Measuring the Adoption of Corporate Social Responsibility Practices and Financial Performance

Abstract

This study aims to develop and validate an original construct and scale measurement of adoption Corporate Social Responsibility (CSR) practices that reflect the business roles towards different stakeholders with respect to economic performance. This objective can be achieved by extensively reviewing the existing body of literature on CSR measurement arena. Mixed methods of qualitative case studies and quantitative survey were adopted to develop, validate and provide more exploration and interruption of the adoption of CSR practices constructs and its relation to financial performance (FP). Two Saudi companies was investigated in case study context. Case studies were conducted based on in-depth interviews with 19 participants at various board and management levels in order to develop the adoption of CSR practices construct and provide further confirmation for quantitative findings. 460 survey questionnaires were analysed for assessing the validity and reliability adoption of CSR practices. The research findings developed and validated the new construct and its scale for measuring the adoption of CSR practices. The new construct and scale were developed by six-dimensional structure of CSR practices, measuring the companies' community, environment, shareholders, employees, customers, and supplier practices. This study builds important theoretical contribution to CSR literature by developing and validating a new construct and scale of adoption of CSR practices. This construct was developed based on the finding of qualitative case studies, in order to provide empirical evaluation of the adoption level of CSR practices companies. This study also can improve board members and managers' awareness in how to evaluate CSR contributions within their organizations. A newly developed scale for the adoption of CSR practices can be considered as broad self-constructed indexes consisting of six main stakeholders were engaged through 17 CSR practices. The implication of CSR self-constructed index has two practical contributions at organizational and national levels. At the organizational level, it helps directors and executives in Saudi companies listed in industrial sectors that have high sensitivity to CSR issues within their operational activities, in managing and rating the adoption level of CSR practices within their organization. Additionally, the developed self-constructed index generates significant CSR guidelines for those companies to formulate effective corporate practices on CSR issues.