International Journal of Innovative Ideas (IJII)

Int. J. Innovative Ideas (IJII)

© www.publishtopublic.com

Effect of Dimensions of Corporate Social

Responsibility on Organization
Performance

Hadi Rasoulzadeh1, Seyed Jafar Hosseinipour 2, Nor Ashikin Mohamed Yusof 3

Mohammad Soltani 4, Seyedemehrsa Hashemi 5
1
hadirasoul2010@yahoo.com
Student of DBA, (MMU) Malaysia
2
Perdana school (UTM), Malaysia. hosseini_8257@yahoo.com
3
Perdana school (UTM), Malaysia,. ashikin@ic.utm.my
4
Islamic Azad University, Mashhad Branch, soltani35@gmail.com
and Master student of perdana school (UTM),
Malaysia.Mehrsa.hashemi@hotmail.com

Abstract- Most of organizations including business enterprise or non-commercial

(public-sector or private-sector) in competitive environment trend to take place the
corporate social responsibility as a strategy for achieving their goals. But there are
several definitions of CSR (Dahlsrud, 2006) that every definition cover some
dimensions of corporate social responsibility. Thus, organizations should determine
their purpose and dimensions of CSR that effect on performance of organization.

Keywords: corporate social responsibility, future generations as stakeholders,

sustainable development

1. INTRODUCTION

According the definition of corporate social responsibility that firms choose,

they should respond to questions such as:

a. Who are the legitimate stakeholders of an enterprise, and what can they
reasonably expect?

b. Who speaks for the environment and future generations as stakeholders?

c. What is the role of business in sustainable development?

In this paper is tried to evaluate the effect of dimensions of corporate social

responsibility on performance of enterprise by reviewing the literature. Thus,
at first is discussed the dimensions of CSR and definitions and then influence
of them on organization performance.

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 Effect of Dimensions of Corporate Social Responsibility on Organization Performance

Dahlsrud (2006) identified five dimensions for corporate social responsibility

that they are shown with related issues in following table.

Table1. Dimensions of CSR and related issues (Dahlsrud, 2006)

Dimension Related issue

The environmental The natural environment
dimension
The social dimension The relationship between
business and society
The economic dimension Socio-economic or
financial aspects,
including describing CSR
in terms of a business
operation
The stakeholder dimension Stakeholders or
stakeholder groups
The voluntariness dimension Actions not prescribed by
law

Here, is cited some definitions from different texts that every one mentions to
some dimensions.Corporate social responsibility is the overall relationship of
the organization with all of its stakeholders that include customers,
employees, communities, owners/investors, government, suppliers and
competitors. (Khoury, Rostami, Turnbull, 1999) This definition covers
stakeholder, social, environment, and economic.
Corporate social responsibility is concerned about dealing with the
stakeholders of the firm ethically or in a socially responsible way.
Stakeholders exist in a firm and outside of it. (Hopkins, 1998) This definition
covers the voluntariness, stakeholder, and social.

CSR is about how companies manage the business processes to produce

an overall positive impact on society.

(Baker, 2010) This definition covers stakeholder, social, environment, and

economic.
Illustration1. Relationship between company and society (Baker, 2010)
Corporate social responsibility is a form of corporate self-regulation
integrated into a business model. Ideally, CSR policy would function as a
built-in, self-regulating mechanism whereby business would monitor and
ensure its adherence to law, ethical standards, and international norms.
Consequently, business would embrace responsibility for the impact of its
activities on the environment, consumers, employees, communities,
stakeholders and all other members of the public sphere.(Wikipedia, 2010)
This definition covers Stakeholder, Social, Environmental, and Economic.

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 International Journal of Innovative Ideas (IJII)

Fig. 1. The business in society

Castka et al. (2004) have designed a useful framework as a process-based

management system. Processes needed for the CSR management system
include processes for management and board responsibilities, identification of
stakeholders’ expectations, strategic planning, managing resources, processes
and systems, measurement and analysis, managing change and continual
improvement. This framework’s key is the transformation of stakeholders’
expectations into the operations of the organisations with continual
monitoring of the impact. Thus, assessment will determine whether the
organisation has satisfied its stakeholders or not. The only way to successfully
address the complete spectrum of the CSR requirements is to look at the
whole organisation and the way it carries out its activities.

