Social Responsibility Journal

Effect of corporate social responsibility on Jordan pharmaceutical industry’s business performance

Abdel-Aziz Ahmad Sharabati,
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Abdel-Aziz Ahmad Sharabati, (2018) "Effect of corporate social responsibility on Jordan pharmaceutical industry’s business
performance", Social Responsibility Journal, https://doi.org/10.1108/SRJ-12-2016-0221
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 Effect of corporate social responsibility on
Jordan pharmaceutical industry’s
business performance
Abdel-Aziz Ahmad Sharabati

Abstract Abdel-Aziz Ahmad

Purpose – The purpose of this study is to investigate the effect of implementing corporate social Sharabati is Assistant
responsibility (CSR) initiatives (social responsibility, economic responsibility and environmental Professor at the
responsibility) on Jordanian Pharmaceutical Manufacturing (JPM) industry’s business
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Department of Business,
performance. Middle East University,
Design/methodology/approach – This study follows a quantitative descriptive design. The data were Amman, Jordan.
collected from 116 managers working at seven JPM organizations by questionnaire. After confirming
validity and reliability of the tool, the statistical analysis means, standard deviations and t-values were
used to test implementation and finally multiple regressions were used to test the hypothesis.
Findings – Results show that there are relationships between CSR variables, and all the three variables
are strongly related to business performance. The results also indicate that the three sub-variables
together affect JPM industry’s business performance. The environmental responsibility has the highest
effect on JPM industry’s business performance, followed by the economic responsibility, and then the
social responsibility.
Research limitations/implications – This study was directed toward pharmaceutical industry in
Jordan. Generalizing the results to other industries and countries is questionable. Therefore,
further research on other industries and countries will help mitigate the issue of generalizing
conclusions.
Practical implications – CSR should be formulated clearly within JPM corporate strategy. The elements
of CSR need to be integrated with the present performance management criteria, leadership
development programs and organizational development programs, and a champion for CSR needs to be
assigned.
Social implications – The CSR initiatives should be derived from local culture and match with
international initiatives because CSR is the responsibility of every person.
Originality/value – Still the topic of CSR is not well implemented and does not have priority by Jordanian
companies; therefore, this study may be considered as one of the few studies dedicated to study this
topic and create awareness about it in Jordan.
Keywords Social responsibility, Business performance, Environmental responsibility,
Corporate Social Responsibility (CSR), Jordanian Pharmaceutical Manufacturing (JPM) industry,
Economic responsibility
Paper type Research paper

Introduction
Actually, there is neither clear-cut definition nor agreement about the components of
Received 28 December 2016
sustainable development, sustainability, social responsibility, corporate social responsibility Revised 15 February 2017
(CSR) and corporate citizenship. All these phrases concerned are about how to behave, act 25 April 2017
8 June 2017
and deal with the society, contribute to economy and protect the environment, whether by Accepted 18 September 2017
using self-motivation or by obeying laws and regulations. However, different authors define The author would like to thank
these phrases in different ways, but it seems that there is consensus among scholars, the Middle East University.

