You are on page 1of 23

ICBI 2011

Faculty of Commerce and Management Studies

A Comparative Study of Corporate Social Responsibility in the Developed


and Developing Countries

Tilakasiri K.
Department of Accountancy
University of Kelaniya, Sri Lanka.
ktilakasiri@kln.ac.lk

Welmilla I.
Department of Human Resource Management
University of Kelaniya, Sri Lanka.
indumathi@kln.ac.lk

Armstrong A.
Victoria Law School, Victoria University, Australia.

Heenatigala K.
Victoria Law School, Victoria University, Australia.

Abstract
This exploratory study examines the theoretical and practical comparison of the concept of
CSR between the developed and developing countries with CSR definitions, frameworks and
concepts being considered. In reviewing CSR literature on developed and developing world
specially this study concerned

the CSR practices and theoretical understanding between

the two world. However, it is argued that the business and society in these countries have
been rather misrepresented in their historical perceptions of CSR, and are now being
misrepresented as having intentions other than philanthropic. To understand the CSR
benefits, measurements and definitions also add to the concept of CSR. However, the major
limitation of the study is that there is a dearth of research in CSR in the developing world
which is still in its primary stage.
Key words: Corporate Social Responsibility; Developed countries: Developing Countries:
economic social and environmental

ICBI 2011
Faculty of Commerce and Management Studies

Introduction
Corporate Social Responsibility (CSR) definitions vary between studies, even though there is
considerable common ground among them (Carroll, 1979; Welford, 2004). Davis and
Frederick (1984) stated that CSR is an organizations obligation to engage in activities that
protect and contribute to the welfare of society, including general communities, customers,
shareholders, the environment, and employees. Their point is that these groups have come to
expect something more from business than their normal products and services. However, a
basic problem in the field of CSR is that there is no commonly accepted CSR definition.
Thus, the scholars used the following definitions for their studies to comprehend a clear idea
of the concept.
The World Business Council for Sustainable Development (WBCSD) defined CSR as the
continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the workforce and their families as well as
of the local community and society at large (WBCSD, 1999, p. 3).
Further, the European Union defined the CSR as a concept whereby companies integrate
social and environmental concerns in their business operations and in their interactions with
their stakeholders on a voluntary basis (European Commission, 2002).
The above definitions articulate two common fundamental nature of CSR (Prayukvong &
Olsen, 2009). Accordingly, businesses are advocated to show concern and take actions and
responsibilities to society and environment, and businesses should integrate environmental
and social implications into their day today business operations. In sum, CSR is integrated
into three areas (often referred to as triple bottom line) namely people (society), planet
(environment) and profit (economics) (Agarwal, 2008; Prayukvong & Olsen, 2009).
This information is implies that, even though the CSR concept has been initiated in the
developed world it cannot be adopted directly into the developing world.

Therefore, to

understand the application of the CSR in the developing countries a review of literature in
both developed and developing countries is required. However, it can be questioned as to
why this concept cannot be directly adopted by these countries as developed world.

Objective of the Study


The prior CSR studies have acknowledged some business benefits by implementing this
concept for

business and the society. Many CSR scholars have discussed these benefits

from the developed countries point of view (Visser 2007). Later, they suggested a clear CSR
notion for the developing countries point of view. However, the Western world pointed out
2

ICBI 2011
Faculty of Commerce and Management Studies

that their CSR principles, standards and indices cannot be appropriated to the developing
world (Chapple & Moon, 2005). The issue is, if so, what are the other CSR applications to
understand the CSR for the developing world. This is the basic task of the CSR study when
comparing the CSR between the developed and developing world. The objective of the study
is to make out the gap between the developed and developing countries CSR practices by
reviewing the literature.

Problem of the Study


The focus of most CSR studies in developing countries are Asia, Africa, Middle East and
the Latin American regions (Belal & Momin, 2009). Generally, they have defined CSR as a
concept meaning that, organisations should integrate economic, social and environmental
concerns into their business strategies, their management tools and their activities, going
beyond compliance and investing more on human, social and environmental capital (Perrini,
2006 p.306). Nevertheless, socially responsible corporate behaviour becomes many difficult
to define as it means different things in different places to different people and at different
times (Campbell, 2007 p.950). Votaw (1972) cited in (Lindgreen et al., 2009) pointed out
that CSR stands for something but not always the same thing to everybody.
The problem of the study is, Why the existing CSR practices cannot be directly taken up to
the developing world?

Significance of the Study


Implementation of the CSR concept is really cost concept (Friedman 1982). However, this is
practiced by the companies for the different reasons. However, the concept was identified the
significance benefits to the both business and society based on the developed countries
viewpoint.

Also prior researches have disclosed the social and environmental related

activities are affected to growth and the survival of the firms. Therefore, this study tried to
identify the benefits which have discussed by the developed world, then it can be directly
taken up to the developing world and search out the benefits them.

Literature Review
Many CSR studies have highlighted that the developed countries like US, UK and many
European countries are strong with the concept of CSR (Crane & Matten, 2007). These
countries have developed CSR frameworks, standards, indices, and principles, both locally
and internationally to be used in their organisations CSR practises. Meanwhile, it has been
3

