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Corporate social responsibility and employee performance: The mediating

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Article in Corporate Social Responsibility and Environmental Management · August 2020

DOI: 10.1002/csr.2011

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DOI: 10.1002/csr.2011

RESEARCH ARTICLE

Corporate social responsibility and employee performance:

The mediating role of employee engagement in the
manufacturing sector of Pakistan

Hafiz Yasir Ali1 | Muhammad Asrar-ul-Haq1 | Shaheera Amin2 | Sadaf Noor1 |

1 3
Muhammad Haris-ul-Mahasbi | Muhammad Kashif Aslam

1
Department of Management Sciences,
COMSATS University Islamabad, Sahiwal Abstract
Campus, Sahiwal, Pakistan Past research proposes that corporate social responsibility (CSR) affects employees'
2
Department of Business Administration,
behaviors and attitude. However, the empirical evidence of this claim is limited par-
University of Sahiwal, Sahiwal, Pakistan
3
Department of Management Sciences, ticularly in the context of eastern developing economies like Pakistan. So, the study
COMSATS University Islamabad, Vehari in hand is an effort to extend the existing CSR literature by investigating the impact
Campus, Vehari, Pakistan
of CSR on employee performance using the lens of social identity theory. Addition-
Correspondence ally, the study also investigates the intervening role of employee engagement (EE) in
Muhammad Asrar-ul-Haq, Department of
Management Sciences, COMSATS University the above-mentioned association. To test the proposed model, data were collected
Islamabad, Sahiwal Campus, Pakistan. from employees of the manufacturing sector in two waves with an interval of
Email: asrar@cuisahiwal.edu.pk
4 weeks. The findings suggest that CSR has a significant impact on employees' per-
formance and engagement. Findings also confirm that EE partially mediates the asso-
ciation of CSR and employee performance. The study concludes with its theoretical
and practical implications and directions for future researchers.

KEYWORDS

corporate social responsibility, employee engagement, employee performance, Pakistan, social

identity theory

1 | I N T RO DU CT I O N acknowledged method to satisfy and please stakeholders like share-

Corporate social responsibility (CSR) has been the field of interest for
both academicians and practitioners over a couple of decades across
the world. Scholars are paying special attention to ethical, social,
moral, environmental, and sustainability concerns of companies. How-
ever, the majority of organizations respond to these concerns via their
social and environmental programs and policies (Carroll, 1991; Story &
Castanheira, 2019). According to Carvalho, Sen, de Oliveira Mota, and
de Lima (2010), CSR plays a significant role in the success of any busi-
ness and contributes toward the better world (Maon, Lindgreen, &
Swaen, 2009). Globally, all types of organizations have been accepting
CSR as a corporate practice (Buertey, Sun, Lee, & Hwang, 2020). At
present, organizations are considering CSR practices as one of their
core strategies to get a competitive advantage in the market (Latif &
Sajjad, 2018). The company's CSR initiatives have become the socially
holders, customers, and employees. Managers, with the help of CSR
practices, are in a position to entrust justice in their organization and
gain the trust of stakeholders to survive in the market (Buertey
et al., 2020). CSR is defined as “the responsibilities of the business for
the welfare of the community” (European Commission, 2019). CSR is
often perceived as how the organization interacts with its stake-
holders, protects their rights, and absorbs their pressure (Story &
Castanheira, 2019). The well-aware customers, rapid changes in tech-
nology, and market conditions require organizations to satisfy their
stakeholders in addition to their economic, social, and environmental
responsibilities (Farrukh, Sajid, Lee, & Shahzad, 2019; Rupp
et al., 2018). Firm's intangible resources are considered one of the
most significant drivers for competitive advantage and sustainable
growth (Du, Bhattacharya, & Sen, 2015). Human capital is considered
a vital intangible resource that plays a significant role to achieve