DOI 10.1108/SRJ-12-2016-0221 © Emerald Publishing Limited, ISSN 1747-1117 j SOCIAL RESPONSIBILITY JOURNAL j
 authors and practitioners about those social, economic and environmental responsibilities
that are common components of these phrases.
Sustainability is used by the Brundtland Commission to mean, “Meets the needs of the
present without compromising the ability of future generations to meet their own needs”
(United Nations, 1987). Sustainable development is considered as a process for
meeting human goals while maintaining the ability of natural systems to continue to
provide the natural resources (Wood, 1991). Social responsibility is a duty every
individual has to perform, to maintain a balance between the economy and the
ecosystems (Palmer et al., 1995). CSR is a business commitment that supports
sustainable economic development and contributes to the quality of life, local
community and society in general (The World Business Council for Sustainable
Development, 2000) . “The 2005 World Summit on Social Development identified
sustainable development goals, such as economic development, social development
and environmental protection” (United Nations, 2005). Sustainable development ties
together concern for natural systems with the social, political and economic challenges
faced by humanity (Finn, 2009). Modern CSR has many names, such as corporate
citizenship, corporate philanthropy, corporate giving, corporate community
involvement, community relations, community affairs, community development,
corporate responsibility, global citizenship and corporate social marketing (Dodd and
Supa, 2011). Sustainability is the practice of reserving resources for future generation
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without any harm to the nature and other components of it (Hendrix, 2014; Kahle and
Gurel-Atay, 2014). Sustainable development includes three dimensions: economic,
environmental and social or ecology, economy and equity (United Nations, 2014). The
organizing principle for sustainability is sustainable development, which includes the
four interconnected domains: ecology, economics, politics and culture (Bakari, 2014).
Social responsibility includes four pillars: social, economic, environmental and cultural
(James et al., 2015).
Corporate citizenship is used to describe how business is matching with laws, regulations,
ethical, moral and economic responsibilities. Corporate citizenship can be defined as the
full range of both internal and external corporate activities that contribute to the well-being
of society (Cavanaugh et al., 2005). Corporate citizenship is the establishment and
management of company’s influence on the society in a way those are benefits for the
company and society (Podrug, 2011). Corporate citizenship can be described as a
company’s responsibility to its community and to the world as a whole (Farlex, 2012).
Corporate citizenship is the extent to which businesses are socially responsible for meeting
legal, ethical and economic responsibilities (Investopedia, 2015).
The concern about CSR is continuously increasing worldwide. CSR has gained momentum
worldwide (Marquina, 2010). Sustainable development is a key theme in policymaking in
Norway (O’Brien, 2010). Corporate citizenship and organizational citizenship have been
important issues in business management (Lin et al., 2010). Globalization and sustainable
development are nowadays the buzzwords in socio-economic discussions (Leeuw and
Scheerlinck, 2011). Companies start to engage in CSR activities to respond to an external
demand (Stancu et al., 2011). The concept of sustainable development holds that business
organizations should not only stress on their economic and business outcomes but also pay
their attention toward environment, society and community (Khan and Majid, 2013). CSR
concept is organization’s commitment to meet the needs and demands of society
(Heydarian et al., 2013). The trend of CSR is continually growing and businesses are
struggling to comply and maximize on its benefits (Razafindrambinina and Sabran, 2014).
The common goal of the domestic and international business community is to bring forth
wealth in a socially and environmentally responsible way (Sawant, 2014). The role of
responsible leadership is creating the necessary transitions to a sustainable global

j SOCIAL RESPONSIBILITY JOURNAL j

 economy (de Jongh, 2014). Today, CSR of organizations and management is most
important thing to count (Rafiei and Fard, 2015).
Focuses perhaps too much on reputation as a key driver may be seen as “green-
washing”. More beneficially, if seen fundamentally as a business opportunity for long-
term stability and a mechanism to integrate with the community and environment.
Companies implement CSR to establish a positive business image and reputation and
enhance corporate brand name by taking actions that lead to develop competitive
advantage (The World Business Council for Sustainable Development, 2000). CSR
activities improve a company’s image (Yoon et al., 2006; Papadopoulos et al., 2011;
Junipriansa and Damayanti, 2014). CSR means to operate business in favor of society
and to achieve its objectives in a competitive environment (Aga et al., 2012). The
importance of CSR initiatives is due to their relation to competitive advantage, financial
result, customer behavior and corporate reputation (El-Garaihy et al., 2014). CSR is
viewed as an organizational function and a mean to establish stakeholder relations and
reputations (Ghorbani et al., 2013), and to promote company’s interaction with society,
which enhance their reputation and credit (Mousavi, 2013). Contemporary
organizations are required to be responsible to their shareholders, customers,
employees, communities and ecology in all aspects of their operations to gain a
competitive advantage (Yahya and Ha, 2014). CSR activity has become a new indicator
of consumer satisfaction (Hsieh, 2014), and has a direct effect on the job satisfaction
and organizational commitment of employees (Tuzcu, 2013). Finally, CSR activities can
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result in a better performance and can generate more profits and growth (Lakra, 2014).
Finally, Jordan is considered as a regional leader and hub of the pharmaceutical
manufacturing industry in the MENA region (ICIEC, 2016). In 2016, Jordan exported 80 per
cent of its pharmaceutical products to 82 countries including Arab countries; exports of
pharmaceutical products comprised 11 per cent of national exports (Al Emam, 2016). Dr
Mohammad Shahin stated that the “Jordan’s Pharmaceutical industry’s contribution to the
export bill was about $1 billion in 2016 and about $0.2 billion for the domestic market,
totaling $1.2 billion” (Shahin, 2017). Pharmaceutical Industry is a highly regulated industry
global. Regulations are at global level (Leeuw and Scheerlinck, 2011). Moreover, there is a
growing interest in CSR disclosure by the pharmaceuticals industry (Azim and Azam, 2013).
Finally, Jordanian people call on Jordanian companies to do more as acts of social
responsibility (Hawkins, 2004). In summary, CSR has many names (such as social
responsibility, sustainability, sustainable development and corporate citizenship), which
used to indicate the responsibility of individuals or organizations toward society, economy
and environment. The aim of any responsible business is to improve quality of life, increase
standards of living and make profit for stakeholders, but without compromising future
generation needs. CSR practices are essential for today’s business activities, and they have
many benefits for organizations, such as improving organizations’ business performance,
increasing customer’s satisfaction and employee’s engagement, helping to develop
competitive advantage and improving organizations’ image and reputation. Therefore, the
purpose of the current research is to investigate the effect of implementing CSR (social
responsibility, economic responsibility and environmental responsibility) on Jordanian
Pharmaceutical Manufacturing (JPM) industry’s business performance and to encourage
JPM organizations to participate more in social activities, contribute to economic
development and increase their awareness to be more environment friendly. Moreover, its
objective is to provide sound recommendations to JPM industry, to other industries
operating in Jordan and to decision-makers concerned about this topic. In addition, its
objective is to encourage more researches about CSR implementation and to increase the
awareness of public and organizations about this hot topic. Finally, this research many be
considered as an initiative research that dedicated to investigate the effect of CSR on JPM
industry’s business performance. Its results may be beneficial not only to JPM industry but
also to other industries and decision-makers.