ICBI 2011
Faculty of Commerce and Management Studies

criticised that these standards and principles which developed based on the practise of those
countries which are biased toward the US context, because their applicability may limited
globally (Lindgreen et al., 2009). They argued that the accepted practices of CSR
considerably vary among different countries. Chapple and Moon (2005) supported this
argument by describing the variation among seven Asian countries. In their analysis of
website reporting of CSR in those seven countries confirm that there is no single pattern of
CSR in Asia (p.436). They therefore suggest that CSR is instead dependent on national
factors. Also found that international companies adapt their CSR to the specific national
contexts of their host business systems.
Matten and Moon (2004) also showed that CSR differ from nation to nation because of the
cultural traditions. Furthermore, Matten and Moon (2008) discovered the differences in CSR
across countries using the Whitleys (1999) national business systems framework. In
particular they explain, why CSR in US companies has largely been explicit, whereas CSR in
Europe has until recently, been mostly implicit. They conclude in their analysis, assessing
the nature of the political system, financial system, education and labour systems and cultural
system in the UK and Europe, and explain how differences in these key institutional arenas
influence CSR on either side of the Atlanthic. Further, Visser (2007) stated that the cultural
traditions strongly affect the organizations CSR implementation. In the developing
countries as a result of the cultural traditions, philanthropy and the CSR have a close
relationship. Their culture is enormously depending on the religion of the country, and many
Asian countries people practice Hinduism, Buddhism, Islam, and Christianity. Nelson (2004)
showed the Buddhist traditions are aligned with CSR in Asian countries. As well, Chapple
and Moon (2005) have highlighted that CSR does vary considerably among Asian countries
but that this variation is not explained by (levels of) development but by factors in the
respective national business systems (p.15).
Burton et al (2000) found difference in the relative importance of the types of CSR
responsibilities between Hong Kong and US students and Ksk and Zarkada Fraser (2004)
reported significant variations in corporate citizenship practices among Australian and
Turkish organisations. According to them, cultural differences are the major variations, and
the level of development of a country may be a key indicator (Burton et al., 2000; Chapple
& Moon, 2005). Ksk and Zarkada Fraser (2004) showed the differences as lack of legal
regulations and lack of legal applications for environmental and anti discrimination laws of
the country, the level of top management interests for CSR, customer loyalty and strong
organisational commitment and internal corporate culture.
4

ICBI 2011
Faculty of Commerce and Management Studies

A considerable amount of CSR literature has been published on cross national CSR variations
(Chapple & Moon, 2005; Ksk & Zarkada Fraser, 2004), CSR applications (Carroll, 1979;
Whitley, 1999; Wood & Jones, 1995) and development of CSR frameworks for developed
countries (Clarkson, 1995; Davenport, 2000).. On the other hand, the researchers pointed out
that CSR concept gives many intangible advantages. It is argued that the companies
implement CSR programmes may obtain business benefits (Porter & Kramer, 2002), for
example: enhanced enterprise image and reputation (Schwaiger, 2004); increased sales and
customer loyalty for the products and services of the company; increased productivity and
quality, reduced complexity and costs; better control and management of risks; increased
ability to attract and retain employees; and higher motivation of employees. These benefits
could be achieved to the developing countries firms when they apply the CSR concept and
the long term it may be positively affected to the firms financial performance (Rais &
Goedegebuure, 2009; Ruf et al., 2001).

Role of the Business in CSR: Developing Countries Context

Business organisations have obligations to their society such as to increase in societal


expectations of business, a reduction in the power and scope of government, globalisation,
heightened media reach, the greater spread of democracy, and a series of corporate scandals
that have undermined confidence in the integrity of corporations, financial institutions and
markets (OECD, 2004; Smith, 2003). As a result management may choose to implement the
concept even though it pays off. In addition the global organisations like united nations,
expects to implement the Millennium Development Goals a world with less poverty,
hunger and disease, greater survival prospects for mothers and their infants, better educated
children, equal opportunities for women, and a healthier environment (UnitedNations, 2006
p.3) in 2000. They expect that this development can be done by participation of these
organisations and that is there key role of the business in tackling the critical issues of human
development and environmental sustainability (Visser, 2007). However, many developing
countries organisations are concerned about the above global aspiration in a most horrible
manner.
However, it has been accepted that many companies in developing countries such as India,
Bangladesh, Pakistan, Sri Lanka, set up CSR programs as a response to their dissatisfaction
with the existing social arrangement. Nevertheless, Sood, Arora et al. (2006) argued that the
motivation of social responsibility activities depend on the companys leadership and
orientation of the top management of the organisation.
5

ICBI 2011
Faculty of Commerce and Management Studies
Difference CSR perspectives between developed and developing countries

Visser (2006) has focused following four rationales for adopting CSR in developing countries
as distinct from CSR in the developed world.

Developing countries have dynamic changing economies and therefore the profit

making growth markets available for the business activities (IMF, 2006).

Many social crises and environmental disasters have been recently experienced in

developing countries (UNDP, 2006; WRI, 2005).

Developing countries are where globalisation, economic growth, investment, and

business activity are likely to have the most dramatic social and environmental impacts (both
positive and negative) (WorldBank, 2005).

Developing countries present a distinctive set of CSR agenda and their challenges are

quite different to those faced in the developed world. Visser (2007) explained this idea as
many of the CSR issues in developing countries present themselves as dilemmas or tradeoffs, for example, development versus environment, job creation versus higher labour
standards, and strategic philanthropy versus political governance. Further, he added, the
issues being prioritized under the CSR banner are often different in developing countries, for
example, tackling HIV/AIDS, improving working conditions, provision of basic services,
supply chain integrity, and poverty alleviation.
Building on prior research, Welford (2005) reported a significant relationship between CSR
and economic development of a country. He stated that the CSR polices are based on
localized issues and cultural traditions of the nation. Consistent with these findings, Visser
(2007) pointed out that the difference in the focus of CSR mainly comes from the internal and
external drivers in developing countries.

Alternatives to CSR practices on developing countries

However, Schwabenland (2006) introduced the three categories as alternatives to

CSR

practices in developing countries such as alternatives to the state, alternative to community


and alternatives to the market which are adopted. Each of the categories is described in the
following section. Also it provides answers to the question Why CSR is needed for the
developing countries?

