Master Thesis
MSc Business Administration – Strategic Innovation Management
The Effect of Corporate Social Responsibility on Financial
Performance through Primary Stakeholders’ Orientation
By:
Gde Bagus Nicholaus Octafta
S3881660
1
The Effect of CSR Orientation and Primary Stakeholders’
Orientation on Financial Performance
University of Groningen Faculty of Economic & Business
MSc Business Administration Strategic Innovation Management
First Supervisor: dr. J. D. van der Bij Co-Assessor: dr. W. G. Biemans Date of Completion: 19/01/2020
Word Count: 15.090 (including references & appendix)
Gde Bagus Nicholaus Octafta
2
Table of Content
Introduction ... 6
Literature Review... 10
Corporate Social Responsibility ... 10
Financial Performance... 10
CSR Relationship with Primary Stakeholders ... 11
CSR and Supplier Orientation ... 11
CSR and Market Orientation ... 11
CSR and Local Community Orientation ... 12
The Relationship between Primary Stakeholders Orientation and Focal Firm’s Financial Performance ... 12
Stakeholder Theory ... 12
Supplier Orientation ... 13
Market Orientation ... 14
Local Community Orientation ... 16
CSR & Financial Performance ... 17
3
Analysis... 25
Confirmatory Factor Analysis ... 26
Path Analysis ... 27 Result ... 28 Discussion ... 30 Conclusion ... 34 Theoretical Implication ... 34 Managerial Implication ... 37
Limitation & Further Research ... 38
Bibliography ... 39
4
Abstract
Corporate Social Responsibility (CSR) has grown into an interesting and important subject of research for many of researchers. It outlines the important attention firms must put towards CSR orientation as it pays attention to societal, ethical, environmental, and sustainability aspects related to the firm activity and how it affects internal and external stakeholder. CSR gives insight of how it does not just create value for the firm, but also for the firm’s orientation towards its ‘primary stakeholders’. This research aims to analyze the growing importance of CSR in the global world of business and its effect to focal firm’s financial performance both in the short-term and long-term. By conducting a LISREL analysis on a dataset collected from managers’ responses in 88 firms located in The Netherlands and Belgium, this study cannot provide conclusive evidence on the direct positive impact of CSR on the financial performance. Despite of the inconclusive evidence of CSR orientation effect on financial performance, this study is able to provide empirical evidence on how CSR orientation can affect financial performance through the primary stakeholders as the mediator. This study also provides empirical evidence of the importance of primary stakeholders’ orientation for the firm’s short-term and long-term financial performance. Theoretically, this thesis contributes to the literature in the domain of CSR by adding to the void that exist in understanding how CSR impacts the financial performance of the firm and how multiple primary stakeholders can have a direct effect and act as the mediator to the firm’s financial performance. Practically, this study is capable of establishing clear guidelines to be followed by business managers in developing competitive strategies that would be the driving force behind higher financial performance through its growth strategy.
Keywords: CSR, CSR orientation, stakeholder, primary stakeholders, supplier orientation, market
5
Acknowledgement
This thesis summarized my whole master study here in University of Groningen. It may take a short period of 4 months to complete, but this thesis is a significant part of my academic journey from my bachelor degree to my master study here in Groningen. I am thankful to be given the opportunity to write and finish this thesis in a good manner.
6
Introduction
A considerable stream of research has emerged, suggesting that Corporate Social Responsibility (CSR) orientation is the key to stimulating long-term stability, growth and sustainable performance in a dynamic and changing environment (Luo & Homburg, 2007; Gyves & O’Higgins, 2008; Prado-Lorenzo, García Sánchez, Gallego-Álvarez, & Rodríguez-Domínguez, 2008). Firms have engaged in CSR programs in an effort to enhance their image in society and to compete with global competition in which firms are increasingly using CSR as a marketing tool to establish good public perception. Through devoting greater financial resource to CSR, several businesses have responded to those concerns. Over recent decades, the need for corporate accountability has increased which includes legal, social, ethical, and financial aspects. Firms are increasingly expected to pay attention to ethical, environmental and sustainability issues. Increasing numbers of customers look not only at the financial performance of a firm’s portfolio, but also at how firms serve their social responsibilities (Barnett & Solomon, 2006). Even with the importance of CSR some scholars have mentioned, managers of some firms have refused, maintaining that increased CSR spending is incompatible with their attempts to maximize profits. This attempt at maximizing profits means that managers may have to reduce costs, with one of them being CSR because CSR can attribute a lot of cost to the firm when the firm wants to carry out its CSR initiatives.
7
CSR, they discover that it can be much more than an expense, corporate philanthropy, or competitive advantage. In particular, the authors say the influence of CSR on corporate financial performance will be beneficial if managers and directors are able to prioritize their social agendas in order to achieve greater social impact. For a CSR action to be undertaken by a firm, the benefits of engaging in this activity must offset the high costs associated with the additional resources that must be allocated for the firm to achieve CSR status. Friedman (1970) concludes that the only responsibility of a firm is to maximize its profits because any additional costs incurred by CSR could damage profits.
Although CSR has some clear definitions, it has different interpretation and definition from scholars that did their research regarding CSR. CSR has always been related with the concept of stakeholders. Michelon, Boesso, & Kumar (2013) conclude that whether the firm’s stakeholders have been identified and prioritized in their salience, the firm should link its CSR initiatives to the preferences of the most salient or the more relevant groups of stakeholders. The simple awareness of the various stakeholders does not mean the firm has socially responsible behavior; it is necessary to know what the most relevant stakeholders are and to what degree their interests have been incorporated into the strategic objectives of management (Moneva, Rivera-Lirio, & Munoz-Torres, 2007). Freeman (1984) defines stakeholders as individual or group that affect or is affected by firm’s activities. In line with definition by the author’s definition, primary stakeholders are the ones that affect the firm’s performance and secondary stakeholders are the ones that are affected by focal firm’s strategy or activities. The feature that separates primary from secondary stakeholders is the essence of the relationship with the firm, in which primary stakeholders are those with a mutual and direct relationship with the firm, while secondary stakeholders are influence by these relationships more indirectly (Van der Laan, Van Ees, & Van Witteloostuijn, 2008). The firm’s stakeholder orientation observed in this research is the primary stakeholders which are the suppliers, customers, and local community as the focal firm’s orientation towards these stakeholders can affect firm’s financial performance.
8
Barney (1991), aligned with the Resource-Based View (RBV, emphasizes on the VRIN (Valuable, Rare, Imperfectly Imitable and Non-substitutable) conditions of resources that a stakeholder’s capacity for value creation is greater if the stakeholder’s resources are stronger, imply a causal ambiguity, and are socially complex. This reasoning establishes two different type of stakeholders. Stakeholders can be classified into primary and secondary. The VRIN condition is the realization that primary stakeholders are in an appropriate position than secondary stakeholders to create long term value for the firm because the interaction of the primary stakeholder with firm is more firm-specific and socially complex (Berman, Wicks, Kotha, & Jones, 1999).