j SOCIAL RESPONSIBILITY JOURNAL j

 Problem statement and hypothesis development
The implementation of CSR and its effect on company’s performance have been
investigated on many organizations, industries and countries, but only few researches have
been conducted in Jordan and very limited researches have been performed on Jordanian
Pharmaceutical industry. Many authors recommended conducting researches related to
measuring and evaluating the implementation of CSR. Despite the claim that internal CSR
plays an important role, the understanding of this phenomenon has been neglected
(Ferreira and Oliveira, 2013). The past three decades have witnessed the emergence of
CSR as a field of research and a framework for the role of business corporations and
financial institutions in society (Senthikumar et al., 2011), and the number of academic
contributions that examine the link between CSR and financial performance has been
increased (Belascu and Horobet, 2013). Though the literature review focuses on the
concepts of CSR and its relationship with corporate performance (Gathungu and Ratemo,
2013; Dzhavdatovna et al., 2015), there have been many variations in the results (Mumtaz
and Pirzada, 2014); therefore, the relationship between CSR and corporate performance is
needed to be studied extensively by scholars (Nguyen et al., 2015). Sustainability
measurement is a term that denotes the measurements used as the quantitative basis for
the informed management of sustainability (Ball, 2002). People, planet and profit known as
the triple bottom line form one way to evaluate CSR (Kanj and Chopra, 2010). The metrics
used for the measurement of sustainability are evolving: these include indicators,
benchmarks, audits, sustainability standards and certification systems (Dalal-Clayton and
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Sadler, 2009). Finally, Betianu (2010) stated, “The Global Reporting Initiatives (GRI 2000,
2002, and 2006) are international institution, which their duties are to establish guiding lines
for the publishing of nonfinancial information regarding sustainable development”.
Pharmaceutical industry is an international and highly regulated industry; to be able to
compete internationally, companies have to consider CSR within their context (Leeuw and
Scheerlinck, 2011).
In light of the justification mentioned above, the current research is dedicated to investigate
the effect of CSR (social responsibility, economic responsibility and environmental
responsibility) on JPM industry via testing the following null hypothesis:
H0. Corporate social responsibility (social, economic and environmental) does not
affect Jordanian Pharmaceutical Manufacturing industry’s business performance,
at a  0.05.
H0a. Social responsibility does not affect Jordanian Pharmaceutical Manufacturing
industry’s business performance, at a  0.05.
H0b. Economic responsibility does not affect Jordanian Pharmaceutical Manufacturing
industry’s business performance, at a  0.05.
H0c. Environmental responsibility does not affect Jordanian Pharmaceutical
Manufacturing industry’s business performance, at a  0.05.

