Importance of Corporate Social Reputation and a Stakeholder Network Approach - Research Paper Example

Importance of corporate social reputation and a stakeholder network approach in increasing the competitive power of an organisation Professor University City, State Date Executive Summary Corporate social responsibility (CSR), sustainable development and business ethics are some of the most commonly discussed terms in the corporate world at present. Companies can no more operate as freely as they did in the past. Along with profit making, companies should give attention to CSR and sustainable developmental activities in order to increase their competitive power in the global market since the awareness about the importance of CSR is growing among the people across the world. The modern generation is keen on dealing with companies that have a good track record in terms of CSR. The purpose of the proposed study is to investigate the role of CSR in increasing the competitive power of a company. The proposed study will also evaluate what additional resources can be earned by a company while practising CSR. Corporate image and stakeholder’s perceptions of the firm are some of the important and rare resources than can be earned by a firm while showing commitments to CSR. In other words, reputational capital is one of the major resources a firm can attain through CSR. The proposed study will analyses more about this aspect as well. Table of Contents 1.0 Introduction 1 1.1 Aim and objectives 2 1.2 Research question 3 1.3 Hypothesizes 3 1.4 Rationale/Justification 3 2.0 Literature review 4 2.1 Shareholder approach to CSR 4 2.2 Stakeholder approach to CSR 4 2.3 Organisational structure 4 2.4 Organisational resources 5 2.5 Corporate social reputation 5 2.6 Social network theory 6 3.0 Methodology 7 3.1 Research philosophy 7 3.2 Data collection methods 7 3.3 Sampling 9 3.4 Data analysis 9 4.0 Time Scale 10 5.0 Resources/Cost 10 6.0 Ethical considerations 11 7.0 Research limitations 11 References 12 Introduction As per the views of Kotler and Lee (2004), corporate social responsibility (CSR) is commitment to improve community well-being with the help of ethical business practices. In connection with the stakeholder theory, CSR can be perceived as identifying and building relationships with groups and individuals who may be affected by organisational decisions and behaviour (Freeman, 1984). In any case, it is a fact that modern companies can no more develop their strategies based on profit making motives alone. All companies are operating in a society or community and all of them exploit the community resources in one way or another. Therefore, it is the duty of the organisations to give something back to the communities as a compensation for the resources they exploit. Hawkins (2006) mentioned that it is the society that provides customers and other resources such as manpower, machinery, material and money to the corporations. So, companies have moral and legal responsibilities to protect the interests of the communities in which they operate. Many scholars have already researched the importance of corporate social responsibility in improving the competitive power of an organisation. However, the findings of these scholars have yielded some contrasting results. For example, Waddock and Graves, (1997), Greening and Turban, (2000) and Hillman and Keim (2001) found that corporate social responsibility would help firms in improving their competitive power. However, none of these studies did succeed in establishing a practical link between CSR and competitive power. In other words, these studies failed to support their findings with the help of statistical and practical data. On the other hand, studies conducted by scholars such as Barney (1991), Peteraf (1993) and Wemerfelt (1984) established that corporate social responsibility alone may not help a firm very much in improving their competitive power. They noticed that competitive advantage of a firm can be increased only when the firm is able to develop or create valuable and rare resources. For example, Apple Inc. has introduced some innovative devices such as iPhone, iPad and iPod at the beginning of twenty first century and became the number one technology company in the world. It should be noted that Apple Inc. was struggling for existence before the introduction of these new products. In other words, instead of CSR, innovative products helped Apple Inc. to regain its lost grounds in the market. According to Granovetter (1985) and Gulati and Gargiulo (1999), actors such as individuals, groups, and organisations are enclosed in social structures through their relationship with other actors in society. In other words, there exists a network between individuals, groups, and organisations in a society. Uzzi (1999) and White et al. (2004) mentioned that effective management of such a network would help an organisation to increase its competitive power 1.1 Aim and objectives From the above discussions, it is evident that there is a considerable gap in the literature related to the ability of CSR in improving the competitive power of a company. The major aim of