The Linkage between Corporate Social Performance and the Corporate Financial Performance in the Information and Communication Technology Multinational Companies of Romania

ABSTRACT. Managers are consistently faced with the decision of how to allocate scarce corporate resources in a demanding and highly competitive environment. Moreover, the economic crisis brings the strategic corporate concerns to a new level, where the profitability - social responsibility duality becomes even more controversial. Using regression analysis as in the methodology tested by Waddock and Graves (1997), this paper reports the results of a rigorous study of the empirical linkages between financial and social performance during 2005-2010 in the Information and Communication Technology (ICT) multinational companies of Romania. Aside from biased conclusions drawn by this research, top industries as ICT offer many fruitful opportunities towards sustainable development, especially on a frontier market as Romania.JEL Classification : F230, M140, L250Keywords: corporate social performance, corporate financial performance, ICT industry, multinational companies, Romanian business environmentIntroductionThe paper broadly presents the ICT global development trends with focus on the Central and Eastern Europe and the Middle East and Asia (CEE/MEA) growing markets, in general, and, more specifically, on Romania, as an introductory premise to understand some important particularities of the sample of companies analysed in the next chapters.Even though corporate social performance (CSP) and its related concepts - corporate social responsibility, corporate social responsiveness and corporate citizenship - have been presented in the academic literature for more than 45 years, CSP domain has remained controversial and to a largely extent equated to "doing good" (Wood, 2010). The linkage between corporate social performance and corporate financial performance in the ICT multinational companies operating in frame of Romanias business environment is analysed following the research steps undertaken by Waddock and Graves (1997), adapted to the available Romanian domestic data.By putting together a composite index on corporate social performance, this paper represents a pioneering initiative in reporting the results of the empirical linkages between financial and social performance in Romania.General ICT development trendsIn the report drawn by Business for Social Responsibility in 2008, there have been identified a series of trends like: pervasive computing, innovation in mobile technology, convergence in consumer products, dynamic access from PC to mobile handsets, convergence in service delivery, innovation in highly customized devices, consumer driven-evolution of the web, emerging markets, wireless-centric developing markets, which will lead to increased competition within the ICT sector, as companies are all looking to deliver an end-to-end converged product or service to their customers.While the ICT industry has many opportunities to contribute to sustainable development, the issues where the ICT industry can make the most substantial contribution are: climate change, waste and material usage, access to ICT, freedom of expression, privacy and security, employee and customer relationships, supply chain, product use issues, economic development.The reasons for which the research focuses on the ICT industry are related mainly on:- contagion effect of ICT growth: significant macrolevel impacts of the technological progress across multiple development areas (Kauffman & Kumar, 2008);- mixed effects of the financial crisis upon ICT: both as a rigorous enhancer towards cost control focusing investment on vital services and a facilitator of new opportunities for firms with disruptive technologies to innovate and thrive (International Telecommunication Union, 2009);- development of ICT literacy as an institutional constraint in the educational sector and the human resource development at firm level (Educational Testing Service, 2002);- increased ability of a country to lower its greenhouse and CO2 emissions through the use of ICT, contributing to the sustainable development (Turner et al. …