Corp Soc Responsib Environ Manag. 2020;1–12. wileyonlinelibrary.com/journal/csr © 2020 ERP Environment and John Wiley & Sons Ltd. 1
2 ALI ET AL.
business goals. Organizations that fail to answer the queries of
employees about the meaning of tasks performed by them face diffi-
culties to retain an energetic and competent workforce (Bhattacharya,
Sen, & Korschun, 2008; Farrukh et al., 2019).
Previous scholars have examined numerous outcomes of CSR for
stakeholders. In the context of shareholders, studies documented the
CSR association with the corporate image (Ali, Danish, & Asrar-ul-
Haq, 2020), reputation (Branco & Rodrigues, 2006; Javed, Rashid,
Hussain, & Ali, 2020), and performance (Alafi & Hasoneh, 2012;
Galbreath & Shum, 2012; Margolis, Elfenbein, & Walsh, 2009). From
the customer perspective, studies examined the association between
CSR and customer satisfaction (Lee & Heo, 2009; Saeidi, Sofian,
Saeidi, Saeidi, & Saaeidi, 2015; Xie, Jia, Meng, & Li, 2017) and cus-
tomer loyalty (Tingchi Liu, Anthony Wong, Rongwei, & Tseng, 2014).
Past studies have also reported evidence about CSR and employee
association through various behavior factors, that is, job satisfaction
(Asrar-ul-Haq, Kuchinke, & Iqbal, 2017), organizational identification
(Cheema, Afsar, & Javed, 2020), turnover intentions (Kim, Song, &
Lee, 2016; Lin & Liu, 2017), and organizational commitment (Mory,
Wirtz, & Göttel, 2016).
Although many scholars have examined the association between
CSR and certain employee-related outcomes, yet there is a need to
study it from employee performance perspective, particularly devel-
oping eastern countries like Pakistan. Past studies have ignored the
possible effects of organizational CSR practices on employees' indi-
vidual performance (Aguinis & Glavas, 2012; Shin, Hur, &
Kang, 2016). Furthermore, the majority of organizations are not yet
familiar with the role of CSR to increase employee engagement
(EE) and individual performance (Story & Castanheira, 2019). So, it
requires researchers' attention to examine the association of CSR
with employee individual performance that plays a key role in all
types of business and which is necessary for organizational success
(Jones, 2010; Shin et al., 2016). Story and Castanheira (2019) stud-
ied the relationship between CSR and employee performance
through the intervening role of job satisfaction. Story and
Neves (2015) have reported intrinsic and extrinsic CSR as predictors
of employee performance. However, previous studies were generally
held in Western countries (having strong regulatory agencies and
efficient markets), and it is not appropriate to extend the outcomes
of these studies to developing countries like Pakistan (with relatively
weak control of regulatory agencies and less efficient markets).
Hence, it is logical to examine the association of CSR with
employee performance in Pakistani organizations.
The current study also aims to examine the association of CSR
with EE, which is a significant aspect of CSR practices (Davies &
Crane, 2010; Farrukh et al., 2019). Furthermore, the role of engaged
employees for employee performance and organizational success is
well established (Christian, Garza, & Slaughter, 2011; Rupp
et al., 2018). Globally, limited numbers of employees (only 13%) are
engaged and just the United States is facing a financial loss of around
USD 500 billion yearly because of the low productivity of disengaged
workers (Gao, Zhang, & Huo, 2018). Therefore, it is worthwhile to
hypothesize the association of CSR with EE.
CSR literature also highlights that it is important to understand
the mechanism through which CSR leads to specific results (Rupp &
Mallory, 2015; Shin et al., 2016). EE plays a compelling role in
employees' performance and organizational output (Christian
et al., 2011) as engaged employees know the objectives of organiza-
tions and perform their job outstandingly (Farrukh et al., 2019).
Employees consider their existence meaningful in a socially recog-
nized and responsible company, which motivates them to perform
extra tasks to achieve organizational goals (Aguinis & Glavas, 2019).
CSR initiative is a significant predictor of EE (Rupp et al., 2018) as
employees are keen to be part of that organization which has a posi-
tive impact on society. Furthermore, EE is a strategic resource
(Shuck & Reio, 2011) and a source of employee performance
(Macey & Schneider, 2008) because EE is defined as a positive mental
state, which motivates employees to engage themselves emotionally
and cognitively with their job (Arslan & Roudaki, 2019). Moreover,
engaged employees realize the importance of their job and work hard
to achieve organizational targets (Ismail, Iqbal, & Nasr, 2019), which
results in high performance. Therefore, we examine the intervening
role of EE between CSR-EP association, which has not been studied
previously.
The current study extends the literature in many ways. First, the
present study examines the influence of CSR on employee individual
performance especially in the context of the Eastern developing con-
text, that is, Pakistan (unique socioeconomic culture). Second, the
study introduces a unique mediator (EE) to understand the CSR-EP
association. Finally, it helps to understand the utility of CSR to satisfy
employees and encourage them to play a significant role in the suc-
cess of their respective organizations.
2 | CORPORATE SOCIAL RESPONSIBILITY
Organizations have increasingly acknowledged the CSR's strategic sig-
nificance to improve the quality of their business decisions and prac-
tices across the world (Newman, Nielsen, & Miao, 2015; Porter &
Kramer, 2006). CSR means that organizations opt those policies and
strategies, which pay off to key stakeholders, that is, customers and
employees. It also helps organizations to build positive repute in soci-
ety (Ali et al., 2020; Galbreath & Shum, 2012), decrease the negative
effects of business activities on the environment and societies
(De Roeck & Delobbe, 2012; Newman et al., 2015). Although, scholars
have extensively examined CSR and made it widely studied topic
