Strategic orientation of CSR : the influence of strategic orientations on CSR performance moderated by CSR reporting and corporate reputation

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Strategic Orientation of CSR

The influence of strategic orientations on CSR performance moderated by CSR

reporting and corporate reputation

Student: Mark Hebben, 10757155

MSc. Business Administration, Strategy specialization University of Amsterdam, Amsterdam Business School

Supervisor: Dr. Panikos Georgallis

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Statement of Originality

This document is written by Student Mark Hebben 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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Abstract

Corporate social responsibility (CSR) is argued to enhance business performance when it is integrated in a firm’s strategy. However, CSR has never been studied before related to

different strategic orientations. Different strategic orientations might influence to what degree corporations engage in CSR, and to what extent that reflects to their CSR performance. This study examined two distinct strategic orientations – Prospector- and Defender orientation. It was expected that Prospector orientated firms engaged more in CSR than Defender orientated firms. Furthermore, CSR reporting enhances CSR data transparency, which was argued to enhance CSR performance for Prospector orientated firms. Therefore, it was expected that CSR reporting positively influenced the relationship between strategic orientations and CSR performance. Subsequently, Prospector orientated firms rely on their innovative reputations, therefore I expected that corporate reputation affects the relationship between strategic orientations and CSR. However, this study showed that only CSR reporting had a positive effect on the relationship between strategic orientations and CSR performance, indicating the importance of CSR reporting for managers. For both Prospector and Defender orientated firms CSR reporting had a positive effect, with a more certain effect for Prospector orientated firms. For the main effect of strategic orientations and the moderating effect of corporate reputation was no support. Future research could extent this research by investigating different conditions for measuring CSR reporting and/or corporate reputation, to see if it yields the same results.

Keywords: Corporate social responsibility (CSR), strategic orientations, Prospector, Defender, CSR reporting, CSR transparency, corporate reputation.

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1. Introduction

Corporate social responsibility (CSR) has been studied widely in the academic world (e.g. Dhalsrud, 2008; Du, Bhattacharya & Sen, 2010; Galbreath, 2010; Mohr & Webb, 2005; Nan & Heo, 2007; Sen, Bhattacharya & Korschun, 2006). CSR states an interwoven relationship between business and society, wherein a business has obligations to its society (Wood, 1991). In order for businesses to maximize a firm’s profits, CSR should even be integrated in a firm’s strategy (Baumgartner, 2014; Porter & Kramer, 2006). However, when reviewing prior studies on CSR a lot of research has been done on the importance, the benefits and the

profitability of CSR, and on the believability of CSR reporting messages (e.g. Birth, Illia, Lurati & Zamparini, 2008; Bowen & Aragon-Correa, 2014; Luo & Bhattacharya, 2006; McGuire, Sundgren & Schneeweis, 1988; Willers & Kulik, 2011).

Another way of looking at CSR is why – and to what extent – certain firms engage in CSR and others not. One way of looking at this gap is through considering the strategic orientations of different firms. Because even if firms compete in the same industry, they might respond differently to their environmental cues. This is due to different strategic

orientations a firm might follow (Gatignon & Xuereb, 1997; Miles, Snow, Meyer & Coleman, 1978). Strategic orientations reflect the strategic directions implemented by a firm to create the proper behavior for the continuous superior performance of businesses (Gatignon & Xuereb, 1997, p. 78).It is argued that every strategic orientation consists of different and unique long-term decisions (Gatignon & Xuereb, 1997). In addition, CSR practices are part of the beliefs that drives a company (Baumgartner, 2014; Galbreath, 2009; Porter and Kramer, 2006). According to this literature CSR could even be a source of competitiveness and should therefore be part of the strategic orientation of firms. However, the actual involvement and the way of presenting CSR differs across companies (Gray & Balmer 1998; Luo & Bhattacharya, 2006; Lyon & Maxwell, 2011; McWilliams & Siegel, 2001). This perspective leads to the

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7 conclusion that firms with distinct strategic orientations act differently regarding their

individual CSR policies, reporting and hence their overall CSR performance. This study investigates two distinct strategic orientations, which I believe influence the level of CSR across firms (Miles et al., 1978). These two orientations are referred to as Prospectors and Defenders. Prospector orientated firms are characterized by operating in dynamic

environments, which demand innovative strategies and perusing new market opportunities. Whereas Defender orientated firms operate mainly in stable environments, which these firms try to protect through cost-leadership. Both strategic orientation typologies adopt different business models which I expect influence their CSR involvement.

In addition, the communication of CSR is a critical component for firms in order to benefit from their CSR initiatives (Gray & Balmer, 1998). CSR reporting is a common feature for firms to maximize profits and show their goodwill to stakeholders (Bebbington, Larrinaga, Moneva, 2008; Dawkins, 2005; Du et al., 2010). The most common and accepted way of communicating CSR is through CSR- or sustainability reports (Dawkins, 2005; Hughey & Sulkowski, 2012; Morsing & Schultz, 2006). Since CSR should be integrated within a firm’s strategy and because the differences between the Prospector- and Defender strategic

orientation, I assume that CSR reporting affects the relationship between strategic orientations and CSR.

A firm has different strategies for maintaining or creating a favorable reputation (Bebbington et al., 2008). One of these reputation-building activities is engaging in CSR, it is clear that CSR positively influences a firm’s corporate reputation (Du et al., 2010; Mohr & Webb, 2005; Nan & Heo, 2007; Saeidi, Sofian, Saeidi, Saeidi & Saaeidi, 2015; Sen et al., 2006). However, in this study I search for the effect of corporate reputation on the

relationship between strategic orientations and CSR. Both strategic orientations rely on different business models which could indicate that their reputations have different

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8 components. Therefore, the effect of corporate reputation on the strategic orientation and CSR relationship might differ between the Prospector and Defender orientation.

Since its argued that different strategic orientations might result in differences in CSR performance, which could be affected by CSR reporting and/or corporate reputation, the research question of this study is as following:

What is the moderating effect of CSR reporting and corporate reputation on the relationship between different strategic orientations and CSR performance?

The sample population of this study consists of 119 large American firms, present on the S&P 500 index, representing the overall population of large American firms. To yield longitudinal results, I measured the variables over a time span of six years using a random effects panel data analysis.

This study adds new knowledge to the existing literature regarding strategic orientations and CSR. It was expected that strategic orientations affected the level of CSR performance, such that Prospector orientated firms engaged more in CSR and had therefor higher CSR performances. However, there is no difference in CSR performance regarding different strategic orientations. Subsequently, despite that CSR influences a firm’s corporate reputation, a firm’s corporate reputation has no effect on the relationship between strategic orientations and CSR performance. However, this study shows that CSR reporting affects the relationship between strategic orientations and a firm’s CSR performance. Hence, this study contributes to the understanding of the importance of CSR reporting transparency.

