Int. Journal of Business Science and Applied Management, Volume 15, Issue 1, 2020
The relationship between corporate social responsibility and
employee engagement - A social exchange perspective
Khalid Rasheed Memon*
Graduate School of Business, University Sains Malaysia
Gelugor, Penang, 11700, Malaysia
Email: khalidilm@hotmail.com
Bilqees Ghani
College of Business Management, Institute of Business Management
Korangi Creek, Karachi, 7519, Pakistan
Email: bilqees.ghani@gmail.com
Saima Khalid
Saudi National Hospital
Al-Aziziyah, Makkah, 21514, Saudi Arabia
Email: drsaima.memon@gmail.com;
The purpose of this article is to investigate the impact of internal CSR on Employee Engagement
through a mediation-moderation mechanism in a developing country, using social exchange theory. In
this empirical study, 300 self-reported questionnaires were randomly distributed among the employees
of 25 companies, from the FMCG and Telecom sectors of Pakistan. Data collected from these
employees were further analyzed through confirmatory factor analysis using the structural equation
modeling technique, using the latest available version of software Smart PLS 3. The results of
confirmatory factor analysis prove the hypothesized direct effects of corporate social responsibility on
employee engagement. The findings also indicate the positive mediating role of trust in the relationship
between internal corporate social responsibility and employee engagement. However, the moderator
Leader-Member exchange did not demonstrate any effect. The study encourages practitioners to focus
on building trust in employees for improved participation in the firm's processes, use new ways of
conveying the concerns to employees through various human resource interventions and leader-
member exchange mechanisms. However, since the research has been conducted in a single country, i.e.
Pakistan, with a limited number of respondents, therefore, it cannot be generalized, whereas research in
different countries with a larger sample may bring interesting/contrasting results.
Keywords: corporate social responsibility, employee engagement, trust, social exchange theory,
Int. Journal of Business Science and Applied Management / Business-and-Management.org
The acronym “CSR”, i.e. corporate social responsibility, is a relatively new concept (Skudiene &
Auruskeviciene, 2012). Even the world's third-richest country (after the USA and China), Japan, only
adopted the term formally in 2003. It existed earlier in Japan’s corporate principles and policies, as
described by one of the managers during an interview "to put the utmost priority on respecting human
dignity, safety, and legal compliance,'' and by another manager from a manufacturing company, ''to
contribute to society via our business or mono zukuri [making things].’’ (Fukukawa & Teramoto, 2009).
Nevertheless, corporate social responsibility has now become a widely spread term and has gained
global importance for organizations, especially during the last few years. In a survey conducted in the
Middle East, 86% of the companies rated corporate social responsibility as a vital component of
business strategy, and this percentage was 83% worldwide (Azim et al., 2014; Tebini et al, 2014). CSR
has become a demand of various stakeholders, both internal (top management, executive boards) and
external (shareholders, third party agencies), since it leads the organizations to operate in ways that are
considered to be socially and environmentally responsible (Zulfiqar et al, 2019; Ilkhanizadeh &
Karatepe, 2017; Aguilera et al, 2007; Appelbaum et al, 2007; Cramer, 2005; Welford & Frost, 2006).
Today's modern organizations are known not only because of their financial performance but also for
"doing good".
Recently some studies have been conducted to measure the effect of CSR on employee attitudes
and behaviors, such as employee knowledge sharing behavior (M. Farooq et al, 2014), affective
organizational commitment (O. Farooq et al, 2013), OCB (Azim et al, 2014; Shiun & Ho, 2012;
Wenbin et al, 2012), and employee motivation (Skudiene & Auruskeviciene, 2012), yet scholars need
to explore the behavioral impacts of CSR activities in-depth, to extend the social exchange
relationships among various organizational stakeholders (Mallory & Rupp, 2014; Zulfiqar et al, 2019).