the proposed study is to investigate up to what extent CSR would help a company in improving its competitive power. Another aim of the proposed study is to investigate how CSR initiatives would affect the interests of a company’s stakeholders and help a company to improve its reputation capital. The objectives of the proposed study are given below To identify the value of CSR in improving the corporate image of a company To evaluate the role of CSR in improving reputation capital of a company To assess whether CSR really improves the competitive power of a company or not To understand the relationship between CSR and competitive power 1.2 Research questions The major questions addressed in the proposed study will be: What important resources can be achieved by a firm with the help of CSR? How value of organisational resources earned through CSR can be protected or enhanced with the help of proper stakeholder management 1.3 Hypotheses The following hypotheses will be tested as part of the proposed study: CSR helps an organisation to improve its performance CSR improves the reputation capital of a company CSR and competitive power of a firm have a direct relationship. Stakeholder management is important in protecting the organisational resources earned through CSR 1.4 Rationale/Justification Some of the major problems faced by human at present are: global warming, climate changes, air, land and water pollutions, waste accumulation etc. One of the major contributors of these problems is companies or organisations. All organisational activities cause some kind of problems to the nature and society. The importance of CSR and sustainable development is growing day by day in the present heavily competitive and extremely globalised business world because of the above facts. It is important for companies to develop business strategies suitable for the needs of the present world in order to sustain their competitive power. CSR is believed to be one way of enhancing the competitive power of modern companies. Therefore, the proposed study is extremely significant in the present business world. 2.0 Literature Review 2.1 Shareholder approach to CSR As per the views of classical economics, corporate social responsibility is not at all required for firms. Renowned economists such as Milton Friedman argued that the one and only social responsibility of business is to use its resources and engage in activities designed to increase its profits (Friedman, 1970). In other words, Friedman argued that companies have no role at all in safeguarding the interests of the communities in which they operate. In his opinion, companies should just for profit making. It should be noted that stock holder’s or shareholder’s interests were given prominence in the past. However, instead of shareholders, the concept of stakeholder started to enter the business world later in the 80s and 90s. 2.2 Stakeholder approach to CSR As per the views of Orlitzky et al. (2003) and Rowley and Berman (2000) the concept of CSR is considered differently by different people. Some people believe that the discussions related to CSR are critical to not only to the content and construct validity, but also to criterion validity (Orlitzky et al., 2003). On the other hand many others argue that a firm must seek to engage in relationships with stakeholders in order to maintain the wellbeing of the firm (Freeman, 1984). Clarkson (1995) has extended this view further and argues that firms must identify potential stakeholders, and prioritize them based on their potential to promote the firm’s profitability. In his opinion, social concern should also influence the firm while evaluating the ‘legitimacy’ of the demands of the stakeholder groups. 2.3 Organisational structure Many previous researchers like Chandler (1962) and Ansoff (1965) were of the view that CSR has direct relationship with the organisational structure. As per the views of Chandler, a multi-divisional form (M-form) of organisational structure is necessary for organisations to improve their performances related to CSR (Cockbum et al., 2000). Organisations with M-form of organisational structure would outperform organisations with other types of organisational structure. In other words, organisational structure plays an important role in affecting the competitive power of an organisation as well as the ability to maintain good track records in terms of corporate social responsibility. 2.4 Organisational resources According to Peteraf, (1993) and Mahoney and Pandian (1992), competitive power of an organisation depends on only to the resources they have but also to the ways through which these resources are used. There is no point in an organisation has ample resources and less expertize in exploiting it. In short, the ability to utilize rare organisational resources is extremely important while a firm tries to improve its competitive power (Peteraf, 1993; Mahoney and Pandian, 1992). 