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Thesis

Understanding how employee perception of different CSR practices impacts affective organizational commitment

Author: Francesco Mantovani Student number: 13102516

Date of submission: 22/06/2021 (final draft)

Program: MSc Business Administration – Strategy Track Institution: University of Amsterdam

EBEC approval number: 20210414110413 Supervisor: Hesam Fasaei

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Statement of originality

This document is written by Francesco Mantovani who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are 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 4

1. Introduction 5

2. Theory development 9

2.1 Corporate social responsibility 9

2.2 CSR practices 10

2.3 Organizational commitment 12

2.4 Employee perception of CSR practices and organizational commitment 13

3. Methodology 17

3.1 Method 17

3.2 Sample and data collection 17

3.3 Measures 18

3.3.1 Perception of CSR practices 18

3.3.2 Commitment 19

3.3.3 Control variables 19

3.4 Analytical procedure, reliability, and validity concerns 20

4. Results 21

4.1 Analytical strategy 21

4.2 Results 24

5. Discussion and conclusion 25

5.1 Implications 28

5.2 Limitations and further research 29

Bibliography 31

Appendix 36

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Abstract

Stakeholder capitalism has become a popular topic and a crucial concept needed to understand it is corporate social responsibility (CSR). These practices seek to not only address the needs of the shareholders but those of all stakeholders as well. A big body of literature has concluded that CSR also improves corporate financial performance (CFP) and thus understanding how to optimally deploy these policies is beneficial for all parties. Employees are key to the mechanism that translates a company’s socially responsible conduct into financial performance. Therefore, this study examines how CSR practices can increase employee performance through the improvement of their affective organizational commitment (AOC).

The research will investigate if employee’s perception of their company’s CSR record can influence their level of AOC. Furthermore, a distinction between CSR practices targeting employees and CSR practices targeting the environment is made to verify if agency theory could also play a role. A survey study is conducted, and 158 responses are collected and subsequently analyzed. The results suggest that indeed a better evaluation of a company’s CSR leads to a higher level of affective organizational commitment and on top of that it also seems that CSR practices directly targeting employees are more effective at generating the desired response compared to practices that benefit employees in a less direct way.

Keywords: Corporate Social Responsibility, Affective Organizational Commitment, Corporate Financial Performance, Employee Perception of CSR, CSR Practices

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1. Introduction

The array of practices that make companies actively engage in social initiatives that go beyond the objective of profit maximization is called corporate social responsibility (CSR). Such initiatives are undertaken to satisfy the needs of a wide set of stakeholder interests and expectations (McWilliams & Siegel, 2000). For years a big part of the debate surrounding CSR has revolved around their implications for corporate financial performance (CFP). Contrasting opinions on the issue have been explored but a recent meta-analysis by Vishwanathan, van Oosterhout, Heugens, Duran and van Essen (2020) provides a good picture of the current state of the research on the topic. The meta-analysis confirmed how CSR postively affects CFP (Vishwanathan et al., 2020).

Furthermore, the meta-analysis brings attention to the concept of stakeholder reciprocation.

According to such mechanism when a firm behaves in a socially responsible way, deploying CSR practices that enhance the welfare of its stakeholders, the firm will see a financial return in the form of increased stakeholder endorsement that results in more cooperative, productive and enduring relationships (McWilliams & Siegel, 2001; Bosse and Coughlan, 2016; Bosse, Phillips and Harrison 2009; Jones, 1995).

This becomes a relevant point of view from which to investigate the effects of CSRs because many sources of competitive success like product and process technology, access to financial resources and economies of scale are becoming less powerful than they once were (Pfeffer, 1994). They can still provide leverage to maintain competitive success but to a lesser degree than they were in the past, nowadays organizational culture and capabilities have become the key to a sustained competitive advantage. Because of that the management of human resources has become a key issue for companies (Pfeffer, 1994).

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A large body of research has studied how CSR affects employees' organizational commitment.

Meta analytic studies have concluded that organizational commitment can significantly affect employee turnover and intentions to leave the company (Brammer, Millington and Rayton, 2007). Furthermore, one specific form of commitment, called affective commitment, has been shown to be strongly related to desirable employee outcomes such as attendance, job performance, stress, health and work-nonwork conflict (Meyer, Stanley, Herscovitch and Topolnytsky, 2002).

CSR has in many studies been proved to contribute to the development of commitment in employees but studies have taken different approaches to such analysis. Turker (2009) is one of the first studies to investigate how CSR specifically impacts the employees, in particular how, based on social identity theory, organizational commitment is affected. This study uses an aggregate measure of CSR and although it contributes greatly to the academic literature it doesn’t provide implementable managerial insight.