For instance, Rupp et al (2006) discussed the role of corporate social responsibility as a process of
developing organizational culture and social consciousness. They considered employees as the most
imperative stakeholders of the organization, especially those employees who are not offering corporate
social responsibility activities but are instead affected by them, and such employees can react to as well
as evaluate the corporate social responsibility initiatives of their respective organizations (Rupp et al,
2006). Their study opens a horizon for evaluating corporate social responsibility activities and their
impact on the individual psychological needs of employees. However, this work is only limited to
analyzing the employees' views/reactions to corporate social responsibility initiatives through the
perspective of organizational justice, and the authors do not examine the impact of employees'
personality traits, they also largely ignore the underlying mediation mechanisms through which
corporate social responsibility can affect employee outcomes. Also, there is a need to examine the
possible mediators and moderators in the said relationship. Therefore, our research specifically
investigates the relationship between the perceptions of CSR from employees' perspectives and their
influence on employees' engagement, which has still not been discussed in the literature (Zulfiqar et al,
The term employee engagement (EE) was first defined and known as personnel engagement and
personnel disengagement (Kahn, 1990). Since then, it has always been a major concern for
organizations, especially because organizations are meant for profitability and gaining a competitive
advantage over other firms. In this regard, engaged employees play a vital role in achieving the
organizational mission and goals (Rich et al, 2010; Vance, 2006), leading towards organizational
success and financial performance (Azim et al, 2014). Organizations are now looking for those engaged
employees who can work with full passion, commitment, and dedication while having a clear
understanding of organizational goals and mission. Moreover, they strive for the fulfillment of
organizational goals with a sense of ownership while considering every single tiny matter as their own
and resolving it to the best of their ability for the maximum satisfaction of customers and building a
positive organizational image (Bhattacharjee & Sengupta, 2011; Jose & Mampilly, 2015; Lockwood,
2007). They are less likely to leave their organization as well (Batista-Taran et al, 2009) and they are
deeply involved in their work, with a high level of energy and enthusiasm (Xanthopoulou et al, 2009;
Memon et al, 2018) These employees turn out to be the organization’s asset, they add value effectively
and efficiently and increase organizational profitability as well as paving the way to gaining
competitive advantage (Rich et al, 2010; Vance, 2006; Memon 2014a).
Previous research suggested that perceptions regarding the workplace environment and situations
play a vital role in shaping the behaviors and it is proposed that unfavorable perceptions lead towards
deviant behaviors. However, the reaction to such events may be affected due to personality variables
(Colbert et al., 2004). Conversely, the perceived internal CSR may alter the negative perceptions to the
positive ones and develop feelings of care, concern, and safety (Zulfiqar et al, 2019), transforming
Khalid Rasheed Memon, Bilqees Ghani and Saima Khalid
employees into engaged employees. Considering the importance of humans, being treated as capital
now (Knezović et al, 2020; Memon, 2014b), organizations have changed the way they used to treat
their employees (Dash, 2012), customers, and other stakeholders. Firms are now looking for something
that is beyond the narrow economic, technical, and legal framework (Carroll, 1999; O. Farooq et al,
2014; Fukukawa & Teramoto, 2009). Thus, CSR could be one of the ways through which organizations
can get their employees engaged and convey a sense of personal care and value.
The review of the literature shows that the demographic factors, motivating traits and attitudes that
trigger and enhance employee engagement in corporate social responsibility are not fully researched
and still require groundbreaking research directions (Aguinis & Glavas, 2012; Zulfiqar et al, 2019) and
thus our study will open a new avenue for researchers who have an interest in social psychology (O.
Farooq et al, 2013; Keat el, 2019), especially in a developing country like Pakistan, since it has very
typical demographics and attitudes of employees. In most Pakistani work environments, the prevalent
demeanor to employment has been expressed as poor (Shah et al, 2010). Pakistani employees appear to
be careless about their organizations and are inclined towards their gains. Further, they take interest in
those activities which are directly performed for them, for instance, internal CSR activities (O. Farooq
et al, 2013; M. Farooq et al, 2014)
Unlike the previous studies, which have been carried out through either the stakeholder’s
perspective or social identity theory, this study is based upon social exchange theory (SET) (Blau, 1964)
proposed and tested a new model exhibiting the relationship between corporate social responsibility
and employee engagement. We test the above-mentioned relationships mediated through employee
trust in the organization as well as a leader since trust is made up of both elements. We further explore
whether the leader-member exchange (LMX) of sampled firms moderates the relationship of corporate
social responsibility with employee trust (trust in organization and leader) since LMX is one of the key
elements of social exchange theory and plays a vital role in boosting employees' trust.