around the world (Nejati & Ghasemi, 2012), yet consensus has not
been developed on a single definition (Wood, 2010). It is difficult to
conceptualize CSR as a unified construct (Saeidi et al., 2015;
Wood, 2010) as everyone has perceived CSR from a different per-
spective (Van Marrewijk, 2003). This leads to multiple definitions of
CSR (Talaei & Nejati, 2008). Bowen (1953) has defined it as “the obli-
gations of business to pursue those policies, to make those decisions
or to follow those lines of action which are desirable in terms of the
objective and values of our society.” Subsequently, Carroll (1979) has
explained the range of organization's responsibility in his research and
ALI ET AL.
defined CSR as “the social responsibility of business encompasses the
economic, legal, ethical, and discretionary expectations that society
has of organizations at a given point in time.” According to Lee (2008),
Carroll's study is “one of the most widely cited research in the field of
business and society.” However, CSR's definition “a concept whereby
companies integrate social and environmental concerns in their busi-
ness operations and their interaction with their stakeholders on a vol-
untary basis” has been top-ranked by Dahlsrud (2008).
Literature has documented numerous internal and external
rewards of CSR for organizations. For instance, CSR escalates
employee loyalty (Zhu, Yin, Liu, & Lai, 2014), motivation (Kim &
Scullion, 2013; Skudiene & Auruskeviciene, 2012), satisfaction
(Barakat, Isabella, Boaventura, & Mazzon, 2016; Bauman &
Skitka, 2012), commitment (Collier & Esteban, 2007), and turnover
intentions (Kim et al., 2016). On the other hand, limited studies
(Edwards & Kudret, 2017; Farrukh et al., 2019;Rupp et al., 2018;
Story & Castanheira, 2019) have been found on the association of
CSR with employees performance and engagement, which is not
enough to elucidate theoretically and empirically (Rupp et al., 2018;
Story & Castanheira, 2019), particularly in the context of developing
countries.
3 | THEORETICAL FOUNDATION
This study is an effort to figure out the association of CSR with EE
and performance through social identity theory (SIT). Based on past
studies of CSR and employee behavior (Chaudhary, 2018; Zhang, Di
Fan, & Zhu, 2014), scholars claim that CSR practices develop
employee behavior through organizational identification as an
employee feel proud to be a part of such value-driven organizations.
SIT suggests that individuals see themselves as a member of a
social group (Abrams & Hogg, 1988; Tajfel & Turner, 1985). It also
states that an individuals' self-evaluation and concept are affected by
the membership of social organizations as well as the organization in
which they do the job (Ashforth & Mael, 1989; Brammer, Millington, &
Rayton, 2007). Furthermore, individuals try to create or increase their
positive self-concept through comparison of their group attributes
with other groups and persons (Ashforth & Mael, 1989; Tajfel &
Turner, 1985). This comparison boosts individuals' positive self-con-
cept. Therefore, SIT postulate that individuals tend to become a mem-
ber of such organizations attributed with positive social standing and
reputation (Tajfel & Turner, 1985), as such affiliation boosts their self-
esteem and concept (Abrams & Hogg, 1988; Tajfel & Turner, 1985).
In order to be distinguished and honored, individuals try to iden-
tify themselves with a social group that possesses unique characteris-
tics, values, and a positive reputation (Chaudhary, 2018). So,
individuals aim to identify themselves with a socially responsible and
well-reputed organization as members of such organizations may ful-
fill their psychological needs of uniqueness (Turker, 2009) and keep
them in a positive light (Turker, 2009). Furthermore, identification
with socially reputed organizations make employees pride and build
their self-image as well (Chaudhary, 2018; De Roeck, Marique,
3
Stinglhamber, & Swaen, 2014). Therefore, in the light of SIT, it is pos-
tulated that being a member of a socially responsible and well-reputed
organization that has strong ethical and moral values that confirmed
by their care and concerns for the welfare of all stakeholders,
enhances employees' self-pride and increases their affiliation with the
organization. As affiliations of employees with organization increases,
they engage themselves with their job and perform extra duties to
improve organizational performance.
SIT proposes that the company's CSR practices directly affect
employees' identification with organizations. Employees consider their
work more worthwhile, purposeful, and valuable in socially responsi-
ble organizations. Thus, organizational CSR activities build strong
identification of employees with the organization (Chaudhary, 2018)
which positively influence their attitude, that is, EE (Chaudhary &
Akhouri, 2019; Hur, Moon, & Choi, 2019; Rupp et al., 2018) and lead
to high job performance. So, the present study used SIT to understand
the mechanism, how organizational CSR activities increase EE, and
lead to high performance which in turn increases organizational pros-
perity, productivity, and performance (Dutton, Dukerich, &
Harquail, 1994).
4 | HY P O T H E S E S D EV E L O P M EN T
CSR practices have a strong association with beneficial employees'
attitudes and behaviors (Albinger & Freeman, 2000; Shen &
Benson, 2016; Valentine & Fleischman, 2008). We infer from the lit-
erature that this association is a function of SIT (Chaudhary, 2018;
Story & Castanheira, 2019) and studies (Blader, Patil, &
Packer, 2017; Riketta, 2005; Stinglhamber et al., 2015) also docu-
mented the strong positive association of employees affiliation with
organizations and their behaviors. Korschun, Bhattacharya, and
Swain (2014) reported that the strong affiliation of employees with
their organization encourages them to own it and demonstrate posi-
tive behaviors for its success. Furthermore, CSR practices promote
employee affiliation with their organizations (Chaudhary, 2018;
Korschun et al., 2014).
Limited studies (Ong, Mayer, Tost, & Wellman, 2018; Rupp,
