The interaction between corporate social responsibility and value added intellectual capital: empirical evidence from Turkey

Abstract

PurposeCorporate social responsibility (CSR) has become one of the mainstream issues for sustainable corporate performance in recent decades. Engagement in CSR activities has proven to have certain benefits for companies, ranging from better financial performance to shareholder wealth maximisation. Companies' value creation process has been dominated by companies' hidden assets and concurrently the concept of value added intellectual capital (VAIC). The purpose of this study is to provide evidence from an emerging market about the interaction between CSR and VAIC, and thus contribute to the understanding and awareness of the significance of socially responsible investments for companies.Design/methodology/approachThe empirical analyses, which take into account VAIC and its dimensions, are conducted on a sample of manufacturing companies listed on the Istanbul Stock Exchange (ISE) during the period 2007‐2008. It is shown that some causality is related to the existence of a lag during the periods for the variables CSR and VAIC. Based on previous empirical studies, this study conducts the analyses based on the assumption that there may be a relationship between firm age, financial leverage, return on sales and market‐to‐book ratio and CSR.FindingsThe results fail to provide any significant relationship between CSR and VAIC during the period analysed. These findings should not overshadow the benefits of CSR, but should be attributed to the time it takes for these investments to have an impact on firms' intellectual capital.Practical implicationsA larger sample of firms covering a longer time span could be utilised. Generation of a CSR index in Turkey that eliminates the subjectivity of CSR measurement will undoubtedly improve the accuracy of the analyses.Originality/valueThis paper increases the understanding of the relationship between corporate social responsibility and value‐added intellectual capital. This research is also the first research to have examined Turkish companies for CSR and VAIC issues.

Do Corporate Social Responsibility and Corporate Governance Influence Intellectual Capital Efficiency?

“…Finally, the third category of IC has received different definitions by the prior literature. In particular, some authors refer to relational capital (e.g., References [18][19][20]27]), while other adopt the concept of social capital [14,28,51]. Indeed, consistent with Youndt and Snell [14] (p. 338), the two concepts are convergent as social capital [69,70] in organizational and sociological theories is "virtually identical" to what Bontis [53] called relational capital.…”

“…Consistent with Pedrini's literature review [18], in the past, several instruments have been adopted to measure and monitor IC. From an accounting-based perspective, a widely used quantitative measure of IC is VAIC, the value-added intellectual capital model (e.g., References [27,31,39,[75][76][77]. In particular, this model was implemented to measure IC efficiency and, thus, the contribution to firm financial performance.…”

“…Further, the previous empirical studies on the links between CSR and IC and between CG and IC show several methodological limitations. An overlooked aspect is that most of the research is geographically limited, and the empirical tests are performed on small samples with reference to a specific industry (e.g., References [15,[26][27][28][29][30][31][32][33]). Moreover, some studies adopt univariate tests (e.g., Reference [29]) or adopt cross-sectional data (e.g., Reference [28]) that impede causality examination, whereas other analyses minimize the reverse causality effects (e.g., Reference [15]).…”

“…The findings of the meta-analyses range from small [44] to medium [45] to significantly positive links between CSR and financial performance [46]. On the other hand, we refer to the less-investigated theme of the impact of CSR on IC from a management perspective [15,27,28,[47][48][49]. To integrate these two lines of investigation, the present study assumes the concept of CSR as a "cospecialized asset" [37] (p. 1491) with the capacity to increase the value of other assets, which, in turn, contribute to the firm performance.…”

The Significance of Corporate Social Disclosure for High‐Tech Manufacturing Companies: Focus on Employee and Community Aspects of Sustainable Development

“…Although only few have argued that shareholder wealth maximisation should be the focus of an organisation, many concluded that there is some benefit offered by a wider stakeholder interest consideration while some have gone further to place emphasis on considering all relevant stakeholders in decision-making processes. The different perspectives can be generally split into four categories, namely positive effect (Turban & Greening, 1997), negligible albeit positive effect (Aras et al, 2011), neutral relationship (Abbott & Monsen, 1979), and negative effect (Crisóstomo et al, 2011). One aspect that most research consensually agrees upon is the difficulty in the quantification of the CSR-financial performance effect.…”