Corporate social responsibility effects on competitive advantage
“A research study on the influence of CSR on competitive advantage, including the influence of a firm’s reputation.
Author:
ANR: Supervisor: Study program: Word count:
N.R.F. Willems
267183
D. Hennessy
Pre-master Strategic Management 7610
Foreword
In the context of my pre-master Strategic Management I have been working on this bachelor thesis. The skills and competences that I have learned during the last five months are very important to write the bachelor thesis and will eventually be useful for writing the master thesis. This bachelor thesis is focused on literature research and logical reasoning, based on the findings in literature.
The central topic of this bachelor thesis is corporate social responsibility. I find this a very interesting topic to research since it is very broad and very up to date. For example the recent oil leak caused by BP. This is a classical example of CSR. First is BP really responsible and did they acted responsibly. A few years ago BP changed its name (form British Petrol to Beyond Petrol) for CSR reasons. The goal was to change it reputation to a firm with a responsible brand.
Through this thesis I hope to contribute to the topic of CSR. I try to do this by describing scattered information in a clear way and thus give more insights about the impact of CSR on competitive advantage.
Finally I would like to thank Dr. D. Hennessy and the members of my bachelor thesis group for giving feedback on my work and the support during the process of writing this bachelor thesis.
I hope you will enjoy while reading this bachelor thesis.
Nick Willems 267186
Corporate Social Responsibility Page - 1 -
Management summary
Corporate social responsibility (CSR) is an upcoming phenomenon in industries, but also in academic literature. CSR definitions are scattered and differ from each other. Therefore it is important to define one good, complete and understandable definition. The research about CSR is scattered and is therefore difficult to understand. Central in this thesis is the influence of CSR on competitive advantage. The direct influence is examined and also the influence of CSR on a firm’s reputation and the effect that reputation has on competitive advantage. The primary goal of this thesis is to understand CSR and by gathering scattered information give an answer to the problem statement. The problem statement of this thesis is; what influence does CSR have on the firm’s competitive advantage, in a resource-based view?
Before to even begin with giving the answer to the problem statement it is necessary to get a better view of the keywords corporate social responsibility and competitive advantage. As mentioned CSR is a scattered phenomenon. There has been a lot of research on CSR (Davis & Buchholtz, 1966; Votaw & Sethi, 1973; Van Marrewijk, 2003; Panapaan et al., 2003; Kotler, 2004; Garriga & Mele, 2005; Matten & Crane 2005; Matten & Moon, 2008). But the researchers all gave other definitions to CSR (either different or, in some way, similar). This makes CSR difficult to describe in one understandable definition. In this thesis the definition of CSR is formulated after a time study over the last few decades.
CSR contains of three dimensions (economic, social and environmental) which a firm should take into account. A company must always evaluate all of their decisions; they need to reconsider the impact the decisions might have on the social system. A firm can show its commitment to improve community and its well being by engaging CSR.
The impact of CSR on the firm’s reputation can be described in either a positive or even a negative way. What impact it might have depends on the perception of the customers towards the firm. The public will look at the behavior, the intention and the expenditures of the firm. If the customers accept a firm and the CSR activity, than there will be a positive impact on the reputation. A firm with a positive image among its stakeholders is seen as a more favorable firm. Reputation is an intangible resource for a firm and thus it can effect the competitive advantage. So in this way, CSR can have a positive effect on the firm’s reputation: by engaging in CSR activities, a firm can improve its reputation which leads to better relations with stakeholder, the ability to attract better employees and the possibility to charge higher prices because the customers are willing to pay them.
But how can a firm gain competitive advantage? This is described with the resource- based view theory. In this theory there are conditions which underlie to competitive advantage: (1) heterogeneity, (2) ex post limits to competition, (3) imperfect resource mobility and (4) ex ante limits to competition. When the firm’s resources fulfill these four conditions, a
Corporate Social Responsibility Page - 2 -

company is able to gain competitive advantage. Some authors, like Grant (1991) suggest that not resources on its own are the basis of competitive advantage, but that a firm needs to be able to team these resources to perform tasks or activities. This is called capabilities. If a firm has resources and is able to team these resources and eventually operationalize these resources (capabilities), than a firm has competitive advantage over its competitors.
Reputation is, as mentioned above, an intangible resource. If it fulfills the requirements of a resource and a firm has the capabilities to control and manipulate these resources, a firm is able to gain competitive advantage out of this resource. Reputation can have a positive effect on the firm’s reputations. A firm can build a good reputation by stable investments over time. But CSR does not only influence reputation but also other resources. CSR can lead to competitive advantage if a firm makes good use of CSR to improve the corporate reputation.