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 Effect of Dimensions of Corporate Social Responsibility on Organization Performance

Fig. 2. The CSR framework (Castka et al., 2004)

Also firms should define the organizational performance. In general,

organizational performance is defined as the external measures of ultimate
performance including three specific areas: (Devinney et al, 2005)
(1) Financial performance (profits, return on assets, return on investment,
etc.);
(2) Market performance (sales, market share, etc.); and
(3) Shareholder return (total shareholder return, economic value added,
etc.).about the same or similar problems to support your claims, i.e.,
introducing the PS. PS should then be further elaborated in the following
section usually known as the Literature Review.

Related issues: in this paper, issues that are discussed include dimension of
CSR, organization performance, and relationship between them.

2. LITERATURE REVIEW

While organizations’ social awareness is becoming one of the most important

business intangible assets in competitive environment, CSR is being
considered a more essential factor for organizations’ performance,
maintenance and survival. Galbreath, (2009) said that companies can build
CSR into strategy effectively and achieve their goals successfully. Following
illustration shows how firms can build CSR into strategy and impact the
performance of them. Illustration 3. CSR in the context of strategy Source:
Galbreath (2009).

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 International Journal of Innovative Ideas (IJII)

Mission
CSR CSR

Competitive Strategic
Advantage Issues

CSR
Strategy
Resources Markets
CSR

CSR CSR
Customer
Needs

Fig. 3. Strategy

The organizations can achieve high success by improved profitability,

employee morale, customer satisfaction, legal compliance and societal
approval for its existence (Sharma et al, 2009) but doing these improvements
depend on applying corporate social responsibility.
The roles of business in society are different and reasons for SCR are
presented in following illustrations. Some firms think of CSR as a tool to
improve the relationship with the stakeholders (customers, regulatory
authorities, local communities, NGOs etc.), other companies think of CSR as
a way to increase operational efficiency and reduce costs, and still others are
motivated by the market potentials from having a reputation as a good
corporate citizen. In addition, some organizations may simply believe that
commitment to CSR is morally right. (Pedersen, Neergaard, 2009).
More than three decades, the pressure on firms to apply CSR has
increased. Many managers have responded to these pressures, but many have
resisted. The managers that resist typically have concerned about relationship
between socially responsible behaviour and profitability. Management
researchers have responded to this by attempting to demonstrate the effect of
CSR on profitability. The results of empirical studies of the relationship
between CSR and profitability have been indecisive, reporting positive,
negative, and neutral results (McWilliams and Siegel, 2000).

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 Effect of Dimensions of Corporate Social Responsibility on Organization Performance

Fig. 4. The role of business in society (Pedersen, Neergaard, 2009)

Fig. 5. The reasons for CSR (Pedersen, Neergaard, 2009)

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 International Journal of Innovative Ideas (IJII)

Russo and Fouts (1997) in their empirical research have indicated that there is
a positive relation between environmental performance and financial
performance.
Gyves, O’Higgins, (2008) have said that the relationship between CSR
and financial performance really depends on how CSR is managed. According
to the results of their paper, internally initiated CSR by the firm can
simultaneously provide the most sustainable benefits for the firm itself, its
particular stakeholders and society at large, to increase the chances of creating
a win-win situation.
Doran (1994) in his study has found several important conclusions for
managers trying to balance the conflicting demands of stakeholder groups.
First, there appear to be multiple dimensions to corporate social responsibility,
further beating out the conclusion that multiple stakeholder groups do exist
and must be managed effectively for the well-being of the firm. The
assessment of the social performance of a firm is likely to vary depending on
the party assessing the performance. Given the multidimensionality of social
performance, it may be impossible to adequately address the interests of all
relevant stakeholders groups. Ultimately, management may be required to
weigh the interests of the stakeholder groups against each other and against
the economic welfare of the firm.
Second, performance relative to the dimensions of social performance
implies different outcomes for economic performance. While social
performance does not appear to positively affect the market's anticipation of
future performance, it does appear to tangibly affect economic performance.
This is a very important finding and points to a misconception the market may
have regarding the benefits of social responsible behaviour.
Bhattacharyya et al (2008) have indicated if firms design strategic CSR,
corporate social responsibility effects on performance of companies.
Illustration 6 shows the benefits of strategic CSR. For instance strategic CSR
activities impact on new market opportunities that are related with firm’s
performance. Also these activities effect on reputation of organization and
enhanced reputation is related with financial performance and etc.
The general notion among many businesses is that social responsibility
may be detrimental to company goals and performance. Gabriel et al (2009) in
their study contradict this. They have shown that CSR companies are better
performing in ‘QPS (Quality of products and services), BG (Effectiveness in
doing business globally), IN (Innovativeness), CC (Corporate culture) and
EO (Ethical obligations)’ than the non-CSR companies. Findings indicate that
firms allow the professionals to focus on QPS, BG, IN, CC and EO rather than
just to think about FS (Financial soundness). In terms of FS, it must be noted
that the implementation of CSR efforts strongly depends on short-term
investments.