CSR’s impact on the firm performance through its multiple stakeholder’s orientation is not fully researched even though it has emerged as an important resource for firms (Berman, Wicks, Kotha, & Jones, 1999). Most empirical researches that studies the relationship of the CSR and financial performance tend to focus on the short-term which makes us wanting to also research this on the on the long-term perspective. There are numerous studies regarding the impact of CSR on firm performance (McWilliams & Siegel, 2000) but we cannot find many that addresses how CSR impacts financial performance through stakeholder orientation. Based on the literature gap and the goal of this research, we have formulated a research question that will assess, analyze and produce result on the effect of CSR on the financial performance of the focal firm. The research
question that we have constructed and formulated to support this research is:
How can Corporate Social Responsibility impact the firm performance through its effect on the different primary stakeholders?
9
10
Literature Review Corporate Social Responsibility
Corporate social responsibility (CSR) is about the commitment of business to sustainable development (Mathis, 2007). Khoury, Rostami, & Turnbull (1999) defined corporate social responsibility as the overall relationship of the corporation with all of its stakeholders. These include customers, employees, communities, owners/investors, government, suppliers and competitors. Elements of social responsibility include investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance. Carrol (1979) defined CSR as the social responsibility of business that encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. CSR can be a proactive business strategy and an effective marketing tool to create and sustain a competitive advantage (Lin, Yang, & Liou, 2009). CSR is an answer to the societal uncertainties that business corporations have to cope within the present dynamic, global, and technological social contexts (van Beurden & Gossling, 2008).
Financial Performance
11
CSR Relationship with Primary Stakeholders CSR and Supplier Orientation
According to Jafari, Jimenez, & Frankwick (2015), supplier orientation is the pattern of mutual beliefs and values that help management identify and handle suppliers in creating superior value that will help the firm assess its current and potential suppliers and understand how important it is to build superior value. Not only do firms need to look at price and service quality when selecting suppliers, but also suppliers’ sustainability practices that may impact a firm’s total environmental impact and society as a whole (Carter & Easton, 2011).
The standards of CSR requirements for suppliers include: payment of living wages to workers at both outsourced plant locations and suppliers’ home locations; health and safety of suppliers’ products; environmental impact of suppliers; ethical procurement of raw materials by suppliers; and elimination of child labor and human rights violations at suppliers’ locations (Mishra & Suar, 2010).
Through ensuring that suppliers meet with high CSR requirements, an organization may boost its global market reputation and increase financial performance. On the other hand, suppliers’ breach of CSR standards destroys the reputation of a firm and has an adverse effect on its performance. Therefore, we hypothesize:
Hypothesis 1: CSR has a positive influence on Supplier Orientation
CSR and Market Orientation
12
A favorable customer view of product quality and safety has been found to lead to increased revenue and firm efficiency (Waddock & Graves, 1997). Socially responsible businesses can achieve greater profitability by marketing to ‘morally aware consumers’ either because of an increase in sales volume or because of the ability to charge a higher unit price (Byus, Deis, & Ouyang, 2010). Therefore, we hypothesize:
Hypothesis 2: CSR has a positive influence on Market Orientation
CSR and Local Community Orientation
CSR to the community is seen primarily in terms of philanthropic donations, public-private partnerships, community relationships, and participation in social and economic development issues as these actions can be treated as tools to enhance brand image and build reputation (Lech, 2013). Corporate philanthropy is exceptionally positive, affecting corporate financial performance, as decisions on charitable contributions can be made strategically to raise the image and reputation of a firm and to increase the value of its ‘moral capital’ (Wang & Qian, 2011).
Investments in community development programs have also been found to help a firm achieve competitive advantages through tax savings and lower regulatory burden (Waddock & Graves, 1997). Revenues are increasing as customers prefer environmentally-friendly business products as investment in environmental management programs reduce costs arising from environmental disasters, raw material pollution and inefficient manufacturing processes (Lech, 2013). Therefore, we hypothesize:
Hypothesis 3: CSR has a positive influence on Local Community Orientation
The Relationship between Primary Stakeholders Orientation and Focal Firm’s Financial Performance
Stakeholder Theory
13
organizations – in order to understand their actions, motivations, interrelationships and interests; and to determine the impact and resources they have on decision-making or implementation processes (Varzavasovzky & Brugha, 2000). The influence of stakeholders in organizational strategy requires responses on behalf of the firm reflecting the potential power, whether to threaten or to cooperate, of each stakeholder within a context of mutually exchanging interests and benefit (Mainardes, Alves, & Raposo, 2011). Stakeholder theory proponents aim to explain what managers are currently doing in relation to stakeholder relationships, what would happen if managers adhered to stakeholder management standards and what managers should do in relation to interacting with firm stakeholders (Jones, 1995). Stakeholder theory claims that the well-being of business is managed in a reciprocity benefits way by meeting the needs of the firm’s most important stakeholders (Walsh, 2005). Stakeholder theory’s instrumental view indicates that firms that serve the interests of a broad group of stakeholders enjoy higher performance levels than firms that primarily focused on one or a few stakeholders (Donaldson & Preston, 1995; Jones 1995).
Supplier Orientation
Supplier orientation has frequently been exemplified using the Japanese Keiretsus system in which key suppliers are involved in decision and execution processes related to product development (Dyer, 1996). In an attempt to adapt and anticipate growth, changing trends and developments in the customer market, firms rely on suppliers’ resources to ensure that these critical customer requirements are met (Ulrich & Barney, 1984). The market-oriented focal firm is becoming increasingly aware that end-user-oriented suppliers are critical to their success. Suppliers are an integral part of the firm’s strategy in order to meet the downstream customer needs (Kibbeling, van der Bij, & van Weele, 2013).
14
Supplier relationships are a vital practice for many businesses to strengthen their competitive position as research shows that good relations with suppliers have a positive impact on performance (Soehadi, 2003). Productive partnerships between suppliers create network and supply chain productivity for business performance (Post, Preston, & Sachs, 2002). In order to obtain more favorable conditions for trade and minimize ambiguity in the procurement of the necessary resources, the focal firm should try to build a strategic alliance with its main supplier (Casciaro & Pikorski, 2005). This coordination involves at least the sharing of strategic information (Klein & Rai, 2009), for example, details on the needs and requirements of the end user.