Shao, Thornton, & Skarlicki, 2013; Story & Castanheira, 2019) have
examined the CSR association with employee workplace behaviors.
The association between CSR and in-role employee performance of
multinational organization has been analyzed in certain studies
(Edwards & Kudret, 2017; Story & Neves, 2015) and it is found that
CSR is a strong predictor of employees' performance. However,
they reported that CSR initiatives escalate employee performance
only when employees perceive those initiatives favorable and valu-
able for them. Newman et al. (2015) extended literature on CSR
and employee behaviors by examining its impact on extra-role
behavior along with in-role behavior (employee performance). Fur-
thermore, Chaudhary (2018) stated that CSR has a strong impact on
the performance of only those employees who consider it more
important. Story and Castanheira (2019) also examined the influence
of internal and external CSR on employee performance.
4 ALI ET AL.
Based on SIT assumptions (Tajfel & Turner, 1985), employees
build strong affiliation with organizations when they perceive its
activities according to their beliefs, desirability, and values. Organi-
zations use CSR practices for recognition in society and demon-
strate certain values for the well-being of employees. So, employees
strongly identify value-driven, socially recognized, and responsible
organizations. This encourages them to perform better and do extra
work for organizational prosperity, success, and achievements.
Based on the above arguments, we hypothesize in the context of
Pakistan that:
H1: CSR has a positive association with employee performance.
5 | CSR AND EE
Existing CSR literature highlights different research trends. In early
studies of CSR, scholars reported CSR association with the financial
performance of a company (Abu Bakar & Ameer, 2011; Alafi &
Hasoneh, 2012; Wang, Dou, & Jia, 2016). Subsequently, the focus
was shifted from financial to non-financial performance, that is, cus-
tomer loyalty (Cuesta-Valiño, Rodríguez, & Núñez-Barriopedro, 2019;
Servera-Francés & Piqueras-Tomás, 2019), corporate reputation
(Javed et al., 2020), and corporate image (Saeidi et al., 2015). How-
ever, limited studies are available on CSR association with employee
behavior.
Recently, few studies examined the impact of CSR on EE and
reported a significant association between them (Duthler &
Dhanesh, 2018). Potdar, Guthrie, Gnoth, and Garry (2018) reported
that CSR activities boost EE. This positive association of CSR with EE
was validated by Caligiuri, Mencin, and Jiang (2013). Farrukh
et al. (2019) examined the association of CSR and EE with an explana-
tion of gender differences. They reported that CSR increases the
engagement of female employees as compared to their male counter-
parts. Furthermore, internal CSR activities have a strong effect on EE
as compared to external CSR (Ferreira & Real de Oliveira, 2014). The
reason for this positive association is that organizational engagement
in CSR activities boost employees' self-image and build their identifica-
tion with organization. This strong identification positively influences
their engagement (Chaudhary & Akhouri, 2019) as suggested by SIT
(Tajfel & Turner, 1985) and they feel proud being part of the socially
well-reputed organization (Turker, 2009). They also consider their exis-
tence in organization meaningful and demonstrate strong identification
with the workplace (Glavas, 2012). CSR enables companies to work
beyond their financial responsibility and prescribed value statements
for the welfare of all stakeholders (Glavas, 2016). It motivates
employees to own their workplace and work hard for accomplishing
organizational goals (Rosso, Dekas, & Wrzesniewski, 2010). Similarly,
when employees get aware of CSR initiatives of their organization and
its contribution to the welfare of society, they become happy and
agree to exert extra effort for organizational success (Grant, Dutton, &
Rosso, 2008). So, the common opinion in literature is that CSR has
strong association with EE.
H2: CSR has a positive association with employee engagement.
6 | M E D I A TI N G R O L E OF E E
EE has become an interesting topic for researchers since 2006
(Welch, 2011) Engagement means the connection and commitment of
workers with their organization. Engaged, committed, and involved
employees are the most useful asset for any organization to get a
competitive advantage in the market (Anitha, 2014). A company's
strength is measured through EE (Baumruk, 2004) as an engaged
employee knows his/her responsibilities and do extra work for organi-
zational success (Anitha, 2014). EE is defined as “the harnessing of
organizational members” selves to their work roles; in engagement,
people employ and express themselves physically, cognitively, and
emotionally during role performances (Kahn, 1990).
CSR literature highlights that employees consider their existence
meaningful in a socially recognized and responsible company, which
encourages them to work beyond their duties (Aguinis &
Glavas, 2019). CSR plays a significant role to satisfy employees' desire
for purposeful existence (Rupp et al., 2013) as they address their
moral responsibility for others (Rupp et al., 2018). The organization's
CSR initiatives attract skilled employees and increase their commit-
ment (Jones, Willness, & Madey, 2014). CSR activities are positively
correlated with EE (Caligiuri et al., 2013; Glavas, 2012; Rupp
et al., 2018) as employees happy to do work for organizations that
invest their resources for the welfare of society and employees
(Albinger & Freeman, 2000; Barrena-Martínez, López-Fernández, Már-
quez-Moreno, & Romero-Fernández, 2015). Alonso-Almeida and
Llach (2019) reported that a socially responsible organization is an
attractive and favorite workplace for millennials. Glavas (2016) docu-
mented the positive impact of CSR on EE and validated the findings
of Claxton, Ferreira, and de Oliveira (2014). He also explained that
CSR activities increase employees' self-esteem and also strengthen
employees' identification with the organization which leads to high
