A Structural Equation Model of CSR and Performance: Mediation by Innovation and Productivity

Abstract

<p class="Abstract">This study has explored the role of Innovation and productivity as mediating factors between Corporate Social Responsibility (CSR) and firm’s Performance relationship. The objectives of this study are to build and test a theoretical model to identify the mediating factors in the linkage between CSR and performance.The theoretical model (CIPP Model) is deduced using strategic paradigm of literature. It consists of CSR, Innovation, Productivity, and Performance dimensions. Furthermore, several hypotheses were generated to examine the model. Structural Equation Modeling (SEM) is employed to test the model using data from CSR practicing firms 197 from Saudi Arabia. Confirmatory Factor Analysis (CFA) is performed followed by Structural Equation Modeling to examine the model. The results generally support the hypothesized model with research and managerial implications. The mediation of Innovation along with productivity in CSR linkage to performance isa major contribution to the literature, which may help to explore the black box in the relationship of CSR with performance. Besides proving the business case for the CSR in general, it also advocates the adoption of CSR practices by firms and MNEs operating in the developing countries, as it may enhance innovation and productivity leading to their increased financial performance. This model would be practical and useful for business managers that seek a competitive solution for succeeding in a business crisis and work in the settings of international business.</p>