CSR strategic approach, financial resources and corporate social performance: The mediating effect of innovation

Abstract

Given the current undefined relational effect between corporate financial performance (CFP) and corporate social performance (CSP) and the potentially myopic behavior of managers, this paper answers the call from some scholars to contribute towards a better understanding of the relationship between CFP and CSR. Different from other papers, it does so by analyzing the role of innovation activities as a mediator between CFP and CSR, applying a regression and mediation analysis between firms' financial resources, innovation initiatives, and social and environmental performance. The results demonstrate that innovation is a critical factor in the relationship between CFP and corporate social performance (CSP) as it enables organizations to respond to new economic, social and environmental challenges faster and better than organizations that are not able to innovate. Therefore, the investment of financial resources in innovation initiatives is one of the most important levers to pursue and to increase CSP.