Received: 22 November 2017 Revised: 10 May 2018 Accepted: 2 June 2018

DOI: 10.1002/csr.1644

RESEARCH ARTICLE

The role of sustainable development and innovation on firm

performance
Jaime Guerrero‐Villegas1 | Laura Sierra‐García2 | Beatriz Palacios‐Florencio1

1
Department of Business, Organization and
Marketing, University Pablo de Olavide, Spain Abstract
2
Department of Financial, Economics and In the new economic scenario, characterized by a rapidly changing environment,
Accounting, University Pablo de Olavide,
companies are pushed into seeking new responses in order to survive and succeed.
Spain
Correspondence
Companies are looking for new activities to improve their economic performance.
Laura Sierra‐García, University Pablo de Furthermore, these activities have been focused on innovation and/or socially
Olavide, Department of Financial Economics
and Accounting, Ctra. de Utrera, km. 1, 41013‐
responsible aspects. This paper analyzes the relationship between corporate social
Sevilla. responsibility (CSR), innovation and its effect on performance. Especially, it shows if
Email: lnsiegar@upo.es
innovation has a fundamental role in the development of socially responsible practices
or if social issues are responsible for practices that lead to greater innovation and,
Funding information
Ministerio Español de Economía y consequently, to greater performance. Data were collected from a sample of 121
Competitividad, Grant/Award Number:
Spanish wineries. The results show that CSR and innovation act as a mediator
ECO2017‐58799‐R
depending on the measurement of performance used. CSR, specifically, acts as a
mediator between innovation and objective performance. However, managers
perceive that the relationship between CSR and performance improves through
innovation activities.

KEY W ORDS

Corporate Social Responsibility, Innovation, Objective Performance, Subjective Performance,

Sustainable Development

1 | I N T RO D U CT I O N (Orlitzky, Schmidt, & Rynes, 2003). In other words, this relationship

Corporate social responsibility (CSR) has been the focus of
considerable attention from scholars and managers in recent years
(Aguilera‐Caracuel, Guerrero‐Villegas, Vidal‐Salazar, & Delgado‐
Márquez BL., 2015; Lopatta, Jaeschke, & Chen, 2017). CSR has been
defined as responsible business practices that support the three
principles of sustainable development: economic growth and
prosperity, social cohesion and equity, and environmental integrity
and protection (European Commission, 2003). Through CSR, firms
demonstrate their commitment to contributing to economic, social
and environmental sustainable development.
Many studies have been done with the aim of explaining the
relationship between CSR and financial performance (Hull &
Rothenberg, 2008; Margolis & Walsh, 2003; Vogel, 2005). However,
it has been a controversial issue among scholars because there is not
a consensus regarding the impact that CSR has on firm performance
represents the most questioned area of CSR because the mechanism
through which financial performance is enhanced by CSR is not well
understood (Doh, Howton, Howton, & Siegel, 2010; Jawahar &
McLaughlin, 2001). One major concern is that these studies some-
times use models that are misspecified in the sense that they omit var-
iables, such as innovation (McWilliams & Siegel, 2000; Surroca, Tribo,
& Waddock, 2010) that have been shown to be important determi-
nants of firm performance (Bos‐Brouwers, 2010). Therefore, including
the innovation variable can contribute to a better understanding of the
relationships between CSR and financial performance (Wayne, 2010).
Regardless of many academics accepting the existence of the rela-
tionship between innovation and CSR, empirical research is rarely
available and, when it is, this is only in one direction – from CSR to
innovation (Wagner, 2010). In this line, a recent study conducted by
Marin, Martín, and Rubio (2017) has specified that in spite of CSR
increasingly becoming part of company discussions worldwide in the