Role of the government

The first category is alternatives to the states. The private sector involvement in social
responsibility is an important character in the developing world (Schwabenland, 2006). Many
6

ICBI 2011
Faculty of Commerce and Management Studies

governments in these countries facing poverty problem are trying to involve the private
sector, to a certain extent, to carry on some social and environmental activities in their own
way. In other words the authorities have been promoting the adoption of CSR without
imposing a mandate.
The role of the government is creating an enabling environment for CSR and providing
incentives to help companies, and ensuring minimum legal standards and the firms policy
frameworks become more responsible and accountable, for example, the government allow
tax benefits for CSE involvement by the companies

Table 1: Public Sector Roles Corporate Social Responsibility Practice

Role

Enabling approach

Mandating

Command

and Regulators

control legislation
Facilitating Enabling legislation
Funding support

Implementation

Penalty/Reward

and Legal

and

fiscal

Inspectorates

penalties and reward

Creating

Capacity building

incentives

Stimulating markets

Raising awareness
Partnering

Combining resources Stakeholder

Dialogue

engagement
Endorsing

Political support

Publicity and praise

Source: adopted from Fox, T. et al. (2002)

The research carried out by (Aaronson & Reeves, 2002; Fox et al., 2002; Nidasio, 2004) on
governments and development identifies different key roles for governments in promoting
CSR. One of the most useful classifications of governmental roles was developed by Fox et
al. (2002), where they present the different roles that could be adopted by governments:
mandating (legislative), facilitating (guidelines on content, fiscal and funding mechanisms,
creating framework conditions), partnering (engagement with multi stakeholder processes,
stimulating dialogue) and endorsing (tools and publicity).

Common Social problem

The second alternative is responding to other social problems in addition to the communities
(Schwabenland, 2006). This is done with infrastructure facilities like roads, water supply,
drainage, garbage disposal, power and open spaces for the development of the environment.
Today, there are many organisations in the developing countries that are concerned with
7

ICBI 2011
Faculty of Commerce and Management Studies

environmental protection activities, whether they have engaged in the environment pollution
or not. For example, in 2004, the UN selected Tata Steel Company as one of six examples of
urban planning excellence in India (Lee, 2008). The Tata Steel Company started welfare for
its workers in 1902. In 1902, the son of group founder Jamsetji Nusserwanji Tata wrote a
letter to his son about building a workers' city around his Tata Steel works: "Be sure to lay
wide streets planted with shady trees, every other of a quick-growing variety. Be sure that
there is plenty of space for lawns and gardens." After his death in 1904, the city took his
name, becoming Jamshedpur. Today Jamshedpur, with free housing, free hospitals and free
schools, sports stadiums and clean streets, remains the envy of the country. In 2004, the U.N.
chose italong with Melbourne and San Franciscoas one of six examples of urbanplanning excellence (Lee, 2009).

Alternative social business enterprises

The final alternative is identified as alternative markets. Social business enterprises are based
on market principles, but dedicated to improving the lives of the poor. Developing countries
are concerned about these types of organisations. Some of the well known organisations have
established their CSR in the social enterprises, as an example, Micro Finance company and
Amul company in India. However, Arora and Puranik (2004), pointed out that many
foundations have established structures for a companys charitable giving; as an example, it
is estimated the over 100 corporate foundations are involved in CSR activities in India.
Theoretical perspectives about CSR in the developing countries

Carrolls CSR model developed for the developed world (Matten & Crane, 2005; Visser,
2006). Therefore, Visser (2007) redesigned the Carrolls model for the developing countries
context. He identified the CSR manifestation in the developed world, and investigated how
far it is equivalent with the developing world. In addition, he rearranged the Carrolls (1999)
CSR pyramid, and replaced discretionary responsibilities with philanthropic responsibilities.
The basis of his pyramid was the economic category, the foundation upon the other four
categories rested.

ICBI 2011
Faculty of Commerce and Management Studies

Figure 1: CSR pyramid for developing countries

Ethical
Adopt
voluntary codes
of governance and
ethics

Legal
Responsibilities
Ensure good relations with
government officials

Philanthropic
Set aside/ community de funds for
corporate social projects

Economic Responsibilities
Provide investment, create jobs and pay taxes

Source: Extracted from Visser, (2007)

Even though Carroll proposed a linear evolution in the model where economic
responsibilities came first and philanthropic responsibility came in the last stage of CSR
maturity, a growing body of evidence suggests that in developing countries CSR practice is
focusing on philanthropic responsibilities (Jamali & Mirshak, 2007; Visser, 2007; 2008).
Visser (2007) shows this came in the second stage of the pyramid.
Vissers (2007) also suggested 10 major drivers that characterize CSR in those contexts and
he divided these drivers into internal and external drivers. See Figure 1. Visser (2007)
considered the internal drivers represent pressures from within a country, such as, cultural
tradition, political reform, socio-economic priorities, governance gaps, crisis responses and
market access, on the other hand external drivers represent the international standards,
investment incentives, stakeholder activism and supply chains, which tend to have a global
origin.

Differences and similarities of CSR between the developed and developing countries

The major differences of CSR between the developing and developed countries are still being
argued. However studies show that there is a considerable gap in CSR research between
developed and developing countries. These have been identified with economic, social,
9

ICBI 2011
Faculty of Commerce and Management Studies

environmental, health-related or industrial crises which are normally associated as the big
issues in developing countries. Furthermore access to markets in the developed countries by
developing countries (Baskin, 2006) is also seen as an enabler.
However, in developing countries CSR plays an equal role which is identified by CSR
scholars (Uriarte, 2008). Uriarte, concluded this idea by considering 14 Asia Pacific countries
which includes five South East Asian Countries namely Indonesia, Malaysia, Philippines,
Singapore, and Thailand.
According to the Asia-Pacific Economic Cooperation (APEC, 2006) report, Corporate Social
Responsibility in the APEC Region the following similarities have been noted in CSR
practices and activities in the countries of the Asia-Pacific region:

The origins and conceptualization of CSR are rooted in the historical and cultural

traditions of each country and deeply influenced by ethical concepts and religious practice.
(APEC, 2006)

CSR is gradually moving from its historical focus on business philanthropy to a

broader set of activities that engage business with the full range of its stakeholders and
integrate the practice of CSR into the core strategy of the organization (APEC, 2006).