2.1 Corporate Social Responsibility (CSR)
The origin of corporate social responsibility can be traced back in the 1940s (post World War II),
through the decision of the supreme court of New Jersey. This is when for the first time Standard Oil
Company could donate money as philanthropic action to Princeton University. However, at that time
the general perception was that it would reduce shareholder wealth, and thus, a suit was filed against
this donation by one of the shareholders of Standard oil company (Ali et al, 2010; Carroll & Shabana,
2010). Nevertheless, despite a huge amount of work on the concept of corporate social responsibility, it
is not easy to define it (Matten & Moon, 2008) because corporate social responsibility has several
dimensions, levels of analysis and several issues at stake (Aguinis & Glavas, 2012; Campbell, 2007;
Carroll & Shabana, 2010; Dahlsrud, 2006; M. Farooq et al., 2014). Accordingly, it can be defined with
both external as well as internal aspects e.g. organizations that take care of local communities are
engaged in external corporate social responsibility, and those taking care of their employees by paying
them adequate salaries as well as benefits to meet their local costs of living as determined by the United
Nations are participating in internal corporate social responsibility (Campbell, 2007; Manika et al,
2017). Thus, corporate social responsibility is a wide and dynamic term due to growing concerns
regarding stakeholder relations, firm performance, and its implications for business ethics and
corporate citizenship (Matten & Moon, 2008; Ilkhanizadeh & Karatepe (2017). It even has variations in
its understanding and implications with regards to geographical locations as well as across continents
or cultures (Wei et al., 2009). Yet, it communicates clearly articulated policies, practices and programs
affirmed for the good of society i.e. external stakeholders as well as its internal stakeholders.
This article focuses on internal stakeholders and corporate social responsibility activities, where
internal corporate social responsibility means an internal code of conduct, health and safety programs
and policies, working time and environmental policies, fair pay and benefits, redundancy and lack of
unfair dismissals, etc. (Basil & Erlandson, 2008; Campbell, 2007; Matten & Moon, 2008; Skudiene &
Auruskeviciene, 2012).
2.2 Employee Engagement
Employee Engagement, being one of the most discussed and popular topics in the academic arena
during the last decade (Saks, 2006), surprisingly still lacks any single definition (Shuck & Wollard,
2009) due to different as well as inconsistent opinions presented by academicians and practitioners at
the earlier stages of defining the concept (Macey & Schneider, 2008). However, these controversies are
good in the evolutionary stages of concepts; nevertheless, employee engagement has become the need
of time since employees are getting disengaged even in America (U.S), the annual cost of this
Int. Journal of Business Science and Applied Management / Business-and-Management.org
phenomenon is $300 billion (Rizwan et al, 2011). The concept of engagement is operationalized here
as it is defined by Schaufeli, et al (2002) as a positive, fulfilling, work-related state of mind that is
characterized by vigor, dedication, and absorption. Rather than a momentary and specific state,
engagement refers to a more persistent and pervasive affective-cognitive state that is not focused on
any particular object, event, individual, or behavior. Vigor is characterized by high levels of energy and
mental resilience while working, the willingness to invest effort in one’s work, and persistence even in
the face of difficulties. Dedication refers to being strongly involved in one’s work and experiencing a
sense of significance, enthusiasm, inspiration, pride, and challenge. Absorption is characterized by
being fully concentrated and happily engrossed in one’s work, whereby time passes quickly and one
has difficulties with detaching oneself from work (p. 74).
Further literature indicates that getting engaged is an individual’s personal decision (Rich et al.,
2010) thus, our focus of research will be on the huge construct of employee engagement (Castellano,
2012) and its relationship with corporate social responsibility. Such types of relationships developed at
work are characterized as exchange relationships (Moideenkutty, 2006) based on the social exchange
process/ theory (Blau, 1964).
