The Link Between Competitive Advantage & Corporate Social Responsibility |
Business and Society |
There is currently growing interest in corporate social responsibility (CSR) among both companies and managers. It has become an important topic of theoretical concentration and one of the most widely accepted business concepts. The major issues in the field of CSR concern stakeholder analysis and corporate strategic management. Numerous attempts have been made to link CSR and financial performance. While the debate over CSR continues, it reveals that some additional research can be done on the link between CSR and competitive advantage (CA).
CSR is understood to be the way ...view middle of the document...
Creating and sustaining competitive advantage involves proactively exploiting advantages such that the organization is able to obstruct any efforts on the part of competing organizations to achieve the same competitive advantage (Ma, 1999).
Harrison asserts that: “Competitive advantage implies more than merely creating value. Rather, the key is to create more value than competitors are able to create. A firm is said to have a competitive advantage if it creates and appropriates more value than the least efficient rival capable of breaking even. Simply extending the prior logic, this occurs when the firm drives a wedge between the willingness to pay it generates among buyers and the costs it incurs and then collects returns in excess of its own opportunity costs” (Harrison, 2007).
With a basic overview of CSR and CA provided, it is now possible to consider how CSR can be effectively utilized for the purposes of creating CA in the organization. Focusing on the relative conditions most important to their industries and strategies, companies ensure that their corporate capabilities will be particularly well suited to helping grantees create greater value (Porter, 2002). By enhancing the value produced by philanthropic efforts in their fields, the companies gain greater improvements in competitive context. Corporate philanthropy should be deeply rooted in a firm’s competences and linked to its business environment (Porter, 2002).
Over the course of the last two decades, there have been a number of incidents that have shaped how organizations respond to social issues and larger relationships with external stakeholders (Porter, 2006). For instance, Nike was boycotted after it was revealed that the company had been engaged into abusive labor practices (Porter, 2006). As a consequence many organizations soon came to realize that in order to ensure that they could preserve their image and maintain a positive relationship with customers, these social issues had to be addressed in the context of their business practices (Porter, Strategy & Society: The link between Competitive Advantage and Coroporate Social Resposibility, 2006). This would improve operations in the organization and allow actions based on ethical business practices (Porter, 2006).
According to Porter and Kramer (2006) organizations developed four unique frameworks for conceptualizing and applying corporate social responsibility programs.
• Moral Appeals: Many organizations adopted CSR programs because they believed that it was simply the right thing to do.
• Sustainability: Some organizations chose to adopt CSR as a principle means to ensure the sustainability of operations over the long-term.
• License to Operate: Organizations adopting this approach recognized the interconnectedness of business operations and larger external regulation set by governments, communities and stakeholders.
• Reputation: Organizations came to realize that CSR initiatives could be...