Yang, Aydin, Babich, & Beil (2009) concluded that effective communication is critical in facilitating the accessibility of data between partner firms, not only improving the flow of information between buyers and suppliers (Brown & Magill, 1999) and reinforcing the relationship between firms (Noordewier, John, & Nevin, 1990), but also promoting cooperation between firms for effective economic trade. In other words, communication improves the understanding of quality needs of partner firms, engendering a cooperative relationship in which firms are geared towards their common operational goals by conforming to the mutually desired quality requirements in the buyer-supplier relationship. Therefore, we hypothesize:
Hypothesis 4: Supplier orientation is positively associated with the firm’s financial performance
Market Orientation
15
By definition, a market-oriented organization must adapt to the ever-changing conditions of its competitive environment in order to constantly provide appropriate and timely goods or services that satisfy its customers’ needs and demands (Lee, Kim, Seo, & Hight, 2015). Slater & Narver (1994) stated that market orientation is characterized with the firm’s trait of aiming to continuously deliver superior value to its customers. They further stated that in the creation of this value, it entails firm-wide commitment of continuously gathering information and coordinate customers’ needs, competitors’ capabilities, and the provisions of other significant market agent and authorities. Kibbeling, van der Bij, & van Weele (2013) define Market Orientation as the set of cross-functional processes and activities directed at creating and satisfying customers through continuous needs assessment. They argued that market orientation, particularly customer, can help a firm to identify the demands that are imposed on the firm by stakeholders. Market-oriented firms differentiate from other firms by their proficiency to reveal latent customer needs and their willingness to fulfill current customer needs and to control future demands by exploring new opportunities (Menguc & Auh, 2006). Market orientation paradigm suggests that an organizational culture committed to generating and reacting to information from the product market provides firms with the basis for achieving a sustained competitive advantage, and in turn, increased firm performance (Line, Runyan, & Gonzalez-Padron, 2019). Market orientation represents the orientation of a firm towards generating superior value for customers, and plays a fundamental role in corporate management and planning by leading organizations to efficiently and effectively generate superior value and is recognized by RBV as a specific tool (Liu, Ke, Wei, & Hua, 2013). For this particular research, we are focusing on customer orientation. A number of researches stated that out of the three components of market orientation, customer orientation has the most significant effect on firm’s performance. In line with the characteristic of market orientation set by Slater & Narver (1994), they state that the rationale behind the high profiling of customer orientation is because of a marketing concept which aims and prioritizes interest of customers first. Customer orientation advocates a continuous and proactive firm trait on meeting customers’ interests, which foster and ensure a continuous innovation in the firm activity. Therefore, we hypothesize:
16
Local Community Orientation
To ensure a successful operation of the firm, it must emphasize that in poor economy markets, transactions are often governed by informal governance mechanisms rather than contracts. This makes firms having to build legitimacy and trust and have to embed themselves in the network members. This often requires intermediaries such as influential community members to link firms to these markets as the firms are considered outsiders by the local communities (Puffer, McCarthy, & Boisot, 2010). CSR towards the community is seen mostly as a philanthropic donation, public-private partnerships, community relationships, and participation in social and economic development issues. Corporate philanthropy can be seen as a way in which firms attempt to build better relations with their primary stakeholders such as an increased participation and support on the part of the community to invoke a positive relationship and response (Lech, 2013).
Firms are faced with a trade-off between different social responsibility and financial performance aspects. They incur costs from actions benefiting stakeholders that put them at an economic disadvantage relative to firms that do not respond positively to these stakeholders’ claims (Ullmann, 1985). These costs can result from activities such as charitable contributions, compliance with comprehensive environmental or labor safety regulations, and good relations with the community and NGOs (McWilliams & Siegel, 2001). On the other hand, the firms may benefit from these activities in the form of higher customer good will (Moskowitz, 1972).
The key components for firms to add optimum value to society and the communities where the business is operating are through establishing a strong commitment to corporate and social governance, establishing an open dialogue with external stakeholders and having a determination to achieve environmental sustainability (Zairi & Peters, 2002). Local community orientation has been related to managers paying more attention to the social climate in which their business is incorporated, as well as the use of networking and philanthropic initiatives (Marquis, Glynn, & Davis, 2007). Many researches available is limited to corporate philanthropy review (Wood & Jones, 1995). In some research, because of its capacity to avoid disputes, local community is considered to have an influence because communities open up’ licenses to operate’ according to Post, Preston, & Sachs (2002).
17
(1995) argued that firms are reorienting corporate community relations to fit the firm’s broader strategic plan. Altman (1998) found, through an interview with top manager and community relations officers, that many executives believe that community involvement is a business imperative and that this involvement often creates competitive advantage for the firm. Other researches also suggested that good community relations create a competitive advantage for the focal firm through tax advantages, decrease in regulatory burden, and improvement in the quality of local labor (Waddock & Graves, 1997). To examine the effect of local community’s behavior on focal firm’s financial performance, we therefore hypothesize:
Hypothesis 6: Local Community has a positive direct influence to firm’s financial performance
CSR & Financial Performance
According to Lord Tim Clement (2002), CSR is of the utmost importance and how it is expressed and reported is critical as CSR lets a firm develop customer loyalty, combat claims of corporate greed, avoid expensive class action suits, lower the equity risk premium for the firm and helps recruit, empower, and maintain skilled employees. It is also possible to develop arguments in favor of a positive relationship between CSR and financial performance within a resource-based theory (Rajput, Batra, & Pathak, 2012). The resource-based theory considers a firm as a set of unique resources and skills that form the basis for the strategy of the firm and are the primary source of its profitability (Greening & Turban, 2000). Resource-based theory stresses that services that are sources of competitive advantage are not highly mobile across industries, so businesses may not easily be able to replicate how resources are used within other firms. CSR in this case is aligned with VRIN characteristics of resource which are valuable, rare, inimitable, and non-substitutable which creates a competitive advantage for the focal firm. Investment in socially responsible activities has important consequences in the creation of the above mentioned basic intangible resources, so CSR can be seen as having strategic value for firms (Branco & Rodrigues, 2006). Considered an active source of competitive advantage, CSR can be a proactive business strategy and an effective marketing tool to create and sustain a competitive advantage (Maignan & Ferrell, 2001).
A theory that can be associated with how CSR can affect financial performance is called
18
due to the firm’s own capital, usually dedicated to the predefined activities (Fauzi & Idris, 2009). The role of the resource is to allow the organization to respond effectively to the internal transition pressure or to external change pressure (Buchholtz, Amason, & Rutherford, 1999). The resource that firm needs to adapt effectively is slack in nature, which is described as any accessible or free tool (financial and other operational resource) used to accomplish the firm's specific goal (Bourgeois, 1981; Jensen, 1986). Waddock & Graves (1997) state that slack resource will be available to allow the organization to provide corporate social success such as social and community ties, relationships with employees, and environmental performance when the firm’s financial performance improves. This theory implies that when a slack resource becomes available, firms can focus on CSR initiatives without sacrificing costs using the available slack resource to execute these CSR initiatives. Slack resource, with this rationale, allows managers to still maximize profit and satisfy shareholders by allocating slack resources that the firm has to its own CSR initiatives without compromising the firm’s financial performance.
