Importance of Corporate Social Responsibility (CSR) and Corporate Reputations (CR)

Added on - Dec 2020

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The importance of Corporate Social Responsibility (CSR) and Corporate Reputations (CR) is growing, asCSR is the main tool of the enterprise to increase sustainable development in developed and developingcountries (Balmer and Geyser, 2003, 2006). Appropriate management of corporate reputation isespecially important for firms that are having their main strengths and developing their competitiveadvantage and differentiation strategies based on such intangible assets as innovation, high intellectualcapital and high organizational culture (Barney, 2001). The differentiation strategies are linked withresource-based view of developing strategy, providing how valuable and difficult it is to imitate suchintangible assets like Corporate Reputation and Corporate Brands; therefore, these can provide for highprofits and rapid growth of firms (Walker, 2010; Riera and Iborra, 2017). Corporate Reputation (CR) hasbecome even more important nowadays due to the corporate governance scandals linked to thedangerous products and services, corruption, involvement in politics etc. The recent worldwidecorporate scandals highlighted the influence of irresponsible behaviour on damage for reputation andbrand and bankruptcy of the well-known enterprises claiming themselves as responsible. The CorporateHypocrisy, due to the irresponsible corporate policies, has attracted attention of many scholars in recentyears as well (Janney and Gove, 2011; Armstrong and Kesten, 2013; Arli et al., 2017; Shim and Kim,2017). There are several theoretical and many empirical studies that are dealing with corporatereputation and company image, brands that provide for organizational success by allowing them todifferentiate themselves from other organizations while remaining fully legitimate (Deephouse andCarter, 2005). In this field of research, the most popular issue that is being addressed is linked tomarketing, branding and communications. There is some important empirical proof of relationshipbetween CR and Corporate Branding (CB) and financial performance (Roberts and Dowling, 2002). TheCSR, corporate reporting requirements are as well driving the current interest in corporate reputation.Corporate image represents the public perception of the firm and is linked to the compositepsychological impression of the firm’s name. It is the public perception of the company unlike identity ofthe company. However, there is no clear agreement among scientists regarding the relationshipbetween CSR, Corporate Image (CI) and Corporate Reputation (CR) and Corporate Brands (CB) and theiroutcomes. In addition, there are various definitions of CR, CI and CB that are making development oftheoretical frameworks even more difficult (Dowling, 2001; Crane et al., 2008; Wartik, 2012; Matera andBaena, 2012; Harvey, 2014).Several studies have tried to explain the relationship between CSR and financial performance of firm.Among the list, Mittal et al (2008) investigated the relationship between CSR and organizationalprofitability in terms of economic value added (EVA) and market value added (MVA). The authors foundthat there exists a positive relationship between CSR and company's reputation and that there is littleevidence that companies with a code of ethics would generate significantly more economic value added(EVA) and market value added (MVA) than those without codes. Also Hossein, et al. (2012) examined thelink between CSR and economic performance by examining different impacts of positive and negativeCSR activities on financial performance of hotel, restaurant and airline companies, theoretically basedon positivity and negativity effects. Findings suggest mixed results across different industriescontributing to companies‟ appropriate strategic decision-making for CSR activities by providing moreprecise information regarding the impacts of each directional CSR activity on financial performance.Similarly Emilson, (2012) researched into the correlation between CSR and profitability using economic
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