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2. Literature review and Hypotheses

In the following section I discuss the main insights of the existing literature regarding corporate social responsibility, strategic orientations, corporate reputation and CSR communication, and I will present the hypotheses of this research. First, this study will address CSR initiatives and explain why these are important in strategy formulation.

Thereafter all the relevant information of strategic orientations a company might follow will be outlined. I will explain why strategic orientations might enhance or damage a firm’s CSR performance, this will lead to the first hypothesis. Following that, I will present the main theories of CSR communications. Finally, the concept of corporate reputation will be explained in order to seek the effect on CSR and strategic orientations.

2.1 Corporate social responsibility

CSR has been a topic in the academic literature for a long period of time (Carroll, 1999; Dahlsrud, 2008). According to these studies, CSR was formally first named in the 1950s. Wood (1991) summarizes early definitions of CSR and states that the idea of CSR is an interwoven relationship between business and society. Wood builds upon ideas opposed by Carroll, who argued that a business has obligations to society that “must embody the economic, legal, ethical and discretionary categories of business performance1” (1979, p. 499). CSR states a relationship between a business and its society. Hence, I used the

1_{Following Carroll (1979; 1999) and Luo and Bhattacharya (2006), this definition includes four main categories.} First, firms have a responsibility to produce certain products and generate profits, which accumulates for the economic responsibility. Second, firms have a legal responsibility to produce economic value within an all-in law framework. Third, firms have ethical responsibilities which indicates that firms have moral obligations to define appropriate societal behavior. And lastly, firms are expected – by its stakeholders – to engage in corporate citizenship which is more than actions required by law, this is called philanthropic responsibility (Carrol, 1991).

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10 definition outlined by McWilliams and Siegel (2001)2. Later the environmental factor was added to this social driven definition (Dahlsrud, 2008). Therefore, I adjusted the definition of McWilliams and Siegel into: CSR is explained as actions that a business can engage in, that appears to further some social and environmental goods beyond the interests of the firm and that is required by law.

Following that, multiple scholars pointed out that CSR shows similarities with stakeholder theory (Clarkson, 1995; Donaldson & Preston, 1995; Friedman, 2007). Stakeholder theory is contrasting the classical “black box” input-output model of the corporation (Donaldson & Preston, 1995). They argue that all groups and persons, whose interests participating in an enterprise, want to benefit without one set of interests overruling the other. These groups include all stakeholders, consisting of shareholders and investors, customers, employees, suppliers, governments, communities and the natural environment, which are all affected by the firm (Galbreath, 2010). This is in line with the definition Carroll (1979) provided about CSR. He argues, with regard to his four categories, that a firm has obligations to its society, which corresponds to the above explained stakeholder theory wherein all participating groups and persons seek to benefit from the firm (Donaldson & Preston, 1995). These participating groups, include all primary stakeholders (Galbreath, 2010). Therefore, CSR and stakeholder theory show similarities. Both argue the importance of interwoven relations between business and society (or stakeholders). Following that, stakeholders also demand firms to engage in CSR (Delmas & Burbano, 2011). This

corresponds with the growing attention that is given to CSR over the past years (Carrol, 1991; Dahlsrud, 2008). Therefore, I conclude that CSR is an important factor for companies in order to be successful and should be taken account of when businesses define their business models

2_{“CSR are actions that appear to further some social good, beyond the interests of the firm and that which is}

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11 and strategies. This is important to know because one of the main drivers why firms engage in CSR is because of stakeholder pressure (Delmas & Burbano, 2011). It seems therefore quite logic that stakeholders demand firms to engage in CSR, since these stakeholders are the ones that also benefit from it.

2.1.1 Corporate social responsibility in strategy

CSR theories focusses merely on four main aspects (Garriga and Melé, 2004). One of these aspects is the objective of generating long-term profits. strategy is concerned with a firm’s ability to achieve its goals in the long term (firm’s mission) (Galbreath, 2010). So, both CSR and strategy are concerned with long-term decisions. In addition, Carrol outlined the

importance of CSR by introducing his four responsibilities. Thereafter, the research of Donaldson and Preston (1995) incorporates stakeholder theory, implying the responsibilities to various stakeholders. Both research directions indicate that a firm has various long-term responsibilities that define how the firm fulfills expectations placed on social issues (Carrol, 1979; Donaldson & Preston, 1995; Galbreath, 2010). These responsibilities are both internal and external driven and must meet the firm’s mission and are therefore part of a firm’s strategic issues (Galbreath, 2010).

In addition, companies must identify opportunities to benefit from society and the environment in order to strengthen its competitive position (Porter & Kramer, 2006). Subsequently, companies can combine general management instruments with sustainable development in order to perceive competitiveness (Baumgartner, 2004). The managerial implication of this thought is an integrated view on sustainable development. It argues the integration of sustainable (managerial) abilities into corporate values and strategies (Baumgartner, 2014). Following the views of Baumgartner (2014) and Porter and Kramer (2006) – who are all indicating the importance of a fit between strategy and CSR – combining

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12 with the long-term mission purchase theory presented by Galbreath (2010), shows the

importance of CSR in strategy orientation and formulation.

2.2 Strategic orientations

Even if firms compete in the same industry, they might respond differently to their environment. This is due to the fact that firms have different strategic orientations. More specifically, “strategic orientations reflect the strategic directions implemented by a firm to create the proper behavior for the continuous superior performance of businesses” (Gatignon & Xuereb, 1997, p. 78). Strategic orientations guide the firm towards strategy formulation, implementation and execution in order to achieve superior performance (Gatignon & Xuereb, 1997). Therefore, even within the same industry, firms react differently to internal- and external cues.

Within the academic literature there are several different typologies of strategic orientations. A well-known framework is presented by March (1991), who introduced exploration and exploitation strategies, which defines the strategic orientation on the basis of the choice to explore and/or exploit operating processes. Another famous typology is

presented by Porter (1980) who described strategic orientations on the basis of product differentiation and/or cost leadership. A different view of strategic orientation is presented by Treacy and Wiersma (1995) who described the strategic orientations as product leadership and/or operational excellence. Another example is the typology presented by Miles et al. (1978) who introduced alternative strategic orientations (Prospector vs. Defender) on the basis of strategy, structure and other variables. In all examples, the strategic orientations are ends of a continuum. Besides that, all studies also try to mix the strategies to some degree, exploiting both sides of the continuum (March, 1991; Miles et al., 1979; Porter, 1980; Treacy &

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13 The Miles and Snow (1978) typology is one of the most popular and well-cited typologies (Higgins, Omer, & Phillips, 2015). Miles et al. (1978) introduced three different main strategic orientations, Prospector-, Defender- and Analyzer orientation. These strategic orientations correspond with all other before described examples of strategic orientations. Thereafter, according to Higgins et al. (2015), the Miles and Snow (1978) typologies have been subjected to many different studies in many different settings and to numerous tests of its validity.

