The role of CSR engagement strategies in firm performance: a dynamic capabilities framework

This study examines the performance implications of Corporate Social Responsibility (CSR) applying the dynamic capabilities view (Teece, Pisano and Shuen, 1997; Teece, 2007). It addresses the general question of whether differing financial performance among firms can be attributed to: 1. The firm’s operational CSR engagement capabilities. ; 2. The firm’s dynamic capabilities. ; 3. The moderating effect of competitive intensity (Wilden, Gudergan, Nielson and Lings, 2013) and stakeholder volatility concerning the effects of dynamic capabilities. ; 4. The moderating effect of strategic alignment, length of engagement and reputation concerning the effects of operational CSR capabilities. Data was collected from 94 senior managers from small, medium and large Australian firms. A model was analysed using partial least squares structural equation modeling (PLS-SEM) drawing on the SmartPLS software V3.19 (Ringle, Wende and Becker, 2014). Findings suggest that dynamic capabilities do not have a direct effect on financial performance (Zott, 2003) but instead they operate through the mediating effect of the firm’s operational CSR capabilities thereby affecting firm performance. This study did not identify empirical support for the hypothesised moderating effects concerning the relationship between dynamic and operational CSR capabilities, or for those moderating the effect of operational CSR capabilities on corporate financial performance (CFP). The managerial implications from the research suggest that firms can use their CSR operational capabilities to generate increased financial performance as measured by increased net income and return on assets. Further, firms would benefit from developing dynamic capabilities – sensing, seizing and reconfiguring (Teece et al., 1997) which would assist the firm to maintain currency of their organisational CSR capabilities so that they continue to meet the needs of stakeholders.