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 Effect of Dimensions of Corporate Social Responsibility on Organization Performance

Fig. 6. Benefits of strategic CSR (Bhattacharyya et al, 2008)

Mattila (2009) says that corporations are investing more and more too
different CSR actions. Shareholders and investors are nowadays increasingly
considering the social and environmental performance of companies alongside
financial returns. Good ‘‘corporation citizenship’’ makes image better, and
good image makes better profit. The socially responsible corporation is the
good corporation: and the good corporation keeps its personnel updated about
important things. CSR goes beyond philanthropy and charity. It is about
ethics, religion moral, caring, culture, philosophy and values which will
ultimately translate into good business sense, good practice, good governance,
transparency and better profit.
As long as it is aimed at both inside and outside the corporation, the
common goods will continue growing in socially responsible business. In
short, CSR should be aimed at both the insiders and the outsiders. Everybody
needs it, and every organization has to be aware of it. CSR is about making
profit, but by good, responsible ways. This way CSR will conclude with good
results, both in the eyes of the outsiders and the insiders, in all four ethical
levels.

Finally there is now a consensus, based on both practical experience and

formal studies, that developing an effective CSR policy can deliver significant
benefits which include:
 Improve financial performance
 Reduce exposure to non-financial risk

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 International Journal of Innovative Ideas (IJII)

 Help in identifying new products and new markets

 Enhance brand image and reputation
 Increase sales and customer loyalty
 Improve recruitment and retention performance
 Create of new business networks
 Increase staff motivation, contribution and skills
 Improve trust in the company and its managers
 Improve government relations
 Reduce regulatory intervention
 Reduce costs through lower staff turnover
 Reduce costs through environmental best practice (OWW Consulting , 2010)

3. GAP IN LITERATURE

The gaps identified in the literature include:

1. Positioning in the external environment: The literature suggests that a
procedural context for managing the social environment has been largely
ignored. (Murray, Vogel, 1997)
2. CSR practices: The literature shows that while there is much talk of what
companies should do, information on, and analysis of what companies are
actually doing in practice (and process) is lacking. (Blum-Kusterer,
Hussain 2001)
3. Communication methods in stakeholder relationship: The literature (Clark,
2000) shows that effective communication methods are predominant but
largely absent from social responsibility literature.

4. NEW MODEL

Environment

Social
Economic
Designing Organizationa
Stakeholder strategic CSR
l performance

Voluntariness

Fig. 7. Relationship between dimensions of CSR and organizational performance

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 Effect of Dimensions of Corporate Social Responsibility on Organization Performance

5. CONCLUSION

Corporate social responsibility is a form of corporate self-regulation

integrated into a business model. Dimensions of corporate social
responsibility (environment, social, economic, stakeholder, and voluntariness)
impact on designing strategic CSR for achieving goals. Thus, strategic CSR
effects on organizational performance (financial of firm, market, and
shareholder’s return).

6. REFERENCES

[1]. Baker, Mallen, (2010), “Corporate Social Responsibility - What does it

mean?”, available on http://www.mallenbaker.net/csr/definition.php on
26 April 2010.
[2]. Bhattacharyya, Som S., Sahay, Arunditya., Arora, Ashok P., and
Chaturvedi, Abha., (2008), “A toolkit for designing firm level strategic
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 International Journal of Innovative Ideas (IJII)

[11]. Gyves, Sharon, and O’Higgins, Eleanor, (2008), “Corporate social

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