Brammer et al. (2007) conducted a similar type of analysis but while breaking down CSR in 3 aspects: external CSR and internal CSR (divided between procedural justice and training).

What is lacking in the literature is a study that emphasizes the multifaceted nature of CSR (Saridakis, Angelidou, Woodside, 2020). This study therefore proposes the use of a different measurement scale, instead of a scale such as the one developed by Turker (2009) a more up to date scale is used. That is one based on the KLD index, KLD is an independent social choice advisory firm that rates firm's social responsibility (Flammer, 2015). This scale will allow for a more detailed picture of employees’ opinions on a multitude of different CSR practices.

Another aspect that hasn’t been investigated in the literature yet is how employee-oriented CSR practices influence commitment compared to non-employee-oriented CSR practices do.

Although not investigated before literature suggest that employee-oriented CSR practices will have a higher impact on affective commitment compared to practices not directly directed at

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employees (Wong & Gao, 2014). Farooq (2014) introduces a distinction between CSR to community, CSR to environment, CSR to consumers and CSR to employees. They measure such constructs using a measurement scale that is based on Turker (2009) scale but also adds some items from a Maignam and Ferrell (2000) scale. In this paper the focus will be on the differences between employee directed and non-employee directed CSR and for this reason the constructs of CSR to consumers and CSR to environment are taken into consideration.

The differential effect of CSR practices directed toward different stakeholder groups has been investigated by Krishnamurthy, S., Chew, W., Soh, T., & Luo, W. (2007), the researchers focused in particular on how CSR towards community produce a higher level of organizational identification and trust compared to consumer-related CSR actions. Their study also revealed how CSR towards environment does not appear to have an impact on employees’ attitudes and behaviors. This would support the perspective of Wong & Gao (2014) that predicts non- employee-oriented CSR practices to have a lower impact on employee affective commitment.

This study will use employee affective commitment as the main desirable outcome for managers and will investigate if indeed CSR practices toward the environment have a lesser impact on the employee compared to CSR practices targeting them directly.

The overarching question on which this research will focus on is,

RQ: how does employee perception of different CSR practices impact their level of organizational affective commitment?

This research will contribute to the literature on CSR and organizational commitment in two ways. First it will test the relationship between perceived CSR and affective organizational commitment using the KLD index scale rather than Turker’s scale that has been used in

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previous research (Farooq, 2014). The use of this scale should produce more accurate results as it includes more up to date items like sustainable products and services among others. The results of the survey-based study will also provide some insight on how employee across companies rate different actionable practices, this data will open up opportunities for further studies that could look into CSR as a multifaceted concept made up of specific practices rather than a simple aggregate measure.

Secondly the study will investigate a less explored area of literature, that is the one relative to how employee directed CSR practices affect organizational commitment differently compared to non-employee directed practices. Although it has been theorized by Wong & Gao (2014) that due to agency theory employee will have a better evaluation of practices that affect them directly no studies have investigated this relationship yet. Farooq (2014) focused on understanding the mediation processes in the CSR-AOC (affective organizational commitment) relationship while Krishnamurthy et al. (2007) investigates how different types of CSR practices affect employee trust and organizational identification. This study will combine aspects of both works by testing the relationship between CSR and AOC, but instead of studying the mediating mechanisms it will focus on the effects of different types of CSR practices.

This research will also have some practical contributions, especially relevant for managers.

Studying CSR in more detail and grouping different practices in different categories will allow to produce more insightful data. Managers seeking to boost their employees’ organizational commitment will be able to leverage the finding of this study to find which specific practices elicit a better reaction on employees and in so doing they will maximize organizational commitment within their company. As a result the performance of the workers will also improve thus leading to favourable outcomes not only for the manager but for all stakeholders involved.

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2. Theory development

Within this chapter the current literature on the topics of corporate social responsibility (CSR) and organizational commitment is explored. In particular how the two relate to each other. As a result of this analysis the hypotheses are formulated.

2.1 Corporate social responsibility

Despite having become a highly talked about issue, corporate social responsibility (CSR) still lacks a clear definition (McWilliams & Siegel, 2001). One of the first scholars to advance a definition was H. R. Bowen, he theorized CSR as the obligation of a businessman to “pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society” (Bowen, 1953). Other scholars followed suit approaching the definition from different perspectives such as social performance (Carroll 1979), stakeholder management (Donaldson and Preston 1995; Freeman 1984), corporate governance (Freeman and Evan 1990), business ethics (Solomon 1993), social contract (Donaldson and Dunfee 2002), and corporate citizenship (Matten and Crane 2005). A high- profile name that also joined the discussion is Nobel prize winner Milton Friedman. He made his opinion on the matter clear in an article on the New York Times Magazine titled “The social responsibility of business is to increase its profit” (Friedman, 1970). His opinion is well exemplified by this passage in the article: “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom”.