Research model
Literature review
There are many research works on the implementation of CSR and its effect on different
aspects such as corporate reputation and image, customer satisfaction, employee
engagement, financial including companies’ value and organizations’ performance in
general (Figure 1).
Companies that concentrate on CSR dimensions are perceived as legal and ethical
companies (Lin et al., 2010) and corporate citizens (Servaes and Tamayo, 2013). The
dimensions of CSR have positive effect on corporate reputation (Chao et al., 2010; Servaes
and Tamayo, 2013; Mousavi, 2013), corporate image (Junipriansa and Damayanti, 2014;

j SOCIAL RESPONSIBILITY JOURNAL j

 Figure 1 Research model

Togun and Nasieku, 2015), customer purchasing intention (Chao et al., 2010; Hsieh, 2014),
consumers’ behavior in purchasing (Marquina, 2010) and consumers’ perceptions and
behavioral intention (Papadopoulos et al., 2011). They influence customer satisfaction
(Senthikumar et al., 2011; Azizi et al., 2014), customer delight and loyalty (Rafiei and Fard,
2015; Kazemi and Omidi, 2015), perceived service quality (Rashid et al., 2013), brand
equity (Rashid et al., 2013), brand preference (Mirabi et al., 2014), brand awareness
(Chirimubwe, 2015) and organizational attractiveness (Zaid and Al-Manasra, 2013).
Consumers are more likely to purchase from firms that are engaged in CSR activities
(Nguyen et al., 2015).
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Many authors studied the relationship between CSR and employee engagement and
motivation; the employees’ rights, fair wages and safety at work were the most
prevalent dimensions in the image of a responsible employer (Stancu et al., 2011).
Employees’ positive perception toward organizations’ social ethics and social services
influences their attitudes and performance, which in turn affects productivity of
organizations (Bashir et al., 2012). The CSR practices have positive effect on
employees’ engagement (Ferreira and Oliveira, 2013; Kweyama et al., 2015), and
facilitate staff motivation (Kim and Scullion, 2013). CSR programs have to meet the
expectations of employees, investors and local communities (Gathungu and Ratemo,
2013). CSR also affects employee behavior and attitude toward the environment
(Mumbunan et al., 2015).
Most of the authors indicated that there are strong relationships between CSR dimensions and
company’s financial performance (Mishra and Suar, 2010; Sahin et al., 2011; Wang and Zhang,
2012; Belascu and Horobet, 2013; Heydarian et al., 2013; Mwangi and Jerotich, 2013; Bidhari
et al., 2013; Basuony et al., 2014; Murtaza et al., 2014; Ding, 2014; Mujahid and Abdullah, 2014;
Rahmawati et al., 2014; Mumtaz and Pirzada, 2014; Dzhavdatovna et al., 2015).
Others related CSR activities to profitability (Dabbas and Al-rawashdeh, 2012; Persic and
Markic, 2013; Khan and Majid, 2013; Malik and Nadeem, 2014; Jamali et al., 2015; Jamali
et al., 2015; Kaur, 2015; Emezi, 2015). Moreover, some related CSR to shareholders’ wealth
(Mujahid and Abdullah, 2014; Dzhavdatovna et al., 2015), market share and performance
(Khan and Majid, 2013; Al-Ani and Jamil, 2015), operating performance (Razafindrambinina
and Sabran, 2014), credit, company’s success and position (Mousavi, 2013), employee
satisfaction and increased productivity and profitability (Togun and Nasieku, 2015) and to
all financial performance measurements, such as return on assets, return on equity and
return on sales (Bidhari et al., 2013) and total assets (Abdulrahman, 2014). Furthermore,
some authors studied the relationship between CSR dimensions and company’s value, and
found a positive effect of CSR on company’s value (Susanti et al., 2012; Mandasari and
Hanif, 2013; and Estiasih et al., 2015).
Finally, some authors studied the relationship between CSR and companies’ business
performance and economy in general and concluded that among European countries,
the Baltic region has the highest significant correlation between environmental

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 indicators and GDP (Lapinskiene and Peleckis, 2009). The three dimensions of CSR
were having significant influence on organization’s performance (Abdullah and Abdul
Rashid, 2012; Manyasi and Masinde, 2014; Yahya and Ha, 2014). CSR had a significant
contribution to productivity and stability of companies (Ukpabi et al., 2014). There was
a strong relationship between the initiatives of CSR and competitive advantage
(Al-Sukkar et al., 2013; and El-Garaihy et al., 2014). Sustainable development has
significant impact on environmental integrity, economic prosperity, social equity and
overall sustainability (Mani, 2013). Social responsibility has a great impact on the
society by adding to the infrastructures and development of the society (Richard and
Okoye, 2013). CSR had a positive influence on economic results (Hyks, 2015).
Few research works indicated that either there is no relationship between CSR and
business performance or CSR does not affect business performance, such as CSR
performance having no effect on corporate financial performance (Iqbal et al., 2012).
There was no significant mediating effect of CSR on the relationship between market
orientation and firm performance (Arshad et al., 2012). There was an insignificant relation
between organizational commitment and job satisfaction, and perceptions of CSR
(Tuzcu, 2013).
Moreover, only few research works have been carried out on pharmaceutical industry,
which showed different effects of CSR on business performance. Mehar and Rahat (2007)
concluded that there was an insignificant relationship between CSR and firm’s financial
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performance in pharmaceutical industry in Karachi. Leeuw and Scheerlinck (2011)

