Translating corporate social responsibility into financial performance: Exploring roles of work engagement and strategic coherence

Abstract

AbstractThis study examines how and why corporate social responsibility (CSR) contributes to firms' financial performance. In particular, we investigate the work engagement of employees as a mediator of CSR and firm's financial performance, as well as the moderating role of strategic coherence. With a three‐wave longitudinal survey data of 3343 organizational members from 518 branches and performance records from one of the largest commercial banks, we have found that employees' work engagement mediates the CSR‐financial performance relationship, and strategic coherence, as captured by customer‐ or competitor‐oriented strategy, differentially moderates the mediated relationship. Specifically, the customer‐oriented strategy strengthens the positive influence of CSR on work engagement and subsequent financial performance, whereas the competitor‐oriented strategy weakens the same. Our findings suggest that organizations can maximize financial returns from CSR through employees' work engagement only when CSR, as a non‐market strategy, aligns with the firm's market strategy.