CSR can also be seen as a resource on its own, if it is used to influence business operations in a strategic way. If CSR is seen as a resource and if it meets all conditions in the resource-based theory, a company is able to gain competitive advantage. Because CSR has short-term costs and the benefit of the CSR activities is long-term, sometimes CSR is not mentioned as source of competitive advantage. But eventually CSR has an influence on the competitive advantage.
Corporate Social Responsibility Page - 3 -
Index
Chapter 1: Introduction ...................................................................................................... - 5 - 1.1 Problem background................................................................................................ - 5 - 1.2 Main research question:........................................................................................... - 5 - 1.3 Relevance................................................................................................................ - 6 - 1.4 Structure of the thesis .............................................................................................. - 6 - 1.5 Methodology ............................................................................................................ - 7 -
1.5.1 Type of research ............................................................................................... - 7 -
1.5.2 Data gathering methods .................................................................................... - 7 - Chapter 2: Corporate social responsibility (CSR)............................................................... - 8 -
2.1 What is CSR?...................................................................................................... - 8 -
2.2 Conclusion ........................................................................................................ - 10 -
Chapter 3: effect CSR on reputation................................................................................ - 11 -
3.1 Reputation terminology ..................................................................................... - 11 -
3.2 Possible effect CSR on firm’s reputation ........................................................... - 12 -
3.3 Brand/cause fit .................................................................................................. - 12 -
3.4 Communication ................................................................................................. - 13 -
3.5 Conclusion ........................................................................................................ - 14 -
Chapter 4: Resource Based View of competitive advantage....................................... - 15 -
4.1 Resource based view of competitive advantage................................................ - 15 -
4.2 Conclusion ........................................................................................................ - 18 -
Chapter 5: Impacts on Competitive advantage. ............................................................... - 20 -
5.1 CSR leads to competitive advantage................................................................. - 20 -
5.2 CSR from a resource-based view...................................................................... - 21 -
5.3 Reputation in the resource-based view leads to competitive advantage ............ - 21 -
5.4 CSR as a firms resource ................................................................................... - 22 -
5.5 Conclusion ........................................................................................................ - 23 -
Chapter 6: Conclusion discussion and recommendations................................................ - 24 -
6.1 Conclusion ........................................................................................................ - 24 -
6.2 Discussion......................................................................................................... - 26 -
6.3 Recommendations for further research ........................
Corporate social responsibility effects on competitive advantage“A research study on the influence of CSR on competitive advantage, including the influence of a firm’s reputation.Author:ANR: Supervisor: Study program: Word count:N.R.F. Willems267183D. HennessyPre-master Strategic Management 7610ForewordIn the context of my pre-master Strategic Management I have been working on this bachelor thesis. The skills and competences that I have learned during the last five months are very important to write the bachelor thesis and will eventually be useful for writing the master thesis. This bachelor thesis is focused on literature research and logical reasoning, based on the findings in literature.The central topic of this bachelor thesis is corporate social responsibility. I find this a very interesting topic to research since it is very broad and very up to date. For example the recent oil leak caused by BP. This is a classical example of CSR. First is BP really responsible and did they acted responsibly. A few years ago BP changed its name (form British Petrol to Beyond Petrol) for CSR reasons. The goal was to change it reputation to a firm with a responsible brand.Through this thesis I hope to contribute to the topic of CSR. I try to do this by describing scattered information in a clear way and thus give more insights about the impact of CSR on competitive advantage.Finally I would like to thank Dr. D. Hennessy and the members of my bachelor thesis group for giving feedback on my work and the support during the process of writing this bachelor thesis.I hope you will enjoy while reading this bachelor thesis.Nick Willems 267186Corporate Social Responsibility Page - 1 -Management summaryCorporate social responsibility (CSR) is an upcoming phenomenon in industries, but also in academic literature. CSR definitions are scattered and differ from each other. Therefore it is important to define one good, complete and understandable definition. The research about CSR is scattered and is therefore difficult to understand. Central in this thesis is the influence of CSR on competitive advantage. The direct influence is examined and also the influence of CSR on a firm’s reputation and the effect that reputation has on competitive advantage. The primary goal of this thesis is to understand CSR and by gathering scattered information give an answer to the problem statement. The problem statement of this thesis is; what influence does CSR have on the firm’s competitive advantage, in a resource-based view?Before to even begin with giving the answer to the problem statement it is necessary to get a better view of the keywords corporate social responsibility and competitive advantage. As mentioned CSR is a scattered phenomenon. There has been a lot of research on CSR (Davis & Buchholtz, 1966; Votaw & Sethi, 1973; Van Marrewijk, 2003; Panapaan et al., 2003; Kotler, 2004; Garriga & Mele, 2005; Matten & Crane 2005; Matten & Moon, 2008). But the researchers all gave other definitions to CSR (either different or, in some way, similar). This makes CSR difficult to describe in one understandable definition. In this thesis the definition of CSR is formulated after a time study over the last few decades.CSR contains of three dimensions (economic, social and environmental) which a firm should take into account. A company must always evaluate all of their decisions; they need to reconsider the impact the decisions might have on the social system. A firm can show its commitment to improve community and its well being by engaging CSR.The impact of CSR on the firm’s reputation can be described in either a positive or even a negative way. What impact it might have depends on the perception of the customers towards the firm. The public will look at the behavior, the intention and the expenditures of the firm. If the customers accept a firm and the CSR activity, than there will be a positive impact on the reputation. A firm with a positive image among its stakeholders is seen as a more favorable firm. Reputation is an intangible resource for a firm and thus it can effect the competitive advantage. So in this way, CSR can have a positive effect on the firm’s reputation: by engaging in CSR activities, a firm can improve its reputation which leads to better relations with stakeholder, the ability to attract better employees and the possibility to charge higher prices because the customers are willing to pay them.But how can a firm gain competitive advantage? This is described with the resource- based view theory. In this theory there are conditions which underlie to competitive advantage: (1) heterogeneity, (2) ex post limits to competition, (3) imperfect resource mobility and (4) ex ante limits to competition. When the firm’s resources fulfill these four conditions, aCorporate Social Responsibility Page - 2 -company is able to gain competitive advantage. Some authors, like Grant (1991) suggest that not resources on its own are the basis of competitive advantage, but that a firm needs to be able to team these resources to perform tasks or activities. This is called capabilities. If a firm has resources and is able to team these resources and eventually operationalize these resources (capabilities), than a firm has competitive advantage over its competitors.Reputation is, as mentioned above, an intangible resource. If it fulfills the requirements of a resource and a firm has the capabilities to control and manipulate these resources, a firm is able to gain competitive advantage out of this resource. Reputation can have a positive effect on the firm’s reputations. A firm can build a good reputation by stable investments over time. But CSR does not only influence reputation but also other resources. CSR can lead to competitive advantage if a firm makes good use of CSR to improve the corporate reputation.CSR can also be seen as a resource on its own, if it is used to influence business operations in a strategic way. If CSR is seen as a resource and if it meets all conditions in the resource-based theory, a company is able to gain competitive advantage. Because CSR has short-term costs and the benefit of the CSR activities is long-term, sometimes CSR is not mentioned as source of competitive advantage. But eventually CSR has an influence on the competitive advantage.Corporate Social Responsibility Page - 3 -IndexChapter 1: Introduction ...................................................................................................... - 5 - 1.1 Problem background................................................................................................ - 5 - 1.2 Main research question:........................................................................................... - 5 - 1.3 Relevance................................................................................................................ - 6 - 1.4 Structure of the thesis .............................................................................................. - 6 - 1.5 Methodology ............................................................................................................ - 7 -1.5.1 Type of research ............................................................................................... - 7 -1.5.2 Data gathering methods .................................................................................... - 7 - Chapter 2: Corporate social responsibility (CSR)............................................................... - 8 -2.1 What is CSR?...................................................................................................... - 8 -2.2 Conclusion ........................................................................................................ - 10 -Chapter 3: effect CSR on reputation................................................................................ - 11 -3.1 Reputation terminology ..................................................................................... - 11 -3.2 Possible effect CSR on firm’s reputation ........................................................... - 12 -3.3 Brand/cause fit .................................................................................................. - 12 -3.4 Communication ................................................................................................. - 13 -3.5 Conclusion ........................................................................................................ - 14 -Chapter 4: Resource Based View of competitive advantage....................................... - 15 -4.1 Resource based view of competitive advantage................................................ - 15 -4.2 Conclusion ........................................................................................................ - 18 -Chapter 5: Impacts on Competitive advantage. ............................................................... - 20 -5.1 CSR leads to competitive advantage................................................................. - 20 -5.2 CSR from a resource-based view...................................................................... - 21 -5.3 Reputation in the resource-based view leads to competitive advantage ............ - 21 -5.4 CSR as a firms resource ................................................................................... - 22 -5.5 Conclusion ........................................................................................................ - 23 -Chapter 6: Conclusion discussion and recommendations................................................ - 24 -6.1 Conclusion ........................................................................................................ - 24 -6.2 Discussion......................................................................................................... - 26 -6.3 Recommendations for further research ........................
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