concluded that sustainable development was a driver of companies’ awareness of
sustainability issues of Belgium-based pharmaceutical companies. Aga et al.’s (2012) result
indicated that CSR had a positive impact on firms’ productivity, reputation and customer
loyalty to pharmaceutical companies in Peshawar, Pakistan.
In summary, several research works were carried out on the implementation of CSR, and its
impact on business performance in different industries and countries. Most the of previous
research works indicated that CSR has a positive effect on many aspects such as corporate
reputation, image, customer satisfaction, employee engagement, financial performance,
firms’ value and organizations’ performance in general, whereas very limited research works
indicated that there is no effect. Furthermore, only few research works were carried out in
Jordan and very few performed on pharmaceutical industry; therefore, investigating the
effect of CSR on JPM industry’s business performance is important. This study will consider
the following indicators to measure the dependent variable: productivity, cost, employee
turnover, quality, sales increase, profit, market value, return on assets, return on investment
and company position.

Methods and procedures

Methodology
This research follows a quantitative descriptive design to describe the CSR implementation
and its effect of JPM industry’s business performance. Two sources of data are used in this
research: secondary and primary data. Secondary data are collected from literature review
such as previous researches, thesis, dissertations, articles, books, annual reports and the
internet. Whereas, primary data are collected through the questionnaire that is built on the
basis of previous research works and developed with the help of referee committee, which
constitutes from 13 academicians and 3 managers from 3 JPM companies. The
questionnaire contains three sections: demographic, independent variables and dependent
variables. Independent variables are CSR elements (social, economic and environmental
responsibilities), whereas dependent variable is industry’s business performance and
evaluated by ten indicators (productivity, cost, employee turnover, quality, sales increase,
profit, market value, return on assets, return on investment and company position). The

j SOCIAL RESPONSIBILITY JOURNAL j

 questionnaire used five-point Likert scale (rated from 1 = very low implementation and 5 =
very high implementation) to test the perception of managers regarding each item. While
carrying out this research, 14 JPM organizations were registered in Jordanian
Pharmaceutical Manufacturers Association, all of them are targeted, and this negates any
need for sampling. The data are collected from 116 managers working at seven JPM
organizations because other companies did not allow their managers to participate, so
managers were used as a unit of analysis.
After verification of the filled questionnaires, they were coded against SPSS 20, and then
validity and reliability tests were carried out. Content validity is insured by using previous
research works, thesis, dissertations, articles, books, annual reports and internet, and the
referee committee (panel of judge) confirmed face validity. Construct validity is tested by
factor analysis (principal component correlation analysis). As shown in Table I, all items
rated Component 1 more than 40 per cent and all variables rated Component 1 more than
70 per cent, and Kaiser-Meyer-Olkin (KMO) more than 60 per cent; therefore, validity is
assumed. Cronbach’s alpha is used to test the reliability. As all variables rated more than 60
per cent, reliability is confirmed.

Data analysis

Statistical analysis. To examine the implementation of CSR and business performance

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items, the means, standard deviations and t-value are used. The level of implementation is
measured on the basis of the means and divided into three levels based on the following
criteria: interval (5  1)/3 = 1.33: low implementation (from 1 to 2.33), medium
implementation (from 2.34 to 2.66) and high implementation (from 2.67 to 5).

Independent and dependent variables

Table II shows that the means of CSR variables are ranging between 4.090 and 4.122, with
standard deviation rated from 0.464 and 0.495. This indicates that there is an agreement
among respondents on high implementation of CSR variables. Environmental responsibility
has rated the highest mean 4.122, followed by economic responsibility with mean 4.090,
and finally social responsibility rated 4.011. The average mean for CSR is 4.074, which
points out that CSR is highly implemented. At the same time, Table II shows that the mean
for business performance is 4.080 with standard deviation 0.314, which mean there is an
agreement on high implementation of business performance indicators. This indicates that
there is an agreement among respondents on high implementation of both CSR and
business performance indicators.