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Following many decades of research on the topic scholars have uncovered how in fact, acting in a socially responsible way does not go against the shareholder’s interest of profit maximization (Vishwanathan et al., 2020). According to the meta-analysis by Vishwanathan, van Oosterhout, Heugens, Duran and van Essen there are, at least, four key mechanisms through which CSR affect corporate financial performance (CFP). Such mechanisms are reputation enhancement, increased stakeholder reciprocation, firm risk mitigation and strengthening of innovation capacity. According to their conceptualization, strategic CSR are the corporate social responsibility enhancing activities that produce these four mechanisms and thus lead to an improvement of the corporate financial performance.

Increased stakeholder reciprocation is particularly relevant for this paper, employee in socially responsible firms enjoy a fair pay, a safer work environment and professional development opportunities (El Akremi, Gond, Swaen, De Roeck and Igalens, 2018). As a result, employees develop greater job satisfaction (De Roeck, El Akremi and Swaen, 2016), higher level of commitment (Brammer, 2007) and organization citizenship behaviors (Hansen, Dunford, Boss, Boss and Angermeier, 2011). Firms are then able to capitalize on those by leveraging the trust they built in the form of lower contracting costs, on top of that employee productivity is improved (Jones, 1995).

2.2 CSR practices

As Gjølberg (2009) explains, companies do not operate in a vacuum and thus their strategies to act in a socially responsible way are developed, adapted and refined in interplay with the environments they are present in. This makes studying and comparing CSR practices quite difficult as their meaning varies greatly across cultures and industries. Through manager’s interviews Öberseder, Schlegelmilch and Murphy (2013) observed how companies distinguish

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between different areas of responsibility (CSR domains) to relate to multiple stakeholders.

Each domain can then have a different degree of importance to the firm. Primary stakeholders such as investors, customers, employees and suppliers receive the greatest attention while the environment, society and local communities come later as they are less central to the firm’s operations (Freeman, Harrison, Wicks, Parmar & De Colle, 2010). The least relevant groups for the interviewed managers were media, governments and competitors.

Another contribution of Öberseder et al. (2013) is the classification of the different level of concern for CSR that companies have. Some companies engage in CSR practices in response to an external pressure, this is done mainly to satisfy short-term strategic goals and the main reason is to maximize the financial performance without contributing to any way to society.

This type of approach is classified as ‘minimal response.’ Other companies instead have a so- called ‘departmental response’, in that case some actors withing the company have a genuine motivation to act in a socially responsible way but internal and external constraint make it difficult to implement the desired policies. Finally, some companies see CSR are a conviction, an emphasis is placed on CSR practices benefitting society at large and there is a genuine interest in educating employees and making them part of the initiatives.

Some of the motivation for adopting CSR practices according to managers are found in Jamali

& Mirshak (2007), these reasons include: supporting the local community, aligning with the core values of the founder, giving back to society and CSR being aligned with the core business of the company.

Lastly, once a company has identified the stakeholder group they are mostly concerned with and are motivated to introduce CSR practices they will have to face some challenges in the implementation process. Marano & Kostova (2016) explains that companies are not

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constrained within their national institutional environment with regard to CSR but are instead exposed to a variety of templates across the various countries they operate in. The transnational field can add additional pressures on top of the ones required by their home countries but at the same time it also offers an opportunity for companies to leverage practices from different institutional environments across nations to become a more global and progressive organization.

2.3 Organizational commitment

Like many constructs in organizational psychology, commitment has been conceptualized and measured in many different ways (Allen, 1990). During the 90s organizational commitment was a major focus of research and theory development around it also became increasingly prominent (Meyer, 2002). In particular it has become commonly accepted that commitment is a multidimensional construct and that “antecedents, correlates and consequences of commitment vary across dimensions” (Meyer et al., 2002). An initial distinction between affective and continuance commitment was made by Meyer and Allen (1984), in their conceptualization the term affective commitment denoted an emotional attachment, an identification with and involvement with the organization. Continuance commitment refers instead to the perceived cost associated with leaving the organization (Meyer and Allen, 1984).

In their following work the two scholars suggested also a third component, called normative commitment, that is a result of the perceived obligation to remain in the organization (Allen and Meyer, 1990). During the development of this so called three-component model of commitment the belief was that all three forms of commitment were negatively related with turnover but also that each one affected other work-related behaviours differently (Meyer et al., 2002). In particular the outcomes that are influenced by commitment and that are valued

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the most by employers are: turnover, attendance, in-role performance and organizational citizenship behaviour (Meyer et al., 2002).

