Corporate social responsibility pays off through reputation, not directly

Corporate social responsibility has moved from the margins of corporate philanthropy to the center of strategy. Boards now ask a hard question about every sustainability program: does it buy something competitors cannot easily copy? A new study from the United Arab Emirates offers one of the clearest quantitative answers yet, and the answer is surprising. Responsible conduct does not translate directly into competitive advantage. It works through a hidden conversion mechanism: corporate reputation.

The research, published in Frontiers in Sustainability by a team at Fujairah University led by Hazem Aldabbas, draws on two of the most influential frameworks in management science. Stakeholder theory explains why responsible behavior earns approval: when a firm attends to the legitimate claims of employees, customers, regulators, and communities, those groups revise their evaluations upward. The resource-based view, developed by Jay Barney in 1991, explains when such approval becomes a durable weapon. Firms win sustainably only through resources that are valuable, rare, imperfectly imitable, and non-substitutable. The study integrates the two into a single testable chain: CSR earns stakeholder approval, and that approval, once accumulated into reputation, becomes the inimitable asset.

The logic of why reputation, rather than CSR spending itself, satisfies the resource-based criteria is subtle but powerful. A competitor can observe and match a rival’s community investment or environmental program; expenditure is describable and therefore imitable. Reputation, by contrast, is accumulated rather than acquired. It is built from years of consistent, visible conduct, held in the minds of stakeholders rather than on the balance sheet, and its formation is socially complex and causally ambiguous in exactly the sense the theory requires. No rival can purchase an authentic responsibility profile or announce it into existence.

To test this chain, the researchers surveyed 150 managers and senior executives across the UAE’s hospitality, banking, education, healthcare, government, and other sectors, drawn from 200 questionnaires distributed in February 2025. All constructs were measured with previously validated multi-item scales on five-point Likert formats. The measurement quality was rigorous: exploratory factor analysis yielded a clean three-component solution explaining 76.83 percent of the variance, composite reliability ranged from 0.874 to 0.885, average variance extracted ranged from 0.583 to 0.719, and the Fornell–Larcker criterion confirmed that the three constructs were empirically distinct. A confirmatory factor analysis fit the data well, with a comparative fit index of 0.957 and a root mean square error of approximation of 0.078, and it fit significantly better than one- and two-factor alternatives.

The team then estimated a mediation model using ordinary least squares regression within Hayes’ PROCESS Model 4, with 5,000 bootstrap resamples, controlling for firm age, organization size, and organization type. The results were striking. CSR was a powerful predictor of corporate reputation, with an unstandardized coefficient of 0.746 (p < 0.001), explaining 57.3 percent of the variance in reputational standing. Reputation, in turn, significantly predicted competitive advantage (B = 0.403, p = 0.001). The total effect of CSR on competitive advantage was positive and significant (B = 0.526, p < 0.001), apparently confirming the conventional wisdom.

But once reputation entered the model, the direct pathway collapsed. The direct effect of CSR on competitive advantage fell to 0.226 and became statistically insignificant (p = 0.061), while the indirect effect through reputation remained robust at 0.301, with a 95 percent bootstrap confidence interval of 0.079 to 0.507 that excluded zero. The mediated pathway accounted for approximately 57.2 percent of the total effect, a pattern the authors classify as indirect-only, or full, mediation. In plain terms: what looked like a direct strategic return on responsible conduct was, on closer specification, a return on the reputational asset that responsible conduct accumulates.

Why does reputation confer advantage? The study identifies three routes. First, it lowers transaction costs, because customers, suppliers, regulators, and employees extend trust to well-regarded firms and demand fewer contractual safeguards. Second, it generates a preference premium: when offerings are otherwise comparable, stakeholders choose the firm they regard more highly, a mechanism that earlier work by Roberts and Dowling linked to sustained superior financial performance. Third, it provides insurance value, because accumulated goodwill cushions the firm when problems arise. Rivals cannot copy these benefits quickly, since reputation is earned through conduct over time rather than bought at a point in time.

An instructive asymmetry emerged in the coefficients. The CSR-to-reputation link was strong (standardized beta = 0.724), while the reputation-to-advantage link was more moderate (beta = 0.361). This suggests that converting responsible conduct into reputational standing is the more reliable of the two transformations, whereas converting reputation into competitive position is more contingent, depending on market structure, firm visibility, and stakeholders’ ability to act on their evaluations. Notably, none of the control variables reached significance, hinting that the reputational pathway operates similarly across organizations of different ages, sizes, and sectors within the sample, though the authors caution this should be treated as provisional.

The practical implications are direct. Managers should treat reputational standing as the intermediate outcome against which responsibility investments are judged; programs unlikely to become known to or valued by stakeholders should not be expected to yield competitive returns, however worthwhile on other grounds. Consistency between conduct and communication is essential, because any divergence damages the mechanism itself, not merely the message. And because firm age, size, and sector showed no significant effects, smaller and younger firms have no structural reason to regard reputation-building through responsible conduct as out of reach.

The authors acknowledge limitations: the design is cross-sectional, the data are self-reported from a single country, and common method variance cannot be ruled out entirely, though procedural remedies and statistical diagnostics suggest it is unlikely to account for the findings. Within those boundaries, the study delivers a message with real weight for the Gulf region and beyond. The strategic value of corporate social responsibility is real, but it is stored in reputation. Models that omit this pathway are likely to misattribute where that value actually lives.

Subject of Research: Corporate social responsibility as a strategic resource: examining the mediating role of corporate reputation in securing competitive advantage

Article Title: Corporate social responsibility as a strategic resource: examining the mediating role of corporate reputation in securing competitive advantage

Article References: Aldabbas, H., Elamin, A. M., Gernal, L., Ahmed, A. Z. E., & Ibnauf, R. M. (2026). Corporate social responsibility as a strategic resource: examining the mediating role of corporate reputation in securing competitive advantage. Frontiers in Sustainability, 7, Article 1920283. https://doi.org/10.3389/frsus.2026.1920283

Image Credits: AI Generated

DOI: 10.3389/frsus.2026.1920283

Keywords: Corporate, social, responsibility, strategic, resource, examining, mediating, role, reputation, securing, competitive, advantage