Understanding the relationship between organisational change, corporate social responsibility and firm performance

The dynamic capabilities view has implications for organisations wanting to improve their financial performance through aligning operational capabilities with environmental conditions. This study seeks to answer the following questions: (1) what is the relationship between stakeholder engagement related CSR operational capabilities (stakeholder knowledge building, strategic communication and conversations and stakeholder management) and organisational performance?; (2) how do dynamic capabilities (sensing, seizing and reconfiguring) impact the adaptation and modification of stakeholder engagement related CSR operational capabilities?; and (3) how does servant leadership, visionary leadership and transactional leadership affect the processes underlying dynamic capabilities altering stakeholder engagement related CSR operational capabilities? We develop a model outlining the relationships between dynamic capabilities and stakeholder engagement related CSR operational capabilities, and further investigate the role that various leadership styles play in this context. We empirically test our model by collecting data about 143 hotels in Kenya, and analyse it using partial least squares structural equation modelling. Our findings contribute to existing dynamic capabilities research by confirming that (1) stakeholder engagement related CSR operational capabilities have a significantly positive impact on firm performance; (2) dynamic capabilities positively influence stakeholder engagement related CSR operational capabilities; and (3) servant leadership has a positive effect on stakeholder engagement related CSR operational capabilities–dynamic capabilities relationship, whereas visionary leadership has a negative effect on this relationship and transactional leadership does not affect it. Our findings have implications for managers wanting to improve their CSR performance. They suggest that (1) managers should develop their stakeholder engagement related CSR operational capabilities if they are seeking to improve their financial performance; (2) managers should modify these capabilities using dynamic capabilities in order for them to remain relevant in response to changing stakeholder and industry demands; and (3) organisations should seek to encourage servant leadership style in their management teams to foster successful adaptation of these stakeholder engagement related CSR operational capabilities through leveraging dynamic capabilities.