Academic journal article Management International Review

Strategic Corporate Social Responsibility and Value Creation: A Study of Multinational Enterprises in Mexico

Academic journal article Management International Review

Strategic Corporate Social Responsibility and Value Creation: A Study of Multinational Enterprises in Mexico

Article excerpt

Abstract:

* This paper examines the conditions under which corporate social responsibility (CSR) is related to value creation in the multinational enterprise (MNE).

* Following prior work by Burke and Logsdon (1996), we examine the relationship of centrality, appropriability, proactivity, visibility, and voluntarism to value creation.

* The results of a survey of 111 MNEs in Mexico suggest that centrality, visibility, and voluntarism are related to value creation.

Keywords: Corporate social responsibility- Multinational enterprise. Value creation

Introduction

Corporate social responsibility (CSR) has been defined in numerous ways (Wood 1991, Garriga/Mele 2004). Nevertheless, nearly all these definitions share the view that CSR is founded on business "actions that appear to further some social good" (McWilliams/ Siegel 2001, p. 117). There has been significant research as to whether CSR contributes to the firm's interests in addition to contributing to the social good. In other words, assuming that a firm wants to be socially responsible, the different ways of achieving this objective will have varying consequences for the firm's financial performance. The aim of this research is to demonstrate under what conditions CSR contributes to firm value creation among multinational enterprises in Mexico (Burke/Logsdon 1996).

One of the principal issues this research has faced is demonstrating a positive relationship of CSR to financial performance (Waddock/Graves 1997, Griffin/Mahon 1997, McWilliams/Siegel 2000, Margolis/Walsh 2001). Unfortunately, to date the results are mixed, in some cases showing a positive relationship between the two; in others, a negative relationship; and in still others, no relationship. Recent meta-analysis of several decades of CSR-firm performance research suggests that there might be a positive relationship after all (Orlitzky/Schmidt/Rynes 2003), though the weakness of the correlation indicates that we may be debating this issue for some time to come.

Rather than continue this debate, we take a different tack by arguing that we are more likely to find a positive relationship between CSR and financial performance when executives design CSR programs in ways that will lead to the creation of competitive advantages for the firm (Liedtka 2000, Burke/Logsdon 1996). Working within a framework of strategic management, this paper looks at how different, strategic features of CSR programs may create value for the firm. Taking into account these strategic features allows us to consider how firms can manage CSR opportunities and link social action to social and financial performance.

Borrowing from Burke and Logsdon (1996), we look into the potential relationship of five strategic dimensions of CSR programs (centrality, visibility, specificity or appropriability, proactivity, and voluntarism) with value creation. We then present the results of a survey carried out among multinational enterprises (MNEs) in Mexico that tests these five dimensions. We discuss the importance of these results for the strategic management of CSR and make suggestions for future research.

Theory

Value Creation

Economic value is created when consumers are willing to pay more for products and/or services provided by companies than the cost of their inputs (Barney 2001). Value creation in the CSR realm has been defined as "identifiable, measurable economic benefits that the firm expects to receive" (Burke/Logsdon 1996, p. 497). Value creation occurs by combining firm resources in new ways so as to increase the potential productivity of those resources (Moran/Ghoshal 1999, Schumpeter 1934). Thus, value creation is fundamentally, although not exclusively, about innovation (Schrage 2007, Jacobides/Knudesen/ Augier 2006, Edwards/Battisti/Neely 2004).

CSR as a Driver of Value Creation

Several authors have claimed that CSR innovation is possible under a specific set of circumstances and will create economic value for firms (Burke/Logsdon 1996, Kanter 1999). …

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