Relationship between variables

Bivariate Pearson correlation is used to test the relationship between research variables.
Table III shows that the relationships between CSR variables are medium, where r ranges
from 0.271 to 0.429. Each CSR variable has a strong relationship with total CSR, where r
ranges from 0.725 to 0.790, which means that all the three variables are related to each
other and strongly related to the total of CSR. Furthermore, all the three variables are
strongly related to business performance, where r ranges from 0.539 to 0.656, and total
CSR is strongly related to business performance, where r equals 0.779.

Hypothesis testing
R2 indicates the goodness and fitness of the model. The higher R2 value, the better
explanation of the variation of independent variable on the dependent variable. The F and
t-values indicate the significance of the relationships and effects.

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 Table I Cronbach’s alpha and principal component factor analysis for all variables and items
Paragraphs Factor 1 Alpha KMO Bartlett’s test Sig.

Social responsibility
The company is hiring people with special needs 0.571
The company owns programs help support education in the
community 0.632
The company owns a budget for social work as a financial
support such as community donating to charity 0.740
The company has binding laws for moral behavior 0.534
The company has plans for a health awareness to the community
courses 0.631
The company follows the binding laws to ensure the safety of
workers from the product 0.624 0.683 0.724 15 0.000
Economic responsibility
The company is committed to government laws related to
economic aspect 0.789
The company is seeking to pay tax dues on time specified 0.848
The company contributes to the local economy by bringing hard
currency 0.661
The company helps in building infrastructure such as bridges . . .
etc. 0.578
The company contributes to the employment of local labor 0.459 0.666 0.611 10 0.000
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Environmental responsibility
The company is interested in reducing the environmental
pollution 0.520
The company achieved an optimum exploitation of resources,
especially non-renewable resources 0.820
The company owns a variety of means to deal with the
surrounding environment-friendly products 0.759
The company provides guidance on the use of products and
ways to get rid of them and their residues 0.654
The company uses non-harmful products (eco-friendly) and set
forth in the good manufacturing 0.589
The company recycles some materials 0.623 0.746 0.666 15 0.000
Business performance
The company gets the best productivity of the individual 0.473
The company has the least cost to produce per unit compared
with competitors 0.591
The company has the least work rotation (staff) 0.647
The quality of products match with competitors 0.425
The company has continually increase in sales 0.440
The company achieves better profit compared with competitors 0.610
The market value of the company’s shares increases on an
annual basis 0.547
Return on investment commensurate with return on the industry 0.682
The Company manages cost effectively 0.522
The company has an exceptional position among competitors 0.497
The company gets the best productivity of the individual 0.473 0.739 0.634 45 0.000
Corporate social responsibility
Social responsibility 0.815
Economic responsibility 0.748
Environmental responsibility 0.708 0.627 0.623 3 0.000
Note: Extraction method: principal component analysis

Before conducting multiple regressions, the following assumptions have been confirmed:
n Linearity test: To test the linearity, we depend on plotting of studentized residual against
the predicted value. As shown in Figure 2, there is no relation between the predicted
and residual values; therefore, linearity is assumed.

j SOCIAL RESPONSIBILITY JOURNAL j

 Table II The mean, standard deviation, t-value and implementation of all variables
Item Mean Standard deviation t Sig. Implement

Social responsibility 4.011 0.464 23.477 0.000 High

Economic responsibility 4.090 0.495 23.705 0.000 High
Environmental responsibility 4.122 0.477 25.354 0.000 High
Corporate social responsibility 4.074 0.362 31.935 0.000 High
Business performance 4.080 0.314 37.002 0.000 High

Table III Bivariate Pearson correlations matrix for research variables

No. Variables 1 2 3 4 5

1 Social responsibility
2 Economic responsibility 0.429**
3 Environmental responsibility 0.381** 0.271**
4 Corporate social responsibility 0.790** 0.758** 0.725**
5 Business performance 0.577** 0.539** 0.656** 0.779**
Note: **Correlation is significant at the 0.01 level (two-tailed)
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Figure 2 Linearity test

n Normality: To test the normality, we depend on the histogram of residuals. Figure 3

shows that the errors are normally distributed around X, and the shape follows the
normal distribution, so the model does not violate this assumption.
n Equal variance (homoscedasticity): To test the equal variance, we depend on the plot of
studentized residual against the predicted value. Figure 3 shows that the errors are
constant for all the value of independent variables. Therefore, there is no relation
between the predicted and residual values, so this assumption is not violated.
n Independence of errors: Table IV shows that Durbin–Watson value D = 1.709, which is
about two, indicates that the errors are independent from one another; hence, this
assumption is not violated.