Summarizing these statements, I choose the Miles and Snow (1978) typology in this study due to the generalizability to other typologies, the numerous validity tests, and the generalizability to multiple industries. To narrow it further down, I will use only the first two strategic orientations – Defender vs. Prospector strategic orientation – because the Analyzer strategy has components of both Prospector- and Defender strategies and is an example of a mixed strategy. With this perspective, I follow the research of Higgins et al. (2015).

2.2.1 Miles and Snow’s strategic orientations

Miles et al. (1978) described that organizational behavior is only partly explained by

environmental conditions and that choices made by management are critical determinants of organizational structures and processes. They identified three problems for organizational adaptation (Miles et al., 1978): the entrepreneurial problem, which helps setting definitions of organizational domains, specific goods and market segments. Second, the engineering

problem, which establishes organizational systems of operation in order to produce and distribute the chosen goods and/or services. Lastly, the administrative problem which copes with dealing- and reducing uncertainty.

Coping with these problems happens simultaneously and the decisions of each of these dilemmas creates a continuum (Miles et al., 1978). On the one hand firms are defined as

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14 Prospectors, whereas on the other end of the continuum firms are defined as Defenders. The Prospector strategic orientation is characterized by innovations, whereas the Defender strategic orientation is characterized by efficiency (Miles et al., 1978). The third and fourth typology introduced by Miles et al. (1978) – Analyzer- and Reactor orientation – will not be studied in this paper3.

As stated before, the incentive to engage in CSR is presumably to reap long-term benefits and investigating opportunities. This assumption holds for both Prospector and Defender orientated firms, since both are still eager to generate profits (Miles et al., 1978), but the way they accumulate their profits differs. Prospector orientated firms engage more in exploration and innovation, whereas Defender orientated firms engage more in exploitation and efficiency (Higgins et al., 2015; Miles et al., 1978).

2.2.2 Prospector and Defender firms

The prime source of success for Prospector orientated firms is the capability of finding and exploiting new product and market opportunities (Miles et al., 1978). The Prospector

orientated firms follow a more innovation-driven strategy (Higgins et al., 2015). Their growth is on basis of product and market development and they create change in the industry (Miles et al., 1978). In order to maintain an innovative reputation, Prospector firms invest heavily in

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Between the two extreme strategic orientations, a third typology arises in the form of Analyzers, which defines a unique combination of both the Prospector- and Defender orientation (Miles et al., 1978). Furthermore, Miles et al. (1978) introduced a fourth type of a strategic orientation, Reactors, which they described as a strategic “failure”, because of inconsistencies in strategy, technology, structure and process. As mentioned before this study is interested in the extremes of the continuum and will therefore leave out the Analyzer typology. Also, the “failure” typology – Reactors – will be left aside since these firms operate in highly uncertain and instable environments in which their strategic choices are based on responding strategies (Miles et al., 1978).

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15 individual groups who scan for environmental- opportunities and demands (Miles et al.,

1978). This is supported by DeSarbo, Anthony Di Benedetto and Sinha (2005), who argued that prospector firms rely heavily on communication mechanisms in order to develop a stained competiveness. These characteristics are all examples of long-term strategies since an innovation is not meant for short-term benefits. One of the reasons why firms engage in CSR is to fulfill the wish of long-term economic performance (Porter & Kramer, 2006). Besides that, in order to let these new innovations be successful, companies need a healthy society. Education, healthcare and a productive workforce are important factors for sustained growth and profitability. Such a healthy society is in the end a source for the creation of new business opportunities (Porter & Kramer, 2006). The creation of new opportunities is the main

argument that defines the Prospector strategy (Miles et al., 1978). Subsequently, Prospector firms are characterized by entrepreneurship (Slater, Olson & Hult, 2006). Prospector orientated firms have a clear vision which represent the future of the organization which reflects good management and therefore is beneficial for long-term strategies (Chun, 2005; Slater et al., 2006). This also enhances the engagement in CSR practices since CSR is beneficial for long-term sustainability. I therefore expect Prospector firms to engage in CSR activities.

In contrast, Defender orientated firms are maintaining and defending a stable environment (Miles et al., 1978). Defender orientated firms act within a narrow and limited domain, and try to protect their market share (Marín, Rubio & Maya, 2012; Miles et al., 1978). Defender orientated firms try to act as efficient and formal as possible (Miles et al., 1978). Thereafter, Defender orientated firms engage in continuous improvements in

technology, which is closely related to their current goods and/or services (Miles et al., 1978). Unlike their Prospector counterparts, Defender orientated firms do not engage in (aggressive) product or market innovations. Defender firms stay in a limited range of products in order to

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16 focus more on resource efficiency and process improvements that might cut costs (DeSarbo et al., 2005). It is important for firms to utilize their resources in a proper manner in competitive markets (Bhattacharyya, Sahay, Pratap-Arora & Chaturvedi, 2008). This stimulates efficiency and can be a source of long-term sustainable profits. However, if firms want to engage in CSR they need to relocate their resources from their initial purpose (Bhattacharyya et al., 2008). Resources are always scarce and valuable, and undertaking CSR activities calls for the sacrifice of these resources in their initial purpose. For Defender orientated firms, which are argued to rely heavily on efficiency, this might be a harmful endeavor. On the contrary, customers are demanding firms to engage in CSR (Delmas & Burbano, 2011), and are therefore more satisfied when firms indeed engage in CSR. So, despite the fact that engaging in CSR might harm the efficiency of companies, where Defender firms heavily rely on, it is also said that engaging in CSR is beneficial since customers are demanding it. Besides that, in order to generate long-term profits, companies are obligated to engage in CSR, even Defender firms. It is the art of integrating CSR within the processes of firms that can create greater benefits (Bhattacharyya et al., 2008; Porter & Kramer, 2006).

Following the characteristics of both Prospector and Defender orientated firms, I expect Prospector orientated firms to engage more in CSR than Defender orientated firms. Firms following a Prospector strategy have a higher incentive to maintain an innovative reputation, which might enhance their engagement in CSR, whereas Defender orientated firms are more occupied with efficiency. For Defender driven firms, it is important that CSR activities are integrated within the actual company processes because otherwise it might harm their efficiency. Because CSR is demanded by customers, I expect both company types to engage in it, but the engagement for Prospector firms will be greater since they rely more on long-term exploration. In light of this reasoning I also expect that Prospector firms will have higher CSR performances than Defender firms. Hence, hypothesis 1 is as follow:

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17 Hypothesis 1: Strategic orientations positively influence a firms CSR, such that Prospector

orientated firms have a higher CSR performance.