Affective commitment in particular has been shown to be the more closely related to CSR (Brammer et al., 2007; Turker, 2009; Stities and Michael, 2011) and individuals with higher levels of affective commitment are more likely to display the desirable behavior such as increased effort to perform (Allen and Meyer, 2002). For this is reason most of the research in the field has focused on investigating this specific dimension of organizational commitment (Farooq 2014, Wong & Gao, 2014; Ahmad R, Ahmad S, Islam & Kaleem, 2020).

Also, Allen and Meyer (1990) bring the focus on the issue of reliably measuring organizational commitment. The two scholars developed a scale capable of reliably measuring affective, continuance and normative commitment using a 24-item questionnaire. The questions require respondents to rate a statement on a 1 to 7 scale, going from “strongly disagree” to “strongly agree” (Allen and Meyer, 1990). This scale will be used to measure the dimension of commitment that this study is interested in, that is affective organizational commitment (AOC).

2.4 Employee perception of CSR practices and organizational commitment

A large body of literature has investigated the direct link between CSR and commitment, these studies demonstrated that in fact there is a positive relation between employee perception of CSR and organizational commitment (Peterson, 2004; Brammer, 2007; Turker, 2009; Rego, Leal, Cunha, Faria & Pinho, 2010; Stities and Michael, 2011). An explanation for this is provided by social identity theory (Ashfort and Mael, 1989), de Groisbois (2012) suggests that an employee’s self image is influenced by the image and reputation of their employers (Wong

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& Gao, 2014). In fact, according to Porter and Kramer (2006) employees take pride in being part of an organization that is also contributing to the community at large.

It must also be added that convincing employees that a firm’s CSR commitment are serious is not easy and companies need to continuously attain ethical, environmental and social results (Collier and Esteban, 2017). This fact is also highlighted in Rodrigo, Aqueveque and Duran (2019), this paper found that in order to increase affective organizational commitment CSR have to be designed to address the stakeholders needs but that’s not always enough. It is also important that the company ingrains these policies in their mission, values, and processes. This is because employees especially develop the desired attitudinal changes when they can see that the CSR activities align with organizational goals.

Another theory that is helpful to further understand the relation between CSR and commitment is agency theory (Eisenhard, 1989), Wong & Gao (2014) argue that employees’ commitment is higher when an organization’s CSR activities are directed towards its employees and their social community. This is because individuals tend to show more commitment towards activities that relate to their self-interest (Wong and Gao, 2014). Krishnamurthy et al. (2007) investigated the different effect of CSR activities relating to different stakeholders on employees’ level of organizational identification and trust. Their findings, in alignment with Wong & Gao (2014) suggest that CSR to environment, thus not directed toward employees has a lesser effect on trust and identification.

Another important aspect to consider is that literature suggests that perception of CSR practices is enough to generate higher commitment regardless of the objective degree of socially responsible practices that the company is involved in. Ali, Rehman, Ali, Yousaf and Zia (2010) investigate this exact aspect, they conducted an exploratory study to observe how employee perceive the CSR practices conducted by corporations. Their findings reveal that indeed

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perception of CSR increases commitment and that in so doing it also improves organizational performance.

This paper thus wants to investigate this relationship between perception of CSR and commitment but also wants to explore the role that agency theory may play. To do so the multifaceted aspect of CSR needs to be highlighted. Farooq (2014) further defined the constructs of CSR to community, environment, consumers and employees. This offers an opportunity to also make a comparison between two constructs in particular, CSR to environment and CSR to employee which respectively represent CSR practices affecting the community at large and affecting the employees directly (Krishnamurthy et al. 2007).

The resulting hypotheses are therefore:

H1: a more favourable evaluation of the company’s CSR toward the employee will result in higher levels of affective organizational commitment

H2: a more favourable evaluation of the company’s CSR practices toward the environment will result in higher levels of affective organizational commitment

The hypotheses are graphically represented in the following conceptual framework:

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It is therefore expected that both CSR toward employee and CSR toward environment will lead to an increase in affective organizational commitment (Farooq, 2014). Furthermore, the study will provide an opportunity to investigate if Wong & Gao (2014) and Krishnamurthy et al.

(2007) actually contribute to the explanation on how different types of CSR practices affect organizational commitment differently. In particular it would be expected that CSR toward employee (Wong & Gao, 2014), directly benefitting primary stakeholders (Krishnamurthy et al., 2007), would produce more affective organizational commitment when compared to CSR toward the environment which still benefits employees but in a much less direct way.

