companies who exited the list, had a negative change in their predicted earnings. This

suggests these companies performed worse when their CSR activity decreased or did not keep up with the competition.

The findings of in the data do finds multiple ways CSR can influences a firms

performance (Table 6). As discussed before customers, and employees are important factors in this effect. CSR also influences the company in different ways that could lead to an

increase in firm‘s performance. We can also see how a decrease in CSR can cause a decrease in financial performance. Though these effects are concluded by multiple studies, it remains a fact that CSR difference between industries and is no guaranty.

Table 6. Summarized findings financial performance

Variable Relationship is positive

negative outcome Corporate reputation Competitive advantage Customer satisfaction CSR

positive Firm performance

Buyer‘s corporate reputation Positive Supplier‘s financial

performance; Buyer‘s financial performance

Buyer‘s employee rights Positive Buyer‘s financial

performance

Supplier employee rights Positive Supplier‘s financial

performance Employee perception of CSR

activity

Positive Perceived corporate

performance

CSR Positive Brand equity

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18 3.2.4 Other results:

Besides the previous findings, the last category of findings was not able to fit in the one of the other categories. But these findings do have important information for managers. The findings can help them in the decisions considering CSR. In the articles we found more evidence that enhances the view that CSR is good for a company but also skepticism on CSR. Lin-Hi (2013) states that not doing bad and ―avoiding bad‖ has the same effect as ―doing good‖. Lai et al. (2015) concluded Strategic CSR will significantly influence the performance of

corporate sustainability. This means CSR if used strategically is good for the sustainability of the corporation. Sakarya et al. (2012) promotes the use of social alliances, because these will give both partners shared value. These alliances are seen as a win-win situation. On an

environmental perspective Putrevu (2012) found results that environmental laws will increase the cost for firms, but in the long run will increase the investment significantly. And Camison (2010) also found that environmental regulation allows for a superior improvement and higher level of environmental performance. Other findings are that Companies who engage in CSR are also less likely to be stork by crime and illegal intention against the company. (Del Bosco, 2011)

But there are also findings concerned about the real usefulness of CSR. Lee et al.

(2012) was already discussed on how the fit of the CSR activities must fit with the customers, and Brunk (2010) concluded that no matter the motives of the company, the CSR activities have to fit. Prasad et al (2013) wants to take this a step further; the article claims CSR doesn‘t do anything besides acting like a PR tool. Something Holmqvist (2009) researched when studying the effect of labeling events as social responsible. CSR would become a tool to create a false satisfaction of the customer‘s desire, and accomplish a false accomplishment in terms of desired and appropriate human behavior. The final findings of this study concern the difference CSR has in different areas. Putrevu et al. (2012) concluded that the media has significant influences on how effective CSR will be and factors that promote CSR differ per type of firm. These results were already tested to a small extend by Kuznetsov, et al (2009), with the difference between Russian executives and western theories about CSR. And a study by Steurer (2009) already tested this theory between western European countries and

central/eastern European countries. The differences in prioritizing certain CSR activities were significant.

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19 4.0 Theoretical Discussion

The findings in this study are but a small overview of all what is known about CSR. Our findings though do raise some interesting questions and the findings are mostly in line with the literature that is not selected for this study. The findings for instants speak about the financial improvement of CSR, and like Sakarya et al. (2012) the possibility for social shared value if companies engage in social alliances. This aligns with the theory of Porter & Kramer (2011); of the benefit of engaging in CSR to create shared value with partners. The findings also speak of the multiple ways of increased financial performance through the improvement of the customer satisfaction and company evaluation. (Grimmer, et al. 2013; Holmqvist, 2009; Ko et al., 2013; Saeidi et al., 2015). This effect is also found in multiple studies like Martinez et al. (2013); Luo et al. (2006) and Creyer et al. (1997). But these studies also agree and disagree on some findings of this study. Creyer et al (1997) has similar findings concerning the impact of customers. Creyer et al (1997) concludes that ―The willingness of consumers to “reward” or “punish” businesses on the basis of ethics shows how important defining a clear ethical position is to all firms.´. The same conclusion is concluded by Lee et al., (2012) and Brunk et al., (2010). Customers will only reward the company if they believe the company is doing the right thing. Luo et al. (2006) do find evidence of a decrease in customer satisfaction in some cases, something that is not found in the studies included in the data. They found that with companies low innovativeness capability, CSR reduces the customer satisfaction. This should have been taken into account by the studies in the data base.