2.3 Communicating corporate social responsibility

CSR reporting or CSR disclosure is defined as “the information that a company disclosures about its environmental impact and its relationship with its stakeholder by means of relevant communication channels” (Gamerschlag, Möller & Verbeeten, 2011, p. 235). Companies engage in CSR reporting because it is argued that CSR disclosure fits the demands of customers, who expect companies to engage in CSR (Delmas & Burbano, 2011). Moreover, companies engage in CSR information disclosure because this fit their “profit-maximizing CSR perspective” (Gamerschlag et al., 2011; Porter & Kramer, 2006, Du et al., 2010). Following that, it is important to review the relevant communication channels (Gamerschlag, et al., 2011). 80 percent of the 250 biggest companies worldwide in 2005 communicate their CSR activities through sustainability reports (Du et al., 2010).

Subsequently, the prime source of communication to opinion leading audiences is through the issuing of these sustainability reports (Dawkins, 2005). Moreover, even most consumers agree upon the idea that companies should communicate their CSR initiatives (Morsing & Schultz, 2006). It is argued that consumers think that issuing annual sustainability reports is the best way to communicate CSR (Morsing & Schultz, 2006). Furthermore, a greater availability of company CSR data is beneficial for the overall CSR reputation of firms (Hughey &

Sulkowski, 2012). Following that, they state that CSR data availability and -transparency could in turn lead to greater CSR conduct. It is therefore important that firms engage in CSR reporting since CSR reporting might enhance future CSR conduct. Following prior research, which indicated the importance of CSR-, Sustainability, Progress or Citizenship –reports as

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18 prime sources of CSR disclosure (Dawkins, 2005; Du et al., 2010; Morsing & Schultz, 2006), this study will examine the impact of these types of CSR information disclosure.

Following the characteristics of the Prospector strategic orientation, it is argued that Prospector orientated firms are characterized by entrepreneurship (Miles et al., 1978; Slater et al., 2006). Moreover, Prospector orientated firms scan their environments for new

environmental- opportunities and demands (Miles et al., 1978). This indicates that Prospector orientated firms operate at the far boundaries in order to seek new opportunities. Following prior research, engaging in CSR and CSR reporting is growing in attention over the past years (Carrol, 1991; Dahlsrud, 2008). Combining these statements, it would indicate that Prospector orientated firms are interested to fulfill these growing CSR (reporting) demands. Following these thoughts, it can be argued that CSR reporting triggers the company to engage even more in CSR, since companies are obligated to fulfill promises they have made in the past in such CSR reports and because it is growing in attention over the past years. It therefore can be argued that CSR reporting enhances the CSR engagement of Prospector orientated firms, which could indicate a virtuous cycle.

Subsequently, stakeholders are demanding firms to engage in CSR (Delmas & Burbano, 2011), this demand might enhance the CSR reporting transparency of firms. Defender orientated firms already ‘proved’ themselves and operate mainly in stable environments within their niche product-markets (Miles et al., 1978). For these firms fulfilling CSR demands is less important since it is argued that CSR engagement might relocate resources from their initial (more efficient) purpose (Bhattacharyya et al., 2008). Contrary to that, for Prospector orientated firms it is more important to be perceived as transparent, since these firms rely more on positive perceptions due to their innovative character. Since it was argued that greater CSR reporting transparency might lead to greater CSR conduct (Hughey & Sulkowski, 2012), it can be argued that the effect of CSR reporting

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19 enhances the engagement in CSR by Prospector orientated firms. These firms rely on the perspectives of consumers because these firms need to ‘prove’ themselves regarding their future innovations. The perceptions of consumers about these Prospector orientated firms could positively change when firms engage in CSR reporting, which will ultimately result in greater CSR engagement.

Following the idea that Prospector orientated firms are seeking new market opportunities, of which CSR might be a possibility, CSR engagement and CSR reporting could end up being a virtuous cycle. Besides that, it was argued that Prospector orientated firms rely on positive perceptions, which could indicate the importance of CSR reporting on the relationship between the Prospector strategic orientation and actual CSR performance. I therefore expect that CSR reporting positively influence the impact of the Prospector strategic orientation regarding their CSR engagement and performance. Following this reasoning hypothesis 2 is as follow:

Hypothesis 2: CSR reporting positively moderates the relationship between strategic orientations and actual CSR performance, such that it enhances the effect of the Prospector

orientation on CSR performance.

2.4 Corporate reputation

Reputation is linked to a company’s past and future actions and its appeal to all its key constituents (Fombrun, 1996; Roberts & Dowling, 2002). This thought is supported by Gotsi and Wilson who added the importance of experiences with the firm. Therefore, the following definition of corporate reputation will be deployed: “A corporate reputation is a

stakeholder’s overall evaluation of a company over time. This evaluation is based on the stakeholder’s direct experiences with the company, any other form of communication and

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20 symbolism that provides information about the firm’s actions and/or a comparison with the actions of other leading rival” (Gotsi & Wilson, 2001, p. 29).

It is argued that a corporate reputation can provide a company with a credible appeal, which could indicate that this company is reliable and will survive in the future (Chung, Yu, Choi, & Shin, 2015). This is more important to Prospector orientated firms than for Defender orientated firms, since Defender orientated firms are already perceived as ‘good’ since they rely on existing products and stable environments. For Prospector orientated firms, it is important that the company is perceived as reliable, which can stimulate the success of its future innovations. It was argued that these future innovations rely on healthy societies, entrepreneurship and clear representations of the future, which were all indicating more engagement in CSR by Prospector orientated firms than by Defender orientated firms (Chun, 2005; Porter & Kramer, 2006). So, since Prospector orientated firms rely on factors indicating a higher CSR engagement – on the basis of its innovative character – which is empowered by reliable reputations, I expect that corporate reputation positively influences the impact of the Prospector strategic type on CSR performance.

Thereafter, a corporate reputation indicates the aggregate past interactions between a firm and its stakeholders (Hond, Rehbein, Bakker & Lankveld, 2014). The better these past interactions, the better a company is perceived in the future. When stakeholders do not know the quality of the products or services ahead, they rely on these past interactions and

evaluations with the actor initializing the innovations (Stuart, 2000). In other words, before the quality of new products or services is widely known, firms are evaluated on what more the firm does. Because Prospector orientated firms rely on innovations, these firms will be

evaluated on past actions and reputations when these innovations are not yet available. Since stakeholders are demanding firms to engage in CSR (Delmas & Burbano, 2011), it could be argued that Prospector orientated firms seek to engage more in CSR following the fact that

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21 they will be evaluated on their reputations – which in turn increases by engaging in CSR (Du et al., 2010; Lii & Lee, 2012; Roberts & Dowling, 2002). Following these statements, I summarize that due to the fact that Prospector oriented firms will be evaluated on past interactions and reputations, these firms try to enhance their reputations by increasing their engagement in CSR. Therefore, I expect that the relationship between the Prospector strategic orientation and CSR performance is influenced by having enhanced corporate reputations, such that Prospector orientated firms engage more in CSR due to reputation building activities.

