Intellectual capital: the missing link in the corporate social responsibility–financial performance relationship
| DOI | https://doi.org/10.1108/JIC-02-2020-0038 |
| Published date | 15 October 2020 |
| Date | 15 October 2020 |
| Pages | 420-438 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Niccolò Nirino,Alberto Ferraris,Nicola Miglietta,Anna Chiara Invernizzi |
Intellectual capital: the missing
link in the corporate social
responsibility–financial
performance relationship
Niccol
o Nirino
Department of Management, University of Turin, Turin, Italy
Alberto Ferraris
Department of Management, University of Turin, Turin, Italy and
Research Fellow of the Laboratory for International and Regional Economics,
Graduate School of Economics and Management, Ural Federal University,
Ekaterinburg, Russia
Nicola Miglietta
Department of Management, University of Turin, Turin, Italy, and
Anna Chiara Invernizzi
University of Eastern Piedmont, Novara, Italy
Abstract
Purpose –The purpose of this paper is to propose and empirically test intellectualcapital (IC) as a mediator in
the corporate social responsibility (CSR) and financial performance (FP) relationship.
Design/methodology/approach –The empirical research was conducted on 345 European firms listed in
the STOXX Europe 600 index. To evaluate the mediating effect of IC, we applied the four-step Baron and Kenny
model, tested through an ordinary least squares regression analysis.
Findings –The findings highlighted a partial mediation of IC on the CSR–FP relationship, suggesting that the
implementation of CSR strategies has a positive effect on the development of firms’IC, which in turn enhances
firms’competitive advantage and superior long-term FPs.
Originality/value –We found a new mediator in the CSR–FP relationship and we contribute to a new line of
research that aims to study environmental and sustainability aspects strictly interrelated with IC and
performances (sustainable intellectual capital).
Keywords Intellectual capital, Financial performance, CSR, Sustainable intellectual capital, Intangibles
Paper type Research paper
Introduction
In the knowledge economy, information and knowledge allow companies to grow, improving
business processes thanks to the development of a unique set of skills and competencies that
ultimately enhance the company’s financial performance (FP) (Ferraris et al., 2018a,b). In the
current scenario, intellectual capital (IC) can be defined as one of the main factors of
competitive advantage for each kind of organisation (Jord~
ao and de Almeida, 2017). Thus, IC
is evolving fast, embracing new issues inherent to different strategic aspects of the company.
In particular, based on the natural resource-based view (NRBV; Hart, 1995), firms’decisions
related to corporate social responsibility (CSR) and the development of IC are interconnected.
In this regard, recent studies have begun to explore the link between IC and CSR activities and
their impact on firm’sFP(Beretta et al., 2019;Massaro et al., 2018).
Interestingly, Chang and Chen (2012) underlined the existence of interconnections
between IC and the environmental and social aspects within companies. In fact, the
development of strategies related to environmental and social issues can improve the
JIC
23,2
420
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 20 February 2020
Revised 30 June 2020
24 August 2020
Accepted 1 October 2020
Journal of Intellectual Capital
Vol. 23 No. 2, 2022
pp. 420-438
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-02-2020-0038
company’s bulk of intangibles with the creation of a competitive advantage for the company
(Nikolaou, 2019). Based on the NRBV of the firms (Hart, 1995), CSR and the social and
environmental aspects may positively influence the development of IC (Chang and Chen,
2012;Wang and Sarkis, 2017). Unfortunately, the relationship between CSR and IC, which can
lead to the development of “Sustainable IC”(SIC), is not much explored in literature.
Consequently, SIC can be a unique intangible asset, creating an exciting new stream of
research. Similarly, the role of intangibles in the specific relationship between CSR and FP is
still in an embryonic state of study, due to the difficulty of measuring and evaluating these
key resources within the company (Grewatsch and Kleindienst, 2017). The resulting effect is
that the impact of CSR and IC on the firm’s FP or their interconnections is still not clear in
literature (Kim et al., 2018). Margolis and Walsh (2003) also clearly underlined the relevance of
developing more models that combine new variables to analyse the causal links between CSR
and FP.
Therefore, based on these considerations, we aim to fill this gap by suggesting IC as a
mediator in the CSR–FP relationship. In fact, we suggest that CSR strategies increase the
firm’s IC thus creating a new form of IC, “sustainable IC”, which is closely linked to the
environmental and social knowledge that the company must have to increase its competitive
position (Chang and Chen, 2012). To reach the paper’s objective, we propose and empirically
test IC as a mediator in the CSR–FP relationship using Baron and Kenny’s (1986) four-step
approach on a sample of companies included in the STOXX600 list. The STOXX600 index
incorporates the main listed companies from 17 European countries, covering 90% of the
total capitalisation of Europe. We thus test our hypothesis on a representative and relevant
sample of big companies in the European context that allow us to generalise our results. Our
findings indicated a significant partial mediation of IC on CSR–FP.
Thus, our research contributes to IC literature by specifically improving the knowledge on
the recent stream of literature that refers to IC and environmental and sustainable concerns
(Beretta et al., 2019). First, we developed a new theoretical model designed to evaluate the
impact of CSR on the IC of the company and, consequently the effect on FPs. We argue that
when a company is involved in sustainable practices it can increase knowledge and
understanding of certain social or environmental issues by generating commitment from all
stakeholders (Nikolaou, 2019). Second, we have expanded the boundaries of IC analysis by
trying to understand how CSR strategies can influence its efficiency (measured by the Value-
Added Intellectual Coefficient [VAIC]) leading to an increase in performance in the long run
(Bejinaru, 2017). Third, this study emphasises the role of IC in understanding the performance
implications of CSR and to better understand when IC and CSR are financially beneficial. In
fact, we tested a new mediator in the common CSR–FP relationship, following the directions
of Margolis and Walsh (2003) in which they suggested the need for new models and variables
to understand the dynamics of this complex and controversial relationship.
As a practical implication, we suggest to companies to invest in several CSR strategies to
improve their CSR indicators that are positively associated with higher levels of IC resources,
which in turn positively affects the firm’s FP. Managers should focus on the development of
sustainable practices directed to the development of IC, which are skills that are difficult for
competitors to replicate that allow the development of a sustainable competitive advantage.
Ultimately, we also suggest some insights to scholars and practitioners considering the
COVID-19 pandemic and how CSR and IC can be crucial in preventing risks associated with
unexpected events accelerating the transaction process to a more sustainable economy.
This work is organised as follows: the first section includes a literature review and
hypotheses development that delineate our conceptual model. After that, the research
methodology adopted is explained, followed by the findings and a discussion of results. In the
last section, the conclusions and future research lines are presented along with the limitations.
Intellectual
capital
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