engagement (Chaudhary, 2017). Employees of those organizations are
happier, committed, satisfied, and do extra work that involves in the
welfare of society while workers of less responsible organizations are
less satisfied and engaged with their work (Jones, 2010; Zhou, Luo, &
Tang, 2018). Thus, the organization's CSR initiative is one of the key
predictors of EE (Aguinis & Glavas, 2019) as employees are enthusias-
tic to be part of that organization which has a positive impact on
society.
On the other hand, EE is a strong predictor of his/her perfor-
mance (Cesário & Chambel, 2017) which ultimately leads to organiza-
tional success (Anitha, 2014; Bedarkar & Pandita, 2014) because
engaged employees are more happy, committed toward work and
have a strong affiliation with organization (Robertson-Smith &
Markwick, 2009). EE is positively associated with his/her performance
(Demerouti, Cropanzano, Bakker, & Leiter, 2010). Many studies have
validated these results (Mone & London, 2018). Research also
reported that job performance, productivity, and commitment of
engaged employees are higher than unengaged (Anitha, 2014;
ALI ET AL.
Bakker & Leiter, 2010; Macey & Schneider, 2008). Many studies
(Anitha, 2014; Christian et al., 2011; Macey & Schneider, 2008)
reported EE positively associated with employee performance, satis-
faction, and commitment because engaged employees know the sig-
nificance of their role for organization success and also have a good
relationship with co-workers which motivate them to do extra work
(Anitha, 2014; Macey & Schneider, 2008). Previous literature
suggested that EE has a significant association with CSR (exogenous
variable) and employee performance (endogenous variable). Thus,
conditions of Baron and Kenny (1986) have been satisfied to establish
mediation (Figure 1). Therefore, we hypothesized that:
H3: Employee engagement mediates CSR-EP association.
6.1 | Sample
The sample of the present study consisted of employees working in
the manufacturing companies of Pakistan. The employees were asked
to fill the survey containing questions regarding CSR practices of their
organization, their engagement, and performance. Employees of only
those companies were included in the sample that was practicing
CSR. We also confirmed it from companies' websites and annual
reports. Researchers personally visited the manufacturing companies
located in big cities (Karachi, Lahore, Faisalabad, and Peshawar) of
Pakistan. The higher authorities of companies permitted us to distrib-
ute the survey among their employees. Questionnaires were randomly
distributed among employees within a company to get the maximum
representation of the population. However, data were collected only
from those employees working at any (first, middle, and top) level of
management, as they have first-hand information about company pol-
icies & strategies and directly involved in the decision-making process.
Furthermore, we also ensured that only those employees were chosen
as respondents who were directly involved CSR activities. A cover let-
ter was attached to each questionnaire to make respondents aware of
the purpose, scope, and confidentiality of the study. Participation in
the survey was voluntary. Researchers collected data in two stages
with an interval of 4 weeks. At the first stage, respondents were asked
to provide data regarding their demographics and CSR practices in the
organization. At the second stage, information about mediator
(EE) and the outcome variable (employee performance) was collected.
At the first stage, researchers personally distributed 340 question-
naires among employees and received 282 questionnaires back with an
FIGURE 1 Theoretical framework
5
83% response rate. After 4 weeks, only those 282 respondents were
contacted who provided data at the first stage and 223 questionnaires
were received back with a 79% response rate. Six responses containing
incomplete information were not included in the analysis. Thus,
217 responses were used for data analysis and testing hypotheses.
The demographic section of the questionnaire consisted of ques-
tions about experience, age, gender, and education level of respon-
dents. The results showed that more than 50% of respondents were
working in the same company for a minimum of 6 years which shows
that respondents were having enough information about CSR prac-
tices of the company. The detail of demographic information is given
in Table 1.
6.2 | Measures
The variables of the present study were measured through validated
and verified scales which are widely used in literature. All measure-
ment scales were in English as it is the corresponding language (the
language of communication) in Pakistani companies, that is, for infor-
mation (financial and non-financial) disclosure (Javed et al., 2020). All
respondents were graduated from university where the mode of
teaching is English. So, it was easy for respondents to understand the
survey, designed in the English language. Furthermore, respondents
were asked to give a response on the 5-Likert scale, ranging from “1=
strongly disagree” to “5= strongly agree” to overcome respondent's
frustration and enhance the quality of data (Dawes, 2008; Nauman,
Malik, & Jalil, 2019). In order to ensure reliability and validity, we con-
ducted Cronbach alpha and CFA for each variable.
6.3 | Corporate social responsibility
Twenty-nine-item CSR scale was adopted from Carroll (1979). This
scale consisted of four dimensions: economic, discretionary, ethical,
and legal. The scale is widely used in CSR studies (Ali et al., 2020;
Saeidi et al., 2015). Questions include, “top management establishes
long-term strategies for our business”, “a program is in place to reduce
the amount of energy and materials wasted in our business”, “fairness
toward coworkers and business partners is an integral part of our
employee evaluation process”, and internal policies prevent discrimi-
nation in employee compensation and promotion. The statistics of
Cronbach's alpha was (0.91). Both factor loading (0.60–0.68) of all
items and the value of AVE (0.51) were greater than the acceptable
6 ALI ET AL.