Following the ideas that Prospector orientated firms rely on factors indicating higher CSR engagement than Defender orientated firms, which is empowered by reliable reputations and the fact that Prospector firms are evaluated on reputational outcomes which enhances their engagement in CSR, I expect the relationship between strategic orientations and CSR performance to be moderated by favorable corporate reputations. Hence Hypothesis 3 is as follow:

Hypothesis 3: A firm’s corporate reputation positively moderates the relationship between strategic orientations and actual CSR performance, such that it enhances the effect of the

Prospector orientation on CSR performance.

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3. Methodology

The following chapter explains the research design of this study. First, the sampling strategy will be outlined. After that all the dependent, independent, moderator and control variables will be explained and operationalized. Lastly, I will explain the statistical model of this research, indicating a longitudinal panel-data analysis.

3.1 Sampling strategy

The overall sample population is based on large American firms. To select the sample, I looked at the S&P 500, which is an index of the 500 largest American companies trading common stock on either the NYSE or Nasdaq. During a time period of six years (2012-2017) companies were included given that they had no missing data on either advertisement expense or research and development expense. Applying this criterion gives me the means to

accurately measure the strategic orientations of these firms and ensures that firms in this study are comparable over time with regards to their strategic orientation. Furthermore, the S&P 500 index contains a wide variety of different companies operating in different industries and is therefore a good representation for the overall population of large American corporations. This filtering strategy resulted in a sample of 119 large American firms followed over a six-year period. Because of the excluded missing observations on advertisement- and research and development expense, a total of 714 individual observations were found for these companies in a time span of 2012 until 2017.

3.2 Dependent, independent and moderating variables

CSR. To measure dependent variable CSR, I used company based ratings. These ratings can be leveraged through the Thomson Reuters ASSET4 database using the total ESG company scores. I chose the total ESG ratings because these ratings combine social, environmental and

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23 corporate governance measures. This corresponds with my adopted working definition of CSR4. Results of these three sub measurements are grouped into ten different categories. A combination of these ten categories, weighted proportionately to the count of measures within each category formulates the overall ESG score. The ASSET4 ESG ratings provide objective, relevant and systematical environmental, social and corporate governance (ESG) information on the basis of over 250 key performance indicators.

Strategic orientation. Following prior research the descriptive STRATEGY will be used as a proxy to measure the composite strategic orientations of firms (Hambrick, 1983; Higgins et al., 2015; Ittner, Larcker & Rajan, 1997; Miles et al., 1978). To measure and construct the composite independent variable STRATEGY measure, I used the following variables: 1. R&D intensity, measured as a ratio of research and development expenditures to sales, 2. Employee intensity, measured as a ratio of employees to sales, 3. Marketing intensity,

measured as a ratio of advertisement expenditures to sales, 4. Capital intensity scaled by total assets, and 5. Historical growth numbers in sales. I retrieved data for these financial ratios from the Campustat North-America Daily database. The explanation of these ratios follows the study of Higgins et al. (2015). As Prospector firms are defined as innovative, their R&D expenditures will be higher than those of Defender firms. Since Defender firms are defined as more efficient I expect them to have fewer employees per dollar of sales. Because Prospector firms focus more on marketing activities than Defender firms, I expect them to have higher marketing expenditures (Bentley, Omer & Sharp, 2013). Since Defender firms are defined as more efficient, they will be more automatized than Prospector firms, therefore I expect their capital intensity by total assets to be higher. It is argued by Miles and Snow (1978) that

4_{“CSR is explained as actions that a business can engage in, that appears to further some social and} environmental goods beyond the interests of the firm and that is required by law.” (See p. 10 of this thesis).

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24 Prospector firms grow through product and market development which occurs more in

discharge and therefore I assume their historical growth numbers to be higher.

To further construct the STRATEGY variable, these five variables will be divided by forming quintiles, so the highest scoring quintile provides a score of 5, the next of 4, and further. Following this, per company a minimum score of 5 can be obtained and a maximum of 25. Only sub-variable 4 has to be reversed, in order to fit with the other variables. The higher the ranking on the STRATEGY measure the more a firm follows a Prospector

orientation. Alternatively, the lower the score the more a firm follows a Defender orientation. For a complete overview of the STRATEGY measurement construct I refer to appendix 1. CSR Reporting. I measured the quantity and transparency of CSR reporting as the total number of words used in either Sustainability-, Progress-, Citizenship- or CSR- reports issued on an annual basis. These reports were retrieved from company websites or company

archives. The LIWC software gave me the means to calculate the total words used in these reports. The greater the number of words used in such reports, the greater the data availability and -transparency. In order to measure CSR reporting consistently and give meaning to this variable, I standardized all observations.

Corporate reputation. Following prior research (Chun, 2005; Walker, 2010), I will use presence in the Fortune’s Most Admired Companies List as a proxy for corporate reputation. In this ranking, corporations are ranked following nine distinct criteria. Thereafter, more than 3500 executives had to choose out of the top 25 % performing corporations of each industry. This ensures the presence of corporations from multiple industries within the ranking. Ultimately, a list of the fifty best performing companies is presented. Because there are no scores attached to this ranking, I used this list as a basis to create a dummy variable for corporate reputation. Corporations which are present on the Fortune’s Most Admired Companies list are coded 1. Corporations not present on the list are coded 0.

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25 3.3 Control variables

Firm size. Following prior research (Fombrun & Shanley, 1990; Galbreath, 2010; Delmas & Burbano, 2011; Robers & Dowling, 2002), I control for firm size, measured in terms of total assets, as firm size influences CSR across companies. I retrieved data about total sales from the Campustat North-America Daily database.

Industry. Since some industries are more polluting than others, it can be argued that firms in certain industries are more prompt to engage in CSR. Therefore, I control for “dirty” and “green” industries. I will measure this through a dummy variable. Companies operating in dirty industries are coded 1, whereas the other companies are labeled 0. Following Etzion’s (2007) summary of dirty industries, companies operating in the chemical, automotive, forestry-paper-pulp or energy industry are labeled 1.

Profitability. Following prior research (Fombrun & Shanley, 1990; Galbreath, 2010; Roberts & Dowling, 2002), profitability influences CSR. Therefore, I control for profitability. Firm profitability will be measured through the return on assets (ROA). ROA indicates how profitable a company is relative to its total assets. I retrieved data through the Campustat North-America Daily database.