Corp Soc Resp Env Ma. 2018;1–13. wileyonlinelibrary.com/journal/csr © 2018 John Wiley & Sons, Ltd and ERP Environment 1
2 GUERRERO‐VILLEGAS
quest for greater competitiveness and value, CSR and innovation have
seldom been explicitly discussed in combination in the literature.
Therefore, the relationship between CSR and innovation still lacks
even basic conclusions (Ratajczak & Szutowski, 2016).
In the light of the above discussion, we ask the following research
questions: What relationship really exists between CSR and innova-
tion? Is innovation explaining CSR practices? Or is it the opposite?
Are CSR practices explaining performance through innovation? Or,
on the contrary, is innovation explaining performance through CSR
practices? Trying to answer the questions, the purpose of this research
is to achieve a better understanding of the relationship between CSR
and innovation and its impact on performance.
To address the above questions, we used a sample of 121
Spanish wineries to which a survey was sent to managers to get
information about CSR, innovation and performance. Financial infor-
mation was obtained from the SABI (Iberian Balance Sheet Analysis
System) database.
Our research contributes to the literature in several aspects.
Firstly, we show the importance for firms of taking into account
the relationship between innovation and CSR. The study of both
directions of the relationship enables reflecting about the role
played by each of them. Secondly, we extend the debate about
how firms can enhance greater performance focusing their activities
on CSR and/or innovation. Specifically, firms that are more
innovative achieve a better performance through the development
of CSR practices. The study of the mediator role of CSR and inno-
vation in combination with the use of different measures of
performance contributes to a better understanding of the relation-
ship between CSR, innovation and firm performance. Finally, we
contribute to the literature by the consideration of objective
(accounting–based) and subjective (perceptual‐based) measures of
performance since our results showed a divergence of managers'
perceptions about the role played by CSR and innovation to attain
firm performance.
This paper is organized as follows. After this introduction, the fol-
lowing section provides the theoretical background and the develop-
ment of the hypotheses. Then, we describe the methodology used:
the sample, variables and the empirical models. We next present the
results. Finally, we point out the main conclusions and limitations,
and suggest lines for possible future research.
2 | B A C K G R O U N D A N D HY P O T H E S E S
D E V E L O P M E NT
2.1 | CSR and firm performance: the mediating
effects of innovation
Companies' efforts to develop CSR activities have grown significantly
in recent years (Boccia & Sarnacchiaro, 2018; Hur, Kim, & Woo, 2014).
However, research has shown that the influence of CSR on firm per-
formance has been sometimes equivocal, contradictory and inconclu-
sive (Marín, Rubio, & De Maya, 2012; Melo & Garrido‐Morgado,
2012). On the one hand, some studies argue that there is no relation-
ship between CSR and firm performance (Mahoney & Roberts, 2007;
ET AL.
McWilliams & Siegel, 2001) because many contingencies affect the
variability of returns to CSR (Aragon‐Correa & Sharma, 2003).
On the other hand, there are studies that maintain a negative rela-
tionship between CSR practices and financial performance (Moore,
2001; Salzmann, Ionescu‐Somers, & Steger, 2005). These studies
argue that CSR engagement can trigger disproportionally high costs,
while stock market and product market returns are negligible
(Brammer & Millington, 2008; Cornell & Shapiro, 1987; Friedman,
1970). Consequently, firms that try to enhance CSR by drawing
resources and management efforts away from core business areas,
obtain lower profits (Jensen, 2001). In sum, the implementation of
social practices involves substantial costs that reduce shareholder
wealth (Friedman, 1970).
Finally, numerous studies support a positive relationship between
CSR and financial performance, mainly due to the company's ability to
respond to stakeholder demands in the different contexts where they
operate (Margolis & Walsh, 2003; Waddock & Graves, 1997). In this
sense, according to stakeholder theory (Freeman, 1984), being able
to cope with the needs and demands imposed by different interest
groups allows organizations to reduce their transaction costs, increase
their legitimacy and their trust, and to gain competitive advantage
over their competitors (Choi & Wang, 2009). In contrast, companies
that act in a socially irresponsible manner with the aim of reducing
their implicit costs (for example, by locating activities of high environ-
mental impact in countries with lower legal requirements) will suffer
higher explicit costs due to a lack of legitimacy, suffering the social
rejection of interest groups (Bansal, 2005).
Related to the relationship between CSR and performance, there
is a research line showing that there can be several factors, such as
innovation, which might be a missing link to explain this relationship
(Hull & Rothenberg, 2008; McWilliams & Siegel, 2001; Yang, Lin, &
Chang, 2010). According to the European Competitiveness Report
(2008) there are three ways in which CSR can contribute to innovation
and performance: (1) identifying business opportunities through
addressing societal challenges; (2) creating workplaces that are more
conducive to innovation; and (3) innovation resulting from engage-
ment with a variety of stakeholders.
Several studies have underlined arguments about the relationship
between CSR practices and firm innovation (Bansal, 2005; Briones
Peñalver, Bernal Conesa, & De Nieves Nieto, 2018; Husted & Allen,
2007). For instance, McWilliams and Siegel (2000) show that the
adoption of environmental practices, going beyond the legal require-
ments, may promote investments in research and development, which
in turn can produce either a process or product innovation or both.
Wagner (2010) finds a significant positive relationship between CSR
practices and innovation that brings high social benefits. Firms can
build their differentiation‐based advantage by developing products'
innovative features (e.g., by increasing product durability, energy
savings, compliance with technical, safety, and ecological standards –
“green” products, serviceability, etc.), and by achieving better cus-
tomer service. Some of those activities result from social or ecological
pressure and the application of CSR practices (Golebiowski &
Lewandowska, 2015). Besides, firms that are perceived as socially
responsible can attract better and more innovative employees (Turban
& Greening, 1997). In brief, these studies maintain that CSR practices