TABLE 1 Demographic analysis TABLE 2 Reliability and validity

Variable Category Frequency Percentage Variable Factor loading AVE CR

Gender Female 52 24 CSR 0.60–0.68 0.51 0.83
Male 165 76 EE 0.65–0.73 0.56 0.89
Age 22–26 24 11 EP 0.63–0.79 0.53 0.85
27–31 48 22 Abbreviations: AVE, average variance extracted; CR, composite reliability;
32–36 98 45 CSR, corporate social responsibility; EE, employee engagement; EP,
Above 36 47 22 employee performance.

Experience 0–2 35 16
3–5 56 26
6 or above 6 126 58
value which confirmed the validity of the construct. The fitness indi-
ces showed that higher-order CFA is best fit (CMIN/df = 3.24,
SRMR = .067, GFI = 0.90, RMSEA = 0.078).
6.4 | Employee performance
Five-item scale was adopted from Janssen and Van Yperen (2004) to
measure employee performance. Questions include “employee
(I) always complete the duties specified in my job description” and
“employee (I) fulfill all responsibilities required by my job.” The
Cronbach alpha (α = 0.81). We confirmed convergent validity through
factor loading which must be more than 0.5 (Hair, Black, Babin, &
Anderson, 2010). All items were having the factor loading (0.63–0.79)
more than the threshold value. The statistics of AVE (0.53) were also
more than the threshold range. The fitness indices of CFA confirmed
that all five items yielding best fit model (CMIN/df = 3.23,
SRMR = .057, GFI = 0.93, RMSEA = 0.053).
6.5 | Employee engagement
Nine-item scale was adopted from Soane et al. (2012) to measure
EE. This scale included the dimension of “intellectual,” “social,” and
“affective engagement.” This scale has been validated by certain
researchers (Mañas-Rodríguez, Alcaraz-Pardo, Pecino-Medina,
Limbert, 2016). Questions include “employee (I) pay a lot of attention to
my work”, “I share the same work attitudes as my colleagues”, and “I am
enthusiastic in my work.” Cronbach alpha for this scale was (.79) which
is also above the threshold value. The factor loading (0.65–0.73) of all
items above the threshold value and confirmed the convergent validity
of the variable. The fitness indices showed that higher-order CFA is best
fit (CMIN/df = 2.68, SRMR = .074, GFI = 0.91, RMSEA = 0.068).
MacKenzie, Lee, and Podsakoff (2003) to overcome the potential
problem of common method bias (CMB). Respondents were told
that participation is voluntary; data would remain confidential and
would be used for research purposes only. The statistics of the
Single Herman test (39.50%) confirmed that there is no issue
of CMB.
To examine the effect of control variables (age, experience, and
gender), one-way analysis of variance was used. The result indicated
an insignificant effect and was in line with previous researches
(Galbreath & Shum, 2012). Thus, the present study did not control
these variables.
6.7 | Confirmatory factor analysis
Validity (discriminant and convergent) and reliability of variables were
confirmed through CFA by following the guidelines available in the lit-
erature (De Clercq et al., 2013; De Clercq, Bouckenooghe, Raja, &
Matsyborska, 2014). The factor loading of all items and the value of
AVE were above the threshold value (0.50) as suggested by Hair
et al. (2010). This confirmed the convergent validity. The detailed
results are given in Table 2. The square root of AVE was above the
correlation of variables (Table 2) which proves the discriminant valid-
ity (Hair et al., 2010). Reliability is proved through composite reliability
by following the process of Fornell and Larcker (1981). The model fit-
ness indices showed that the model is best fit (SRMR = .67, CMIN/
df = 2.87, GFI = 0.90, RMSEA = 0.074).
& 6.8 | Descriptive analysis
The results of the descriptive analysis are given in Table 3. The statis-
tics show that CSR is positively associated with EE and performance
(r = .374, .325). EE is also positively associated with employee perfor-
mance (r = .30).
6.9 | Hypotheses results

