A Comparative Study of CSR in Developedand Developing Countries

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A Comparative Study of CSR in Developedand Developing Countries...


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. [email protected]

Welmilla I. Department of Human Resource Management University of Kelaniya, Sri Lanka. [email protected]

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 organization‘s 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

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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 organisation‘s CSR practises. Meanwhile, it has been 3

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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 Whitley‘s (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 Küskü 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). Küskü 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

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A considerable amount of CSR literature has been published on cross national CSR variations (Chapple & Moon, 2005; Küskü & 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 company‘s 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


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

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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


Enabling approach



and Regulators

control legislation Facilitating Enabling legislation Funding support



and Legal




penalties and reward


Capacity building


Stimulating markets

Raising awareness Partnering

Combining resources Stakeholder


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

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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 it—along with Melbourne and San Francisco—as 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 company‘s 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

Carroll‘s CSR model developed for the developed world (Matten & Crane, 2005; Visser, 2006). Therefore, Visser (2007) redesigned the Carroll‘s 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 Carroll‘s (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.


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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. Visser‘s (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

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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

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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 company‘s 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 country‘s 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 (Melé, 2004).

In addition to the above differences, the following characteristic have been extracted from Visser‘s 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).


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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 government‘s 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

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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

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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 firm‘s 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 firm‘s 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 firm‘s strategic position in market place.


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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

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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.

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