GUERRERO‐VILLEGAS ET AL.
can lead to innovation through the use of “social, environmental or sus-
tainability drivers to create new ways of working, new products, services,
processes and new market space” (Little, 2006). Other researchers have
found strong positive relationships between firm innovation and firm
performance (Calantone, Cavusgil, & Zhao, 2002; Low, Chapman, &
Sloan, 2007; Yamin, Gunasekaran, & Mavondo, 1999).
Based on the above studies, we propose that innovation plays a
mediating role between CSR and firm performance (Blanco,
Guillamón‐Saorín, & Guiral, 2013; Perrini, Russo, Tencati, & Vurro,
2011; Surroca et al., 2010). That is, innovation is the way in which
social responsible firms can improve their performance. Therefore,
we propose:
Hypothesis 1 Firm innovation mediates the relationship
between CSR practices and firm performance.
2.2 | Innovation and firm performance: the
mediating effects of CSR
Nowadays, firms operate in a rapidly changing environment (Gunday,
Ulusoy, Kılıc, & Alpkan, 2011), forcing companies to constantly seek
new solutions guaranteeing maintaining or gaining competitive advan-
tages. Innovation has become an inevitable and crucial requisite for all
firms, helping them to better respond to fast and abrupt environmen-
tal changes (Hogan & Coote, 2014). Innovation can be defined as “the
adoption of an idea or behavior pertaining to a product, service, device,
system, policy or programme that is new to the adopting organization”
(Damanpour & Gopalakrishnan, 2001).
Previous research has shown that the influence of innovation on
firm performance has sometimes been contradictory and inconclusive
(Li & Atuahene‐Gima, 2001). There are studies finding a negative rela-
tionship (McGee, Dowling, & Megginson, 1995; Vermeulen, De Jong,
& O'Shaughnessy, 2005) or no relationship (Birley & Westhead,
1990; Heunks, 1998) between innovation and firm performance.
These studies support the idea that innovation is a risky and expensive
activity, having negative outcomes, such as increased exposure to
market risk, higher costs, employee dissatisfaction and unwarranted
changes (Simpson, Siguaw, & Enz, 2006).
All the same, in spite of the studies mentioned above, there is a
numerous group of studies explaining the positive relationship
between innovation and firm performance (Brown & Eisenhardt,
1995; Damanpour, 1991; Decarolis & Deeds, 1999; Guo, Baruch, &
Zhou, 2005; Li & Atuahene‐Gima, 2001; Schulz & Jobe, 2001;
Weerawardena, Sullivan Mort, Liesh, & Knight, 2007). This fundamen-
tal line of research maintains that innovation is the main driver for
economic growth, contributing to the firm's profitability and long‐term
continuity (Bos‐Brouwers, 2010; Porter, 1985). It leads to quality
improvement, increasing variation and diversification in products and
has a positive influence on turnover and employment (Guinet & Pilat,
1999). In addition, innovation allows an extension of market shares,
improved operational efficiency, improved reputation and cost reduc-
tions (Abernathy & Clark, 1985). According to Schumpeter (1934),
innovation is an opportunity for entrepreneurial firms to gain earnings
through the temporary establishment of a monopoly. The existing
products and services are vulnerable to new technologies, changing
customer needs, shortened product life cycles, and increased
3
international competition. In this sense, innovative products may cre-
ate new demands and thus facilitate firm growth (Rosenbusch,
Brinckmann, & Bausch, 2011).
Despite the potential adverse effects of innovation activities, the
theory and most of the empirical studies suggest a positive relation-
ship between innovative activity and firm performance. In short, due
to the changing environment and shortened product life cycles, a
firm's ability to generate innovations may be a key element allowing
it to maintain or gain competitive advantage and thus improve perfor-
mance (Artz, Norman, Hatfield, & Cardinal, 2010). Most of the
research has investigated the impact of CSR practices on firm innova-
tion. Yet, there are not enough empirical studies analyzing this rela-
tionship in the opposite direction, that is, from innovation to CSR
(Wagner, 2010).
Innovation is usually inherent to highly risky operations (Drucker,
1985). Stakeholders that closely deal with firms of high innovation can
demand greater transparency of firm's operations since they may have
little control over the process. In general terms, stakeholders want to
make sure that the firms they are doing business with are sustainable
and responsible (Agudo‐Valiente, Garcés‐Ayerbe, & Salvador‐Figueras,
2015). High innovation firms are usually motivated to signal their sus-
tainability through actively engaging in CSR. In this way, firms relieve
stakeholders' concerns. In this sense, CSR practices expand the inves-
tor base by attracting financing from socially conscious investors,
increasing access to less expensive external financing (Cheng, Ioannou,
& Serafeim, 2014; Dhaliwal, Li, Tsang, & Yang, 2011; El Ghoul,
Guedhami, Kwok, & Mishra, 2011; McWilliams & Siegel, 2001).
Achieving sufficient capital investment to commercialize new products
and services is critical for achieving ultimate success from innovative
activities (Mishra, 2017).
According to Gallego‐Álvarez, Prado‐Lorenzo, and García‐Sánchez
(2011), innovation can promote a firm's development of more flexible
technology, thereby allowing the incorporation of customer prefer-
ences into the design of goods produced. This innovative activity
can improve customer satisfaction and, consequently, the firm's CSR
practices (Prior, Surroca, & Tribó, 2008). For instance, innovations
could bring more socially environmental responsible technology, cov-
ering external stakeholders' needs about the environment. Hill and
Jones (1992), maintain that innovation affects stakeholders and the
way in which the company relates to them. When a company makes
the decision to develop a managerial innovation by changing its
human resources policy it could influence not only its employees but
also CSR, as it aims to improve the wellbeing of its workers or its
stakeholders. Regarding the internal stakeholders, innovation also
could bring more responsible practices to its employees, allowing
and/or promoting the development of employees' skills and careers.
In brief, these innovative actions can improve the corporate image
and maximize social welfare as a whole.
To summarize, the literature leads us to think that there could be
an indirect effect of innovation on firm performance through CSR
practices. That is, CSR is the way in which innovative firms can
improve their performance. Therefore, we propose:
Hypothesis 2 CSR practices mediate the relationship
between innovation and firm performance.
4 GUERRERO‐VILLEGAS ET AL.

