Ph.D Thesis: Impact of Corporate Social Responsibility on Financial Performance and Competitiveness of Business: A Study of Indian Firms
Posted: 16 Apr 2013 Last revised: 1 Dec 2014
Date Written: July 19, 2012
The past two decades have witnessed a remarkable change in the way businesses run and operate, with the quest for excellence and all-round growth the primary objective of corporations. Pursuit of financial growth does not always lead to social advancement, and is often detrimental to the environment, resulting in unhealthy workplaces, exposure to toxic substances, urban decay and other similar issues. Managers and practitioners have often been criticised for being single minded about value maximisation. The turn of events has pressurised firms to put serious efforts into a wide range of Corporate Social Responsibility (CSR) activities. CSR has become a critical aspect in strategic decision making of a firm primarily due to financial scandals and a drop in investors’ confidence.
CSR has emerged as a view that can add to the financial performance of a company and suggests that corporate decision-makers must take care of a range of social and environmental affairs in order to maximise long-term financial returns. Every firm differs in the way it implement CSR in strategic business practices, with its size, operating industry, stakeholder demands, historical CSR engagement, level of diversification, research and development and labour market conditions a few of the factors that determine this decision making. One side of the coin confirms the benefits colligated with good reputation, while the other indicates that a firm’s costs of adhering to ethical standards will translate into higher product prices, a competitive disadvantage and lower profitability. Even after deep exploration of the Corporate Financial Performance (CFP)- Corporate Social Performance (CSP) relationship, empirical evidence to date is somewhat conflicting.
Globalisation and liberalisation in the Indian economy has shifted corporate goals from a socio - economic focus towards increasing shareholders value to the benefit of various stakeholders. Although extensive research on CSR-CFP has been carried out in developed countries, there is a paucity of such studies in India. The main thrust of the current study is to get intimate with this issue or devise a problem along with attaining new insights into it. This study intends to get to grips with and derive the perceptivity of corporate social behaviour towards its stakeholders along with justifying its triple bottom line benefits while filling the literary gap through replicating and extending previous findings on social and financial performance of firms. In doing so, this study also attempts to analyse in detail the aforesaid relationship and discuss the effectiveness of social and financial performance along with competitive performance of sample Indian companies. The results identify critical Indian CSR factors and determine their importance in shaping the CSP-CFP relationship, on the basis of which further research in sectors identified as weak may be carried out.
Keywords: Corporate Social Responsibility, Corporate Financial Performance, Corporate Social Performance, Competitiveness, globalisation, financial growth, stakeholder relationship, India, transparency and disclosure, environment, business ethics
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