3.4 Statistical model

For this research data about 119 firms over the years 2012 until 2017 is gathered. This study uses a multidimensional data set, which is called panel data. This means that single

observations are interdependent, such that an observation in 2012 is interdependent with an observation in 2013 (Hayes, 2006). Following Hayes (2006) an ordinary regression analysis is not sufficient, since this does not take account for interdependency. The cross-sectional and time-series nature of the data indicates that a longitudinal analysis is necessary (Hayes, 2006). For this type of analysis, it is important to specify the within (fixed) or GLS (random) effects.

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26 For this study I presume random effects, since it is not possible to use a fixed model if some variables do not change over time (in this case variable ‘industry’ does not change over time).

Subsequently, I standardized all variables before creating interaction variables in order to mitigate any possible multicollinearity problems. In order to test the hypotheses, I used STATA 15 as statistical package to run the random (GLS) models.

4. Results

The following section provides the results of this research. First, the descriptive statistics for the variables of this study are presented with the corresponding overview of the data.

Thereafter, I performed a correlation analysis and the correlations are presented. Finally, multiple regressions were carried out in order to the test the stated hypotheses of this paper. In order to increase the internal validity of this paper I added a robustness test to yield the

interaction effects.

4.1 Descriptive statistics and correlation analysis

On page 28, table 1 provides the descriptive statistics and the bivariate correlations of the

variable-set of this paper. The correlation relationships were analyzed using the Pearson correlation coefficient. First, I will discuss the correlations between the dependent variable, (CSR) and the control variables. Thereafter, the correlations between CSR and the moderating variables (CSR reporting and corporate reputation) will be outlined. Subsequently, I discuss the correlations between the independent variable (STRATEGY) and the dependent variable. Lastly, I present the main correlations between moderating, independent and control

variables.

The sample consisted of 119 companies with 714 observations ranging from 2012 to 2017. Reviewing the correlations between the dependent variable and the control variables,

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27 there was a positive correlation between CSR and firm size (r = .225). Contrasting to that, the correlation of CSR and firm industry was weak and negative (r = -.077). Also, the correlation between CSR and firm industry was negative (r = -.104). Considering the correlations

between CSR and the moderating variables, there was a moderate positive correlation between CSR and CSR reporting (r = .381). Additionally, also the correlation between CSR and corporate reputation was positive (r = .159).

Considering the correlation between CSR and STRATEGY, these variables were negatively correlated (r = -.268). Reviewing the composite STRATEGY measure, it is good to understand how the correlation of STRATEGY is built up. I therefore included the

correlations of the sub-variables. Considering these sub-variables, CSR was weak and negatively correlated with R&D intensity (r = -.067), employee intensity (r = -.047), marketing intensity (r = -.072), and historical growth (r = -.262). The only positive correlation between CSR and a sub-variable of STRATEGY was found between CSR and capital intensity (r = .047).

Reviewing the independent variable and the moderating variables, STRATEGY was negatively correlated with CSR reporting (r = -.141). Also, STRATEGY and corporate reputation were negatively correlated (r = -.268). Considering the correlations between STRATEGY and the control variables, STRATEGY was negatively correlated with firm size

(r = -.109) and with industry (r = -.062), but positively correlated with profitability (r = .109). Moderating variable CSR reporting was positively correlated with firm size (r = .392)

and industry (r =.022), but negatively correlated with profitability (r = -.062). On the other hand, corporate reputation was moderately positive correlated with firm size (r = .459). Whereas corporate reputation was negatively correlated with industry (r = -.188) and

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28

Table 1. Descriptive Statistics and Correlation Matrix

N Mean S.D. 1. 2. 3. 4. 4a. 4b. 4c. 4d. 4e. 5. 6.

1. Firm size 714 28,643.13 54,687.46 2. Industry 714 .19 .40 -.007 3. Profitability 714 .22 .52 -.070 -.059 4. STRATEGY 714 20,40 2.26 -.109** -.062 .109** a. R&D intensity 714 .07 .11 -.110** .000 -.054 b. Employee intensity 714 .04 .00 -.075* -.057 .059 -.215** c. Marketing intensity 714 .03 .04 -.091* -.162** -.043 -.044 -.051 d. Capital intensity 714 .22 .22 0.92* .045 -.070 .090* .110** -.042 e. Historical growth 714 .06 .15 -.081* -.073 -.010 .104* -.048 -.035 -.084* 5. CSR reporting 628 13,470.32 24,248.07 .392** .022 -.062 -.141** -.053 -.079* -.028 .050 -.176** 6. Corporate reputation 714 .16 .37 .459** -.188** -.065 -.134** .016 -.025 -.030 .127** .055 .204** 7. CSR 607 77.23 25.61 .225** -.077 -.104** -.268** -.067 -.047 -.072 .047 -.262** .381** .159**

**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

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4.2 Regression analysis

Table 2 provides a summary of the random (GLS) estimation results. Model 1 provides an overview of the control variables. In model 2 the independent variable STRATEGY is added. Models 3 and 5 introduce the moderator variables, whereas models 4 and 6 provide the interaction variables. Table 3 includes the base model including both the Prospector and Defender sample. These sub-samples were created by splitting the overall sample in half based on the STRATEGY measure mean. The control variables are added in base models 7 and 9. The moderating effects are introduced in base models 8 and 10.

Hypothesis 1 states a positive effect of strategic orientations on CSR performance, such that Prospector orientated firms engage more in CSR than Defender orientated firms, and therefore have a higher CSR performance. Following the coefficients in model 2, there is no significant effect of strategic orientations on CSR performance (p = 0.225). Therefore, hypothesis 1 is not supported.

Hypothesis 2 postulates that CSR reporting positively moderates the relationship between strategic orientations and CSR. Considering the coefficients in model 3 and 4, CSR reporting has a positive and significant effect on CSR performance (p = 0.000). Also, the interaction effect between independent variable STRATEGY and moderator CSR reporting has a statistically positive and significant effect on the overall firm specific CSR score (p =

0.039). Therefore, hypothesis 2 is supported.

Hypothesis 3 states that a firm’s corporate reputation positively moderates the relationship between the firm’s strategic orientation and CSR performance, such that highly valued companies have higher CSR performances. Model 5 and 6 show no significant effect of corporate reputation on CSR performance (p = 0.575). Also, the interaction effect shows no significant effect (p = 0.822). Therefore, hypotheses 3 is not supported.

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4.3 Robustness test

In order to test if these results are valid and correct, I added a second test, which increases the internal validity of this paper, which yielded the same results. I restricted the sample of firms on the basis of the STRATEGY variable mean (M = 20.40), so that firms scoring lower than 20.40 were indicated to follow a more Defender type of strategic orientation, whereas firms scoring above 20.40 are following a more Prospector type of strategic orientation.

Considering table 3, CSR reporting has a positive and significant effect for Prospector orientated firms (p = 0.000). Subsequently, for Defender orientated firms the effect of CSR reporting is also statistically significant and positive (p = 0.029). The effect for Prospector orientated firms is with more certainty than that of Defender orientated firms (0.05 > p >

0.001). However, both models indicate a positive and significant effect of CSR reporting.