On the other hand, there is a contrary, though less common view of the interplay between CSR and FP, which holds that, despite socially responsible initiatives, costly companies frequently face a trade-off between social and financial results (Zabroek, 2014). That is, to implement CSR policies, firms frequently incur costs that put them at an economic disadvantage compared to other, less socially involved companies (Aupperle, Carroll, & Hatfield, 1985). CSR adoption increases the potential for cost escalations and performance impairments. Henderson (2001) states that managers will be charged with wide-ranging goals, engaging with external consultants in a time-consuming process of discussion. This would require new accounting, auditing and monitoring systems if they practice CSR that may offset any CSR gains.
Hypothesis 7: CSR has a positive influence on firm’s financial performance
Interaction Effect
19
impacts have been impactful enough that they have led to the development of a supplier code of conduct in some cases (Mamic, 2005).
Firms can positively impact the local community by selecting and supporting local suppliers when possible (Carter & Jennings, 2002). Sourcing from minority-owned suppliers plays a key role in strengthening the economic outlook of minority communities (Carter, Auskalnis, & Ketchum, 1999). As consumers are aware of the local development impact of corporate supplier decisions, they pressured firms to do business in local communities, which necessitated working with minority enterprises (Rogerson, 2012).
Based on the explanation above, the interaction between supplier and local communities pushes a focal firm to carefully select its suppliers. Since the supplier selected by the firm can be the one that is opposed by the local community, it ultimately leads to opposition from the local community toward the focal firm on conducting business in their area. Other than carefully selecting its suppliers, a focal firm can ensure the local community support by using and empowering local community owned businesses. This allows the firm to get good attention and intention from the local community to support the firm’s operation. Therefore, we hypothesis:
Hypothesis 8: The interaction between supplier orientation and local community has a positive influence on focal firm’s financial performance
Mediation Effect
20
They also suggest that businesses with a good CSR and stakeholder focus respectively increase the value of shareholders and meet obligations toward society. With high levels of responsibility or good relations with stakeholders, businesses can face less financial risk because they will enjoy more stable relationships with government and the financial community (McGuire, Sundgren, & Schneeweis, 1988).
McWilliams & Siegel (2001) state that companies invest in social activities because they want to meet stakeholders’ demands. Firms have to face a trade-off between various aspects of social responsibility and financial performance as they incur costs from actions benefitting stakeholders, which put them at an economic disadvantage compared to organizations that do not respond positively to these stakeholders’ claims (Ullmann, 1985). Such costs can arise from activities such as charitable contributions, compliance with stringent environmental or worker safety regulations, and good relations with the community and NGOs (McWilliams & Siegel, 2000). Firms may benefit from socially responsible behavior in terms of employee morale and profitability and the trust of their customers (Moskowitz, 1972).
21
Research Methodology Sample
For this research, we will employ an existing database that consists of data from 88 firms. The data that will be used is from only one source, although the data has been collected from three different sources that include executives from the focal firm, key supplier, and the business points collected from three professional platforms in the Netherlands and Belgium. The dataset used for this particular research is obtained from the research of Kibbeling, van der Bij, & van Weele (2013), and this research is based on that particular research. This dataset was analyzed using LISREL statistical software. The firms include MVO (CSR Netherlands), VOKA Chamber of Commerce, Kempen and buyer’s cooperative INKA. Although the original sample set consisted of 582 business-to-business firms, only 88 focal firms and their key suppliers and customers responses were received. Of these 582 businesses, 182 (34.5%) agreed to take part in the research and received a link or copy of their personal questionnaire. After email and phone updates, they received 125 (68.7% of the questionnaires sent) completed questionnaires. They received contact details from 98 suppliers and 95 customers (53.3% of the questionnaire participants). Their questionnaire was issued to these 193 referenced persons at supplier and client companies, and 185 were returned after several reminders. Only aligned chains were included in their paper and the final number in this paper was 88 chains with complete data from all three supply chain partners (48.4% of the focal firms that received the questionnaire and thus could lead to matched chains of questionnaires).
The focal firms from which data was collected operated primarily in manufacturing, construction, information and communication, wholesale and retail trade, administrative and support service activities, and other industries. A questionnaire served as the primary means of data collection.
22
separately into Dutch by two independent translators whereas the Dutch version was translated into English by two separate translators.
Dependent variable
For the dependent variable in this research, financial performance of the focal firm will be used. A subjective eight-item scale based on the study by Narver & Slater (1990) and Spanos & Lioukas (2001) will be employed that includes dimensions such as profit margin, return on investments, return on equity, net profits, and so on. The analysis on the financial takes two measures which are short-term and long-term financial performance of the firm based on the separation of the financial performance measure on the dataset used for this analysis.
The measures used on the dataset for short-term financial performance are the firm’s
Return on Shares which is the net income divided by book value of shares, Return on Investment which is net profit divided by total possession of shares, Profit Margin which is net
income deducted with income from sales, and Net Profit which is the profit before tax or usually called EBIT or earnings before interest and tax. Aside from the measures from the perspective of the firm, the term financial performance also take measure from the perspective of the short-term financial orientation of the firm. Short-short-term financial performance is usually associated with focal firm’s financial performance that occurs within a year. This type of financial performance can be measured through the firm’s quarterly or semi-annual financial performance. These two types of interim financial performance can be used as a basis for analysis on the next period of financial performance within the same year.
23
Independent variable
This research will employ an independent variable which is Corporate Social Responsibility (CSR). For CSR measurement, the three prominent application categories outlined by Bansal (2005) that include environmental assessment, social issue management and ethical business behavior. These categories have been used and adapted for the items in the scale of Deshpande & Farley (1998). CSR within the data set consists of 9 variables that are measured with a 7-point, Likert-type scale. These variables consist of 9 different question or dimension of firm’s CSR initiatives in regard to the focal firm’s CSR orientation.
Mediating variable
Supplier Orientation, Customer Orientation and Local Community will be considered as the mediating variables that affect the financial performance of the firm. The scale developed by Deshpande & Farley (1998) will be used for the measurement of market orientation. For supplier orientation, the measurement idea was extracted from the six-item scale of Hult, Ketchen Jr., Adams, & Mena (2008) and Deshpande & Farley (1998). The scale from Hult, Ketchen Jr., Adams, & Mena (2008) and Deshpande & Farley (1998) is considered fit for supplier orientation as the scale by Hurley & Hult (1998) does not entirely pictures the variable in terms of the stakeholder theory. This issue has been corrected by the inclusion of Deshpande & Farley (1998).
Control Variable
24
are expected to have more innovation. When innovativeness is low, though, business behavior may mimic other best practices, not inherently in different ways or with different activities, but with "common activities" based on existing and unchallenged patterns. Firm-level innovativeness (five items) was measured with a 7-point, Likert-type scale similar from what is used by Hurley & Hult (1998).
25
Analysis
Within our conceptual model, Table 1 displays the descriptive statistics and associations for the constructions. We began by purifying our measurement scales using a primary component analysis with varimax rotation within SAS 9.2 to conduct an exploratory factor analysis (EFA) The analysis for the primary, mediating, and independent variables was done. We checked each construct after completing the EFA, and deleted items that loaded on several constructs or had small items to create factor loadings. Subsequently, in LISREL 8.8, we conducted a confirmatory factor analysis (CFA) to test for possible additional changes by maximum likelihood calculations. The CFA was also introduced independently for the primary, mediating, and independent variables. The CFA-based measuring models are presented in Table 2a (short-term) and 2b (long-term).