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 Figure 3 Histogram of residuals

Table IV Collinearity statistics and Durbin–Watson

Collinearity statistics
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Variables Tolerance VIF Durbin–Watson

(Constant) 1.709
Social responsibility 0.740 1.352
Economic responsibility 0.802 1.247
Environmental responsibility 0.840 1.190

n Multicollinearity: Table IV shows that the variance inflation factor (VIF) value is less than
10 and tolerance value is more than 0.2 for each sub-variable, so collinearity
assumption is not violated.

Multiple regressions

H0. Corporate social responsibility (social, economic and environmental) does not affect
Jordanian Pharmaceutical Manufacturing industry’s business performance, at a 
0.05.
Table V shows the results of the multiple regression analysis that regress the three sub-
variables of CSR against industry’s business performance. It shows that the three sub-
variables together explained 62.5 per cent of the variance, where R2 = 0.625, F = 62.142,
Sig. = 0.000. Therefore, the null hypothesis is rejected and the alternative hypothesis is
accepted, which states that CSR (social, economic and environmental) affects JPM
industry’s business performance, at a  0.05.
Table VI shows the significant effect of each sub-variable of CSR on business
performance. It shows that the environmental responsibility has the highest effect
on JPM industry’s business performance, where Beta = 0.473, t = 7.487, Sig. = 0.000,
followed by the economic responsibility, where Beta = 0.294, t = 4.551, Sig. = 0.000,
and then the social responsibility, where Beta = 0.271, t = 4.022, Sig. = 0.000.
Therefore, the three sub-hypotheses are rejected and the alternative hypotheses are
accepted, which state:

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 Table V Results of multiple regression analysis (ANOVA): regressing CSR sub-variables
against business performance
r R2 Adjusted R2 F Sig.

0.790 0.625 0.615 62.142 0.000

Table VI Results of multiple regression analysis (ANOVA): regressing CSR sub-variables

against business performance
Unstandardized coefficients Standardized coefficients
Variables B Std. error Beta t Sig.

(Constant) 1.296 0.206 6.302 0.000

Social responsibility 0.183 0.046 0.271 4.022 0.000
Economic responsibility 0.187 0.041 0.294 4.551 0.000
Environmental responsibility 0.312 0.042 0.473 7.487 0.000
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1. Social responsibility initiative affects Jordanian Pharmaceutical Manufacturing

industry’s business performance, at a  0.05;

2. Economic responsibility initiative affects three sub-hypotheses industry’s business

performance, at a  0.05; and
3. Environmental responsibility initiative affects three sub-hypotheses industry’s business
performance, at a  0.05.

Results show that environmental responsibility has the highest effect, followed by economic
responsibility, and finally social responsibility.

Results discussion
Results show that there is an agreement among respondents on high implementation of
CSR variables. Environmental responsibility has rated the highest implementation, followed
by economic responsibility, and finally social responsibility. In addition, there is agreement
on high implementation of business performance indicators. These results are in line with
those of Abdullah and Abdul Rashid (2012), which concluded that CSR–environment was
having highest influence on organizational citizenship behavior, followed by CSR–employee
and CSR-customer, respectively.
Results also show that the relationships between CSR variables are medium. Each CSR
variable has strong relationship with total CSR, which means that all three variables are
correlated to each other, and strongly related to the total of CSR. Furthermore, all the three
variables are strongly related to business performance, and the total CSR is strongly related
to business performance. These results are supported by Lapinskiene and Peleckis (2009);
Marquina (2010); Aga et al. (2012); Wang and Zhang (2012); Khan and Majid (2013);
Belascu and Horobet (2013); Tuzcu (2013); Mwangi and Jerotich (2013; Yahya and Ha
(2014); Mumtaz and Pirzada (2014); Abdulrahman (2014); Malik and Nadeem (2014);
Dzhavdatovna et al. (2015); Manyasi and Masinde (2014); Murtaza et al. (2014); Mumtaz
and Pirzada (2014); Kaur (2015) and Emezi (2015). It seems that three dimensions of CSR
are highly related to each other and all of these are related to business performance.
Finally, the results indicate that the three sub-variables together affect JPM industry’s
business performance, at a  0.05. The environmental responsibility has the highest