Hence, hypothesis 2 is supported.

For corporate reputation was no support found, considering table 3, there are no significant differences between Prospector or Defender orientated firms. Hence, there is indeed no statistical effect in support of hypothesis 3.

Following the results of the regression analysis and the robustness test, there is no significant support for the effect of different strategic orientations on CSR performance. Neither is there statistical significant support for a moderating effect of corporate reputation. However, CSR reporting positively moderates the relationship between strategic orientations and CSR performance. The results from the robustness test indicate that CSR reporting moderates the relationship between the Prospector and Defender orientation and CSR performance, such that the effect on the relationship between the Prospector orientation and CSR performance is more certain, this indicates that hypothesis 2 is supported.

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31 Table 2. GLS (random) effects model for CSR

Control STRATEGY CSR Reporting Corporate reputation

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Variables Coefficient SE Coefficient SE Coefficient SE Coefficient SE Coefficient SE Coefficient SE Firm size 0.000** (0.000) 0.000 0.000** (0.000) 0.000 0.000** (0.001) 0.000 0.000** (0.001) 0.000 0.000** (0.000) 0.000 0.000** (0.000) 0.000 Industry -4.483 (0.427) 2.030 -4.683 (0.385) 5.385 -5.884 (0.260) 5.220 -5.508 (0.283) 5.131 -4.479 (0.408) 5.414 -4.511 (0.406) 5.427 Profitability -9.226** _(0.000) -4.483 -9.125** _(0.000) 2.051 -11.294** _(0.000) 2.389 -11.294** _(0.000) 2.400 -9.048** _(0.000) 2.056 -9.049** _(0.000) 2.057 STRATEGY -0.494 _(0.225) 0.407 -0.674 _(0.122) 0.436 -0.652 _(0.134) 0.435 -0.505 _(0.575) 0.408 -0.496 _(0.227) 0.410 CSR reporting 3.899** _(0.000) 0.000 4.800** _(0.000) 0.000 STRATEGY x CSR reporting 1.888* (0.039) 0.914 Corporate Reputation 1.863 (0.575) 3.320 1.751 (0.602) 3.358 STRATEGY x Corporate reputation 0.194 (0.822) 0.863 Model F 38.87** 40.27** 56.56** 61.62** 40.52** 40.50** R2 0.062 0.077 0.148 0.169 0.079 0.079 N 607 607 569 569 607 607 31

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Table 3. GLS (random) effects model for CSR with Prospector and Defender sample

Prospector orientation Defender orientation

Model 7 Model 8 Model 9 Model 10

Variables Coefficient SE Coefficient SE Coefficient SE Coefficient SE Firm size 0.000** _(0.000) 0.000 0.000* _(0.023) 0.000 0.000** _(0.009) 0.000 0.000* _(0.015) 0.000 Industry -9.101 (0.205) 7.177 -3.066 (0.580) 6.727 -3.206 (0.573) 5.687 -5.823 (0.306) 5.724 Profitability -9.579** (0.003) 3.201 -8.964** (0.005) 3.252 -6.079* (0.022) 2.660 -13.781** (0.002) 4.261 CSR reporting 12.904** _(0.000) 3.015 2.035* _(0.029) 0.934 Corporate Reputation 3.647 (0.516) 5.611 -4.656 (0.297) 4.461 Model F 24.38** 42.38** 12.10** 22.85** R2 0.082 0.193 0.052 0.103 N 291 279 316 290 32

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5. Discussion

This study investigated the moderating effect of CSR reporting and corporate reputation on the relationship between different strategic orientations and CSR performance. In this chapter I will discuss the main findings and implications. Then, I discuss the contributions of this study to the existing literature and the practical implications for managers. Lastly, I explain the limitations of this research and set out recommendations for future research.

5.1 Main findings and implications

The past few decades there has been a lot of discussion on the integration of CSR in strategy formulation. Some studies argue that firms must fully integrate their CSR activities in order for both company and society to maximize the benefits (Baumgartner, 2014; Porter & Kramer, 2006). But as studies about CSR and strategy emerge, there has not yet been a research of CSR and the different strategic orientations of firms. Strategic orientations are considered to reflect strategic directions to create continuous superior performance (Gatignon & Xuereb, 1997), which perfectly matches the integrated purpose of CSR (Porter & Kramer, 2006).

However, this study found no support for the interaction between strategic orientations and CSR performance, such that Prospector orientated firms do not engage more in CSR than Defender orientated firms. The argument that Defender orientated firms seek efficiency and are afraid to relocate their resources to CSR purposes is therefore not supported. On the other hand, it was argued that Prospector orientated firms engage more in CSR as these companies need healthy societies to leverage their innovations. But there is no evidence supporting this one-sided statement. One of the reasons of the lack of difference between both Prospector and Defender orientated firms regarding CSR could be that CSR is already fully integrated in strategy, but that this integrated part of strategy formulation does not affect differences in the

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34 Prospector or Defender typology. This thought supports the reasoning of Delmas and Burbano (2011), who argued that firms need to engage in CSR because of the demands of consumers. However, this statement neglects the different strategic orientations, because to consumers it does not matter whether a firm tends to be more Prospector orientated than Defender

orientated. Both different orientated firms should engage in CSR and there should not be a difference between them.

On the other hand, consistent with my prediction, a greater availability and

transparency of CSR data positively influences the CSR performance of firms. This supports the findings of both Dawkins (2005) and Morsing and Schultz (2006), who argued that companies should communicate their CSR initiatives, in order to maximize their benefits (Gray & Balmer, 1998; Sen et al., 2006). Considering the set-up of the CSR reporting measurement, it can be argued that CSR reporting through sustainability reports is a fair and transparent way of reporting CSR initiatives, since a greater amount of words regarding CSR, states a positive relationship with the actual CSR rating. This conclusion follows the research of Morsing and Schultz (2006), who argued that issuing sustainability reports is the

preference of communicating CSR according to consumers.

Following the results of this study, there is significant support for the moderating effect of CSR reporting for both Prospector and Defender orientated firms. These results support the statements that through CSR reporting Prospector orientated firms seek to fulfill consumers’ demands to engage in CSR which in turn could lead to a virtuous cycle between actual CSR engagement and CSR reporting. This shows that through CSR reporting

Prospector orientated firms are triggered to enhance their CSR engagement. Furthermore, these results also indicate that Prospector orientated firms could use CSR reporting to be perceived as transparent, which in turn was deemed necessary for innovative firms. In this case CSR reporting transparency could indeed lead to greater CSR conduct, showing the

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35 moderating effect of CSR reporting. The evidence of the moderating effect of CSR reporting is more certain for Prospector orientated firms than for Defender orientated firms. This small difference may be due to the fact that Prospector orientated firms have a bigger incentive to engage in CSR reporting as this might enhance their perceived transparency which could lead to greater CSR conduct. Nevertheless, for both strategic orientation typologies CSR reporting could enhance actual CSR engagement.