Efforts at measurement and reporting are growing rapidly in the belief that formal

monitoring and evaluation of outcomes will enhance the credibility of CSR and make it easier
to substantiate (APEC, 2006).

CSR is evolving in response to profound external forces, including meeting legal and

regulatory obligations and responding to the elite and broader public opinions that demand
higher standards of accountability, for example, meeting environmental requirements and
assuring appropriate labour standards throughout the supply chain (APEC, 2006).

Companies are increasingly turning to partnerships with other stakeholders including

both governments and non-government organizations in implementing CSR activities (APEC,


2006).

Despite the overall similarities, there are notable differences between the experiences of the
developed countries and those of the developing countries. Maignan and Ralston (2002)
found that organisations in different nations varied in the extent to which they reported CSR
10

ICBI 2011
Faculty of Commerce and Management Studies

activities on their web sites, as well as their managerial practices and stakeholder issues that
were emphasised. The CSR activities in the developed countries tend to have the following
patterns:

Strong environmental responsibility

When compared with the developing countries the developed countries are more concerned
of the environmental responsibility and increased environmental management practices
(Mazurkiewicz, 2004). Furthermore, many citizens consider corporate environmental
responsibility as: the duty to cover the environmental implications of the companys
operations, products and facilities; eliminate waste and emissions; maximize efficiency and
productivity of its resources; and minimize practices that might adversely affect the
enjoyment of the countrys resources by future generations (Mazurkiewicz, 2004).

Strong and active civil society involvement

Civil society particularly includes non-government organisations (NGOs) such as


Greenpeace, Amnesty International, Community Aid Abroad, the councils of Social Service.
The tools that NGOs use to regulate businesses are very different to the market and
government. They are, in the first instance, neither price nor law. Often they are just ideas
expressed in a strange new language, which is the language of CSR such as Corporate
Citizenship, the Triple Bottom Line, and the Stakeholder Corporation. These language and
the ideas are seductive and appear benign. However, whatever the language Corporate Social
Responsibility is really Civil Society Regulation in disguise (Mel, 2004).

In addition to the above differences, the following characteristic have been extracted from
Vissers study (2007), which is related to the developing countries CSR practices.

Formal CSR practices are being used by large, high profile national and international

companies (Abboud & AbdulRazek, 2010; Crane et al., 2008).

Formal CSR practices are applicable by the companies of developing countries for

their own issues (e.g. fair trade, supply chain, HIV/AIDS) or sector-led (agriculture, textiles,
mining) (Abboud & AbdulRazek, 2010; Crane et al., 2008).

11

ICBI 2011
Faculty of Commerce and Management Studies

Common CSR practices are philanthropic activities such as education, health sports,

development, the environment, and other community services (Crane et al., 2008; Jamali,
2007; Lantos, 2001).

Economic contributions are the most important CSR activities which is an effective

way for business to make a social impact (Berniak-Wozny, 2011; Porter & Kramer, 2002).

Businesses engaged in social activities see CSR as governments responsibility

(Matten & Moon, 2008).

Cultural values and religious concepts are strongly adopted with the CSR in

developing countries (Welford, 2005).

The focus on CSR in developing countries can be a catalyst for identifying, designing

and testing new CSR frameworks and business models (Visser, 2007).

According to Welford, there are less policies and practices implemented in the organisations
of the developing world than in European firms. He pointed out that there are differences in
policies between European and Asian firms regarding fair wages, freedom of association and
equal opportunities for employees. Welford (2005) also stated that the policies of
philanthropy are common in North America and less popular in Europe and lowest in the
Asia. Furthermore, according to Ramasamy and Ting (2004)

the awareness of CSR in

developing world is less than the developed countries. They also reported that thelevel of
CSR awareness in Malaysia is generally lower than in Singapore. It was noted that while
many companies in the region do not understand CSR (Rathnasiri, 2003), but the
philanthropic and community development are widely known and implemented in Asia.
Baughn et al.(2007) also stated that the philanthropic and community development are not
new to Asia and such CSR activities are done using variety of names including donations and
social giving.
Many CSR studies, for examples, (Baughn et al., 2007; Dobers & Halme, 2009; Lindgreen et
al., 2009; Visser, 2008) have discussed the CSR practices in Africa and Middle East, Central
and Eastern Europe, South and Latin America, Asian countries. The governments of these
countries are driving their economy which is considerably weak position (Lindgreen et al.,
12

ICBI 2011
Faculty of Commerce and Management Studies

2009). As well as the health issues of these countries such as HIV/AIDs and lower life
expectancy at birth are paying more attention. As a result they are looking for solutions from
developed countries to relieve the existing unfavorable situations in these countries
Furthermore, they conclude by stating the meaning and practices of CSR in Africa and Asia
differ from the traditional US model. There are no comparative studies been published in core
CSR journals in these countries and the literature review suggests that CSR practice may be
influenced by factors such as culture, stage of CSR maturity, and the immediate socio
economy environment.

CSR in Asia

Chambers et al.(2003) studied CSR in Asia by reviewing the websites of companies operating
in India, South Korea, Thailand, Singapore, Malaysia, Philippines and Indonesia. They found
three primary factors that characterized CSR in Asia. They are: CSR lags behind the western
world; different national systems of business-society relationships influence CSR, therefore,
there is no uniformity among Asian countries; and CSR in Asia is enhanced by globalisation.
However, two major limitations were identified in Chambers et al.s study. First, websites
are not widely used for business communications in Asia, because the information
technology facilities are still in preliminary stage and internet usage is low (Chapple &
Moon, 2005; Rotchanakitumnuai & Speece, 2003). Second, the top fifty companies are the
largest companies in the country which adopt more strategies to implement the CSR.
However larger firms implement more CSR than the smaller firms in developing countries
(Lepoutre & Heene, 2006; Perrini et al., 2007).
Visser (2008) stated that Asia is the developing region that is most often covered in the CSR
literature, with a significant focus on China, India, Malaysia, Thailand and Indonesia
(Balasubramanian et al., 2005; Blowfield, 2004). However, whilst Asian countries share
similar concerns regarding environmental management, social responsibility and sustainable
development, each country has very different priorities, norms and values, and is at different
stages of economic development (Rock, 2002; Ruud, 2002). Therefore, it is necessary to
consider in-depth, the concerns, norms and priorities of each country.