2.5 Corporate Social Reputation If CSR is the actual behaviour of firms towards their relevant stakeholders (Wood, 1991) Corporate Social Reputation is the potential outcome of such socially responsible activity (Neville et al., 2005). In other words, corporate social responsibility is a process and corporate social reputation is a product. According to Fombrun et al. (2000), corporate social reputation is the ability to accumulate reputational capital. Each and every organisation has some reputations in the society based on their performances in the past. These reputations may be good at some times and bad at other times. Reputation capital will be accumulated when firms respond positively with the needs of its stakeholders (Neville et al., 2005). For example, better quality, safety and innovative features of products and services would help companies to improve their reputation capital (Sen and Bhattacharya, 2001). In any case, it is a fact that modern customers deal only with reputed companies at present. They are not at all interested in dealing with companies that follow unethical business practices. Many studies have proved that corporate social reputation has the ability to improve the earning potentials of a firm. For example, Black et al. (2000), Little and Little (2000) mentioned that corporate social reputation has the ability to affect the market value, earning potential and financial sustainability of a firm. The reputation of a company plays a big role in fixing the prices of its product. For example, Apple Inc. is one of the highly reputed companies in the world. As a result of that smartphones from Apple Inc. are priced much higher than that from other companies. In other words, better reputation helped Apple Inc. to set higher prices for its products and still able to sell them rapidly in the market. The studies conducted by Neville et al. (2005) proved that corporate social reputation is the missing link between Corporate Social Responsibility (CSR) and Corporate Financial Performances (CFP). It is believed that the positive effect of Corporate Social Reputation is more in highly competitive industries compared to other industries 2.6 Social Network Theory According to Borgatti and Foster (2003) social network theory is extremely relevant in business decision-making. As per the views of Emerson (1976), social relations and social networks emerge because of the efforts of the individuals in pursuing their self-interest. While the interactions among the individuals increase, committed partnerships/alliances will also be emerged out (Uzzi and Gillespie, 2002). Cook and Whitmeyer (1992) mentioned that the exchanges between different people constitute a network and social structures that help business in one way or another. 3.0 Methodology 3.1 Research Philosophy Both positivist and naturalist research philosophies will be used for the proposed study. “Researchers who use quantitative tools, techniques that emphasize measuring and counting, are called positivists whereas those who prefer the qualitative tools of observation, questioning, and description are called naturalists” (Research philosophy And qualitative Interviews, n.d., p.14). Both quantitative and qualitative data are necessary for making reliable, credible and valid conclusions from the proposed study. It is often said that quantitative data has the ability to define whereas qualitative has the ability to describe. It is necessary to define and explain many things as part of the proposed study. Naturalists assume that reality constantly changes (Research philosophy And qualitative Interviews, n.d.). For example, the attitudes of the companies towards CSR and sustainable development have changed a lot in the recent past. In order to learn more about it, the use of naturalist philosophy is necessary for the proposed project. At the same time, it is necessary to prove scientifically that CSR perspectives have been changed a lot in the recent past. Positivist research philosophy would help the researcher in this regard since it works on scientific methods. 3.2 Data collection methods As part of the proposed study, a mixed research method will be used for the data collection. “Mixed research method is a research method in which both quantitative as well as qualitative research technique is employed” (Saunders 2007, p.102). According to Creswell (2003, p. 109), “quantitative research technique is a method in which statistics or numbers are involved and the observation are evaluated on the basis of number of respondents”. On the other hand qualitative research is usually conducted with the help of theories and principles. The theories and principles formed as part of the proposed study will get more validity, credibility and reliability when the arguments are backed up with statistics. Primary and secondary research methods will also be used for the proposed project. The researcher has already taken permission for conducting semi-structured interviews with around five top level executives of some prominent companies. Moreover, an online questionnaire survey will be conducted as part of the proposed project in order to learn more about the opinions of ordinary people and employees of prominent companies about the importance of CSR in the present business world. It should be noted that interviews would help the researcher to ask open ended