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3. Methodology

3.1 Method

Considering the quantitative nature of the research and the previous literature on the topic the survey is selected as the best mean of data collection (Farooq, 2014; Turker, 2009; Turker, 2009; Brammer et al., 2007; Ahmad et al., 2020). Such survey will be administered online and it will be run on Qualtrics. Specific scales will be used to measure the variables and respondents will be asked to rate certain statements using 5-point Likert scales, more detail on these measurement scales in the following sub-chapters. The primary data obtained in this way will then be analyzed using statistical software IBM SPSS. Each scale will produce a summarizing variable, that is perception of CSR (for environment and employee) and commitment. These three variables will then be analyzed to check the required assumptions and finally a multiple regression analysis is run in order to observe the relationship between the variables and their relative strength.

3.2 Sample and data collection

The population of interest for this study are employees that do not hold managerial position.

Subjects holding managerial positions are excluded from the study as they are capable of influencing CSR practices directly and thus their perception of them would not be representative of the average employee perception (Farooq, 2014). Respondents will be reached using convenience sampling and snowball sampling, this is due to the fact that the link to access the survey will be distributed on social media. It is hard to predict the response rate but the reach of the profiles that will share the survey is of 2629 combined (1464 on Facebook, 645 on Instagram and 516 Linkedin). It must be noted that there is some overlap between platforms and most people are not part of the population of interest. The minimum number of

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effect on social networks such as Linkedin. After data collection the final number of questionnaire entries is 158.

3.3 Measures

The two constructs of interest, that is the perception of CSR practices and affective organizational commitment, will be measured using peer reviewed scales. Control variables are also included in the study.

3.3.1 Perception of CSR practices

To test respondents’ opinions on different CSR practices the KLD index positive practices are used. The areas of interest for this study are employee relations and environment, in total respondents will evaluate 10 practices. (Saridakis, Angelidou, Woodside, 2020). This approach is in line with prior research that considers KLD strength item to be consistent with acting responsible (Husted, Jamali & Saffar, 2016). The respondent is asked to provide an evaluation on a Likert scale reflecting their perception of how the company deals with the practices. The 5-point scale will range from a value of 1 (strongly disagree) to 5 (strongly agree) and the respondent will be asked how much they think their company engages with the listed practices and/or takes care of the listed issues. To measure the perception of CSR practices toward the employee the following items from the KLD index scale are used: union relations, cash profit sharing, employee involvement, retirement benefits, health and safety.

To measure the perception of CSR practices toward the employee the following items are used:

sustainable product or service, pollution prevention, recycling, use of clean energy, sustainable management systems.

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3.3.2 Commitment

To test commitment a 24-item measurement scale is used. Such scale has been proven to be a reliable way to measure the three dimensions of commitment (Allen and Meyer, 1990). In the study only the 8 questions pertaining to affective commitment will be used and the respondents will have to rate each statement using a Likert scale (Cronbach's alpha = 0.85). The 5-point scale will range from 1 (strongly disagree) to 5 (strongly agree). It must be noted that this scale includes 4 reversed items (Q4, Q5, Q6, Q8) that will then have to be recoded during the data analysis phase. The 8 items used are:

1. I would be very happy to spend the rest of my career with this organization 2. I enjoy discussing my organization with people outside it

3. I really feel as if this organization's problems are my own

4. I think that I could easily become as attached to another organization as I am to this one (R)*

5. I do not feel like 'part of the family' at my organization (R) 6. I do not feel 'emotionally attached' to this organization (R) 7. This organization has a great deal of personal meaning for me 8. I do not feel a strong sense of belonging to my organization (R)

3.3.3 Control variables

Farooq (2014) is used as a reference because of the similarity between the studies. The relevant control variables are age, gender, years of experience at the company, education level and hierarchical role within the company. Age is recorded in three groups: 18-28, 29-40 and more than 40 years. Years of experience are recorded as: 0-5, 6-10 and more than 10 years. Education level distinguishes three groups: high school education, bachelor level or master level.

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Finally, the roles within the company are classified as non-management, lower-management and mid or upper management. Farooq (2014) notes that the mid or upper management group should be excluded from the study since they are in a position that allows them to actively give an input on CSR practices and thus their judgement could be biased.

3.4 Analytical procedure, reliability, and validity concerns

Validity refers to the extent to which a concept is measured accurately in a quantitative study.

In this research the constructs of affective organizational commitment and perception of CSR practices are measured. To avoid validity concerns only peer reviewed measurement scales were used. To measure commitment a scale from Allen & Meyer (1990) was used, this has been widely adopted in research and provides valid results. To measure CSR another popular scale has been used, that is the KLD Index scale (Saridakis, Angelidou, Woodside, 2020) of which items relating to the environment and employees were selected. Not having adopted the scale in its entirety may represent an issue and the relatively low R-squared value that is later presented may be due to this fact.

