Impact Of Corporate Social Responsibility Commerce Essay


The first step of any research is to analyse the previous researcher literature and theories. The literature review gives the researcher the idea and gap on the research as well as the understanding of the research topic which help the researcher to focus towards the conclusion. As a part of this research various research on corporate social responsibility are reviewed and analyse to get the gap on the previous research and try to fill that gap on this research project.

The study conducted by Archie B, Carroll (1999) found the history, evolution of concept and the definition of corporate social responsibility. As their study result the corporate social responsibility first guideline of modern era start at 1950s and expand the defination1960s, 1970s. According to them there some new definition created in 1980s due to some research and understanding. The new themes began to mature at that time which includes corporate social performance and stakeholder theory. As this way the corporate social responsibility gradually develop and many firms, businesses try to follow even though it is not compulsory to make good connection between society and environment.

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As the McWilliams and Siegel (2001) study and defines the corporate social responsibility. They define the corporate social responsibility as the actions by the firm for the further some social goods beyond the requirement of laws and regulations. From this study it is revel that the corporate social responsibility is not the compulsory but if the businesses follow these it will have positive impact on their success. As the business always short term objective is to make profit but as it expand and establish it has to stand as a one of the member of the society. So it has to deal with the every problem because it also hampers it business sooner or later. So even the problem seems to be only for society and environment the business should help the society to cope with that problems. So that it can sustain in the society for the long term.

The study journal written by Ye Cai (2012) examines the empirical association between the firm values and the corporate social responsibility on the sinful industries which produces tobacco, gambling and alcohol as well as some industries which produce weapons, oil. To overcome these issues they develop three hypothesis: window dressing hypothesis, the value â€"enhancement hypothesis and the value-irrelevance hypothesis. By taking US sample from 1995-2009, they found after controlling for various characteristics even this controversial industries have positive impact on the society. Even they did different study to overcome some problems but they found positive relation between those industries and the corporate social responsibility. From this study the society is concern about the company behaviour toward the society rather than what they do within their business unless it does not affect the outside society.

The study conducted by Guler Aras, Asli Aybars, Ozlem Kutlu, (2010), found that the companies' social responsibility activity can improve their financial performances of the current year, have significant effects on their financial performances of the next year, and vice versa. The variation of CSR and financial performance can also significantly influence each other.

Another study done in Brazil conducted by Vicente Lima Crisostomo, Fatima de Souza Freire, Felipe Cortes de Vasconcellos, (2011), found that CSR is value destroying in Brazil since a significant negative correlation between CSR and firm value was found. Additionally, a neutral relationship characterises the mutual effect between CSR and financial accounting performance.

According to the study in Indonesia conducted by Juanita Oeyono, Martin Samy, Roberta Bampton, (2011), the corporations are aware of the CSR in the emerging economy and they follow them. According to their result, the CSR has the positive impact on the financial performance of the company so its beneficial on the country like Indonesia where the economy is emerging.

Accourding to the study conducted by Ali Quazi, Alice Richardson, (2012), found that sample size and methodology are significant sources of variation in measuring the link between CSR and CFP.

According to the study of Holmes (1976) on corporate social responsibility he found the strongest response that business should help to solve the social problems in addition to making a profit even though those problems are not created by the business. This study also focus for the long term aim of business should not be only focus on profitability but also response accordingly in need of society.

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According to the Department for Business Innovation and skills defines corporate social responsibility as how the companies address the social environmental and economic impacts of their operations and get able to meet their sustainable long term goal. According to them the government will make the minimum rules to make sure for health and safety and environmental but the business has their own responsibility to make sure they take their own responsibility toward society and environment beyond minimum. The UK government is encouraging the business to follow the corporate social responsibility to sustain long term.

The study conducted by Philip and Robert (1984) on corporate social responsibility and financial performance revel that average age of corporate assets is found to be highly correlated with social responsibility ranking. So even after controlling this factor there is also correlation between corporate social responsibility and financial performance. This study gives the clear view that on any business there is the influence of corporate social responsibility on its financial performance.

Another study by McWilliams and Siegel (2000) on corporate social responsibility and financial performance give positive, negative and neutral effect. They found this inconsistency due to the flawed empirical analysis. So they try to prove imperfection on the econometric studies which creates such inconsistent result between corporate social responsibility and financial performance. After the study they found the model used in research as misspecific as CSR which does not have control on research and development which is the main important part of business success. So they specified the model and found that corporate social responsibility has the neutral affect on the financial performance of the business.

According to the study of Jean B. McGuire et. al. (1988) on corporate social responsibility and firm financial performance they found that the firm’s prior performance measure on stock market returns and accounting based measure are also linked with the corporate social responsibility. But corporate social responsibility is more closely related with the risk measure. From this study the corporate social responsibility does not have direct impact on financial performance but while the risk grows higher there is cost will be higher. As the cost rises in any business the profitability will be lower. So even the corporate social responsibility cannot be measure directly with financial loss in short term but if in long term it will impact on the sustainability of the business. So every business should focus their responsibility toward society and environment.

The international organisation for standardisation on its ISO 26000, gives the voluntary guidance about corporate responsibility and aimed to follow by the public and private sector businesses from the worldwide. The ISO will inform and give guide to the participant organisation. The standards are being developed with other relevant declarations and conventions from United Nations and International Labour Organisation. These standards cover definitions, social responsibility, guidance on social responsibility and its implementation. This standard is mostly followed by UK’s businesses.

From the above literature review the different researcher found the different result but one thing is sure that the corporate social responsibility has the impact on its performance. But still there is not exact result whether it gives positive or neutral effect as some research says it has positive effect and some say it has neutral. But one thing is sure if the businesses follow the corporate social responsibility it does not have any negative effect. Also it is the best and only way for any business to fulfil their responsibility towards the society as they receive many more benefit from the society and environment.

While studying the corporate social responsibility of business the researcher also have to study the customer behaviour. Without the study of customer behaviour the research will be only one sided. Therefore the research will not give the perfect result. So some literature reviews on customer behaviour are also reviewed for this research.

The study of Andrew J. Newman, Gordon R. Foxall, (2003) found that most of the customers are attracted by the store layout and the presentation of the product. From their study the different model used to analyse the customer behaviour but the customer mostly attracted by the store marketing and store layout. This study gives the conclusion that customer does not read the business annual report before they come for shopping unless and until the business corporate issue are out to the public.

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Another study by Amy Wong, Amrik Sohal, (2003) about customer relationship management is retail chain focus on the customer perception on shopping on retail chain. On this study customer were asked to recall their positive and negative incident while shopping in retail chain. The result shows that the positive incident increases the customer satisfaction, loyalty and the regularity on the shopping. While the negative incident increases the customer complaints which make them to change the shopping destination.

.1.1Literature gaps

As the many research done on the corporate social responsibility to fulfil many gaps on this topic. They even compare with the corporate social responsibility with the financial performance to be able to make sure there are links on their positive performance target. But still there are gaps on the corporate social responsibility and the businesses. To fill the gaps between these two this research may not sufficient but add one more stone.

The previous research mainly focused on the corporate social responsibility definitions and some research focus on comparing its performance by financial performance indicator. But much research still not done under which performance indicator the corporate social responsibility will be measure. The other gap is the corporate social responsibility and the customer behaviour. There are still unanswered question whether the customer really care about the shop or business they visit will follow the corporate social responsibility or not.

This research project tries to cover the customer behaviour on the business corporate social responsibility with taking account its impact on the financial performance. This research is also trying to find out the other measurement indicator for the corporate social responsibility so that business can compare it with their prior year and also with the competitor.