2.3 Social exchange theory
The social exchange theory presented by Blau (1964) is based on the "reciprocity" concept,
considering that if an organization is fair, caring, and kind with its employees, then employees, in turn,
will reciprocate the same generous behavior towards firm (Cropanzano & Mitchell, 2005). Over time,
this relationship shapes itself into trust, loyalty, and commitment (O. Farooq et al., 2013). While
operationalizing this social exchange relationship, the concepts of perceived leader-member exchange
and trust have been discussed (O. Farooq et al., 2013). Leader-member exchange explains the exchange
relationship between the employee and supervisor/leader. Trust explains the exchange relationship of
employees with an employer and immediate supervisor (Cropanzano & Mitchell, 2005).
2.4 Corporate social responsibility and employee engagement: mediating role of employee trust
Whitener, et al (1998) consider trust as one of the most important and fundamental elements of
social exchange relationships that form the basis of cooperation. Further, this interpersonal trust has a
significant relationship with various organizational constructs, for instance, performance, quality
communication, citizenship behavior, etc. (Dirks & Ferrin, 2001) and its definition has the following
three facets:
First, trust in another party reflects an expectation or belief that the other party will act
benevolently. Second, one cannot control or force the other party to fulfill this expectationthat is,
trust involves a willingness to be vulnerable and risk that the other party may not fulfill that
expectation. Third, trust involves some level of dependency on the other party so that the outcomes of
one individual are influenced by the actions of another” (Whitener et al., 1998).
Whitener et al. (1998) explain that there are two elements of this definition, which are the
“trustor”, the one who develops trust over the other is thetrustee”. Research has focused on 'trustor
beliefs, perceptions, and attribution regarding the trustee based on how he sees trustees’ behavior.
Further, the authors Whitner et al (1998) have explained this relationship of trust by taking into
consideration the “agency theory” and “social exchange theory”. The authors consider the manager-
employee as the principal-agent, where there is an economic exchange relationship between the two
parties for protecting self-interests and both parties try to maximize benefits as well as minimize the
risks associated with the said relationship. Both the employer and employee face risk; agents face it in
the form of outcome, which may not be controllable, but compensation is based on this outcome. The
principal faces risk regarding the incompetence of agents and opportunism (i.e. unavailability of
information regarding the agent’s actions). This risk may be minimized through social exchange
relationships where economic incentives may not be involved as they are voluntary actions from one
party e.g. the manager, which in return is reciprocated by the employee (the agent) considering it as an
obligation. However, the risk of not reciprocating is there, especially during the early phases of this
relationship, but as this relationship grows over time from a low to a higher level, it gives fruitful
results in the form of employee trust in an organization and the immediate supervisor. Further, social
exchange creates much better relationships because of extrinsic benefits (through economic value) and
intrinsic benefits through social support, where expressions of support and friendship are extrinsic
benefits having intrinsic value as well. Thus, the agency relationship tries to impose greater controls
due to the risks involved, whereas social exchange relationships minimize the risks through the gradual
development of trust (Whitener et al., 1998).
Khalid Rasheed Memon, Bilqees Ghani and Saima Khalid
Therefore, the greater the social exchange, the stronger will be the relationship between the
employee-organization and the employee-leader. Organizations try to strengthen this relationship
through internal corporate social responsibility and firms take risks and work for the betterment and
welfare of employees through such activities. This is why it has been demonstrated that perceived
corporate social responsibility is positively related to outcomes (M. Farooq et al., 2014). Further, in
high exchange relationships between the leader and employee, an employee would feel obligated to
engage in job roles especially those which directly benefit the leader but are beyond his job role. In
such instances, a leader would support the employee through rewards and other benefits (Wayne et al,
1997), resulting in employee engagement. Thus, we postulate the following:
Hypothesis 1: Corporate social responsibility has a significant relationship with employee
Hypothesis 2: Employees' trust mediates the relationship between corporate social responsibility
and employee engagement.