Many researchers have investigated the meaning of CSR in Asian, African and Latin
American organizations to develop suitable CSR principles and models (Khan & Atkinson,
1987; Khan, 2005; Visser, 2008). Some have suggested that CSR in developing countries is
purely philanthropic (Mohan, 2001; Visser, 2008), but others maintain CSR activities go
13

ICBI 2011
Faculty of Commerce and Management Studies

beyond this (Arora & Puranik, 2004; Belal, 2001; Fernando, 2007; Haslam, 2007; Kemp &
Unies, 2001; Khan, 2005; Kumar et al., 2001; Ratanajongkol et al., 2006; Thompson &
Zakaria, 2004; Visser, 2008; Welford, 2004). In order to understand the CSR in different
countries in the developing world, this study revealed the global literature related CSR which
would help to develop a CSR framework for the developing countries such as Sri Lanka.
As discussed in Chapter two, scholars have researched the relationship between CSR and
company performance to identify the linear relationship (Griffin & Mahon, 1997; Tsoutsoura,
2004; Ullmann, 1985; Waddock & Graves, 1997). These research studies are based on the
developed countries CSR and its firm performance. However, this relationship have been
studied less in the developing countries due to the problems such as measurement of CSR,
reporting, and no experience of the concept. Thus, some developing countries such as
Malaysia, Thailand, China and India, have tried to identify the relationship between CSR and
financial and non financial variables (Fauzi et al., 2007; Mishra & Suar, 2010; Rais &
Goedegebuure, 2009) .

CSR and Company performance in developing countries

CSR is predominantly considered as a Western phenomenon due to strong institutions,


standards, and appeal systems, which are weak in developing countries of Asia (Chapple &
Moon, 2005). Such weak standards pose considerable challenge to firms practicing CSR, in
developing countries including Sri Lanka. The relation between CSR and firm performance
has evoked much interest among researchers. There are few empirical research studies
(Mishra & Suar, 2010; Rais & Goedegebuure, 2009) for example, which have considered the
relationship between CSR and firms performance in the developing country context.
Recent study by Rais and Goedegebuure (2009) examined corporate social performance and
financial performance in 101 Indonesian firms in the manufacturing industry. They examined
stakeholder relations as a solid measure of CSP (Clarkson, 1995) and its impact on firm
performance. They understood the stakeholder relationship is a meaningful measure of social
performance. Using the Structural Equation Model they measured CSP as a single attribute of
the firm, which was derived from primary stakeholder issues as defined by (Clarkson, 1995)
(Davenport, 2000; Moore, 2001). They concluded that the CSP strongly and significantly
affects both a firms competitive position and its financial performance. They also identified
the relationship between CSP and financial performance is not mediated by firm strategy, but
by the firms strategic position in market place.

14

ICBI 2011
Faculty of Commerce and Management Studies

Wickramasinghe (2006) explored the impact and relationship of CSR on the success of
selected manufacturing companies in Sri Lanka. He considered six CSR issues: economic,
personal, product, environment, discrimination and community and measured company
success using Return on Investment (ROI). He concluded that there is a significant positive
relationship between the success of the selected companies and the level of social
responsibility in Sri Lankan companies. Further analysis revealed that economic
(shareholders) and personal (employee) issues are the major social issues that affect a
company. As a result environmental, discrimination, and community involvement are
neglected.

Benefits from the CSR

By the late 1990s, CSR had attracted worldwide attention and several scholars had
determined that socially responsible companies enjoy a number of benefits. These include
profitability factors, such as achieving a competitive advantage (Porter & Kramer, 2002;
Smith, 1994), generating a positive corporate image (Smith & Stodghill, 1994), attracting and
retaining high quality employees (Turban & Greening 1997) and enhancing product loyalty
via an overall evaluation of the firm (Brown & Dacin, 1997). Some acknowledged, however,
that socially responsible initiatives could create additional costs (Agarwal, 2008) and
companies could experience some economic disadvantages from implementing CSR (Turban
& Greening, 1997; Ullmann, 1985). The table 1 shows the benefits from the CSR which
identified by the recent studies. Those benefits summarized for five areas such as positive
effects on company image and reputation: positive effects on employee motivation, retention,
and recruitment: Cost savings; Revenue increases from higher sales and market share: CSRrelated risk reduction or management.

Implication from the literature to current study

The literature in developing countries have highlighted that, each stakeholder can be
measured separately when the stakeholder framework is used (Mishra & Suar, 2010; Rais &
Goedegebuure, 2009). Current research on CSR in Sri Lanka are mostly limited to nature and
characteristics (Rathnasiri, 2003; Tilakasiri & Higgins, 2010; Tilakasiri et al., 2008), and
policies and practices of CSR in some Sri Lankan companies

(Fernando, 2010) without

linking it to firm performance. Therefore intention of this study is to fill that gap. It replicates
and extends the past findings on CSR and firm performance of Western and some developing
countries (Cochran & Wood, 1985; Mishra & Suar, 2010; Rais & Goedegebuure, 2009;
15

ICBI 2011
Faculty of Commerce and Management Studies

Ullmann, 1985; Waddock & Graves, 1997; Wickramasinghe, 2006). This research will be
carried out in a country which was affected by political and economic instability in the recent
past, at a different time period and also in different industries using different measures. Such
replications are warranted to establish the external validity of results and to rebuild the
confidence of researchers and practitioners on earlier findings.

