Examining the Effects of CSR on Organizational Innovation

This research paper investigates the intricate relationship between Corporate Social Responsibility (CSR) and organizational innovation. It delves into how different types of CSR—reactive and proactive—impact exploitative and exploratory innovation processes within firms. The paper begins with an introduction highlighting the significance of CSR and innovation for sustainable business practices. The problem statement addresses the inconsistencies in existing research regarding the CSR-innovation link. The study then poses key research questions concerning the influence of different CSR types on innovation and the reverse effect, how innovation affects the engagement of organization in CSR activities. A thorough literature review examines CSR-innovation research, the corporate innovation process, and the impacts of reactive and proactive CSR on exploitative and exploratory innovation. The paper emphasizes the importance of understanding CSR's role in enhancing a company's social image, brand reputation, and competitive edge. It explores the effects of different CSR approaches on exploitative and exploratory innovation, and the role of innovation on increasing organization engagement in CSR. The paper concludes by addressing the literature gap and providing a comprehensive analysis of the complex dynamics between CSR and innovation.

Running head: HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
How different CSR affects different Innovations in Firms
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1HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
Table of Contents
Introduction................................................................................................................................2
Problem Statement.....................................................................................................................3
Research Questions....................................................................................................................3
Literature Review.......................................................................................................................3
CSR-Innovation Research......................................................................................................3
Corporate Innovation Process................................................................................................5
Impacts of Reactive and Proactive CSR on the Exploitative and Exploratory Innovation....5
Literature Gap............................................................................................................................8
References:...............................................................................................................................10

2HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
Introduction
The ever increasing significance of Corporate Social Responsibility (CSR) and its
effect on the value of a firm is often considered to be a significant shift in the management
paradigm. According to many researchers, the companies that fail to take the requirements and
needs of its stakeholders in account are likely to experience an eventual decline of their
marketing value (Reypens, Lievens & Blazevic, 2016; Slack, Corlett & Morris, 2015).
However, it is to mention that innovation is widely considered to be one of the important
pathways by means of which the CSR balances the financial and social performance of the
companies and helps in achieving their sustainable goals. According to O’Riordan and
Fairbrass (2014), CSR reflects the level to which a company actively engages in the social
initiatives as a response to a diverse set of stakeholders’ interests. At the same time, innovation
is regarded as the key element that determines the ability of a company to sustain its
competitive edge in contemporary days. However, given the high extent of influence of CSR in
the performance and strategy of a company, it is required to understand the diverse factors that
drive the company’s engagement in CSR activities. A myriad of researches have demonstrated
that companies make use of CSR for enhancing their social image and brand reputation in
order to differentiate themselves effectively and gain a competitive edge over the other market
players (He & Lai, 2014). Notwithstanding this fact, the prospective relationship or linkage
between CAR and the other business strategy and innovative process has not been thoroughly
investigated. For gaining a better understanding of this relationship, it is required to examine
whether a company’s innovative affects its engagement in the CSR activities.
This paper shall elaborate on presenting a research paper on examining- ‘how different
types of CSR affects different organisational innovation”.

3HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
Problem Statement
There are many studies that have found a productive relationship in between CSR and
innovation process of organisations, while others have demonstrated some unimportant
associations in between these constructs. For resolving the issue of inconsistency, this study is
presented in an attempt for exploring the influences of different CSR types on the process of
organisational innovation and how innovation affects the engagement of organisation in CSR
activities. It is assumed that after conducting the research paper, these gaps would get bridged
and idea on how innovation influences organisational engagement in CSR activities will
become clear.
Research Questions
The research study focuses on the relationship between Innovation and CSR and targets
at exploring the below mentioned research questions:
a) Do different types of innovations affected by different types of CSR?
b) Does innovation affects organisation’s engagement in CSR?
For addressing these above mentioned research questions, the research paper is built on the
institutional theory for examining the impacts of the different types of CSR- Reactive CSR and
Proactive CSR on the innovation and the role of innovation on increasing organisation
engagement in CSR.
Literature Review
CSR-Innovation Research
It is to mention that on an academic level, the relationship in between technological
innovation and CSR has still not been evidenced. Literature studies on the topic of CSR

4HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
provide a good understanding of the process in which companies integrate their environmental
and social concerns to their daily business operations as well as in their communication process
with their different stakeholders on an elective basis (Eccles, Ioannou & Serafeim, 2014). Tai
and Chuang (2014) in this context have defined CSR as “the broad array of strategies and
operating practices that a firm develops in its efforts to deal with and create relationships with
its numerous stakeholders and the natural environment”. According to O’Riordan and Fairbrass
(2014), CSR reflects the level to which a company actively engages in the social initiatives as a
response to a diverse set of stakeholders’ interests. Researches on CSR and Innovation
relationship suggest that CSR can aid to a firm’s performance by means of promoting its
innovation capabilities.
On the other hand, the term “innovation” in the context of businesses is broadly defined
as “the process of introducing new processes, products or services of an organisation for
affecting positive change in their business” (Nambisan et al., 2017).Innovation is widely
considered to be the key pathways through which the CSR balances the financial and social
performance of the companies and helps in achieving their sustainable goals. The capability of
a firm to innovate helps it in better responding to the fast and abrupt environmental changes
and development. It is to note that through high rate of attention has been given to the
antecedents of the firm innovation, there has been very limited efforts devoted for examining
whether or not innovation influence the other strategic choice of the companies.
It is to mention that the early research papers on CSR-Innovation relationship were
focused on one particular dimension of CSR and that is- Environmental Practices. The recent
studies on the same have elaborated the idea of CSR beyond environmental dimension for
gaining a wider and broader understanding for examining the question of the way in which
CSR boosts innovation of firm. For example, depending on the “supply and demand
framework”, Siegel and McWilliams have suggested that CSR has the potential of stimulating

5HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
the process of innovation for fulfilling the potential demands of the stakeholders and the
customers. Notwithstanding this fact, other relevant empirical researches demonstrate that the
relationship between CSR and Innovation is equal (Taylor & Taylor, 2014).
Corporate Innovation Process
According to Varadarajan (2017), there are several processes of innovation but there is
no widely accepted theory on one specific process that manage to integrate all the economic,
organisational and cognitive dimensions of innovation processes in companies. Different
scholars from different backgrounds interpreted their point of views on the understanding of
innovation process. The economists tend to emphasis on the economic incentive for the process
of innovation, while the organisational specialists are likely to focus on the structural relation
among the innovative processes and activities. Similarly, the sociologists focus on their social
consequences and other different social aspects. As opined by Foris and Camison (2015), the
innovation process also differs in terms of organisation size, corporate strategy and experience.
They therefore suggested a framework for enabling a better understanding of the complicated
knowledge and skill in the processes of innovation. Brunswicker and Vanhaverbeke (2015) too
in this context have claimed that the innovation processes involve the exploitations and
exploration of the different opportunities for improved products, services and processes on the
basis of advancement in the technical practice or transformation in the market demand or their
combination.
Impacts of Reactive and Proactive CSR on the Exploitative and Exploratory
Innovation
It is to mention that according to the prior studies, there are a total of two types of
innovation- exploitative innovation and exploratory innovation (Guan & Liu, 2015). These
types of innovation are different on the basis of objectives, learning patterns and R&D

6HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
(Research and Development) investments. According to Huang, Ding and Chen (2014),
exploitative innovation can be defined as the efforts that are made by the companies towards
the improvement and modification of the existing skills and knowledge used for the present
business and demonstrates the changes in the technological aspects. On the other hand, the
exploratory innovation is defined as the efforts made by organisations towards the
identification and generation of new knowledge that are beyond the scope of the current
knowledge base and this further reflects some notable leaps in the technological development.
It is to note that according to Park and Kim (2015) there are three types of CSR- innovation,
integration and philanthropic. The innovation type of CSR is focused on introducing new
business models for solving the environmental and social problems, the integration type of
CSR on the other hand is focused on conduction existing business operation in more
responsible manner and lastly, the philanthropic CSR is focused on charity, sponsorships and
employee voluntarism. On the other hand, Foris and Camison (2015) have described about the
five different stages of CSR- “defensive, charitable, promotional, strategic and systematic”.
The other researchers have made a two-fold division to point the strategic and traditional CSR
(Zang, 2018). Their main aim was verifying the prevalence of the correlation among the
innovation management practices and social strategy such as enhanced employee participation
etc.
However, majority of the research studies have concentrated on two types- reactive and
proactive CSR. The modern companies are engaging in different socially responsible activities
right from reactive to proactive. The reactive CSR refers to a strategic practice as a response to
the pressure coming from the stakeholders of the company (Pedersen & Gwozdz, 2014). As
opined by Young and Thyil (2014), it is focused on fighting a fire or solving a specific issue
after it takes place and this could be detrimental to the success of the company. If not acted in
ethical manner in such situations, the key stakeholders of the company would question the

7HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
organisation’s integrity. Implementation of reactive CSR can help the companies in acquiring
legitimacy and this can enable the companies in gaining external resources like governmental
and financial support along with talent. On the other hand, the proactive CSR is defined as the
business practices that are adopted voluntarily by the companies that go beyond the regulatory
requirements for actively supporting the sustainable economic, environmental and social
development and in this way, it aids positively to the society. According to Guan and Liu
(2015), proactive CSR entails the action oriented behaviour. The proactive CSR aims at
implementing the strategies and plans prior to the issues that take place. Identification of the
issue can be very difficult and this CSR type helps the company in managing its public profile
and organisational reputation. Implementation of proactive CSR can help the firms by means of
enabling them to adopt the new organisational management systems and structures.
According to Pedersen and Gwozdz (2014) implementation of proactive CSR helps the
companies in capturing new market opportunities by means of addressing the social and
environmental problems. Tully and Winer (2014) too in this context have indicated that the
customers are likely to be willing to pay more for the goods and services that are premium and
are with environmental and social attributes. For example, in many of the developing countries
like India, China, Brazil Russia etc., with the growing public concern about environmental and
social issues, recent research studies and evidences showcase that there is an increasing scale
of customer groups are wilfully support CSR activities of firms and at the same time, also pay
higher price for their services and products. Zang (2018) too have opined that for catering the
available market opportunities, proactive CSR can help the firms by means of enabling them to
adopt the new organisational management systems and structures while leading the
organisational managers to take into consideration the different sustainable related goals in the
process of decision making. With the same, according to Guan and Liu (2015), proactive CSR
can spark the process of organisational learning.

8HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
Sobczak and Havard (2015) have further argued that reactive CSR helps in the
promotion of exploitative innovation. On the other hand, Tully and Winer (2014) have opined
in against of this statement as they believe that reactive CSR is not in line with the core
business of a firm and therefore, it is unable to capture the present market opportunities and the
knowledge from different stakeholders effectively. Notwithstanding this fact, Pedersen and
Gwozdz (2014) in this context have stated that implementation of reactive CSR can help the
companies in acquiring legitimacy and this can enable the companies in gaining external
resources like governmental and financial support along with talent. All these external
resources are very important for the development and implementation of the technologies.
Adoption of reactive CSR also can improve the social reputation of the companies and this is
an intangible resource that is of great significance. For example, the reactive CSR like efforts
of an organisation to reduce its carbon emissions and support the local communities can help it
in the establishment of a reliable image of committing towards business sustainability.
Literature Gap
In the set of articles reviewed in the above section, many indicated research gaps and
directions for future research on the topic. Varadarajan (2017) also claims that further research
is required to identify the diverse outcomes of different CSR strategies. Furthermore, the usage
of social strategy for creating competitive advantage is required to be assessed as per the study
conducted by (Taylor & Taylor, 2014). With the same, the other research gap is the
determinants of the organisational engagement in the CSR. Pedersen and Gwozdz (2014) in
this scenario has opined that the strength of the family firms in the e process of development of
innovations with high level of social advantages. They have postulated that future research is
required to attempt for the verification of the notion that if it is generally the care in the small
and the medium sized corporations. Apart from these, other research gaps were also found,

9HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
such as the ways of using innovation for dealing with the key global challenges and the
synergies that help in the creation of innovation and holistic approach towards them are
required to be examined (Brunswicker & Vanhaverbeke, 2015).

10HOW DIFFERENT CSR AFFECTS DIFFERENT INNOVATIONS IN FIRMS
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