3 | METHODS TABLE 1 Sample

Target Wineries
3.1 | Sample Geographical scope Spain
Method of capture Questionnaires
The target population of our study is the wine industry in Spain. For
Collected questionnaires 135
two reasons, we deem that the wine industry is particularly suitable
Valid questionnaires 134
for our study. First, it is of extraordinary importance for Spain in
Wineries without financial information 13
economic, social and environmental terms (Wine Technology Plat-
Final sample 121 (14.16%)
form, 2017). Spain is the third largest wine producer in the world
(37.8 million hectoliters in 2016). Regarding the extension of the Source: Own elaboration
vineyard cultivation area, Spain occupies the first place worldwide,
with a total area of 959,535 hectares. It is also the largest wine
exporter, with sales of 3,000 million euros abroad in 2016. Second, speed was measured through four items borrowed from previous

companies in the sector are currently developing activities focused studies (Carbonell & Rodríguez Escudero, 2010; Kessler & Bierly III,

on CSR with the aim of promoting the economic, social and environ- 2002). The measurement scale is shown in Table 3. As it is a very small

mental sustainability of vineyards and wineries to respond to the sector in comparison to others, differentiation lies in the speed with

new conditions of global change. In addition, the innovation activi- which the wineries develop new products or services.

ties developed by companies of the sector have acquired significant According to Orlitzky et al. (2003) and Martínez‐Ferrero and

relevance with the aim of taking advantage of the sources of knowl- Frías‐Aceituno (2015), there are three group classifications to measure

edge and technology available to produce products and services that CSR‐related performance: 1) market‐based, 2) accounting‐based, and

are accepted in the global market. In sum, this sector represents a 3) survey measures. Based on our data, measurement items were

promising research subject to analyze CSR and innovation business introduced in accordance with a careful literature review. We used

activities. two measures for performance: one that was objective (accounting–

In order to choose our sample, we selected in the SABI1 database based) and one which was subjective (perceptual‐based). We used

those Spanish Wineries with sales of more than 100,000€ (sample of return on assets (ROA) to measure objective performance because this

1,775 Wineries), and from those wineries we selected the ones that is one of the best measures that reflects the performance‐return of
2
have sent their wines to Peñin scores (854 wineries). After selecting CSR actions (Gallego‐Álvarez et al., 2011; Hull & Rothenberg, 2008;

these wineries, we sent the questionnaire by email to general Mahoney & Roberts, 2007; Margolis & Walsh, 2003; McWilliams &

managers. We collected 135, though our final sample was 121 Siegel, 2000; Miras‐Rodríguez, Carrasco‐Gallego, & Escobar‐Pérez,

questionnaires (see Table 1 that summarizes the sample used). 2015; Moore, 2001; Orlitzky et al., 2003; Yang et al., 2010). The
objective data was obtained using the SABI database. For the subjec-
tive performance, we used information included in our questionnaire.
3.2 | Variables Measurement The measurement scale is shown in Table 4. Four items were used, fol-
lowing previous studies (Calantone et al., 2002; Cegarra‐Navarro,
The constructs of social corporate responsibility and innovation are
Reverte, Gómez‐Melero, & Wensley, 2016; Deshpandé, Farley, &
measured with a Likert‐type scale with five levels of answers (from
Webster Jr, 1993; Li & Atuahene‐Gima, 2001; Low et al., 2007; Mar-
1 = “Strongly disagree” to 5 = “Strongly agree”), where value 3 is
tinez‐Conesa, Soto‐Acosta, & Palacios‐Manzano, 2017; Perez‐Luño,
interpreted as indifference. Next, Figures 1 and 2 show the models
Gopalakrishnan, & Valle Cabrera, 2014) (from 1 = “Strongly disagree”
proposed.
to 5 = “Strongly agree”).
The CSR variable was measured with a scale of twenty‐four indi-
Finally, we controlled for age and organizational size. We took the
cators, adapted from Farooq and Jasimuddin (2014), Herrera, Larrán,
age, employees and size data from the SABI database. The age variable
Martínez, and Martínez‐Martínez (2016) and Zheng, Luo, and
was operationalized as the number of years old, number of employees
Maksimov (2015), and validated in previous studies. This scale incor-
and size as the total of assets. Due to its dispersion, we used a log
porates different activities which form CSR: philanthropic, protection
transformation of variables (Perez‐Luño et al., 2014).
of the environment, defending consumers, respect for workers' rights
and helping the community (See Table 2).
In this study, the OSLO Manual's dimensions (OECD, 2005) and 3.3 | Models
earlier research are adopted to measure the innovation variable. This Next, Figures 1 and 2 show the models proposed. Firstly, the concep-
was measured through the speed of development of products and ser- tual model for the mediation of innovation and secondly for that of
vices implemented by the organization over the past three years, as the mediation of CSR.
differentiation in the wine sector involves innovation. The innovation