Table 1: Descriptive Statistics & Correlation Matrix – Financial Performance
Mean Std. Deviation A B C D E F G
Supplier Orientation A 4.7455 1.07756
Market Orientation B 5.4886 .96110 .391**
Local Community Orientation C 4.2841 1.48517 .309** .246*
CSR Orientation D 5.2330 .94823 .353** .444** .456**
Innovativeness E 5.2765 1.13374 .331** .441** .283** .447**
Market Turbulence F 4.3466 1.30947 .342** .348** .167 .252* .327**
Short-Term Financial Performance G 4.4470 1.14681 .274** .132 .062 .153 .186 .169
Long-Term Financial Performance H 4.6591 1.17272 .029 .172 .101 .138 .298** .151 -.155
(*p<0.05 **p<0.01)
26
Table 2a: Factor Loading, T-Value, and Cronbach’s Alpha – Short-Term Financial Performance Item Factor Loading T-Value Cronbach’s α
Market Orientation MO1 0.80 5.12 .639 MO2 0.65 3.64 MO3 0.77 5.29 MO5 0.92 6.29 Supplier Orientation SPO1 0.87 4.41 .631 SPO2 1.02 5.30 SPO5 0.85 5.39
Corporate Social Responsibility
SO5 0.58 5.05 .535 SO6 0.74 3.90 SO9 0.69 5.55 Innovativeness INN1 0.78 4.65 .7 INN2 0.74 5.46 INN3 1.30 8.12 Market Turbulence MT1 0.88 4.50 .71 MT2 1.39 5.97
Short-Term Financial Performance
FPST5 0.72 6.06
.878
FOST6 1.27 12.55
FOST7 1.29 11.66
Table 2b: Factor Loading, T-Value, and Cronbach’s Alpha – Long-Term Financial Performance Construct Item Factor Loading T-Value Cronbach’s α
Market Orientation MO1 0.75 4.66 .656 MO3 0.79 5.27 MO5 0.96 6.33 Supplier Orientation SPO3 0.83 4.25 .547 SPO4 1.10 5.31 SPO5 0.61 3.85
Corporate Social Responsibility
SO4 1.24 6.69 .64 SO5 0.47 4.16 SO6 1.02 5.65 Innovativeness INN1 0.81 4.83 .7 INN2 0.87 6.49 INN3 1.16 7.26 Market Turbulence MT1 0.90 4.96 .71 MT2 1.35 6.71
Long-Term Financial Performance
FPLT1 1.00 10.05
.958
FPLT2 1.20 11.83
FPLT3 1.14 11.03
FPLT4 1.26 12.43
Confirmatory Factor Analysis
27
(RMSEA) is at 0.034, Normative Fit Index (NFI) for FPST is a bit lower than the standard good fit (0.82) but this index is complemented by Comparative Fit Index (CFI) at 0.96, Incremental Fit Index (IFI) at 0.96 and Goodness of Fit Index at 0.86.
For the long-term model, Degrees of Freedom for the short-term model is 120 and the Minimum Fit Function Chi-Square is 158.31. RMSEA is at 0.043. NFI is at the minimum level of 0.85, while CFI and IFI are at 0.96 each, and GFI also at 0.85. From 48 initial variables that were analyzed for both of the models, the variables left for FPST CFA are 18 variables while for FPLT CFA, there are 16 variables left. This was done to achieve a good fit model due to the effect some variables create for both of the models. Although both of the models’ indexes are lower or at the bare minimum, the models are still a good fit which can be carried on to path analysis. We also did a check on the Cronbach Alpha for both FPST and FPLT model. The result came out as the dataset for the both of the models indicate that both of the models are a good fit statistically. The Cronbach Alpha for FPST is 0.83 while for FPLT is at 0.84.
Path Analysis
Figure 1 - Short-Term Financial Performance Conceptual Model (Chi-Square=11.68, df=12, P-value=0.47178, RMSEA=0.000)
28
indicated that the model is a perfect fit. NFI is 0.92, both CFI and IFI is 1.0, and GFI is at 0.97. These results indicate that this model is a very good fit.
Figure 2 - Long-Term Financial Performance Conceptual Model (Chi-Square=21.78, df=14, P-value=0.08318, RMSEA=0.080)
For the long-term financial performance path analysis, the Chi-Square is 1.923 (Degrees of Freedom = 14, Minimum Fit Function Chi-Square = 26.93) while the RMSEA is at 0.08. Indexes for this model are 0.86 for NFI, CFI is 0.92, IFI is 0.93 and the GFI is 0.93. These results indicate that FPLT’s analysis shows that this model is also a good fit, even though the FPST’s path analysis shows a better result. The results for both of the models concluded the analysis on the dataset as both of the models are a good fitted model. Although both of the models show a goodness of fit, both of these models produced different results that are quite surprising to us as it differs from previous researches on the similar or same topic.
Result
The result we obtained from our analysis concluded that H1 (ST 0.42<0.01; LT 0.41<0.01), H2 (ST 0.93<0.01; LT 0.68<0.01), and H3 (ST 0.60<0.01; LT 0.59<0.01) suggested that there are a positive and direct influence of CSR on focal firm’s stakeholder with the hypotheses supported.
H4 (ST 0.27<0.05) is supported. Meanwhile, H5 and H6 are not supported, concluding that only
29
30
Discussion
The path analysis conducted for both FPST and FPLT concluded that all of the hypotheses
1, 2, and 3 are positive and significant, both on the short-term and long-term. This indicates that
CSR has a direct influence on supplier, market or in this case customer, and local community, both in the short-term and long-term. By linking CSR initiatives to the likely preferences of the stakeholders and channeling firm CSR resources to objectives favored by top management and directors, firms can ensure that their corporate capabilities will be particularly suited to helping create value for the stakeholder groups whose salient needs they are trying to address (Ruf, Muralidhar, Janney, & Paul, 2001). The support for these three hypotheses also supports the argument from McWilliams & Siegel (2001) in which they state that in order to comply to stakeholder needs, firms invest in social activities. Freeman (1984) also states that satisfying the interests of the stakeholders will ultimately lead to improved financial and economic performance of the firm. McGuire, Sundgren, & Schneeweis (1988) concludes that firms with a high level of responsibility or good relationships with stakeholders will face less financial risk because they will have more stable relationships with government and the financial community. In line with Mishra & Suar (2010) regarding supplier orientation, this result means that the firm is selecting suppliers that are complying to CSR in ways of ensuring the well-being of the suppliers’ workers, paying attention to the environmental impact of suppliers, ethical procurement of raw materials, and elimination of child labor and human rights’ violations at suppliers’ locations. For market
orientation, Waddock & Graves (1997) states that favorable customer view of product quality and
safety can lead to the increase in firm’s financial performance. This reasoning gives us insight of when firms take into account customer’s safety and quality, also if the firm is transparent with the product and when the firm targets morally aware customers, firms can achieve higher financial performance. For local community orientation, firm’s effort of philanthropic donations, building relationship with the community, and participation in social and economic development issues can lead to increase the firm’s financial performance. This is in line with a statement from Wang & Qian (2011) where they state that corporate philanthropy is exceptionally positive, affecting corporate financial performance, as decisions on charitable contributions can be made strategically to raise the image and reputation of the firm.