6.6 | Common method bias Researchers used the multiple regression to test hypotheses
(Figure 2). The results show that CSR has positive and significant
Researchers followed the guidelines of De Clercq, Dimov, and effect on EE and performance (β = .77, p = .000, LLCI = .464,
Thongpapanl (2013) and Podsakoff, MacKenzie, Lee, and Podsakoff, ULCI = .945 and β = .82, p = .000, LLCI = .719, ULCI = .934). EE has
ALI ET AL. 7

also significant effect on performance (β = .41, p = .001, LLCI = .215,
ULCI = .618).
In order to assess the intervening effect of EE between CSR-EP
relationship, we followed three different methods (Baron &
Kenny, 1986;Hayes, 2013; Preacher & Hayes, 2004). Results show
that CSR has a significant effect on the mediator (engagement) and
the outcome variable (performance) as shown in Table 4. Results also
show the significant effect of the mediator on the outcome variable.
The direct effect of CSR on performance (β = .82) becomes weak
when the mediator (engagement) is included in the regression equa-
tion (β = .50). This indicates that EE partially mediates CSR-EP rela-
tionship. Bootstrapping technique is also used to confirm the
intervening effect of EE (Hayes, 2013; Preacher & Hayes, 2004). The
results show that the positive effect of CSR on employee perfor-
mance through EE is significant (β = .27) and confidence interval of
this indirect effect is significantly different from zero (LLCI = .077,
ULCI = .58).
TABLE 3 Descriptive statistics
7 | DI SCU SSION
The objective of the present study was to examine the impact of CSR
on EE and performance. Additionally, this study analyzed the mediat-
ing role of EE in CSR-EP relationship. We found that CSR has a direct
impact on employee performance and engagement. Furthermore, EE
partially mediates the CSR-EP relationship as EE has a direct link with
CSR and employee performance. So, it works as an influential media-
tor between CSR-EP relationship.
The direct impact of CSR on employee performance indicated
that employees of Pakistani manufacturing companies consider CSR
practices more relevant to increase their identification with companies
and is a significant predictor of their performance. These results veri-
fied the previous literature of CSR-EP relationship (Chaudhary, 2018;
Newman et al., 2015; Story & Castanheira, 2019). Employees feel
proud, work harder and become more productive in those companies
which follow CSR practices (De Roeck, El Akremi, & Swaen, 2016;
Story & Castanheira, 2019) and consider them more reputable in soci-
ety (Saeidi et al., 2015). Employees feel that they must perform well in

Mean SD CSR EE EP organizations having good repute in society. Furthermore, employees

respond with more productivity and higher performance to those
CSR 4.08 0.39 (0.714)
companies which satisfy all stakeholders. Therefore, it can be inferred
EE 4.20 0.47 0.374** (0.748)
that CSR practices shape employee behavior and have a significant
EP 3.93 0.52 0.325** 0.30** (0.728)
impact on their performance.
Note: **Significant at 0.05. The findings also revealed that CSR has a significant positive
Abbreviations: CSR, corporate social responsibility; EE, employee engage-
impact on EE. This study confirmed the findings of previous scholars
ment; EP, employee performance.
This is square root Average Variance Extracted (AVE) and confirm the dis- (Farrukh et al., 2019; Gao et al., 2018; Rupp et al., 2018; Tsourvakas &
criminant validity of variables. Yfantidou, 2018). These results disclosed that employees in Pakistani

FIGURE 2 Multiple regression

analysis

TABLE 4 Mediation analysis

Path R R2 β SE T-test p-value

CSR à EP .689 .475 .82 .054 15.19 .000
CSR à ENG .83 .69 .77 .032 24.05 .000
ENG à EP .41 .10 4.08 .001
Indirect effect Effect SE LLCI ULCI
CSR à ENG à EP 0.27 .103 0.0627 0.4667