3.4 | Data analysis

1
SABI (Iberian Balance Sheet Analysis System‐ Bureau van Dijk Electronic Pub-
lishing). This database contains financial information and data on the economic To test the research models, we used SmartPLS 2.0 software to apply
activity, partners, etc. of about 1,086,200 Spanish firms. partial least squares (PLS), a variance‐based structural equation model-
2
PEÑIN is the most complete manual of Spanish wines in the world. ing technique (Henseler, Ringle, & Sinkovics, 2009). The reasons for
GUERRERO‐VILLEGAS ET AL. 5

FIGURE 1 Conceptual model proposed for the mediation of innovation between CSR and Performance

FIGURE 2 Conceptual model proposed for the mediation of CSR between innovation and Performance

TABLE 2 CSR Measurement Scale

CODE ITEM DIMENSION

CSR1 My company gives adequate contributions to charities Community

CSR2 My company supports Non‐Governmental Organizations (NGOs) working in problematic areas
CSR3 My company contributes to the campaigns and projects that promote the well‐being of society
CSR4 My company has transparent relations with the local authorities
CSR5 My company is considered part of the local community and is concerned with its
development and the improvement of its infrastructures
CSR6 My company participates in the activities which aim to protect and improve the quality Environment
of the natural environment
CSR7 My company makes investments to create a better life for future generations
CSR8 My company implements special programs to minimize its negative impact on the natural environment
CSR9 My company targets a sustainable growth which considers future generations
CSR10 My company reuses and recycles materials
CSR11 My company protects consumer rights beyond the legal requirements Consumers
CSR12 My company provides full and accurate information about its products to its customers
CSR13 Customer satisfaction is highly important for my company
CSR14 My company takes measures to prevent customer complaints
CSR15 My company responds to customer complaints or inquiries
CSR16 My company encourages its employees to participate in voluntary activities Employees
CSR17 My company's policies encourage the employees to develop their skills and careers
CSR18 The management of my company is primarily concerned with its employees' needs and wants
CSR19 The managerial decisions related with the employees are usually fair
CSR20 My company recognizes the importance of stable employment for its employees and society (in the local area)
CSR21 My company has a specific budget to carry out social and humanitarian activities. Philanthropy
CSR22 My company regularly carries out altruistic activities (disinterested).
CSR23 My company has personnel in charge of carrying out altruistic activities.
CSR24 My company cooperates with NGOs to carry out social and humanitarian activities.

Source: Farooq and Jasimuddin (2014), Herrera et al. (2016) and Zheng et al. (2015)

our choice of PLS are as follows (Roldán & Sánchez‐Franco, 2012).
Firstly, the study focuses on predicting the dependent variable. Sec-
ondly, the research is incremental, which implies that earlier models
form the basis of the study, while the current model adds new mea-
sures and structural paths. Thirdly, and most importantly, the study
uses a formative measurement model.
4 | RESULTS AND DISCUSSION
First, we present the model's results related to CSR and Innovation
using objective performance (OP) as a final variable. Then we do so
with the results related to CSR and Innovation with subjective perfor-
mance (SP).
6 GUERRERO‐VILLEGAS ET AL.

TABLE 3 Innovation Measurement Scale statistical significance of the path coefficients. Simultaneously, the cal-