31
firm’s short-term financial performance. Many existing empirical researches focusing on the cross-sectional relationship between stakeholder relationships and firm financial performance have found that there is generally a positive link between the two (Choi & Wang, 2009). The explanation is that because this research employs a dataset from 2008, the effect of stakeholder orientation, to be particular market and local community orientation, to the focal firm’s financial performance could have changed in the past decade. Also, this dataset contains responses only from firms in the Netherlands and Belgium. This indicates that the global context of the study cannot be established since the firms are located in the specific region. Result regarding stakeholder orientation effect on financial performance might differ if the dataset contains data from other regions. The explanation for the significance of supplier orientation is that the firm must pay undivided attention to its supplier orientation when it is at its short-term financial performance. Nowadays, firms outsource more and focus primarily on their core competencies (Handfield, Krause, Scanell, & Monczka, 2000). With this reasoning, it is the duty of the supplier to provide creative and quality products in a timely manner to ensure competitive edge for the firm because failure to do so on the part of the supplier has a direct negative effect on the firm’s results. The firm will resolve this deficiency by helping to improve current supplier skills and by incorporating product growth approaches into the firm’s long-term strategic focus. The explanation for the insignificance of
market orientation is that market orientation or the firm’s orientation toward customer must be
different across region. The customer orientation the firm has in Netherlands and Belgium will be different than for example, in India or Indonesia. This brings us to the conclusion that customers in these countries cannot be treated the same hence, leads to the insignificance of primary stakeholder orientation towards focal firm’s financial performance in the global context. Najafi-Tavani, Sharifi, & Najafi-Tavani (2016) states that market orientation strategies of the firm are largely about the ongoing monitoring of customers’ current and latent needs and market and competition conditions, which will then later disseminated within the firm and eventually reacted to by drawing up and executing plans (Laukkanen, Tuominen, Reijonen, & Hirvonen, 2016). With this rationale, it means that the information and needs of customers in different regions could be different than the ones studied or included in the dataset because different cultures and regions can mean different preferences from the customer. Explanation regarding the insignificance of local
community could be that in developing countries, since the well-being of the local community are
32
orientation becomes important because the local community in developing areas or countries might expect the firm to enhance or empower them in the sense of economic welfare through for example, utilizing local businesses or hiring people from the area to work for the firm. This is in line with the statement from Zairi & Peters (2002) where they state that the key components for firms to add optimum value society and the communities where the business is operating are through establishing a strong commitment to corporate and social governance, establishing an open dialogue with external stakeholders and having a determination to achieve environmental sustainability
Contrary to our expectation, hypothesis 7 is insignificant and therefore, not supported. This is different than our previous expectation since there are a lot of previous researches that concluded that CSR has either a positive or negative effect to the focal firm’s financial performance. Most of the previous researches on CSR effect on focal firm’s financial performance suggest that CSR has an influence on firm’s financial performance. By conducting this research, we can conclude that the firms in this analysis are not affected by whether or not their CSR strategies or orientation affect these focal firms’ financial performance. This result could also be affected from the dataset we are using because it is a decade old dataset or exactly from 2008. With the rapid changes in business, this effect could result otherwise if we employ a dataset from a more recent study because a lot of previous researches have concluded that CSR either has a positive or negative effect to the firm. Other explanation from McWilliams & Siegel (2000) concludes that CSR has a neutral impact on financial performance and suggest that this should not be unexpected since many firms that are actively engaged in CSR are also following a differentiation approach that requires parallel strategic R&D spending.
Hypothesis 8 is supported, showing that there is a positive and significant effect of the
33
perceive the firm as failing to identify the needs of the local community, it will disrupt the focal firm’s performance. In line with the hypothesis, the selection of the suppliers and the relationship between the firm and supplier is supported by the local community in the long-term because the local community sees that the firm is selecting the right supplier that positively interacts with the surrounding local community. In line with Rogerson (2012), this means that the firm is paying attention to the local suppliers in the local community and decide to work with them to gain approval from the local community. Empowering the local community would attribute to the support from the local community. Local community impacts the firm because it has the power to prevent conflicts that can negatively affect focal firm’s performance (Rais & Goedegebuure, 2009) and it also holds the power for firm to succesfully operate in the community’s area (Post, Preston, & Sachs, 2002).
Hypothesis 9 is supported but only for the mediation effect of supplier orientation due to
34
Conclusion
There has been numerous mixed results regarding the discussion of how multiple stakeholders affect focal firm’s financial performance. Our results confirm that CSR has a direct effect on each of the stakeholders of the firm. Furthermore, it is concluded that only supplier has a direct effect to firms’ short-term financial performance, compare to market and local community orientation that have no direct effect on the focal firm’s financial performance, both in short-term and long-term. The interaction effect of supplier and local community to financial performance also become significant in the long run compared to in the short run. After CSR has been mediated with the primary stakeholder orientation on its relationship with focal firm’s financial performance, only supplier has a positive influence, and it is found only in relation with short-term financial performance. Despite the fact that many researches have concluded that CSR orientation of firm can directly affect the focal firm’s financial performance, our result concluded otherwise. We found an insignificant result on CSR orientation influence on both short-term and long-term financial performance of the firm.
Theoretical Implication
35
firm can be obtained through these employees being driven to meet the customers’ demands (McWilliams & Siegel, 2001). In relation with the supplier orientation, the firm acts responsibly by selecting suppliers that ensures a good CSR practices like paying attention their labor or creating a safe working environment for their workers (Mishra & Suar, 2010). This will ultimately lead to higher supplier orientation of the firm.
Surprisingly, we found an insignificant effect of market orientation and local community on focal firm’s financial performance. Only supplier orientation has a positive significant effect on focal firm’s short-term financial performance. Handfiel, Krause, Scanell, & Monczka (2006) states that firms nowadays outsource more and are focusing mainly on its core competencies, helps us understand that it is the duty of the supplier to provide creative and quality products in a timely manner to ensure competitive edge. One explanation of why this relationship of market orientation and local community becomes insignificant can be found in the research of Scholtens & Zhou (2008). They suggest that if management tends to satisfy shareholders by achieving higher stock returns, stakeholder interests must be sacrificed because companies appear to be facing trade-offs between shareholder interests and stakeholders. Fulfilling the stakeholder needs and requirement is ultimately the objective of the firm as it can ultimately impact the focal firm’s financial performance, since they incur costs from contributions by investors and thus put them at an economic disadvantage (Scholtens & Zhou, 2008). This rationale implies that when the firm puts the interests of the shareholder first, the firm will put to rest its focus on how to serve the needs of customer better by cutting cost on for example, market research to understand the dynamic nature of customer preference and in the case of local community, cutting contributions or activities directed to empower the local community as it can cost the firm a lot of money.