What is missing in the findings is the profit that can be gained as discussed by Stefan et al. (2009). No study in the data looks at the potential profitable or cost reducing activities CSR can bring to a company. Things like a selling pollution reducing technology, decrease in labor cost, because more people like to work at companies with a good reputation, a decrease in cost of capital, because ethical companies or sustainable businesses can borrow money more easily or gain access to certain funds. The articles in the data base the relationships between financial performance and CSR are mostly indirect, while there are also some direct advantages like discussed in Stefan et al. (2009).

Some of the findings on the effect cultural differences in CSR are very interesting. It confirms the problem already discussed in Donaldson et al. (1999). CSR activities have different effects in different cultures, and CSR activities have different values in different cultures. Its developed theory called the ‗Integrative Social Contract Theory‘ might bring some guidance in tackling the problems cause by cultural differences found by Putrevu et al. (2012) Kuznetsov, et al (2009) and Steurer (2009). This theory developed certain

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20 ‗Hypernorms‘ that must be followed globally, than less standardized consistent norms which are altered to norms of the local culture with a third level of moral space for individual interpretation. If a company uses this theory it can more easily create a flexible ethical code for different cultures

The findings in this study are very promising for the use of CSR. The positive effect

CSR can have for customers, employee and financial performance are very helpful for companies to let them see the benefits of CSR and start giving back to the society. Though there are some conflicting findings within this study and studies that were not included in this study. This study allows us to quickly see the large impact CSR can have on a company and its stakeholders. In a world were globalizing is going faster every day it is important to have managers see the benefits, or even necessary of CSR, and possible pitfalls of engaging in CSR. This study contributes to the existing literature as an overview for managers of recent discoveries and theories in the world of CSR. This can help the manager to make decision on a more easily to argument basis. The overview allows mangers to easily see what the

influence of CSR activities can be, and allows them to see the possible pitfalls. This overview allows mangers to quickly see if CSR activities could be a part of the solution to the

company‘s problems and might give managers a little push to take a step into engaging in CSR.

Managers are wise to carefully look at the way they implement CSR into their

company. Though the findings find large amount of positive effects of CSR, CSR cost money on a short term basis and need a proper strategy. Mangers should use these findings to make sure the goals the company wants to achieve are possible by using CSR. CSR should be at the core of the company to be effective. When customers or employee finds selfish reasons of the company for the use of CSR, it most likely results in a significant decrease in the hoped effects. The CSR activities should align with the fit of the company and should perceived as fitting the company culture by both employee and customer. Managers have to remind they should focus on long term, not short term vision. Though CSR cost money on the short term; if used correctly it will pay out on the long term. (McGovern, et al., 2007)

There are few studies studying the concept of CSR on a micro level. More research in

the reasoning of the employee and customer could increase our knowledge on how to implement CSR in the most efficient way. Knowing ‗why‘ one person embraces some CSR activities and why the other prioritizes other activities will give insight on why certain CSR activities are appreciated in one market or area and not in another one. The study of Öberseder et al. (2013) is the only study found in this data to look at the ‗why?‘ though the primarily

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21 focus of the study was to know ‗What‘ consumers find important to form an opinion about CSR. Studies like Öbersederet et al. (2013) and Green et al. (2011) are useful for knowing what influences customers, but if more studies answering the question ‗why‘ does CSR affect this person or organization, a better understanding of people would give great insights and maybe open a new view on CSR. More knowledge about this matter should give a better way to understand the differences in world when implementing CSR. This will give insights on how to tackle the difficult problems of Globalization for multi-national organization when engaging in CSR throughout the world. We therefor suggest examining the influence of CSR at a micro level to gain a better understanding of what goes on in the mind of the

stakeholders.