References
Aaronson, SA & Reeves, JT 2002, Corporate responsibility in the global village: The role of
public policy, National Policy Association.
Abboud , L & AbdulRazek, TM (2010). Social Responsibility and Labour Force : Lebanon
Case Study. paper presented to Social Responsibility, Professional Ethics, and Management
Proceedings of the 11th International Conference 2010 Ankara, Turkey,, 2427 November
2010.
Agarwal, S. (2008). Corporate social responsibility in India. Sage, New Delhi.
Agarwal, SK. (2008). Corporate social responsibility in India. Sage Publications Pvt. Ltd.
Amaeshi, KM, Adi, B, Ogbechie, C & Amao, OO. (2006). Corporate Social Responsibility in
Nigeria: Western Mimicry or Indigenous Influences?. Journal of Corporate Citizenship, vol.
24, pp. 8399.
APEC (2006). Corporate Social Responsibility in the APEC region; Current status and
implications.
Arora, B & Puranik, R. (2004). A review of corporate social responsibility in India',
Development. vol. 47, no. 3, pp. 93-100.
Balasubramanian, NK, Kimber, D & Siemensma, F. (2005). Emerging opportunities or
traditions reinforced: an analysis of the attitudes towards CSR, and trends of thinking about
CSR, in India. Journal of corporate citizenship, vol. 17, pp. 79-92.
Baskin, J. (2006). Corporate responsibility in emerging markets. Journal of Corporate
Citizenship, vol. 24, pp. 29-47.
Baughn, CC, Bodie, NL & McIntosh, JC. (2007). Corporate social and environmental
responsibility in Asian countries and other geographical regions. Corporate Social
Responsibility and Environmental Management, vol. 14, no. 4, pp. 189-205.
Belal, A & Momin, M 2009. Corporate social reporting (CSR) in emerging economies: A
review and future direction. Accounting in Emerging Economies (Research in Accounting in
Emerging Economies, Volume 9), Emerald Group Publishing Limited, vol. 9, pp. 119-43.

16

ICBI 2011
Faculty of Commerce and Management Studies

Belal, AR 2001, 'A study of corporate social disclosures in Bangladesh', Managerial Auditing
Journal, vol. 16, no. 5, pp. 274-89.
Berniak-Wozny, J. (2011). Corporate social responsibility in developing countries: polish
perspective. Reframing Corporate Social Responsibility: Lessons from the Global Financial
Crisis (Critical Studies on Corporate Responsibility, Governance and Sustainability, Volume
1), Emerald Group Publishing Limited, vol. 1, pp. 271-302.
Blowfield, M. (2004). Implementation deficits of ethical trade systems: lessons from the
Indonesian cocoa and timber industries. Journal of corporate citizenship, vol. 13, pp. 77-90.
Brown, T & Dacin, P. (1997). The company and the product: corporate associations and
consumer product responses. The Journal of Marketing, vol. 61, no. 1, pp. 68-84.
Burton, BK, Farh, JL & Hegarty, WH. (2000). A cross-cultural comparison of corporate
social responsibility orientation: Hong Kong vs. United States students. Teaching Business
Ethics, vol. 4, no. 2, pp. 151-67.
Campbell, JL. (2007). Why would corporations behave in socially responsible ways? An
institutional theory of corporate social responsibility. The Academy of Management Review
ARCHIVE, vol. 32, no. 3, pp. 946-67.
Carroll, AB. (1979). A three-dimensional conceptual model of corporate performance.
Academy of management Review, vol. 4, no. 4, pp. 497-505.
1999, 'Corporate social responsibility', Business & Society, vol. 38, no. 3, p. 268.
Chambers, E, Chapple, W, Moon, J & Sullivan, M. (2003). CSR in Asia: A seven country
study of CSR website reporting.
Chapple, W & Moon, J. (2000). Corporate social responsibility (CSR) in Asia. Business &
Society, vol. 44, no. 4, p. 415.
2005, 'Corporate social responsibility (CSR) in Asia: a seven-country study of CSR web
site reporting', Business & Society, vol. 44, no. 4, p. 415.
Clarkson, M. (1995). A stakeholder framework for analyzing and evaluating corporate social
performance. Academy of management review, vol. 20, no. 1, pp. 92-117.
Cochran, P & Wood, R. (1985). Corporate social responsibility and financial performance.
Academy of Management Review . vol. 4, pp. 758-69.
Crane, A & Matten, D. (2007). Business ethics: managing corporate citizenship and
sustainability in the age of globalization, Oxford University Press, USA.
Crane, A, McWilliams, A & Matten, D. (2008). The Oxford handbook of corporate social
responsibility, Oxford University Press, USA.

17

ICBI 2011
Faculty of Commerce and Management Studies

Davenport, K. (2000). Corporate citizenship: a stakeholder approach for defining corporate


