Is corporate social responsibility linked with firm performance? An alternative test

Abstract

Direct tests between corporate social responsibility (CSR) and firm performance (FP) have been argued to be a futile pursuit. Following this line of thinking, the present study sought to test an alternative model in understanding the CSR-FP relationship. Specifically, reputation and customer satisfaction are posited to be the mediational pathway by which CSR positively affects firm performance. Studying a sample of Australian business firms the findings suggest that CSR is positively linked with firm performance. However, the effect is indirect: reputation and customer satisfaction fully mediate the CSR-FP relationship. The results are provocative, suggesting that to reduce ambiguity surrounding the CSR-FP relationship scholars need to turn their attention to moderating and mediating variables. Discussion is given to these findings along with paths for future research.