Reliability on the other hand related to the consistency of the measure, Cronbach-alpha is used to measure internal consistency and the results, later explain, return a value of (.861) indicates that there is a good level of reliability. Nevertheless some further considerations are made, the sample might not be entirely representative as it is biased toward a younger demographic, in particular of university students. Also, since the survey was administered online it was not possible to monitor the accuracy of responses. To limit the number of not-representative answers all surveys completed below a threshold time of 1 minute were eliminated, this is because it was not possible to realistically complete the survey in such short amount of time and thus the responses had to be given without a proper read of the questions.

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4. Results

4.1 Analytical strategy

Data cleansing: out of 158 entries only 101 will be used in the analysis. Incomplete data or survey that had been completed in well below the realistic time required to complete the survey were not considered.

Recoding: the measurement for affective organizational commitment included 4 reversed items (Q11_4, Q11_5, Q11_6, Q11_8) that needed recoding. For example, a ‘strongly agree’ answer was recoded from a value of 5 to a value of 1. The process was repeated for all 5 points of the scale for all reversed items.

Reliability: since the study is based on a survey a reliability check is run to verify the internal consistency of the data. An initial run of the test returned a Cronbach alpha of (.826) but upon review of the item total statistics it was noticed that Q9_4 had item total correlation of (.070), the number is well below the 0.30 threshold and thus it was excluded from the measurement.

A second reliability test was run without item Q9_4 and the result was an increased Cronbach alpha of (.861).

Computing scale means: means were computed for the three variables (CSR toward environment, CSR toward employees, affective organizational commitment). The new variables were added to the dataset and are reported in the following table.

Table 1: Descriptive Statistics

M SD N

CSR to employee 2.835 .789 101

CSR to environment 2.800 1.073 101

Affective organizational commitment 3.163 .917 101

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Correlations: using a correlation table (Table 2, below) it is possible to compare how the two independent variables predict affective organizational commitment. In particular the table shows how CSR to employee is the strongest predictor at (.360) compared to CSR to environment at (.318).

Other interesting statistically significant correlations are the ones between commitment and having 10+ years of experience at the company (.270**) compared to having 0-5 years and 6- 10 years of experience which respectively have correlations of (-.146) and (-.019). This result suggests that beyond CSR practices also the years of experience that someone has inside one company could influence the level of affective organizational commitment but further studies would be needed especially to determine the direction of the relationship. This is in line with Becker’s (1960) side-bet theory which states that as times goes on one’s ability to disengage with the activity they are doing becomes harder. In particular in the context of organizational tenure, that is how long someone has been in a company, employees slowly progress through the year earning better positions inside the company and other benefits (Ritzer and Trice, 1969).

This makes it increasingly difficult to switch companies later on in one’s career and thus results in increased organizational commitment.

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4.2 Results

To test the hypotheses a regression analysis was performed. The three variables, represented by the average value for commitment, CSR toward environment and CSR toward employee can be treated as continuous thus it is possible to run a multiple regression. Before running such analysis the dependent variable has to undergo a test of normality, ‘commitment’ does pass the normality test as the Shapiro-Wilk is not statistically significant since (.516 > .05).

Furthermore also the Kolmogorov-Smirnov is not statistically significant (.200 > .05) confirming the normality of the data. Other assumptions are the absence of multi collinearity which is ruled out since correlations between independent variables are below (.750).

Correlations between the independent variables and the dependent one are above (.300) so this assumption is also satisfied. Analyzing the scatterplot (*ZPRED; *ZRESID) it is observed that no value falls outside the +3/-3 range. Cook’s distance is also measured and the data satisfied the condition of not exceeding a value of 1. The data therefore passes all the assumption tests and it’s fit to undergo further analysis.

Computing the R squared reveals how much of the variance in commitment is due to changes in the independent variables. The result of (.166) means that the model only explains 16.6% of the variance of the dependent variable. This could be due to the fact that only two types of CSR practices were included in the study and not all five present in the KLD index scale.

Nevertheless the results confirm the hypotheses because both types of CSR practices do contribute to affective organizational commitment, as expected. Furthermore using ANOVA it was verified that the results were statistically significant with a value of (.000) for predictors CSR_environment and CSR_employee.

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Table 3: Multiple regression results

Affective Organizational Commitment

Variable b SE Std. b

CSR to employee .323 .116 .278

CSR to environment .178 .086 .209

To further investigate the effects on commitment the standardized coefficient beta is used a to make a comparison between the effects of CSR to employee and CSR to environment. The standardized beta coefficient compares the strength of the effect of each individual independent variable to the dependent variable, the higher the absolute value of the beta coefficient the stronger the effect. The results are presented in table 3, CSR to employee has a standardized beta of (.278) compared to (.209) of CSR to employee, this would suggest that there is in fact a difference in the way that different types of CSR practices affect commitment. These results are statistically significant as the P values are both below the .05 threshold (.007 and .040). A possible explanation for such difference is provided by Wong & Gao (2014) who suggest that due to agency theory CSR practices directly affecting employees such as the ones tested in this study (union relations, cash profit sharing, employee involvement, retirement benefits, health and safety issues) produce more affective organizational commitment compared to other practices such as those towards the environment (sustainable products and services, pollution prevention, recycling, use of clean energy, sustainable management system).