social performance and identifying measures for assessing it. Business & Society, vol. 39, no.
2, p. 210.
Davis, K & Frederick, W. (1984). Business and society: Management, public policy, ethics,
McGraw-Hill Companies.
Dobers, P & Halme, M. (2009). Corporate social responsibility and developing countries.
Corporate Social Responsibility and Environmental Management, vol. 16, no. 5, pp. 237-49.
Fauzi, H, Mahoney, L & Rahman, A. (2007). The Link Between Corporate Social
Performance and Financial Performance: Evidence from Indonesian Companies. Issues in
Social and Environmental Accounting, pp. 149-59.
Fernando, M. (2007) Corporate Social Responsibility in the Wake of the Asian Tsunami::: A
Comparative Case Study of Two Sri Lankan Companies', European Management Journal,
vol. 25, no. 1, pp. 1-10.
2010, Corporate social responsibility in the wake of the Asian tsunami: Effect of time
on the genuineness of CSR initiatives. European Management Journal, vol. 28, no. 1, pp. 6879.
Fox, T, Ward, H & Howard, B. (2002). Public sector roles in strengthening corporate social
responsibility: a baseline study. World Bank, Washington.
Griffin, J & Mahon, J. (1997). The corporate social performance and corporate financial
performance debate. Business & Society, vol. 36, no. 1, p. 5.
Haslam, P. (2007). Is Corporate Social Responsibility a Constructivist Regime? Evidence
from Latin America. Global Society, vol. 21, no. 2, pp. 269-96.
IMF (ed.) (2006). World Economic Outlook: Financial Systems and Economic Cycles,
International Monetary Fund, Brussels.
Jamali, D. (2007). The case for strategic corporate social responsibility in developing
countries. Business and Society Review, vol. 112, no. 1, pp. 1-27.
Jamali, D & Mirshak, R. (2007). Corporate social responsibility (CSR): theory and practice in
a developing country context. Journal of Business Ethics, vol. 72, no. 3, pp. 243-62.
Kemp, M & Unies, N. (2001). Corporate social responsibility in Indonesia: quixotic dream
or confident expectation?. United Nations Research Institute for Social Development.
Khan, F & Atkinson, A. (1987). Managerial attitudes to social responsibility: A comparative
study in India and Britain. Journal of Business Ethics, vol. 6, no. 6, pp. 419-32.

18

ICBI 2011
Faculty of Commerce and Management Studies

Khan, S. (2005). Exploring the concept of sustainability in emerging markets: Evidences


from the Indian pharmaceutical industry. URL: http://www. oikosstiftung. unisg.
ch/academy2005/paper_khan. pdf>[Acessado em 10 June 2006].
Kumar, R, Murphy, D & Balsari, V. (2001). Altered images: the 2001 state of corporate
reasponsibility in India poll, Tata Energy Research Institute, New Delhi.
Ksk, F & Zarkada Fraser, A. (2004). An Empirical Investigation of Corporate Citizenship
in Australia and Turkey. British Journal of Management, vol. 15, no. 1, pp. 57-72.
Lantos, G. (2001). The boundaries of strategic corporate social responsibility. Journal of
consumer marketing, vol. 18, no. 7, pp. 595-632.
Lee, S. (2008). Corporate Social Responsibility in India. Oxford-Achilles Working Group on
Corporate Social Responsibility.
2009, Corporate Sociiall Responsiibiilliity iin Indiia. A Case Study for the OxfordAchilles Working Group on Corporate Social Responsibility, viewed 12.7.2011,
<http://www.sbs.ox.ac.uk/research/Corporate+Social+Responsibility/>.
Lepoutre, J & Heene, A. (2006). Investigating the impact of firm size on small business
social responsibility: a critical review. Journal of Business Ethics, vol. 67, no. 3, pp. 257-73.
Lindgreen, A, Swaen, V & Campbell, T. (2009.'Corporate Social Responsibility Practices in
Developing and Transitional Countries: Botswana and Malawi. Journal of Business Ethics,
vol. 90, pp. 429-40.
Maignan, I & Ralston, D. (2002). Corporate Social Responsibility in Europe and the US:
Insights from Businesses' Self-Presentations. Journal of International Business Studies, vol.
33, no. 3, pp. 497-515.
Matten, D & Crane, A. (2005). Corporate citizenship: Toward an extended theoretical
conceptualization. Academy of management review, vol. 30, no. 1, pp. 166-79.
Matten, D & Moon, J. (2004). Corporate Social Responsibility Education in Europe. Journal
of Business Ethics, vol. 54, no. 4, pp. 323-37.
2008. Implicit" and" explicit" CSR: a conceptual framework for a comparative
understanding of corporate social responsibility. The Academy of Management Review
(AMR), vol. 33, no. 2, pp. 404-24.
Mazurkiewicz, P. (2004). Corporate environmental responsibility: Is a common CSR
framework possible. World Bank.
Mel, D. (2004). Corporate social responsibility in Spain: An overview. Barcelona: IESE
Business School, IESE Research Papers No. D/543.

19

ICBI 2011
Faculty of Commerce and Management Studies

Mishra, S & Suar, D. (2010). Does Corporate Social Responsibility Influence Firm
Performance of Indian Companies?. Journal of Business Ethics, pp. 1-31.
Mohan, A. (2001). Corporate citizenship: perspectives from India. Journal of corporate
citizenship, vol. 2, no. 1, pp. 107-17.
Moore, G. (2001). Corporate social and financial performance: an investigation in the UK
supermarket industry. Journal of Business Ethics, vol. 34, no. 3, pp. 299-315.
Nelson, JA. (2004). Beyond Small-Is-Beautiful: A Buddhist and Feminist Analysis of Ethics
and Business, Tufts University.
Nidasio, C. (2004). Implementing CSR on a large scale: The role of Government research
track, vol. 7.
OECD (2004) 'OECD Principles of Corporate Governance'.
Perrini, F. (2006). SMEs and CSR theory: evidence and implications from an Italian
perspective. Journal of Business Ethics, vol. 67, no. 3, pp. 305-16.
Perrini, F, Russo, A & Tencati, A. (2007). CSR strategies of SMEs and large firms. Evidence
from Italy. Journal of Business Ethics, vol. 74, no. 3, pp. 285-300.
Porter, M, E. & Kramer, M, R. (2002). The competitive advantage of corporate philanthropy.
Harvard Business Review, vol. 80, no. 12, pp. 56-68.
Prayukvong, P & Olsen, M. (2009). Research on the CSR Development in Thailand.
Rais, S & Goedegebuure, RV. (2009). Corporate social performance and financial
performance. The case of Indonesian firms in the manufacturing industry. Problems and
Perspectives in Management, vol. 7, no. 1, pp. 224-34.
Rais, S & UAE, RVG. (2009). Corporate social performance and financial performance. The
case of Indonesian firms in the manufacturing industry.
Ramasamy, B & Ting, HW. (2004). A comparative analysis of corporate social responsibility
awareness. Journal of Corporate Citizenship, vol. 13, no. 13.
Ratanajongkol, S, Davey, H & Low, M. (2006). Corporate social reporting in Thailand.
University of Waikato, Hamilton, New Zealand.
Rathnasiri, H. (2003). Corporate Social Responsibility Practices of Sri Lankan Private Sector:
An Exploratory Study. Sri Lanka Journal of MAnageemnt, vol. 8, no. 3-4, pp. 195-228.
Rock, M. (2002). Pathways to industrial environmental improvement in the East Asian newly
industrializing economies. Business Strategy and the Environment, vol. 11, no. 2, pp. 90-102.
Rotchanakitumnuai, S & Speece, M. (2003). Barriers to internet banking adoption: a
qualitative study among corporate customers in Thailand. International Journal of Bank
Marketing, vol. 21, no. 6/7, pp. 312-23.
20

