Corporate Social Responsibility and Firm Performance: A Literature Review

Abstract

Research Aims: This study explores the complex relationship between Corporate Social Responsibility (CSR) and company performance, focusing on how board composition, leadership, and cultural influences affect the efficacy of CSR initiatives.
Design/methodology/approach: Using a literature review method.
Research Findings: Independent directors on company boards positively influence CSR activities, which in turn enhance company value. These effects receive moderation from the resources available to the company and mediation through the CSR activities themselves. The research also highlights that leadership qualities such as integrity and stakeholder engagement significantly boost organizational performance by promoting responsible corporate culture. It further reveals that market-oriented cultures strengthen the positive impacts of CSR on performance, while adhocracy cultures have the opposite effect. Geographical variations emerge in the effectiveness of CSR, with significant impacts observed in regions like Argentina and Bolivia, unlike in Chile where CSR shows negligible effects. The study notes that while CSR typically improves operational performance, its impact on market valuation proves complex and hinges on strategic emphasis on value utilization over creation. Moreover, a company’s initial CSR reputation crucially impacts its financial performance, where positive reputations enhance and negative ones detract from company success.
Theoretical Contribution/Originality: The findings advocate for aligning CSR with corporate strategy and culture to maximize its benefits on company performance.