Corporate Social Responsibility and Enterprise Development

Introduction

Overview

This part covers the foundation of the study, issue articulation, study objectives, and hypotheses and the significance of the study.

Study Foundation

Corporate citizenship, corporate ethics, social performance, and sustainable accountable entity are all characteristic terms used to describe corporate social responsibility (Keim 1978). Corporate social responsibility is a self-governing instrument whereby organizations take into consideration the societal rules and statutory regulations. The term came into the limelight in the 1960s. The principal objective of CSR is to enhance organizations’ responsibility towards the environment and the wellbeing of the stakeholders (McWilliams & Siegel 2001). The Stakeholder Theory fronted by Freeman and the UN Global Compact is the underlying principles behind CSR (Friedman & Miles 2006; Mitchell Agle & Wood 1997).

Mackey and Mackey (2007, p. 818) defined CSR as the regular commitment by corporations to act morally and take part in economic development while enhancing the quality of life of the employees, as well as the surrounding community and society in general. CSR occurs when businesses engage in operations that seem to present a societal agenda beyond the prevailing statutory requirements (Roberts & Dowling 2002; Barnett 2007).

In the earlier days, CSR was viewed as a corporate charity until the early 90s. Since then, companies are now seeing CSR as a strategy for surviving the current uncertain and turbulent business environment (Mackey & Mackey 2007). According to Barnett (2007, p.795), “companies are part of the society and their operations affect many people, not just stakeholders”. As a result, just like human beings, companies should also be responsible members of the community in which they operate (Barnett 2007).

Problem Statement

At the point when organizations bolster the causes in the right ways, they create an ethical cycle (Mensah 2009). However, the question is, does this cycle essentially bolster an organization’s primary concern, or are there further advantages? Organizations’ inability to integrate their CSR policies and operations is often the reason why CSR undertakings are not well received. Along these lines, companies undertaking or promoting CSR activities ought to be aware of the dangers and rewards associated with such endeavors. Simply holding discussions about CSR is not enough; CSR exercises need to be supported by real organization practices, constant communication, and witnessed by consumers in a perceptible manner (Bhattacharya & Sen 2007).

Despite massive investment in CSR activities, the impact is limited. As a result, numerous questions still remain on the subject, for example, why organizations take part in CSR exercises, the impact of CSR on enterprise development, and the losses attributed to corporate irresponsibility. Numerous studies have been conducted on the effect of CSR on brand performance (Mackey & Mackey 2007; Porter & Kramer 2006; Mensah 2009) but studies researching enterprise irresponsibility and the effect of CSR on enterprise development are very scarce (Levitt 1958). The lack of adequate knowledge of the subject calls for further study.

Objectives of the Study

The primary objective of the study is to dissect the effect of CSR on business performance. In line with the main objective, the specific objectives are:

  1. To pinpoint the significance of CSR on business performance.
  2. To establish the impact of CSR on organizational success.
  3. To determine the effect of business irresponsibility on performance.

Study hypotheses

In accordance with the above objectives, the accompanying hypotheses were tested:

  1. CSR enhances and speeds up the attainment of business goals
  2. There is a direct relationship between CSR and business performance.
  3. Business irresponsibility can lead to massive losses.

Significance of the research

The significance of the study will include but not limited to the following:

  1. The study results will help in understanding the role that CSR activities play in speeding up enterprise development.
  2. The findings of the study will also highlight the main issues that affect the relationship between CSR and business performance.
  3. The eventual outcomes of this study are extremely important to the business administrators in light of the way that they can use it for attracting and retaining clients.

Literature Review

Business enterprises have become conscious that they can enhance their status only when they have strong support from society. Keim’s (1978) exemplary connotation of CSR included four segments: financial, legitimate, moral, and deliberate or charitable. Exemplary morals can have a positive financial effect on business performance (Mackey & Mackey 2007). CSR relies upon the rapport amongst organizations and society and how businesses react towards their principal partners, for example, workers, clients, venture capitalists, suppliers, the surrounding community, and particular vested parties (Barnett 2007). Organizations have an ethical commitment to give back to society and improve it, as they draw their assets from within (McWilliams & Siegel 2001).

As indicated by Mensah (2009), harder aggressive conditions as of late have put pressure on companies to assess their altruism and social exercises. In the event that organizations can move one-time charitable contributions into a focused communal initiative, it can be a noble step towards achieving an all-inclusive approach to the societal obligation (Mackey & Mackey 2007).CSR is regarded as a hidden arsenal for securing a wider market share. Venture capitalists are looking for monetary benefits from their organizations’ involvement in corporate social activities (McWilliams & Siegel 2001).

As Friedman and Miles (2006) highlighted in their research, the main responsibility of any enterprise is to enhance its revenue. Therefore, the primary social obligation of business enterprises is to utilize its assets and to take part in exercises intended to expand its revenue so long as it abides by the setup laws and regulations (Friedman & Miles 2006). The organization ought to operate in a manner that safeguards long-term financial objectives by evading provisional activities that are socially harmful or uneconomical (Roberts & Dowling 2002).