Contrary to the results of CSR reporting, there has not been significant support for the effect of corporate reputation on the relationship between strategic orientations and CSR performance. Whereas the positive effects of CSR on corporate reputation is straightforward (Baumgartner, 2014; Birth et al., 2008; Du et al., 2010; Donaldson & Preston, 1995; Luo & Bhattacharya, 2006), the effect of corporate reputation on the strategic orientation and CSR relationship is less straightforward. A possible explanation could be the absence of

differences in reputation between both Prospector and Defender orientated firms. This entails that differences between more explorative or exploitative strategic orientations have no effect on firm specific reputations. Despite the statements of Miles et al. (1978) that Prospector firms have a lower degree of formalization and decentralized control, which should be beneficial for reputational values (Bebbington et al., 2008), also Defender orientated firms have their specific reputation creating qualities. A possible explanation could be the enduring and long-term engagements in the creation of core products and/or services, which might entail stability and assurance, which in turn is beneficial for a firm’s corporate reputation (Bebbington et al., 2008). Both Prospector and Defender firms can have highly valued reputations, and these highly valued reputations could be built up differently, but these

differences do not include differences in the component of CSR, which holds the same values across both Prospector and Defender orientated firms.

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5.2 Contributions of this study

The goal of this study was to empirically test the moderating effects of CSR reporting and corporate reputation on the relationship between a firm’s strategic orientation and CSR performance. This study enhances the CSR communication and strategic orientation research field. It shows that greater CSR reporting affects the relationship between strategic

orientations and CSR, such that the effect for Prospector orientated firms is more certain than for defender orientated firms, which means that greater CSR dataavailability and

-transparency is beneficial for the overall CSR performance of firms. The effect of CSR

reporting for both Prospector and Defender orientated firms were both significant. This entails that greater data-availability issued by firms regarding their CSR policy, not necessarily indicates that firms engage in greenwashing practices. It shows that reporting transparency is rewarded by higher CSR scores. For practical application, this study showed that managers should be aware when they communicate their CSR activities. This study showed that data-availability and -transparency is rewarded, which should come as no surprise because nowadays most customers demand firms to actually engage in CSR.

In addition, because of the greater benefits, CSR should be integrated in strategy formulation and integration, and because of the different strategic directions between

Prospector and Defender orientated firms, it was expected that there would be differences in how firms organize their CSR and how this affects their corresponding CSR performance. However, there were no significant effects of strategic orientations on CSR, this entails that different strategic directions do not necessarily indicate differences in CSR policies.

Therefore, it can be concluded that despite the fact CSR should be fully integrated within a firm’s strategy it does not necessarily mean that differences within strategies correspond with differences in CSR policies or CSR strategies.

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37 Hence, the findings of this study support the idea of integrated CSR, but leaves room for how different orientated firms integrate it within their own strategic directions. Subsequently, managers should be aware that data availability and transparency regarding CSR is positively associated with CSR performance and could therefore be a source for higher business

performance.

5.3 Limitations and future recommendations

Similar to other studies, this paper has some limitations that could set directions for future research opportunities. For the composite STRATEGY measure, I left out one of the sub-variables. I excluded the sub-variable employee fluctuation due to too many missing

observations. I believed that employee fluctuations do not had effects on the validity of this study since the composite STRAGEY variable of this study yields similar results as Higgins et al.’s study (2015). But of course, this is not without any noise and therefore for future studies this might be a possibility to extent the research field in order to see whether or not it would yield the same results.

Besides that, I only focused on two ‘extreme’ strategic orientations (Prospectors vs. Defenders) on the relationship with CSR performance, leaving out the third orientation typology, Analyzers. Of course, it is arguable that in today’s competitive environment firms entail characteristics of both the Prospector and Defender orientation. Analyzer orientated firms adopt characteristics of both Prospector and Defender orientations (Miles et al., 1978). Therefore, future studies could investigate the relationship of CSR performance with the third typology, Analyzers, and see if their relationship with CSR performance, CSR reporting and corporate reputation yields similar or other results.

Subsequently, in order to measure the strategic orientations adequately, I left out observations that had missing data on either R&D expenditures or advertisement

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38 expenditures. By doing so, I was able to analyze firms consistently in order to give them the label of a Prospector or Defender orientation. But missing data would not simply imply that the data was indeed missing. For some firms missing data could also imply their expenditures for either R&D- or advertisement expense was zero. This would indicate that firms, who do not have any R&D or advertisement expense, simply do not report about it, which the database interprets as missing. Including these missing data observations could give a complete other view on the sub-samples of Prospector and Defender firms. It might be interesting for future research directions to investigate other opportunities to increase the sample with the companies that had ‘missing’ data on either R&D or advertisement expense.

Thereafter, in order to measure the total data-availability regarding CSR, the variable CSR reporting was measured as the total amount of words used in CSR-, sustainability-, Progress- or Citizenship reports. However, despite consumers thinking that reports are the best source for CSR data, firms have multiple other means to report about their CSR activities. This study neglected company -websites, -brochures and -marketing campaigns. For future research, it might be interesting to see whether or not including these other means of CSR reporting/marketing, yields similar or different results. By including for instance marketing reporting means, future researchers could investigate the relationship of strategic orientations and different CSR communication styles, for example greenwashing.

Lastly, this study only researched American firms listed on the S&P 500 index, which might indicate that the results are generalizable to other large American firms which is the overall population for this study. However, it could be interesting to compare the results with other firms from different countries and therefore it might be an opportunity for future research to include firms based in different countries.

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6. Conclusion

This study shows no support for companies with distinct strategic orientations regarding differences in their CSR performance. Corporate reputation did not influence the relationship of these strategic orientations and a firm’s CSR performance, such that the effect of the Prospector orientation does not enhance CSR engagement. On the other hand, CSR reporting has a positive significant effect on the relationship between strategic orientations and CSR performance. For both distinct strategic orientation typologies, the relationship was

significant, with a more certain effect for Prospector orientated firms than for Defender orientated firms. These results indicate that the effect of the Prospector strategic orientation on CSR performance is enhanced by CSR reporting. Hence, these results answer the research question regarding the moderating effect of CSR reporting and corporate reputation on the relationship between strategic orientations and CSR performance. This study indicates and emphasizes the importance of data-availability and -transparency regarding a firm’s

individual CSR activities and corresponding CSR reporting. Future research could extend the conclusions of this study by investigating other conditions that might influence the various variables used in this study.

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Strategic orientation of CSR : the influence of strategic orientations on CSR performance moderated by CSR reporting and corporate reputation