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6 J. Mgmt. & Sustainability 139 (2016)
A Structural Equation Model of CSR and Performance: Mediation by Innovation and Productivity

handle is hein.journals/jms6 and id is 358 raw text is: Journal of Management and Sustainability; Vol. 6, No. 2; 2016 ISSN 1925-4725 E-ISSN 1925-4733 Published by Canadian Center of Science and Education A Structural Equation Model of CSR and Performance: Mediation by Innovation and Productivity Khalid M. Al-Shuaibi1 1 Business School - Rabigh, King Abdulaziz University, Jeddah, Saudi Arabia Correspondence: Khalid M. Al-Shuaibi, Dean of Business School - Rabigh, King Abdulaziz University, Jeddah, Saudi Arabia. E-mail: kshuaibi tthotmail.com Received: May 2, 2016 Accepted: May 20, 2016 Online Published: May 23, 2016 doi: 10.5539/jms.v6n2p139 URL: http://dx.doi.org/10.5539/jms.v6n2p139 Abstract This study has explored the role of Innovation and productivity as mediating factors between Corporate Social Responsibility (CSR) and firm's Performance relationship. The objectives of this study are to build and test a theoretical model to identify the mediating factors in the linkage between CSR and performance.The theoretical model (CIPP Model) is deduced using strategic paradigm of literature. It consists of CSR, Innovation, Productivity, and Performance dimensions. Furthermore, several hypotheses were generated to examine the model. Structural Equation Modeling (SEM) is employed to test the model using data from CSR practicing firms 197 from Saudi Arabia. Confirmatory Factor Analysis (CFA) is performed followed by Structural Equation Modeling to examine the model. The results generally support the hypothesized model with research and managerial implications. The mediation of Innovation along with productivity in CSR linkage to performance isa major contribution to the literature, which may help to explore the black box in the relationship of CSR with performance. Besides proving the business case for the CSR in general, it also advocates the adoption of CSR practices by firms and MNEs operating in the developing countries, as it may enhance innovation and productivity leading to their increased financial performance. This model would be practical and useful for business managers that seek a competitive solution for succeeding in a business crisis and work in the settings of international business. Keywords: Corporate Social Responsibility (CSR), innovation, productivity, financial performance, mediation, MNEs, developing country, Structural Equation Modeling (SEM) 1. Introduction Corporate social responsibility (CSR) has grown to be an issue of much concern in the 21st Century for international business (Cegarra-Navarro et al., 2016; Kolk & van Tulder, 2010). Hence, CSR has been increasingly getting more attention in international business studies (Park & Ghauri, 2014). Multinational corporations (MNCs) and investors in international businesses are increasingly interested in the issue of socially responsible business around the globe (Besieux et al., 2015; Cruz & Boehe, 2010). The effect of CSR on the firm performance has attracted quite an interesting number of researchers recently. Although, most of the studies have found positive association between CSR and Financial performance (Cegarra-Navarro et al., 2016; Choi et al., 2010; Galbreath et al., 2014; Orlitzky et al., 2003; Surroca et al., 2010), yet few others hadfound a negative relationship (Marcus, 1989; Wright & Ferris, 1997). While, some others still found no relation between the two (Aupperle et al., 1985; Teoh et al., 1999), therefore the question still remain unsettled (Aguinis & Glavas, 2012). Such contradictory evidence has created ground to investigate this issue further and therefore, the requirement to model CSR effect on performance of firms and include factors that may mediate this path (Aguinis & Glavas, 2012). Furthermore, in literature, as proposed by Hart (1995), and empirically tested by Sharma & Vredenburg(1998) that some firms while adopting CSR practices may develop few potential sources of competitive advantage; hence, emphasizing, the mediating role of few factors in the path from CSR to financial performance. McWilliams & Siegel (2001) observed that this inconsistency in results of different studies might be the result of oversight of innovation or R&D efforts of firm in the measurement models. Despite the fact that innovation is widely accepted as important construct in CSR literature, yet there have been very few studies to model and measure it as a mediatingfactor in CSR and firm's performance context. It was further observed in the study by

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