5. Discussion and conclusion

Studies in the field of CSR are numerous and the field is increasingly under the spotlight as sustainability and stakeholder capitalism become more prominent themes in public discourse.

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Most of the literature has focused on the more direct effects that CSR have on a firm, in particular financial performance has been at the center of attention since profitability is ultimately one of the main drivers for businesses. This has been the view of many economists such as Friedman (1970) but as Vishwanathan et al. (2020) showed the two concepts are not contra posed, in fact CSR has been shown not to be a net cost for firms but an investment that will have positive returns for the firm even in financial terms.

One of the mechanisms that lead to this increase in financial performance is centered around employees. As primary stakeholders (Vishwanathan, 2020) employees greatly contribute to the firm’s performance and their welfare is directly related to organization citizenship behavior (Hansen et al., 2007) and greater commitment to the firm (Brammer, 2007).

For this reason, understanding how such behaviours can be stimulated could be especially useful for managers wanting to deploy some CSR practices and wanting to maximize the return on their investment.

In order to do so the study investigated how two categories of CSR practices in particular (Farooq, 2014), CSR toward the employee and CSR toward the environment, contributed to an increase in affective organizational commitment. The study was aimed at demonstrating that both types of CSR practices lead to increased commitment, furthermore following the findings from Wong & Gao (2014) the study also proposed to observe if CSR targeting employees directly was more effective at increasing commitment.

The data obtained by the means of a survey was analyzed and it is possible to draw some conclusions.

In line with previous studies (Peterson, 2004; Brammer, 2007; Turker, 2009; Rego, Leal, Cunha, Faria & Pinho, 2010; Stities and Michael, 2011) the results suggest that the two studied dimensions of CSR do contribute to increased affective organizational commitment. It must be noted that an R squared of .166 suggests that the current model only explains 16.6% of the

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dependent variable. This means that only using CSR toward employee and CSR toward environment does not provide a full picture on all the dimensions of CSR. This was expected as it was chosen to focus on two groups of CSR practices only therefore leaving out the remaining dimensions, namely: CSR toward diversity, CSR toward product and CSR toward community (Saridakis et al., 2020).

After conducting a multiple regression analysis it is possible to use the beta standardized coefficient to compare how each of the CSR practices contributed to commitment. The statistically significant results suggest that CSR toward the employee (.278) has a larger contribution to commitment when compared to CSR toward the environment (.209). The difference was expected if taking into account Wong & Gao (2014) which suggested that due to agency theory CSR practices directly targeting employees are more effective in eliciting the desired behaviour compared to practices that do not have such direct link like CSR toward the environment.

The findings mean that when employee perceives that their company is acting in a socially responsible way, they are more likely to develop affective organizational commitment, this is in line with the findings of Turker (2009) and Brammer at al. (2007). In turn this increases the firm’s financial performance (Vishwanathan et al., 2020) by increasing employee citizenship behaviour (Hansen et al., 2011) and reducing turnover. CSR toward the environment and towards the employee have been studied to test if in fact agency theory plays a role in the model according to what has been also questioned in Wang & Gao (2014). CSR to employee should elicit more commitment as such practices directly relate to their self-interest. Data seems to prove this point as CSR toward environment scored lower on the adjusted beta value used for the comparison. This is likely due to the fact that CSR toward the environment is not perceived as benefitting employees directly and therefore is not as effective at increasing commitment.

This conclusion is also in agreement with a similar study from Krishnamurthy et al. (2007)

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which found that CSR toward the environment has a lesser impact on organizational trust and identification.

5.1 Implications

From a theoretical point of view this research studied CSR from a different point of view. Most literature focuses on mediating mechanisms between CSR and CFP (McWilliams & Siegel, 2001; Bosse and Coughlan, 2016; Bosse, Phillips and Harrison 2009; Jones, 1995) but few look into CSR in more depth as a multifaceted concept (Saridakis, Angelidou, Woodside, 2020). This is also confirmed by the results that show how the selected groups of CSR practices only explain a minor part of commitment suggesting that taking into account more components of CSR is essential to understand its full implications. In line with previous literature (Peterson, 2004; Brammer, 2007; Turker, 2009; Rego, Leal, Cunha, Faria & Pinho, 2010; Stities and Michael, 2011) the results confirm the existing relationship between corporate social responsibility and affective organizational commitment. Furthermore the arguents from Wong and Gao (2014) also introduce another factor, that is if the CSR practices affect employees directly or not. Using multiple regression is possible to show how in fact agency theory could play a role in the different effects that CSR toward employee and CSR toward environment have on commitment but further studies would be needed to establish that.