2.5 Corporate social responsibility and trust: moderation of leader-member exchange
While explaining social exchange relationships, the authors O. Farooq et al. (2013) convey that
there are two forms of exchange relationships with regards to their structures, i.e. restricted (direct) and
generalized (in-direct) reciprocity. Restricted exchange is categorized as one to one (employer and
employee) and generalized exchange represents group-based reciprocity (organization, environment,
community, and consumers). We are here covering the internal corporate social responsibility aspect,
which is why we posit that as corporate social responsibility invokes restricted exchange, it will further
create organizational trust in employees; thus, in our model trust is a primary outcome of internal
corporate social responsibility initiatives leading towards employee engagement (O. Farooq et al., 2013;
Hansen et al, 2011). Similarly, the leader-member exchange is expected to have positive effects on
employee outcomes such as trust in the leader/supervisor, due to internal corporate social responsibility
activities. Consistency of policies and the communication strategy, appraisals, as well as rewards and
recognition, result in the reciprocation of performance results of employees beyond expectations
(employee engagement) through the development of trust in the leader/supervisor (Wayne et al., 1997).
Trust is the most significant outcome of favorable exchanges for a firm’s employee-friendly initiatives
(Blau, 1964; O. Farooq et al., 2013; Hansen et al., 2011). In this regard, human resource policies and
programs also enhance an employee’s trust in his/her organization, being the major contributor to the
conception of organizational support and are considered to be an integral part of internal corporate
social responsibility, which is nothing without human resource policies and programs (Wayne et al.,
1997). Therefore, the third hypothesis of this research is:
Hypothesis 3: The relationship between corporate social responsibility and employee’s trust is
moderated by leader-member exchange (LMX) such that the higher the LMX, the higher will be the
employee's trust in the leader/supervisor.
2.6 Conceptual Framework
Figure 1 depicts the relationship between corporate social responsibility and employee
engagement. Further, it shows the mediation of employee trust in the organization and the leader in the
relationship of corporate social responsibility and employee engagement. Also, the model specifies the
paths showing the moderation of leader-member exchange in the relationship of corporate social
responsibility and employee trust.
Figure 1: Moderated-mediated relationship of CSR and employee engagement
Internal Corporate
(Vigor, dedication
and absorption)
Employee’s Trust
(organization and
Hypothesized Causal Relationships
Hypothesized Moderating Effects
Int. Journal of Business Science and Applied Management / Business-and-Management.org
3.1 Sample and Procedure
This research is based on a cross-sectional survey administered through a self-reported
questionnaire. We have focused on the employees of 25 manufacturing units in the Telecom and
FMCG Sectors. These include both multinational and national level companies. FMCGs have products
like mineral water and food items whereas the others provide mobile phones and mobile network
services. These companies are operating almost all over the country except for a few national
companies, and these firms have large sales volumes since Pakistan has a population of approximately
200 million inhabitants.
Table 1: Demographic characteristics of the Respondents
The sampled firms were selected based on their corporate social responsibility information
available through secondary data sources, especially websites, implying that they are involved in
corporate social responsibility activities and their employees are well aware of the related concepts and
activities (M. Farooq et al., 2014; O. Farooq et al., 2013).
We used the convenience sampling method for the collection of data with the help of our field
survey team; questionnaires were handed over to employees of the relevant organizations working in
Pakistan. The questionnaire was accompanied by a cover letter explaining the purpose of the study and
asking for consent of the employee to participate in the study; employees were not asked their names to
ensure anonymity. Through this procedure, we collected the data from 300 employees, in line with the
definition of employees as described by (Rupp et al., 2006), those who are not involved in formulating
policies and conducting corporate social responsibility activities themselves and thus do not defend
their corporate social responsibility activities. The demographic characteristics of the sampled
employees are given in Table 1. This shows that the sample comprised 252 males and 48 female
respondents with an educational qualification of bachelors for 141 informants, 126 participants were
less educated than bachelors, 27 had masters and others had MS/MPhils (18 years education).
Employees hold various service tenures i.e. 78 participants had 3-year service, and 51 employees had
4-year experience, 63 respondents had 5-year employment tenure, 21 had 6 or more years of service,
whereas the remainder had less than 3-year service time. 93 of them were functional managers/lower
management, whereas the others were supervisors and operational level staff members.