36
their area and choose to go with them instead. The local community would want these focal firms to positively impact its economic welfare, one of the examples is by contracting the local suppliers. Aside from just contracting with local suppliers, focal firms can help the local community by doing business with local businesses available because with doing so, the focal firms directly impact the economic welfare of the local community.
CSR having no direct influence on the firm’s financial performance is a surprising result that we obtained from our analysis. McWilliams & Siegel (2000) stated that firms allocate great attention to their products or services to signal to customers that the firms pay attention to societal or environmental issues that are taking place. They also suggested that if there is an insignificant effect of CSR on financial performance, this should not be surprising because many firms that actively engage in CSR are also pursuing a differentiation strategy, involving complementary strategic investments in R&D. Husted & Allen (2007) conclude that although CEOs and government leaders insist in public that CSR projects create value for the firm, privately they admit that they do not know if CSR pays off. Their research suggests that the strategic use of social strategy relies on the nature of particular industrial environment, capital and values arrangements. It seems that for the use of social strategy, the existence of unique combinations of environmental factors, services and values is crucial. With the rationale from Aupperle, Carroll, & Hatfield (1985) in which they states that firm’s CSR policies can incur cost that put firms in economic disadvantage, firms have to pay attention to the allocation of resource they are giving to ensure their CSR initiatives are not a burden to the company in which a miscalculation for the cost needed for the initiatives increase the likelihood of decrease of performance.
37
the short-term and long-term because when firms pay attention to these orientations, they will facilitate the creation of competitive advantage for firms.
Managerial Implication
The insignificance we found of the impact of CSR on the focal firm’s financial performance implies that when firms are trying to pursue socially responsible activities, managers should carefully account the costs associated with these activities because the financial costs accrued by such activities might exceeds the implicit and explicit benefits associated with pursuing such activities. Most firms now have a dedicated CSR division in the company’s structure (Arjalies & Mundy, 2013) that looks into operationalization of such activities and the overall benefit to the business of such activities. Managers can look at the importance of having a dedicate CSR division to avoid pitfalls of CSR incurring costs that exceeds the benefit that can be generated to the focal firm. For managers, the findings suggest that, although social investments in any stakeholder sphere that momentarily compensate in the form of increased exposure, only prioritized and strategically focused social investments are likely to have an impact on financial performance. On the other hand, businesses that ignore CSR programs targeted at those stakeholder groups that are increasingly becoming more important to their business model’s success can attribute to poor performance because any social investment and project should therefore be the subject of detailed strategic planning to move from corporate philanthropy to value-sharing with key stakeholders and shareholders (Boesso, Favotto, & Michelon, 2015).
38
This study establishes that innovativeness has a direct positive effect on the long run in which it emphasizes the value of the business being creative and constantly looking for opportunities by new and innovative ideas and products to improve its results. If the managers do so, the firm can achieve a positive financial performance in the long run by building absorptive capacity and developing its own R&D capability (Zahra & George, 2002). This can be achieved through entering strategic alliances to gain access to new external information to boost their innovativeness or access open innovation channels through which efficiency gains can also be identified (Chesbrough, Vanhaverbeke, & West, 2008).
Limitation & Further Research
This research produced a result that is significantly different than other previous researches that investigated the similar topic, particularly about how stakeholder orientation can have an influence on focal firm’s financial performance. The limitation of this research also is emphasized in the number of responses we have. The previous author of this research has a small amount of responses only from 88 firms out of 582 firms Kibbeling, van der Bij, & van Weele (2013) reached out to. Furthermore, the dataset consists of response from the year 2008, which implies that the trend in the industry has changed overtime since market trends are dynamic in nature. Future research needs to address this limitation by using a more recent database.
39
Bibliography
Altman, B. W. (1998). Corporate Community Relations in the 1990s: A Study in Transformation. Business & Society, 37(2), 221-227.
Arjalies, D.-L., & Mundy, J. (2013). The Use of Management Control Systems to Manage CSR Strategy: A Levers of Control Perspective. Management of Accounting Research, 24(4), 284-300.
Aupperle, K., Carroll, A. B., & Hatfield, J. D. (1985). An Empirical Examination of the
Relationship Between Corporate Social Responsibility and Profitability. The Academy of
Management Journal, 28(2), 446-463.
Ayers, D., Dahlstrom, R., & Skinner, S. J. (1997). An Exploratory Investigation of
Organizational Antecedents to New Product Success. Journal of Marketing Research,
34(1), 107-116.
Balabanis, G., Phillips, H. C., & Lyall, J. (1999). Corporate social responsibility and economic performance in the top British companies: are they linked? European Business Review,
98(1), 25-44.
Bansal, P. (2004). Evolving sustainably: a longitudinal study of corporate sustainable development. Strategic Management Journal, 26(3), 197-218.
Barnett, M. L., & Solomon, R. M. (2006). Beyond dichotomy: the curvilinear relationship between social responsibility and financial performance. Strategic Management Journal,
27, 1101-1122.
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of
Management, 17(1), 99-120.
Berman, S., Wicks, A., Kotha, S., & Jones, T. (1999). Does Stakeholder Orientation Matter? The Relationship between Stakeholder Management Models and Firm Financial Performance.
The Academy of Management Journal, 42(5), 488-506.
Boesso, G., Favotto, F., & Michelon, G. (2015). Stakeholder Prioritization, Strategic Corporate Social Responsibility and Company Performance: Further Evidence. Corporate Social
Responsibility and Environmental Management, 22(6), 424-440.
Bourgeois III, L. J. (1981). On the Measurement of Organizational Slack. Academy of
Management Review, 6(1), 29-39.
Branco, M. C., & Rodrigues, L. L. (2006). Corporate Social Responsibility and Resource-Based Perspectives. Journal of Business Ethics, 69, 111-132.
40
Buchholtz, A. K., Amason, A. C., & Rutherford, M. A. (1999). Beyond Resources: The
Mediating Effect of Top Management Discretion and Values on Corporate Philanthropy.
Business & Society, 38(2), 167-187.
Byus, K., Deis, D. R., & Ouyang, B. (2010). Doing well by doing good: Corporate Social Responsibilit and Profitability. SAM Advanced Management Journal, 75(1), 44-55. Carrol, A. B. (1979). A Three-Dimensional Conceptual Model of Corporate Performance. The
Academy of Management Review, 4(4), 497-505.
Carter, C. R., & Easton, L. (2011). Sustainable supply chain management: evolution and future directions. International Journal of Physical Distribution & Logistics Management,
41(1), 46-62.