The findings also relate to Öberseder, Schlegelmilch and Murphy (2013), as explained in their research different CSR domains are used to address different stakeholder needs. Being employee part of what’s called the primary stakeholder group they receive great attention from the company. Better understanding how to satisfy them, for example using CSR practices that target their self interest specifically, could impact a firm’s bottom line positively.

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From a managerial point of view this study also has some implications. Using employee perception as a measure of CSR offers more insight than using an index with objective measurements of company’s CSR. This is because the desired effect that leads to the increase in commitment is related to the perception that employees have of CSR and not to the actual CSR the company engages in (Farooq, 2014). Since it is in the manager’s interest to increase financial performance, knowing which type of CSR practices to engage in to maximise such effect is useful. For example, results in this study suggest that to maximize employee commitment and thus stimulating citizenship behaviour it is more useful to invest in practices that benefit the employees directly rather than indirectly. Using KLD index item also offers some concrete suggestions of practices that employees appreciate such as employee involvement, retirement benefits and health and safety issues. Practical implications of this study are that if management is thinking about introducing new CSR practices and wants to invest in employees in particular it should look at KLD index strength items and implement them (Saridakis et al., 2020). For example, a measure that does not require any particular monetary investment could be improving employee involvement. This could be put into practice by establishing recurring meeting to get some feedback from the employees. Another option is to introduce a seat in the board of directors to be filled by a worker’s representative.

The resulting increase in involvement in the decision-making process that employees perceive will be reflected in an increase in affective organizational commitment with all its derived benefits for the firm.

5.2 Limitations and further research

Using convenience sampling and snowball sampling can reduce the generalizability of the data.

For example, administering the survey through a personal network could introduce some bias

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in the results as most respondents will have similar characteristics as the person sharing the survey such as university degree and field of studies.

Furthermore, people filling in the survey may show a bias in their responses due to the social desirability of their answer. Especially because respondents are asked to provide an evaluation of their employer it was crucial to stress that the survey is completely anonymous, this way it is be possible to improve the quality of the answers.

Another limitation is that the survey was administered regardless of the respondents’ employer, this could also generate some bias as every company might have different values and its employee may come from different backgrounds. This also opens up new ideas for further research, for example it would be interesting to repeat the study also introducing the employer as a variable to analyze if the behaviour changed also depending on the company where employees work.

As a similar study finds (Farooq, 2014) it remains unclear what exact mechanism determines the different effects of CSR_environment and CSR_employee and a qualitative study investigating this aspect in more depth would be useful.

It would also be interesting to study if someone’s commitment to the environment and sustainability has an influence on the importance they give to CSR toward the environment.

That is, people that are more environmentally conscious may not display such a difference in the effects of the two types of CSR practices.

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Appendix

KLD scale “strengths” and “weaknesses” by dimension (Saridakis et al., 2020)

Dimension Strength Weakness

Diversity – Assignment of a woman or minority CEO

Promotion of women or minority employees Assignment of women or

minority board of directors Work/Life benefits Women & minority

contracting

Employment of the disabled Gay & lesbian policies

Controversies and discrimination issues Non-Representation of

women or minorities

Employee relations Union relations Cash profit sharing Employee involvement Retirement benefits Health and safety issues

Union relations

Health and safety issues Work force reductions

Product – Product quality

R&D/Innovation Benefits to economically

disadvantaged consumers

Product safety issues Controversial marketing/

Contracting practices Antitrust

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Environment Sustainable products and services

Pollution prevention Recycling

Use of clean energy Sustainable management

systems

Use of hazardous waste Regulatory problems Use of ozone depleting

chemicals

Substantial emissions Use of agricultural

chemicals

Impact on climate change

Community – Charitable giving Innovative giving

Non-US charitable giving Support for housing Support for education Volunteer programs

Investment controversies Negative economic

impact Tax disputes

Organizational commitment measuring scale (Allen and Meyer, 1990) Affective commitment

9. I would be very happy to spend the rest of my career with this organization 10. I enjoy discussing my organization with people outside it

11. I really feel as if this organization's problems are my own

12. I think that I could easily become as attached to another organization as I am to this one (R)*

13. I do not feel like 'part of the family' at my organization (R) 14. I do not feel 'emotionally attached' to this organization (R) 15. This organization has a great deal of personal meaning for me 16. I do not feel a strong sense of belonging to my organization (R)

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