CODE ITEM
The speed of development of our new products has been …
IN1 Very much below our aims
IN2 Slower than the industry average
IN3 Much slower than what we expected
IN4 Slower than the average speed of the development
of our products
Source: OECD (2005)
TABLE 4 Measurement Scale for Subjective Performance
CODE ITEM
Related to your business' largest competitor:
38A The profits obtained by your firm are
39A The size of your firm is
40A The market share of your firm is
41A The rate of growth that your firm has is
Source: Deshpandé et al. (1993); Li and Atuahene‐Gima (2001); Calantone
et al. (2002); Low et al. (2007); Perez‐Luño et al. (2014); Cegarra‐Navarro
et al. (2016); Martinez‐Conesa et al. (2017)
4.1 | Measurement model
The evaluation of the reflective measurement models examines their
reliability and validity (Henseler et al., 2009). Individual item reliability
is adequate when an item has a factor loading greater than 0.7 for its
construct or dimension, loads of 0.5 and 0.6 being accepted when the
scales are applied in different contexts (Barclay, Higgins, & Thompson,
1995). In this study, the reflective indicators and dimensions satisfy
this requirement, except for items 4, 10 and 11 of CSR. The
assessment of construct reliability uses composite reliability (ρc) and
Cronbach's alpha. 0.7 is the benchmark for both indices. All the
reflective constructs and dimensions in the study are reliable (Tables 5
and 6). The average variance extracted (AVE) confirms the convergent
validity for all the reflective constructs and dimensions. These attain
convergent validity with AVE values over 0.5. Finally, Tables 5 and 6
show the results of the discriminant validity assessment, providing evi-
dence that each reflective construct relates more strongly to its own
measures than to the rest of the constructs for each model proposed.
4.2 | Structural model
As Henseler et al. (2009) note, the use of bootstrapping (5000
resamples) generates standard errors and t‐statistics to evaluate the
culation of the bootstrapping confidence intervals of standardized
regression coefficients forms part of the analysis. For the case of the
model where innovation acts as a measurement, the direct effect of
the CSR‐objective performance is significant (see Figure 3). The per-
centile bootstrap at a 95% confidence interval also has this outcome
(Table 7). In addition, the results in Table 7 confirm that the structural
model has satisfactory predictive relevance for the objective perfor-
mance variable (Q2 = 0.09).
Tests on the mediation hypotheses (H1op) use an application of
the analytical approach described by Hayes, Preacher, and Myers
(2010). Figure 3 expresses the total effect of CSR on objective perfor-
mance as the sum of the direct (c') and indirect effects (ab). The estima-
tion of the latter uses the product of the path coefficients for each of
the paths in the meditational chain. The application of bootstrapping
allows the testing of the mediation hypotheses (Preacher & Hayes,
2008). This study's 5000 resamples generate 95% confidence intervals
(percentiles) for the mediators. When the mediator (Figure 3) is added,
the influence of CSR hardly decreases, but a significant direct effect on
objective performance is maintained (c’ = 0.213; t = 2.17), in accordance
with previous research. Moreover, it is shown that innovation (H1op:
a*b) does not mediate the relationship between CSR and objective per-
formance in contrast to previous findings (Blanco et al., 2013; Hull &
Rothenberg, 2008; Surroca et al., 2010).
In the case of the model where CSR mediates between innovation
and objective performance, the direct effect of innovation on objec-
tive performance is not significant (see Figure 4). Figure 4 shows the
total effect of innovation on objective performance with the direct
and indirect effect added. When the mediator is added, the influence
of innovation continues being not significant (c’ = 0.055; t = 0.04).
Moreover, it is shown that CSR (H2op: a*b) mediates the relation
between innovation and objective performance. The results in
Table 8 confirm that the structural model has satisfactory predictive
relevance for the objective performance variable (Q2 = 0.09). These
results are in accordance with previous studies (McWilliams & Siegel,
2000; Mishra, 2017).
Now, we show the results for the subjective performance models.
The results for the convergent and discriminant validities of the new
models are shown in Tables 9 and 10. Both tables show that the
new measurement model properly meets all the criteria.
For the case of the structural model where innovation acts as a
mediator variable, the direct effect of CSR‐subjective performance is
not significant (see Figure 5). The percentile bootstrap at a 95% confi-
dence interval also has this outcome (Table 11).

TABLE 5 Discriminant validity (with innovation mediating)

1 2 3 4 5 6 Composite reliability AVE

1. CSR 0.71 0.79 0.51

2. OP 0.224 N.A. N.A. N.A.
3. INNOVATION 0.360 0.116 0.87 0.93 0.76
4. AGE −0.009 0.093 −0.014 N.A. N.A. N.A.
5. EMPLOYEES −0.181 0.036 −0.085 0.339 N.A. N.A. N.A.
6. SIZE −0.079 −0.086 0.035 0.270 0.425 N.A. N.A. N.A.

Source: Own elaboration

GUERRERO‐VILLEGAS ET AL. 7

TABLE 6 Discriminant validity (with CSR mediating)

1 2 3 4 5 6 Composite reliability AVE

1. OP N.A. N.A. N.A.
2. INNOVATION 0.116 0.87 0.93 0.76
3. CSR 0.224 0.360 0.71 0.79 0.51
4. AGE 0.093 −0.014 −0.009 N.A. N.A. N.A.
5. EMPLOYEES 0.036 −0.085 −0.181 0.339 N.A. N.A. N.A.
6. SIZE −0.086 0.035 −0.079 0.270 0.425 N.A. N.A. N.A.

