Corporate Social Responsibility and Financial Performance: The Mediating Role of Employee Engagement and the Moderating Role of Job Autonomy in Malaysian Manufacturing Firms

Abstract

Corporate social responsibility (CSR) has historically been treated as a discretionary activity outside the realm of strategic management. However, over time CSR has gained traction as a necessary addition to any organisation with positive impact on the firm’s bottom line. Despite this progress, how CSR affects financial performance is not well understood, especially in an emerging- market manufacturing setting. This study investigates CSR’s impact on financial performance for Malaysian manufacturing firms while testing employee engagement as a mediating variable and job autonomy as a moderating condition. Five hypotheses were formulated on the basis of Stakeholder Theory, Social Exchange Theory, and Self-Determination Theory; direct effects of CSR on employee engagement and financial performance, the indirect effect of employee engagement on financial performance, mediation of employee engagement, and moderation of job autonomy were investigated. A quantitative, non-experimental, cross-sectional design was utilised. Participants were Malaysian employees working in manufacturing firms who completed a questionnaire. 384 completed questionnaires were collected from a sample of 500 resulting in a response rate of 76.8%. Data were analysed through descriptive statistics, exploratory factor analysis, reliability analysis, Pearson correlation, multiple regression, and conditional process analysis with PROCESS Model 7 using 5,000 bootstrap resamples. Results found CSR to have a positive and significant effect on financial performance and employee engagement. Employee engagement had a positive and significant effect on financial performance and fully mediated the relationship between CSR and financial performance. Job autonomy was found to have no significant effect on the relationship between CSR and employee engagement but was found to have a positive and significant relationship with employee engagement. This study contributes to the field of CSR by providing evidence that employee engagement serves as an important internal mechanism through which responsible organisational practices affect financial performance. The findings of this study show that job design may play an important role in manufacturing contexts where there are more formal procedures and requirements for operation.