**3. Material and methods**

#### **3.1 Size and characteristics of the sample**

CSR can be defined in many ways and measured using many different approaches. In the present study, we focus on a sample of European firms that form part of the Dow Jones Sustainability Index (DJSI). The firms in this index are leaders in the field of CSR. To qualify for incorporation into the index, they must conform to very demanding CSR guidelines (based on economic, social, and environmental indicators that will be included in the integrated report) and are rated according to these guidelines by the Sustainability Index of the Sustainable Asset Management (SAM) Group [57]. This score was utilised in the present study. The indexed companies develop practices that go beyond legal requirements and respond to ethical values and commitments demanded by society.

The period 2011–2015 is examined, obtaining an initial sample of 176 European firms that formed part of the DJSI. From the total number of European companies included in this index, we removed 41 that were dedicated to financial and insurance activities and a further 17 that have not been in the index throughout the entire period analysed. Accordingly, the final sample consisted of 118 firms.

The sample is distributed by country and sector as shown in **Tables 1** and **2**.

#### **3.2 Variables selected**

Innovation is the dependent variable. Innovation can be measured through output indicators (product and process innovations, patents) [58] or input indicators (R&D expenditure). Integrated reporting chooses to measure innovation through industrial property, i.e. innovation is measured by the number of patents registered (PAT) [59]. Patents have the advantage of being an objective element and a


**Table 1.**

*Countries in the sample.*

*The Desirability of a Future Integrated Reporting in the Study of Social and Innovative Practices DOI: http://dx.doi.org/10.5772/intechopen.98670*


#### **Table 2.**

*Industries in the sample.*

measure of the results obtained from R&D activities [60, 61]. Moreover, it provides a measure of a firm's current technological capacities, efficiency, and potential future profits from R&D [62]. In addition, it constitutes a mechanism that favours the appropriation of the benefits obtained from innovation [63] and the capacity to create added value [64].

In Europe, the adoption of patent protection tends to increase as firms grow [65]. Patents have been considered the most believable proxy of innovation [65]. The patents corresponding to each of the firms in our study were compiled from information disclosed by the Spanish Patent and Trademark Office (OEPM) for each of the years considered in this study.

Stakeholder orientation and CSR were taken as the independent variables.

On the one hand, stakeholder orientation (STAKE) is measured through the existence of mechanisms and channels of communication that aid the active participation and collaboration of stakeholders and provide possibilities for interaction [66]. Specifically, the characteristics of interactivity, the existence of forums/chats, and the existence of web 2.0 technologies (websites and social networking sites that allow users to share information and interact with each other), online surveys, and information sheets are analysed [67–69]. To this end, the websites of the companies selected each year from those making up the sample are reviewed.

On the other hand, CSR is a multidimensional construct that takes into account various dimensions and aspects- social, environmental and economics- [25, 70, 71] in accordance with the aims of this study. Many researchers use a single CSR measure, such as environmental performance, philanthropic contributions, corporate policies, revealed misdeeds, transparency, or investment in health and safety [72]; but this only considers one aspect of CSR. Among the multidimensional measures most commonly used are Kinder Lydenberg Domini's *Socrates* database [7, 12, 73] and the Fortune magazine database. In recent years, stock indices have been set up with components including sustainability. In the present paper, CSR is measured using the DJSI score in the period referred to above for each of the companies included in our sample [57].

We also included a moderating variable"STAKE\*CSR", to reflect the joint effect of the two variables. This will allow us to observe whether a company's stakeholder orientation positively moderates the effect of corporate social responsibility on innovation.

Finally, control variables were included referring to the firm's size, risk, and the industry sector in which it was active [9]. Size was measured using the logarithm of total asset (ASSETS) [71, 74]; the industrial sector (IND) was measured in accordance with the standard industrial classification code, thus creating a 5-block group [60, 75, 76]; and risk (RISK) was measured by the firm's debt/asset ratio [75].

#### **3.3 Methodology**

Panel data econometric analysis was used to test the hypotheses proposed in this paper. Specifically, a random effect model (GLS regression) was utilised after applying the Breusch-Pagan and Hausman tests. Panel data provide consistent data from samples for which repeated observations of cross-section data are available; in the present case, this refers to firms over a period of various consecutive years. Thus, no information is lost. In addition, the use of panel data makes it possible to control unobserved heterogeneity, which would otherwise bias the results [77, 78]. Therefore we eliminate the possibility of aggregation bias that can arise when using mean data for the variables, in time series models. The use of random effects has advantages over fixed effects, such as the problem of incidental parameters, being appropriate for random samples of large populations or allowing the treatment of omitted factors [79].

Panel data allow for the introduction of dynamic elements into the model. All this is why this analysis has been used in the recent literature on CSR and innovation [79, 80]. To test the hypotheses, the following model was considered:

 $\text{PAT} = \mathbf{b}\_1 \star \mathbf{b}\_2$   $\text{STAKE} \star \mathbf{b}\_3$   $\text{RSC} \star \mathbf{b}\_4$   $\text{STAKE} \star \mathbf{b}\_5$   $\text{ASSCTS} \star \mathbf{b}\_6$   $\text{IND} \star \mathbf{b}\_7$   $\text{RISK} \star \mathbf{e}$ .

