Profit-Driven Corporate Social Responsibility as a Bayesian Real Option in Green Computing

Posted: 25 Feb 2018

See all articles by Hemantha Herath

Hemantha Herath

Brock University

Tejaswini Herath

Brock University - Department of Finance, Operations and Information Systems (FOIS)

Date Written: February 12, 2018

Abstract

The idea that socially responsible investments can be viewed in terms of real options is relatively new. We expand on this notion by demonstrating how real option theory, within a Bayesian decision-making framework, can be used by managers to help when making green technology investment decisions. The Bayesian decision framework provides a more flexible approach to investment decision making because it adjusts for new information. Responding to a call for multidisciplinary and multifaceted research in environmental sustainability, this paper integrates ethics, finance, and information technology by viewing investments in environmentally friendly technology as a profit-driven CSR real option. Our model provides managers with the analytic tool needed to make the business case for CSR initiatives providing an opportunity for firms to create economic, social, and ecological solutions that benefit all stakeholders. The practical applicability of our model is demonstrated in an illustrative case scenario based on real data.

Keywords: Corporate Social Responsibility, Green Computing Investment Decisions, Real Options, Bayesian Decision Framework

JEL Classification: M00

Suggested Citation

Herath, Hemantha and Herath, Tejaswini, Profit-Driven Corporate Social Responsibility as a Bayesian Real Option in Green Computing (February 12, 2018). Journal of Business Ethics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3122521

Hemantha Herath (Contact Author)

Brock University ( email )

St. Catharines, Ontario L2S 3A1
Canada

Tejaswini Herath

Brock University - Department of Finance, Operations and Information Systems (FOIS) ( email )

Ontario, L2S 3A1
Canada

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