Abbreviations: CSR, corporate social responsibility, ENG, employee engagement, EP, employee performance.
8 ALI ET AL.
companies consider CSR as a strong predictor of work engagement
which increases their loyalty and commitment toward the job. Studies
also indicated that engaged employees become more committed, hap-
pier, healthier, and more productive (Kinjerski & Skrypnek, 2008;
Rupp et al., 2018). Gao et al. (2018) reported engagement as a strong
predictor of employee performance. So, it is logical that engaged
employees work beyond their limits, feel pride, work more effectively,
efficiently, and become more productive in those organizations who
involve in CSR practices. These firms have also positive repute and
image in society (Ali et al., 2020; Saeidi et al., 2015).
Researchers also found that CSR-EP relationship is partially medi-
ated by EE, as engagement has a direct correlation with both predictor
(CSR) and outcome (EP). Although CSR has a positive and strong impact
on employee performance, EE makes this association stronger as
engaged employees work beyond their duties and are committed to their
job. Furthermore, engaged employees work effectively and efficiently.
7.1 | Implications
This study has several theoretical and practical implications. It has dis-
cussed how CSR shape employee behavior (performance) and enhance
behavioral predictor of employee performance especially in the con-
text of Pakistani manufacturing companies which were ignored in the
previous studies. Firm's intangible resources are considered one of the
most significant drivers of competitive advantage and sustainable
growth (Du et al., 2015). Human capital is considered a vital intangible
resource, as engaged, capable, experienced, and skilled employees play
a significant role in sustainable growth. Earlier researches have also
indicated that CSR increases organizational performance by improving
vital intangible assets (Surroca, Tribó, & Waddock, 2010). So, this study
extends literature through empirical evidence on how CSR plays a sig-
nificant role to increase employee performance and engagement. This
would help to achieve the ultimate goal of every organization.
This study also extends the literature on CSR and EE in certain
aspects. Earlier scholars studied the impact of CSR on limited
employee behaviors, like organizational citizenship behavior, organiza-
tional identification, and commitment (Abdullah & Rashid, 2012;
Brammer et al., 2007; Lin, Lyau, Tsai, Chen, & Chiu, 2010). Limited
studies have focused on EE which is a significant predictor of
employee performance, productivity, and organizational performance,
especially in developing countries like Pakistan (Esmaeelinezhad,
Boerhannoeddin, & Singaravelloo, 2015; Gao et al., 2018;
Glavas, 2016). According to Gao et al. (2018), a very limited number
of employees (13%) across the world are engaged and just the United
States is facing a financial loss of around USD 500 billion yearly just
because of the low productivity of disengaged workers. It is useful to
examine the effect of CSR on EE, especially in developing countries.
So, these countries can overcome financial loss and use this amount
for increasing the capabilities, skills, and life standard of their people.
This study extends the literature by examining the impact of CSR on
EE. It also contributes to the literature by examining the mediating
role of EE between CSR-EP relationship.
This study may help the managers of manufacturing companies in
Pakistan to understand the value of CSR for increasing EE and perfor-
mance. For instance, companies might be thinking to invest their
financial resources for employees' friendly workplace practices and
donate for the welfare of general society and especially for
employees' families. Furthermore, managers may understand that CSR
plays a vital role to make employees happier, healthier, and increase
their commitment toward the organization which increases their pro-
ductivity and performance. The findings of this study may also
encourage managers to participate in such activities that are initiated
for employees' welfare to increase their performance. For instance,
the HR department may update the employees about the firm's
involvement in CSR activities and share it with new employees in their
orientation sessions. This would also help the companies to hunt the
best talent and gain a competitive advantage, as employees prefer to
do jobs in socially responsible companies (Albinger & Freeman, 2000;
Alonso-Almeida & Llach, 2019; Barrena-Martínez et al., 2015).
7.2 | Limitation and future directions
The present study has few limitations. Firstly, the present study col-
lected data through self-reported measures of EE and employee per-
formance, which might be a cause of CMB (Podsakoff et al., 2003).
However, it is assumed that respondents answered the questions
honestly (Gao et al., 2018). Furthermore, researchers have used many
pre-remedial strategies to overcome the potential issue of CMB
(Podsakoff et al., 2003), such as clearly explain the purpose of the
study with the help of a cover letter, ensure the confidentiality of
responses and perform CFA. The results of CFA stated that the
hypothesized model has better model fitness as compare to other
models. Therefore, future studies may use time-lagged or longitudinal
design and use peer-reported measures in order to mitigate the
potential issue CMB and social desirability.
Secondly, we used data of only manufacturing companies to
study the effect of CSR on EE and performance. Future studies may
collect data from other sectors like the service sector that has a major
role in Pakistan's economic growth and producing employment oppor-
tunities to increase the reliability of findings. Thirdly, the present
study did not consider cultural heterogeneity. So, future studies may
also collect the data from different cultures for comparative studies to
increase the generalizability of findings. Finally, we have introduced a
unique mediator to understand the mechanism that how CSR boots
employees' performance by using the assumption of SIT. Future stud-
ies may also use other mediators (organizational identification, organi-
zational commitment) moderator (different leadership style) in the
lens of different theories (contingency theory, stakeholder theory) to
further explain this mechanism and explore the role of CSR in
employees' performance.
OR CID
Hafiz Yasir Ali https://orcid.org/0000-0001-9350-2824
Muhammad Asrar-ul-Haq https://orcid.org/0000-0003-3639-0234
ALI ET AL.
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How to cite this article: Ali HY, Asrar-ul-Haq M, Amin S,
Noor S, Haris-ul-Mahasbi M, Aslam MK. Corporate social
responsibility and employee performance: The mediating role
of employee engagement in the manufacturing sector of
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