Source: Own elaboration

FIGURE 3 Analysis of the structural model (with innovation mediating) for objective performance

TABLE 7 Effects on endogenous variables (with innovation mediating) for objective performance
Effects on endogenous Variables Direct effect t Value (bootstrap) Percentile 95% confidence interval Explained variance
2 2
Innovation (R = 0.13/Q = 0.09)
CSR (a) 0.36*** 4.51 [0.22; 0.53] Sig 12.96%
Objective Performance (R2 = 0.08/Q2 = 0.09)
CSR (c’) 0.213* 2.15 [0.002; 0.38] Sig 4.77%
ns
Innovation (b1) 0.055 0.44 [−0.19; 0.29] No Sig 0.06%
Control variables
Age 0.098ns 0.80 [−0.11; 0.37] No Sig 0.9%
Employees 0.107ns 0.70 [−0.25; 0.34] No Sig 0.4%
Size −0.143 ns
1.42 [−0.32; 0.07 No Sig 1.2%

Source: Own elaboration

FIGURE 4 Analysis of the structural model (with CSR mediating) for objective performance
8 GUERRERO‐VILLEGAS ET AL.

TABLE 8 Effects on endogenous variables (with CSR mediating) for objective performance

Effects on endogenous variables Direct effect t Value (bootstrap) Percentile 95% confidence interval Explained variance
2 2
CSR (R = 0.13/Q = 0.04)
Innovation (a) 0.36*** 4.62 [0.23; 0.53] Sig 12.96%
Objective Performance (R2 = 0.08/Q2 = 0.09)
CSR (b1) 0.213* 2.17 [0.003; 0.38] Sig 4.77%
ns
Innovation (c’) 0.055 0.44 [−0.19; 0.30] No Sig 0.06%
Control variables
Age 0.098ns 0.80 [−0.11; 0.37] No Sig 0.9%
Employees 0.107ns 0.70 [−0.25; 0.34] No Sig 0.4%
Size −0.143 ns
1.42 [−0.32; 0.07 No Sig 1.2%

Source: Own elaboration

TABLE 9 Discriminant validity (model with the moderation of innovation) for subjective performance
1 2 3 4 5 6 Composite reliability AVE

1. CSR 0.72 0.84 0.52

2. SP −0.001 0.85 0.91 0.72
3. INNOVATION 0.368 0.109 0.87 0.93 0.76
4. AGE −0.084 0.099 0.028 N.A. N.A. N.A.
5. EMPLOYEES −0.111 0.271 −0.157 0.496 N.A. N.A. N.A.
6. SIZE −0.070 0.078 0.040 0.964 0.489 N.A. N.A. N.A.

Source: Own elaboration

TABLE 10 Discriminant validity (model with the moderation of CSR) for subjective performance
1 2 3 4 5 6 Composite reliability AVE

1. SP 0.85 0.91 0.72

2. INNOVATION 0.109 0.87 0.93 0.76
3. CSR −0.001 0.360 0.72 0.84 0.52
4. AGE 0.099 0.028 −0.084 N.A. N.A. N.A.
5. EMPLOYEES 0.271 −0.157 −0.111 0.496 N.A. N.A. N.A.
6. SIZE 0.078 0.040 −0.070 0.964 0.489 N.A. N.A. N.A.

Source: Own elaboration

FIGURE 5 Analysis of the structural model (with innovation mediating) for subjective performance
GUERRERO‐VILLEGAS ET AL. 9

Table 11 confirms that the structural model has satisfactory pre-
dictive relevance for the subjective performance variable (Q2 = 0.07).
It expresses the total effect of CSR on subjective performance
as the sum of the direct (c') and indirect effects (ab). CSR has a
non‐significant total effect on subjective performance. This result is
in contrast to those of previous studies (Clemens, 2006; Rettab, Brik,
& Mellahi, 2009). When the mediator (Figure 5) is added, the
influence of CSR increases, but continues being not significant
(c’ = 0.034; t = 0.34). However, it shows that innovation (H1sp:
a*b) mediates the relationship between CSR and subjective
performance, consistent with earlier research (Cegarra‐Navarro
et al., 2016).
The direct effect is significant for the model where CSR mediates
the relationship between innovation and subjective performance (see
Figure 6). The 95% confidence interval also has this outcome
(Table 12). In addition, the results in Table 12 confirm that the struc-

TABLE 11 Effects on endogenous variables (model with the moderation of innovation) for subjective performance
Effects on endogenous variables Direct effect t Value (bootstrap) Percentile 95% confidence interval Explained variance
2 2
Innovation (R = 0.136/Q = 0.10)
CSR (a) 0.368*** 4.61 [0.27; 0.51] Sig 13.54%
2 2
Subjective Performance (R = 0.11/Q = 0.07)
ns
CSR (c’) 0.034 0.34 [−0.13; 0.20] No Sig 0.12%
Innovation (b1) 0.18* 1.92 [0.27; 0.51] Sig 3.24%
Control variables
Age 0.241ns 0.83 [−0.28; 0.64] No Sig 5.81%
Employees 0.337*** 3.60 [0.19; 0.50] Sig 11.36%
Size −0.329ns 1.21 [−0.69; 0.15] No Sig 10.82%

