| Summary: | Over the last 20 years, corporate social responsibility (CSR) has worked its way up the business and political agenda. Evidence of firms’ increased CSR investments are not matched,however, by clear evidence of how CSR creates value for firms.
As recession takes hold,managers will increasingly be required to review their inputs and outputs and consider how
their various resource allocations create value. That some firms invest in CSR suggests it can provide a competitive advantage; yet, a vast body of research exploring the link between CSR and financial performance has failed to
confirm a positively correlated relationship.
More recent approaches focus on the strategic perspective, looking at how CSR supports core business activities; and the economic perspective, looking at how CSR favours stakeholder relations which reduce transaction costs. Typically, research focuses on one or other of these perspectives. In this paper, I argue that for mutual insurers, given the nature of their business and their ownership structure, CSR offers value from both a strategic and economic perspective.
I show how theory contributes to our practical understanding of how CSR offers value to mutual insurers, and in particular, how Barnett’s (2007) stakeholder influence capacity concept can be complemented by absorptive capacity concept. While CSR that takes account
of stakeholders’ priorities is said to contribute to stakeholder influence capacity and build trust, I posit that CSR that addresses (emerging) social and environmental risks contributes to absorptive capacity and builds risk knowledge for competitive advantage. I then offer a two-tier
model for managers of mutual insurers to assess the extent to which their CSR creates value from an economic and strategic perspective, and consider opportunities for further value-creation, including communication and learning processes to enhance value.
Its application to information obtained from four mutual insurers reveals its potential value for managers, and highlights how future research may further contribute to the model’s practical value.
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