According to the instrumental theory fronted by Friedman in the early 1970s, CSR is a key instrument for achieving economic objectives and creating long-term affluence. The theory holds the view that the legitimate commitment of business enterprises towards the society is pegged on the improved benefits to the stakeholders within an authentic framework and ethical tradition. In addition, the theory posits a positive link between CSR and brand value/equity (Friedman & Miles 2006).

Friedman and Miles (2006) associate brand equity to everything that can enhance value to an organization. Taking this into consideration, Marin and Ruiz (2007) are of the opinion that CSR exercises can considerably influence customer perception, brand authenticity, and organizational image, which are all linked to brand equity.

A solid example of how CSR influence organizational is well apparent on account of Liz Claiborne, a design organization situated in New York City. In the early 90s, the company sponsored a campaign against domestic violence towards women. Before the campaign, the company had carried out a study and established that nearly 90 percent of its clients had one way or another experienced domestic violence (Castaldo et al., 2009).

The campaign was followed by major fundraising. The funds were donated to all the domestic violence organizations across the region. In addition, the company started producing t-shirts, jewels, and other products that were linked to the campaign. Since then, the Liz Claiborne label has become very popular among women. In fact, the majority of the company’s revenue (60%) comes from the sales of women products (Castaldo et al., 2009).

Sabate and Puente (2003, p. 161) explain that companies all over the globe spend trillions of dollars to create a favorable perception in consumers’ minds which often results in numerous benefits, with trust and commitment, better attributes, appraisals and buying intentions being among them (Sabate & Puente 2003. On the contrary, business irresponsibility is linked to unfavorable consumer perception. The most recent example of the impact of business irresponsibility is the predicament facing Volkswagen.

The company’s share prices fell by more than 30 percent after its admission to emission test cheating. Economists explain that the negative stock response to Volkswagen’s unscrupulous conduct surpasses the probable economic impact on its prospective cash flows. The scandal affected the stakeholders’ trust in the company (Blackwelder et al. 2016).

Methodology

Introduction

This is the technique of coordinating the procedures of carrying out the study Methodology demands that much care ought to be given to the sorts of processes to be followed in fulfilling a given plan or a goal (Blanchard and Cathy, 2002).

Research Design

A research design is a strategy, a layout, or a structure that is utilized to respond to research questions (Saunders, Thornhill & Lewis 2009). The research will use descriptive research which involves observing and describing the behavior of a subject without influencing it in any way. This approach was considered appropriate as it enables researchers to deal with many respondents in a population where it is not possible to study all of them and hence calling for a study of a representative sample and generalization of findings and inferences on the entire population. Descriptive research describes data and characteristics about the population or phenomenon being studied (Saunders, Thornhill & Lewis 2009).

Research Strategy

The study will be based on both primary and secondary research. Bryman (2004) describes secondary sources as all the published and non-published information accessible and gathered for some reason other than the current issue. The use of descriptive research is supported in light of the fact that the researcher decides on a sociology setting of the respondent’s dispositions and variables that impact their conduct. On the other hand, the primary research is guided by the issues described in the existing studies (Saunders, Lewis and Thornhill 2007). As indicated by Noor (2008), primary research is important for arranging the observable elements, looking at the elements, and producing measurable representations to dissect the observations.

Population and Sampling

The target population is the whole group of individuals, items, or entities that are of interest to the researcher (Bryman 2004). The subset of the populace whose features are assumed to represent the entire population is known as a sample. The process of picking a population sample to reflect the entire population is a sampling (Saunders, Thornhill, and Lewis, 2009). In keeping with this study, the population comprised of the personnel of the organizations under study.

Purposive sampling will be utilized in this study, which is a non-probability sampling technique. Despite the fact that this technique increases the likelihood of population samples that do not epitomize the whole populace, it is simple to reach all the respondents. Since it is hard to access the official registers or records containing the names of the workers, the researcher chose to utilize snowball testing to distinguish the respondents. Purposive sampling and snowball testing are linked and have a common feature: a suitable sample is selected at an appropriate time (Saunders, Thornhill, and Lewis, 2009).

Data Collection and Instrumentation

In this research, quantitative research technique will be used to test the hypotheses. Essential information will be gathered by administering questionnaires and interviews. Data collection will involve three phases: a reconnaissance study, pre-study arrangements, and organization of exploration instruments for information accumulation. A reconnaissance study will be conducted so as to guarantee the solidity and legitimacy of the questionnaires. After the experimental study, the questionnaires will be altered by deleting and changing a few words that appear to be vague.

After necessary adjustments had been made on the questionnaires, a memo will be sent to the college delineating the credibility of the researcher. A similar memo will be sent to the administrators of the selected organization seeking their consent to carry out the study. Upon approval, the researcher will hold a brief talk with the personnel department and the top administration on the scheduling of the study and other vital necessities before gathering information. In addition, the study will utilize both open-ended and closed-ended questionnaires.

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