The impact of firms’ strategic CSR integration on their organisational performance: Evidence from Indonesian manufacturing firms

Abstract

Prior studies argue that CSR should be aligned with business strategies to gain benefits for companies. However, research on how CSR and business strategies can be integrated is still scant. This study aims to examine how and to what extent the strategic integration of CSR and business strategies is likely to impact on organizations’ performance. Based on contingency and stakeholder theories, a theoretical framework of the integration of CSR into the business strategy was developed and tested. Using a sample of 435 manufacturing companies in Java, PLS-SEM was employed to test a path model depicting the relationships between strategic integration and company performance. The assessment of the measurement model, including internal consistency, convergent validity and discriminant validity, was achieved satisfactorily. The test of the structural model reveals that the strategic integration of CSR and business strategy has positive and significant impact on company performance. Strategic integration has an essential effect on the customer, employee and operating performance; its impact on financial performance is significantly mediated by the other three dimensions of company performance. The findings can encourage decision makers and managers, particularly those working in manufacturing firms, to strategically undertake CSR through a variety of activities rather than simply undertaking acts of charity, philanthropy or compliance. These findings provide new evidence that CSR strategic integration can positively impact on company performance, both socially and financially.
Keywords: Strategic integration, CSR, organizational performance, manufacturing industries, Indonesia