Source: Own elaboration

FIGURE 6 Analysis of the structural model (with CSR mediating) for subjective performance

TABLE 12 Effects on endogenous variables (model with CSR mediating) for subjective performance
Effects on endogenous variables Direct effect t Value (bootstrap) Percentile 95% confidence interval Explained variance
2 2
CSR (R = 0.136/Q = 0.06)
Innovation (a) 0.368*** 4.43 [0.27; 0.51] Sig 13.54%
Subjective Performance (R2 = 0.11/Q2 = 0.07)
CSR (b1) −0.033 ns
0.30 [−0.20; 0.15] No Sig 0.01%
Innovation (c’) 0.168* 1.95 [0.02; 0.31] Sig 2.82%
Control variables
Age 0.241ns 0.85 [−0.21; 0.64] No Sig 5.81%
ns
Employees 0.337 3.66 [0.20; 0.50] Sig 11.36%
Size −0.329ns 1.23 [−0.69; 0.17] No Sig 10.82%

Source: Own elaboration

10
tural model has satisfactory predictive relevance for the subjective
performance variable (Q2 = 0.07).
Figure 6 shows the total effect of innovation on subjective per-
formance as the sum of the direct (c') and indirect effects (ab). When
the mediator is added, the influence of innovation hardly decreases,
but a significant direct effect on subjective performance is main-
tained (c’ = 0.168; t = 1.95). Moreover, it is shown that CSR
(H2sp: a*b) does mediate the relationship between innovation and
subjective performance. Our results are consistent with Martinez‐
Conesa et al. (2017) who reveal that CSR is a driver to be more
innovative.
5 | C O N CL U S I O N S
The aim of this research has been to highlight the relationship
between CSR practices and innovation and their influence on different
views of performance. We have two reasons for seeking this goal:
firstly, the lack of consensus obtained in previous research between
CSR/innovation on performance and, secondly, the importance of
the company's activities to innovate as a prior step to the implementa-
tion of CSR actions in order to achieve a higher performance in a com-
petitive environment.
In general terms, our results support that innovation influences
CSR and CSR influences innovation. The consideration of the mediator
variable and that of different types of performance (objective and sub-
jective) generate new views and insights about the debate on the role
played by innovation and CSR in performance. Specifically, one expla-
nation of the previous deficient conclusions in the literature can be
the existence of different types of performance. In our case, measures
of objective and subjective performance resulted in different conclu-
sions, making us think that the relationship between CSR and innova-
tion can be conditioned by the dependent variable considered.
We conclude that, from an objective point of view, the relation-
ship between CSR practices and performance, innovation acting as a
mediator, is not significant. However, from the subjective point of
view, the results of our research show that companies' socially respon-
sible behavior positively affects performance through innovation
activities. On the other hand, the study shows the positive impact of
innovation activities on objective performance through socially
responsible actions. Nonetheless, this relationship is non‐existent
when a subjective measure of performance is used. In sum, CSR
directly influences objective performance and indirectly influences
subjective performance. Innovation directly influences subjective per-
formance and indirectly influences objective performance.
Our findings may have important implications for practitioners.
The double conclusion regarding the use of objective versus subjec-
tive performance lets us know that there is divergence between what
managers think how performance is explained (subjective measure)
and what performance is already explained by (objective measure).
The use of the objective measure for performance shows to us that
CSR are the way by which innovation positively impacts on firm per-
formance. In other words, managers wanting to increase firm perfor-
mance should focus on innovation enhanced by CSR practices. CSR
should be considered as a mediator to achieve greater performance.
GUERRERO‐VILLEGAS ET AL.
This research has some limitations. First, the study only looks at
one country (Spain) and one industry (wine). Second, the particular
antecedents and outcomes in this model constitute a limitation to
the generalization of the results to other models. Thirdly, our innova-
tion metric focuses on the speed of introducing new products or ser-
vices, rather than on innovations directly related to CSR dimensions,
therefore other types of the innovation metric could be properly used.
Fourth, the cross‐sectional (rather than longitudinal) design of the
study might misrepresent variables that refer to lengthy processes,
the effects of which only become apparent over long periods. It would
be useful for future studies to adopt a longitudinal approach when
analyzing these questions. Finally, this study follows a soft modeling
approach focusing more on prediction than causality.
ACKNOWLEDGEMENTS
The authors wish to acknowledge the financial support of the Spanish
Ministry of Economy and Competitiveness (Ministerio Español de
Economía y Competitividad) through the research Project ECO2017‐
58799‐R. Any errors included in this paper are the sole responsibility
of the authors.
ORCID
Jaime Guerrero‐Villegas http://orcid.org/0000-0002-1029-401X
Laura Sierra‐García http://orcid.org/0000-0001-8880-0683
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How to cite this article: Guerrero‐Villegas J, Sierra‐García L,
Palacios‐Florencio B. The role of sustainable development
and innovation on firm performance. Corp Soc Resp Env Ma.
2018. https://doi.org/10.1002/csr.1644