Conclusion

In this study we found three big factors that are reasons the engage in CSR and found some less significant other reasons. These three factors that are largely influences by CSR in a positive way, and could be reason to engage in CSR are: (1) Customers; Customers are influenced in multiple ways by CSR, if used correctly CSR can boost the Customers purchase intention to increase the firms performance. (Table 4) (2) Employee; Employees are

influences in a positive way by CSR, increasing employee motivation and employee attachment to the company will lead to an increase in firm performance. (Table 5) (3) Financial performance; CSR can increase the financial performance of a company if used correctly. The financial performance can be increased if the company is able to increase the corporate reputation, consumer intention, and the employee perception of CSR activity is positive. (Table 6) We also found some negative studies concerning CSR. First of all CSR must be used in a correct way, if CSR activities do not align with the perceived fit of the company culture the positive effect of employee might become undone. The same effect goes for customers; customers will only be affected positive if the CSR activities fit the company. CSR has different ways of working around the worlds. Depending on the culture some activities are more influential than others. Caution is advised to managers to do deep research in the segments they want to engage in CSR to ensure a good fit and the maximum results for their efforts. By answering this research question we contributed to the literature by creating an overview of the literature of CSR that are relevant for managers if they want to decides if they want to engage in CSR. Making it easier for them to find good reasons to engage in CSR and to avoid pitfalls of CSR.

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22 year period on CSR. By setting constrains to our search criteria we used four high ranked journals to find the influence of CSR on companies to seek the reasons for companies to engage in CSR. This concluded to an overview of 59 articles discussing a variety of affects CSR has on a company.

Limitations

The findings of this study have been limited because of some of the methodology used, the research design and the data set. The first constrain is the use of Sciencedirect as the only source for data. This data base is limited in its capacity to deliver all data of the world. This means that studies that are not included in the data on Sciencedirect are not included in this study. A second constrain is the use a time period, in this study a time period of 10 years was chosen, this cause for a constrain because of the many studies done before that are not

concluded in this study. The third constrain is the use of academic journals. By only using academic journals, the possible additional knowledge in books, confederation papers or other articles the evidence from those sources are not included in this research. The use of

keywords is also a constrain for this research. CSR is a wide concept, and with many

synonyms. The use of different key words might have altered the results. The last constrain is the use of a limited amount of journals. Because of the use of this limited amount of journals, lots of data is not included in this research. This might cause for an altering in the results. We suggest including more data in future research, using multiple sources instead of just

Sciencedirect and include more journals to be able to make a more complete overview including evidence on all bases in multiple industries. Also we suggest more research on a micro level. With more knowledge about ‗why‘ CSR as a certain effect on someone gives the capability to create better theories to tackle the problems CSR brings with it.

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31 Appendix 1.

Table 3. Results Systematic Literature study Author/ date Topic/focus/ question Research method

Findings Customer (Financial)

performan ce Employee Other Achabou, M. A. and S. Dekhili, (2013) Customers buyers behavior Quantitative Empirical

Negative effect. Luxury Brand behavior is secondary concern. Recycled material has a negative effect on customers buyers behavior for luxury brands

x Ageron, B., et al., (2012). Sustainable supply management (SSM) Conceptual framework based on literature

Companies‘ environmental efforts are based on external: drives like government regulations. External stakeholders

Internal: Top management vision, Customer demand, competitor actions, Employee commitment.

SSM increases customer satisfaction.

x x X Govern ment regulati ons Armstrong, J. Scott Green, Kesten C., (2013) Effect of policy to promote CSR Literature review

Corporate social irresponsible behavior can be countered by stake holders long term interest

X Stakeh older long term interest

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32 Azmat, Fara, (2010) Are immigrant entrepreneurs effected by home country Conceptual framework

Old age first generation is affected by norms and values of their home country, young second generation is not. x Basil, Debra Runte, Mary Basil, Michael Usher, John, (2010) Does size matter on the support for employee volunteerism Survey of 990 random selected Canadian businesses

Larger companies support voluntarism more in a strategic manner, than smaller ones

x Becchetti, Leonardo Ciciretti, Rocco Hasan, Iftekhar Kobeissi, Nada., (2012) Relationship with stakeholders Empiric research of 278 firms.