#### **4. Results and discussion**

**Tables 3** and **4** show the descriptive statistics and correlations, and **Table 5** shows the results obtained after applying the linear model to the panel data.

With respect to the indices of correlation (**Table 4**), there is evidently a positive, significant association between stakeholder orientation and innovation. The existence of communication channels to obtain information on stakeholder demands is a source of ideas that could allow the company to develop its capacity for innovation [55]. On the other hand, innovation in itself can generate social benefits, which justifies stakeholders' demand for it [11, 53, 54]. In this respect, stakeholders could be promoting innovation practices in the company. This highlights the idea of shared value that underlies integrated reporting. The management of different capitals generates mutual benefits [3, 56]. In this case, the management of social and relational resources would develop entrepreneurial innovativeness.


#### **Table 3.**

*Descriptive statistics of the variables used (N = 118).*

*The Desirability of a Future Integrated Reporting in the Study of Social and Innovative Practices DOI: http://dx.doi.org/10.5772/intechopen.98670*


*Pearson's correlation coefficient.*

#### **Table 4.**

*Correlations between dependent, independent and control variables.*


*Standard errors appear in parenthesis.*

#### **Table 5.**

*Regression analysis.*

The analysis of correlations shows a relationship between CSR and patents [68, 73, 75]. Greater effort in the field of CSR is reflected as a higher level of innovation (measured by the number of patents). The results of innovation are associated with CSR [9, 75]. In selecting differentiation strategies, some companies decide on CSR, and this strategy requires innovation activities [53, 81]. CSR constitutes an organisational resource that incorporates various policies, among which is that of innovation. CSR provides a framework for developing innovation [82, 83]. When planning innovation, companies must take into account the priorities determined by CSR. Thus, the latter may be utilised as a means of directing innovation [84]. They may also respond to the fact that the adoption of a CSR strategy requires changes be made to production processes or new products be

introduced, ones that are more environment-friendly – and these considerations are relevant in the innovation process [85].

The positive correlation between CSR and stakeholder orientation shows that socially responsible companies address the demands and interests of their stakeholders and integrate them into their CSR practices [79]. In this sense, socially responsible companies could integrate stakeholders' social and environmental demands into their innovation and development strategies. On the other hand, the correlation suggests that there is a stakeholder demand for corporate social responsibility practices [50, 86].

CSR practices are negatively and significantly associated with levels of debt, which could mean that companies with a lower level of financial risk are more likely to adopt CSR practices. The financial structure of the company determines its capacity for innovation. The greater capacity to access sources of financing allows a greater inflow of financial resources that can be applied to various strategies, including innovation [79]. Finally, the results show a significant correlation between the industry sector and innovation, which indicates that the sector in question is a significant factor with respect to the introduction of technological change [23]. Due to the need for mechanisation of their processes, certain industries have seen their capacity for innovation fostered.

Model 1 of **Table 5** shows that CSR has a positive and significant effect on innovation. The companies analysed are leaders in sustainable and socially responsible practices, so it seems logical to think that they use CSR to generate intangible assets, such as industrial and intellectual property [82, 87]. From a management standpoint, the adoption of sustainability practices has a positive impact on value creation [13].

Model 2 describes the relationship between stakeholder orientation and innovation, and shows that the examined companies' innovation efforts are positively associated with stakeholder orientation. These companies are implementing innovation as a means to respond to the interests of stakeholders. In this sense, we accept Hypothesis 1. In recent decades there has been an increasing demand for more environmentally friendly processes, practices, products, and services. This social demand has triggered a wave of innovation in companies that are more oriented towards stakeholders and society in general [79]. Thus, the results show that more stakeholderoriented companies generate more patents. Relationships, networks, and collaborative mechanisms between the company and the groups of interest are effective mechanisms for capturing new social and environmental needs and developing innovation capabilities to address them [45, 50]. **Table 6** shows the description of the variable stakeholder orientation.

Model 3 shows the possible moderating effect of stakeholder orientation on the relationship between CSR and innovation. The variables in this model are of greater statistical significance, and thus we conclude that the impact of CSR is enhanced by stakeholder orientation. Stakeholder demands encourage the effect of CSR on innovation. Stakeholder orientation should be included in the business strategy to boost research and development in the company [55, 79]. In accordance with the above results, Hypothesis 2 is accepted. Thus, empirical research shows that in order to enhance the effect of corporate social responsibility on innovation, it is necessary for the company to know the demands and interests of its stakeholders, and communication channels are a good means of achieving that objective. In this sense, the results suggest that CSR generates intellectual capital when it generates social value by fostering relationships with stakeholders [14, 15]. The different business capitals are related as the integrated report points out.

*The Desirability of a Future Integrated Reporting in the Study of Social and Innovative Practices DOI: http://dx.doi.org/10.5772/intechopen.98670*


#### **Table 6.**

*Description of the variable stakeholder orientation.*