ICBI 2011
Faculty of Commerce and Management Studies

Ruf, B, Muralidhar, K, Brown, R, Janney, J & Paul, K. (2001). An empirical investigation of


the relationship between change in corporate social performance and financial performance: a
stakeholder theory perspective. Journal of Business Ethics, vol. 32, no. 2, pp. 143-56.
Ruud, A. (2002). Environmental management of transnational corporations in India- are
TNCs creating islands of environmental excellence in a sea of dirt?. Business Strategy and
the Environment, vol. 11, no. 2, pp. 103-18.
Schwabenland, C. (2006). Stories, visions and values in voluntary organisations, Ashgate
Publishing.
Smith, C. (1994). The new corporate philanthropy. Harvard Business Review, vol. 72, no. 3,
p. 105.
Smith, G & Stodghill, R. (1994). Are good causes good marketing?. Business Week, vol. 21,
pp. 64-5.
Smith, NC. (2003). Corporate Social Responsibility: Not Whether, But How. Center for
Marketing Working Paper.
Smith, V & Langford, P. (2009). Evaluating the impact of corporate social responsibility
programs on consumers. Journal of Management & Organization, vol. 15, no. 1, pp. 97-109.
Sood, A, Arora, B & Development, UNRIfS. (2006). The political economy of corporate
responsibility in India, UNRISD.
Thompson, P & Zakaria, Z. (2004). Corporate social responsibility reporting in Malaysia:
Progress and prospects. Journal of corporate citizenship, vol. 13, pp. 125-36.
Tilakasiri, KK & Higgins, C. (2010). Corporate Social Responsibilities in Banks, Insurance
and Finance sector in Sri Lanka. India.
Tilakasiri, KK, McCarthy, G & Glynn, J. (2008). The Corporate Social Responsibility in the
Sri Lankan Universities. paper presented to International Conference on social Sciences in Sri
Lanka 2008 (ICSSL), Sri Lanka.
Tsoutsoura, M .(2004). Corporate social responsibility and financial performance.
Turban, DB & Greening, DW. (1997). Corporate social performance and organizational
attractiveness to prospective employees. Academy of Management Journal, vol. 40, no. 3, pp.
658-72.
Ullmann, A. (1985). Data in search of a theory: a critical examination of the relationships
among social performance, social disclosure, and economic performance of US firms.
Academy of management Review, vol. 10, no. 3, pp. 540-57.

21

ICBI 2011
Faculty of Commerce and Management Studies

Ullmann, AA. (1985). Data in search of a theory: A critical examination of the relationships
among social performance, social disclosure, and economic performance of US firms. The
Academy of Management Review, vol. 10, no. 3, pp. 540-57.
UNDP. (2006). Beyond Scarcity: Power, Powerty and the Global Water Crisis', Brussels:
United Nations Development Programe.
UnitedNations. (2006). Millennium Development Goals Report Brussels.
Uriarte, FA. (2008). ASEAN Foundation', paper presented to LCF CSR Conference 2008,
hangri-la Hotel, Makati City, Philippines.
Visser, W. (2006). Revisiting Carrolls CSR pyramid', Corporate citizenship in developing
countries: new partnership perspectives, p. 29.
2007, Corporate social responsibility in developing countries.
2008, 'Corporate social responsibility in developing countries', The Oxford Handbook of
Corporate Social Responsibility (Oxford University Press, Oxford), pp. 4739.
2008, Corporate social responsibility in developing countries.
Waddock, SA & Graves, SB. (1997). The corporate social performance-financial
performance link. Strategic Management Journal, vol. 18, no. 4, pp. 303-19.
WBCSD (1999). Corporate Social Responsibility: Meeting changing expectations. viewed
12.09.2009,
<http://www.wbcsd.org/DocRoot/hbdf19Txhmk3kDxBQDWW/CSRmeeting.pdf>.
2003, CSR: Meeting changing expectation, WBCSD publication, 2-94-0240-03-5.
Welford, R. (2004). Corporate social responsibility in Europe and Asia: critical elements and
best practice. Journal of corporate citizenship, vol. 13, no. 1, pp. 31-47.
2005, 'Corporate Social Responsibility in Europe, North America and Asia', Journal of
Corporate Citizenship, vol. 17, no. 1, pp. 33-52.
Whitley, R. (1999). Divergent capitalisms: The social structuring and change of business
systems, Oxford University Press, USA.
Wickramasinghe, DWA. (2006). Corporate social responsibility: Does it matter?. paper
presented to ICBM, Sri Lanka.
Wood, D & Jones, R. (1995). Stakeholder mismatching: A theoretical problem in empirical
research on corporate social performance. International Journal of Organizational Analysis,
vol. 3, pp. 229-67.
WorldBank (2005). Investment Climate Survey, World Bank.
WRI (ed.) (2005). World Resources, 2005 -The wealth of the poor: Managing ecosystems to
fight poverty, World Resources Institute; UNDP, UNEP, World Bank, Washington:D.C.
22

ICBI 2011
Faculty of Commerce and Management Studies

23