questions and collect descriptive data. Moreover, it helps the researcher to ask questions other than the pre-planned ones. Only closed ended questions or questions with multiple choice answers will be used for the survey since survey participants usually are reluctant in answering closed ended questions that require descriptive answers. Survey is capable of collecting a large amount of information in quick time from a wider population. “Secondary research makes use of information previously researched for other purposes and publicly available” (The Times100, 2013). Secondary research will be conducted as part of the proposed study with the help of secondary sources such as journals, books, periodicals, magazines, newspapers and internet websites. According to Jackson (1994, p.11), “As secondary data is readily available and generally assessable to everyone as well as it does not involve primary research or survey, as a result it will be directly collected from the secondary data sources”. Secondary data will give information from the past while primary research will give information from the present. Both current information and past information are extremely important while conducting a research on topics such as CSR and competitive advantages of companies 3.3 Sampling Purposeful sampling will be used for the survey and interviews that are going to be conducted as part of the proposed study. “Purposeful sampling means that researchers intentionally select participants who have experience with the central phenomenon or the key concept being explored” (Cresswell, 2006, p.112). The proposed research will make use of both experienced and fresh managerial staff as the samples for the interview and survey. 3.4 Data Analysis Deduction and induction methods will be the methods used for the data analysis of the proposed project. These methods of data analysis work on the following algorithms: If X => Y, and Y => Z, then X => Z (deduction) If X => Y, and X => Z, then Y => Z (induction)(Apgaylard, 2013) It is evident that deduction always gives 100% accurate results. It should be noted that deduction works on facts rather than probabilities. On the other hand, induction works on probabilities and hence 100% accurate results cannot be guaranteed while using it. Deduction is the process of formulating an argument from the collected data whereas induction is the process of finding an argument collected data (Deduction, Induction and Abduction in Academic Writing, 2011). Even though deduction always preferred over induction while interpreting data, it is impossible to use it all the time while doing academic researches. The researcher may come across with a lot of unexpected data while doing actual research and deduction may not be able to interpret such data. On such occasions, use of induction like data interpretation methods become mandatory 4.0 Time Scale The proposed project plan is depicted in the figure given below. Project/ phase Before April 15, 2015 Before April 30 2015 Before May 15, 2015 Before May 31 2015 Before June 15, 2015 Before June 30 2015 Before July 15, 2015 Before July 31, 2015 Before August15, 2015 Before August31 2015 September second week 2015 Proposal Lit. Review Primary data collection Survey Interview Data analysis Initial drafts Final draft 5.0 Resources/Costs Research staff, secretarial staff and money are some of the resources necessary for the proposed research. It should be noted that this research involves a lot of travelling for taking interviews from prominent managerial staffs from some big companies. Moreover, it is necessary to enter the data collected on a computer as soon as they are collected. Therefore, the services of research staff and secretarial staff are necessary for the proposed project. Moreover, it is necessary to spend a substantial amount of money for stationaries. It is estimated that at least $ 25000 is required for the above mentioned expenses of the proposed study. 6.0 Ethical consideration Under no circumstances, the names and personal details of interviewees and survey participants will be revealed. Informed consent will be taken from all survey participants and the interviewees before conducting the actual interviews and survey. Plagiarism is another most commonly occurring ethical problem in academic researches. The researcher will take utmost care to avoid plagiarism issue while writing the final paper 7.0 Research Limitations Shortage of time is the major limitation of the proposed study. As per the given schedule, the proposed study should be completed before September 15, 2015. That means around 6 months are allotted for the completion of this study. Twelve months would have been better for the completion of the proposed project. References Ansoff, H.I. (1965). Corporate Strategy. New York, NY: McGraw-Hill. Apgaylard, 2013. Blind anger. [Online] Available at: http://apgaylard.wordpress.com/2008/07/13/blind-anger/ [Accessed 28 March 2015] Borgatti, S.P. and Foster, P.C. (2003). The network paradigm in organisational research: a review and typology. Journal o f Management, 29, 991-1013. Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99-120. Black, E.L., Carnes, T.A. and Richardson, V.J. (2000). The market valuation of corporate reputation. Corporate Reputation Review, 3, 31-42. Chandler, A.D., Jr. (1962). Strategy and Structure: Chapters in the History o f the Industrial Enterprise. Cambridge, MA: MIT Press. Clarkson, M.B.E. (1995). A Stakeholder framework for analyzing and evaluating corporate social performance. Academy o f Management Review, 20, 92-117. Cockbum, I.A., Henderson, R.M. and Stem, S. (2000). Untangling the origins of competitive advantage. Strategic Management Journal, 21,1123-1145. Cook, K. S., and Whitmeyer, J.M. (1992). Two Approaches to Social Structure: Exchange Theory and Network Analysis. Annual Review o f Sociology, 18,109-127. Friedman, M. (1970). The Strategic Responsibility of Business is to increase its Profits. New York Times Magazine. Greening, D.W. and Turban, D.B. (2000). Corporate social performance as a competitive advantage in attracting a quality workforce. Business and Society, 39, 254-280. Granovetter, M. (1985). Economic action ad social structure: a theory of embeddedness. American Journal o f Sociology, 91, 481-510. Gulati, R. and Gargiulo, M., (1999). Where do inter-organisational networks come from? American Journal o f Sociology, March, 177-231. Hillman, A. J. and Keim, G. D. (2001). Shareholder value, stockholder management and social issues: What’s the bottom line? Strategic Management Journal, 22, 125-139. Creswell, J. (2003). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. Thousand Oaks, California: Sage Publications. pp. 126 – 135 Cresswell, J. (2006). Collecting Data In Mixed Methods Research. [Online] Available at: http://www.sagepub.com/upm-data/10983_Chapter_6.pdf [Accessed 28 March 2015] Deduction, Induction and Abduction in Academic Writing, (2011). [Online] Available at: http://seansturm.wordpress.com/2011/05/23/deduction-induction-and-abduction/[Accessed 28 March 2015] Freeman, R.E. (1984). Strategic management: A stakeholder approach. Boston: Pitman Fombrun, C., Gardberg, N. and Barnett, M. (2000). Opportunity platforms and safety nets: Corporate citizenship and reputational risk. Business and Society Review, 105, 85-106. Hawkins D.E. (2006). Corporate Social Responsibility: Balancing Tomorrows Sustainability and Todays Profitability Publisher: Palgrave Macmillan (September 4, 2006) Jackson, P. (1994). Desk Research, London: Kegan-Paul. pp. 11-35. Kotler P Philip Kotler (Author) › Visit Amazons Philip Kotler Page 4. Find all the books, read about the author, and more. 5. See search results for this author 6. Are you an author? Learn about Author Central 7. and Lee N. (2004), Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, Publisher: Wiley; 1 edition (December 13, 2004) Little, P.L. and Little, B.L. (2000). Do perceptions of corporate social responsibility contribute to explaining differences in corporate price-earnings ratios? A research note. Corporate Reputation Review, 3, 137-42. Mahoney, J.T. and Pandian, J.R. (1992). The Resource-Based View Within the Conversation of Strategic Management. Strategic Management Journal, 13, 363-380. Neville, B.A., Bell, S.J. and Menguc, B. (2005). Corporate reputation, stakeholders and the social performance-financial performance relationship. European Journal of Marketing, 39, 1184-1198. Orlitzky, M., Schmidt, F. and Rynes, S. (2003). Corporate social and financial performance: A meta analysis. Organisation Studies, 24, 403-441. Peteraf, M.A. (1993). The cornerstones of competitive advantage: a resource-based view. Strategic Management Journal, 14, 179-191. Research philosophy And qualitative Interviews, (n.d.) [Online] Available at: http://www.sagepub.in/upm-data/43179_2.pdf [Accessed 28 March 2015] Rowley, T. J. (1997). Moving beyond dyadic ties: A network theory of stakeholder influences. Academy o f Management Review, 22, 887-910. Sen, S. and Bhattacharya, C.B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal o f Marketing Research,38, 225-243. Saunders, M. (2007). Research Methods for Business Students, 5th ed, Financial Times Prentice Hall, pp. 298 The Times100, (2013). Primary and secondary research. [Online] Available at: http://businesscasestudies.co.uk/food-standards-agency/market-research-and-consumer-protection/primary-and-secondary-research.html#axzz2bvuajQQX[Accessed 28 March 2015] Uzzi, B. (1999). Embeddedness in the making of financial capital: how social relations and networks benefit firms seeking financing. American Sociological Review, 64, 481-505. Uzzi, B. and Gillespie, J.J. (2002). Knowledge spillover in corporate financing networks: embeddedness and the firm’s debt performance. Strategic Management Journal, 23, 595-618. Waddock, S.A. and Graves, S. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18, 303-317. Wemerfelt, B. (1984). A resource based view of the firm. Strategic Management Journal,5, 171-180. White, D.R., Owen-Smith, J., Moody, J. and Powell, W.W. (2004). Networks, fields and organisations: Micro-dynamics, scale and cohesive embeddings. Computational and Mathematical Organisation Theory, 10, 95-117. Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16,691-718. 174 Read More