Carter, C., & Jennings, M. M. (2002). Social responsibility and supply chain relationships.
Transportation Research Part E: Logistics and Transportation Review, 38(1), 37-52.
Carter, C., Auskalnis, R. J., & Ketchum, C. L. (1999). Purchasing from minority business enterprises: Key success factors. Journal of Supply Chain Management, 35(4), 28-32. Casciaro, T., & Pikorski, M. J. (2005). Power Imbalance, Mutual Dependence, and Constraint
Absorption: A Closer Look at Resource Dependence Theory. Administrative Science
Quarterly, 50(2), 167-199.
Chen, I. J., Paulraj, A., & Lado, A. (2004). Strategic Purchasing, Supply Management, and Firm Performance. Journal of Operations Management, 22(5), 505-523.
Chesbrough, H. W., Vanhaverbeke, W., & West, J. (2008). Open Innovation: Researching A
New Paradigm. Boston: Harvard Business School Press.
Choi, J., & Wang, H. (2009). STAKEHOLDER RELATIONS AND THE PERSISTENCE OF CORPORATE FINANCIAL PERFORMANCE. Strategic Management Journal, 30(8), 895-907.
Clarkson, M. (1995). A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. The Academy of Management Review, 20(1), 92-117.
Clement, L. T. (2002). Corporate social responsibility − bottom-line issue or public relations
exercise? London: Financial Times.
Deshpande, R., & Farley, J. U. (1998). Measuring Market Orientation: Generalization and Synthesis. Journal of Market-Focused Management, 2(3), 213-232.
Donaldson, T., & Preston, L. E. (1995). The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications. The Academy of Management Review, 20(1), 65-91. Dyer, J. H. (1996). Specialized Supplier Networks as a Source of Competitive Advantage:
41
Fatihudin, D., Jusni, & Mochklas, M. (2018). How Measuring Financial Performance.
International Journal of Civil Engineering and Technology, 9(6), 553-557.
Fauzi, H., & Idris, K. M. (2009). The Relationship of CSR and Financial Performance: New Evidence from Indonesian Companies. Issues in Social and Environmental Accounting,
3(1), 66-87.
Freeman, E. E. (1984). Strategic Management: A Stakeholder Approach. Englewood Cliffs, New Jersey: Prentice-Hall.
Friedman, M. (1970). The Social Responsibility of Business is to Increase its Profits. New York: The New York Times.
Frooman, J. (1997). Socially Irresponsible and Illegal Behavior and Shareholder Wealth: A Meta-Analysis of Event Studies. Business & Society, 36(3), 221-249.
Greening, D. W., & Turban, D. B. (2000). Corporate Social Performance As A Competitive Advantage In Attracting A Quality Workforce. Business & Society, 39(3), 254-280. Greenley, G. E. (1995). Market Orientation and Company Performance: Empirical Evidence
From UK Companies. British Journal of Management, 6(1), 1-13.
Gyves, S., & O'Higgins, E. (2008). Corporate social responsibility: an avenue for sustainable benefit for society and the firm? Society and Business Review, 3(3), 207-223.
Han, J., Kim, N., & Srivastava, R. (1998). Market Orientation and Organizational Performance: Is Innovation a Missing Link? Journal of Marketing, 62(4), 30-45.
Handfield, R. B., Krause, D. R., Scanell, T. V., & Monczka, R. M. (2000). Avoid The Pitfalls in Supplier Development. Sloan Management Review, 41(2), 37.
Heinkel, R., Kraus, A., & Zechner, J. (2001). The Effect of Green Investment on Corporate Behavior. The Journal of Financial and Quantitative Analysis, 36(4), 431-449.
Henderson, D. (2001). The Case Against 'Corporate Social Responsibility'. Policy: A Journal of
Public Policy and Ideas, 17(2), 28-32.
Hult, G. T., Ketchen Jr., D. J., Adams, G. L., & Mena, J. A. (2008). Supply chain orientation and balanced scorecard performance. Journal of Managerial Issues, 20(4), 526-544.
Hurley, R. F., & Hult, G. T. (1998). Innovation, Market Orientation, and Organizational Learning: An Integration and Empirical Examination. Journal of Marketing, 62(3), 42-54.
Jafari, A. M., Jimenez, F. R., & Frankwick, G. L. (2015). Supplier Orientation: Expanding the Conceptual Scope of Market Orientation. Proceedings of the 2008 Academy of Marketing
Science (AMS) Annual Conference, 198.
Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. The
42
Jones, T. M. (1995). Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics.
The Academy of Management Review, 20(2), 404-437.
Jyoti, J., & Sharma, J. (2013). Impact of Market Orientation on Business Performance: Role of Employee Satisfaction and Customer Satisfaction. Vision: The Journal of Business
Perspective, 16(4), 297-313.
Khoury, G. M., Rostami, J., & Turnbull, P. L. (1999). Corporate Social Responsibility: Turning
Words into Action. Ottawa: Conference Board of Canada.
Kibbeling, M., van der Bij, H., & van Weele, A. (2013). Market Orientation and Innovativeness in Supply Chains: Supplier’s Impact on Customer Satisfaction. The Journal of Product
Innovation Management, 30(3), 500-515.
Klein, R., & Rai, A. (2009). Interfirm Strategic Information Flows in Logistics Supply Chain Relationship. MIS Quarterly, 33(4), 735-762.
Kohli, A. K., & Jaworski, B. J. (1990). Market Orientation: The Construct, Research Propositions, and Managerial Implications. Journal of Marketing, 54(2), 1-18.
Laukkanen, T., Tuominen, S., Reijonen, H., & Hirvonen, S. (2016). Does market orientation pay off without brand orientation? A study of small business entrepreneurs. Journal of
Marketing Management, 32(7-8), 673-694.
Lech, A. (2013). Corporate Social Responsibility and Financial Performance. Theoretical and Empirical Aspects. Comparative Economic Research, 16(3), 49-62.
Lee, Y.-K., Kim, S.-H., Seo, M.-K., & Hight, K. (2015). Market orientation and business performance: Evidencefrom franchising industry. International Journal of Hospitality
Management, 44, 28-37.
Lin, C.-H., Yang, H.-L., & Liou, D.-Y. (2009). The impact of corporate social responsibility on financial performance: Evidence from business in Taiwan. Technology in Society, 31(1), 56-63.
Line, N. D., Runyan, R. C., & Gonzalez-Padron, T. (2019). Multiple stakeholder market orientation: a service-dominant logic perspective of the market orientation paradigm.
Academy of Marketing Science Review, 9(1), 42-60.
Liu, H., Ke, W., Wei, K. K., & Hua, Z. (2013). Effects of supply chain integration and market orientation on firm performance: Evidence from China. International Journal of
Operations & Production Management, 33(3), 322-346.
Luo, X., & Homburg, C. (2007). Neglected Outcomes of Customer Satisfaction. Journal of
Marketing, 71(2), 133-149.