Companies exiting the Domini 400 Social index it results in significant negative effect on abnormal returns

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33 Becker-Olsen, Karen L. Cudmore, B. Andrew Hill, Ronald Paul, (2006) Customer behavior Empiric quantitative survey of 28 respondents

Low fit initiatives have a negative impact on consumer belief, attitude and intentions, no matter the motives of the company. Same results for profit driven high fit initiatives. High fit proactive initiatives led to an improvement in consumer beliefs attitudes and intentions. x Brunk, Katja H., (2010) Customer brand perception Conceptual framework based on Qualitative research of 20 long interviews with general consumers.

Extended Conceptual framework of the impact of consumer perceived ethicality (CPE). What are the sources of how the customer sees a company in an ethnic perspective.: (1) consumer, (2) employees, (3) environment, (4) local community and economy, (5) business community and (6) overseas community

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34 Brunk, Katja H., (2011) Customer brand perception Conceptual framework Based on Qualitative research of 20 long interviews

Not all un/ethical acts have the same impact. The effect is multi-dimensional. (1) Monovalent ethical dissatisfiers are corporate acts that can have a negative impact on CPE and refer to adhering to norms; (2) Bivalent ethical dis/satisfiers are business activities that relate to the principle of balancing the needs of the company versus others and, commensurate with a company's efforts, can positively or negatively influence global CPE; and (3) Monovalent ethical satisfiers may have a positive impact on CPE and include all company transactions relating to altruism.

x x Camisón, César, (2010) Influence of environmenta l public policy on environmenta l performance Quantitative Empirical research

The adoption of more advanced environmental innovations by firms submitted to auto-regulation allowed both a superior improvement and a higher level of environmental performance.

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35 Castka, Pavel Balzarova, Michaela A., (2008) Regulation of CSR. Standardizati on of CSR Literature and Quantitative Empirical research

ISO 9000 and ISO 14000 significantly influence the standardization of CSR. x Chen, Lujie Olhager, Jan Tang, Ou, (2014) Relationship between sustainability and factory location Literature review

Economic, environmental and social perspectives are the main factors in a sustainability perspective. But the sustainability perspective has to align with the strategic perspective. Sustainable placement is influences by competitive position, market position, technology, customers, and global footprint.

x Chen, Jen-Yi Slotnick, Susan A., (2015) Link between ethical sourcing and disclosure of supply chain and competitivene ss Qualitative Empirical Research

Market share is affected by reputation and disclosure. Disclosure depends on disclosure costs, competitor׳s actions and other factors. A firm׳s decision to disclose its sources should depend not only on its cost of

disclosure, but also on the actions of its competitor and the effect that its actions will have on its own market share.

X Compet itivenes s

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36 Crifo, Patricia Diaye, Marc-Arthur Pekovic, Sanja, (2014) Performance analysis of combinations of CSR activities Empirical analysis

Qualitative CSR activities have a higher impact than a quantitative approach. The optimal configuration of CSR between dimensions Customer and Supplier HR and Green is: HR and Green. Other combinations can be improved. x x x Del Bosco, Barbara Misani, Nicola, (2011) CSR reducing crime against firm Literature review

Outcomes of CSR may reduce the motivation of potential offenders to act against a firm. These outcomes may also make it more difficult for the offenders to justify their illegal intentions.

Stakeholders who do not participate in the crime may develop attitudes and behaviors that restrict

opportunities for criminal action. Crime-reducing effects of CSR vary according to the legitimacy of the potential offenders and the legitimacy of their claims.

x x X Stakeho lders‘ satisfact ion. Reduce crime

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37 Dubinsky, Alan J. Nataraajan, Rajan Huang, Wen-Yeh , (2005) Influence of Democratic and socioeconomi c on moral philosophies Quantitative Empirical research

This study suggests that when investigating consumers' general ethical perceptions in relation to their

demographic and socioeconomic backgrounds, the interactive effects of the combined background variables provide more precise and detailed

information regarding the relationships than using only one background variable at a time.