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 effect, followed by the economic responsibility, and then the social responsibility. These
results are supported by Chao et al. 2010); Lin et al. (2010); Susanti et al. (2012); Bashir
et al. (2012); Persic and Markic (2013); Mousavi (2013); Mandasari and Hanif (2013);
Heydarian et al. (2013); Mujahid and Abdullah (2014); Basuony et al. (2014); Ukpabi
et al. (2014); Ding (2014); Kaur (2015); Estiasih et al. (2015); Al-Ani and Jamil (2015) and
Hyks (2015). Very few research works indicated that CSR does not have effect on
business performance, such as the works of Iqbal et al. (2012) and Arshad et al. (2012).
It is logical that people are aware of good CSR practices and reward companies that
contribute to society and protect the environment.
In Jordan, the results of the current research is matching with the results of Dabbas and
Al-rawashdeh (2012); Al-Sukkar et al. (2013) and Zaid and Al-Manasra (2013); In addition,
results are on line with some researcher works conducted on pharmaceutical industry, such
as the works by Leeuw and Scheerlinck (2011) and Aga et al. (2012); however, the results
contradicted with those of Mehar and Rahat (2007), which concluded that there is no
significant relationship between CSR and firm’s financial performance.
Finally, nowadays, people are more aware of the CSR activities and support the companies
that contribute more to community in general. This will improve companies’ business
performance by improving their reputation and image.

Conclusion
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The results show that there is an agreement among respondents on high implementation of
CSR variables. Environmental responsibility has rated the highest implementation, followed
by economic responsibility, and finally social responsibility. In addition, there is agreement
on high implementation of business performance indicators; this indicates that JPM
companies are aware of the benefits of implementing CSR dimensions.
The results also show that the relationships between CSR variables are medium, and each
CSR variable has strong relationship with total CSR, which means that all three variables are
related to each other and strongly related to the total of CSR, which means that improving
any variable may affect other CSR variables. Furthermore, all the three variables are
strongly related to business performance, and the total CSR is strongly related to business
performance.
Moreover, the results indicate that the three sub-variables together affect JPM industry’s
business performance, at a  0.05, and each CSR variable affects JPM industry’s business
performance. The environmental responsibility initiative has the highest effect on JPM
industry’s business performance, followed by the economic responsibility initiative, and
then the social responsibility initiative; this means that customers are aware about the
companies that implement CSR dimensions and reward them.
Finally, the companies that pay much attention to society, support economy and protect the
environment will perform better than do not do at local and international levels.

Limitation/recommendations
This research was directed toward the managers of JPM organizations. To test the
robustness of the findings, further research including employees and supervisors is
recommended. This research was also directed toward pharmaceutical industry. To test the
degree to which the findings can be generalized to other industries, further empirical work is
needed. Therefore, further testing with cross-sectional group from a wide variety of
industries will help mitigate the issue of generalizing conclusions on other industries. This
research was conducted on Jordanian organizations. Generalizing results of Jordanian
setting to other countries is questionable. Further empirical research works involving data
collection over diverse countries are needed.

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 In the light of research results, the following recommendations can be suggested for
pharmaceutical industry: CSR should be formulated clearly within JPM corporate strategy.
The elements of CSR need to be integrated with the present performance management
criteria, leadership development programs, organizational development programs, and a
champion for CSR needs to be assigned. The optimal procedure for JPM industry is to
focus on all three components of CSR to increase JPM Industry’s business performance.
Managers should design systems and set up appropriate programs for monitoring and
managing CSR and related databases. Finally, JPM companies should carry out CSR
programs including philanthropy.

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Further reading
Honggowati, S. and Supriyono, E. (2014), “The effect of corporate social responsibility on financial
performance with real manipulation as a moderating variable”, International Journal of Management,
Economics and Social Sciences, Vol. 3 No. 2, pp. 59-78.

About the author

Abdel-Aziz Ahmad Sharabati holds BSc pharmacy (India), MBA (Palestine) and PhD
Downloaded by INSEAD At 03:54 23 August 2018 (PT)

business management (Jordan). He has worked for 20 years in pharmaceutical industry

and published more than 40 papers; some of them have been published in journals and
others presented in international conferences. Currently, he is working as a Lecturer in
Middle East University and as a Consultant in Jerusalem Pharmaceutical Manufacturing
Company. Abdel-Aziz Ahmad Sharabati can be contacted at: APharmaArts@Gmail.Com

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