3.2 Measurements
Various tools have been adapted to test the model, whose validity and reliability have already been
established. For instance, internal corporate social responsibility was measured through the instrument
originally developed by Turker (2009) but adapted from (M. Farooq et al., 2014; O. Farooq et al., 2013)
for the Pakistani context. This tool included 6 items measuring internal corporate social responsibility
towards employees. Employee’s Trust was measured through a 7-item instrument developed by Tyler
Service Tenure (years)
Below Bachelors
Management Level
Middle / Lower Management
Non-Management Lower Level Staff
Khalid Rasheed Memon, Bilqees Ghani and Saima Khalid
(2003) as it measures the trust in the leader as well in top management i.e. the organization. Further,
employee engagement was measured through a 17-item instrument developed by Salanova et al (2005);
this measures employee engagement as vigor, dedication, and absorption, which is according to our
operational definition of employee engagement. The moderator leader-member exchange was
measured through a scale presented by Liden and Maslyn (1998). Measurement items are presented in
We adapted the instrument and translated it into Urdu (the national language of Pakistan). We also
pre-tested the instrument through 20 MBA students to identify any potential problems associated with
adaptation and translation. Further, as per the suggestions of two field experts at the University of
Lahore, Pakistan, we found some minor problems regarding translation, which were corrected at once.
However, no such problem was found with its structure and flow. Thus, we used five-point Likert
scales (1= strongly disagree to 5= strongly agree) to collect the data.
3.3 Data Analysis
Data was analyzed in depth through Smart PLS 3 by using confirmatory factor analysis (CFA)
using the Structure Equation Modeling (SEM) technique. The aims were to conduct a detailed analysis
of the relationship between corporate social responsibility and employee engagement through the
mediation of employee trust; and to test the moderating effect of leader-member exchange between
corporate social responsibility and trust. Because of the violation of data normality (e.g. studies using
employee engagement, leader-member exchange, etc. tend to have non-normal data) and while the
correct model specification cannot be ensured, it leads us to the application of Smart PLS (Wong,
It is important to mention here that there are two sub-models in a structural equation model: the
inner model and the outer model. The inner model specifies the relationships between the independent
and dependent latent variables, whereas the outer model specifies the relationships between the latent
variables and their observed indicators (items). Accordingly, a variable may be called exogenous or
endogenous. An exogenous variable (independent variable) has path arrows pointing outwards and
none leading to it, whereas an endogenous variable (dependent variable) has at least one path leading to
it representing the effects of other variables.
4.1 Reliability and validity tests
Table 3 presents the validity and reliability of all the constructs included in our study i.e. the outer
model. It shows the values of construct reliability and average variance extracted (AVE), which
represent the convergent validity of our constructs. Values indicate that the construct reliability of all
the variables is greater than 0.7, which is the acceptable standard in terms of internal consistency.
Moreover, the average variance extracted values are greater than 0.5 for each construct, thus indicating
that data is convergent valid. (Hair et al, 2017).
Table 3: Construct Reliability and Convergent Validity through AVE
# of
Average Variance Extracted
1. CSR
2. EE
3. LMX
4. Trust
In addition to this, Table 4 presents the discriminant validity of the data through the method given
by Fornell and Larker (1981). The values in the diagonal represent the square root of average variance
extracted values, whereas the remaining values represent the correlations between the variables. All
diagonal average variance extracted values are greater than the correlations, which indicates the
existence of discriminant validity of the data. Moreover, to prove discriminant validity, we also
checked the cross-loadings of all the items. The cross-loadings were appropriate and above 0.7 for each
relevant item of a specific variable. Cross-loadings are reported in Table 5.
Int. Journal of Business Science and Applied Management / Business-and-Management.org
Table 4: Discriminant Validity
Furthermore, after checking the reliability and validity of the outer model, we examined whether
any multicollinearity issue exists in the data. It was examined for both inner and outer models through
the variance inflation factor (VIF) values. The rule states that variance inflation factor values must be
below 5, indicating no issue of multicollinearity; values for our model lie between 1.0 and 3.5, which
are less than the threshold of 5 (Cohen, 2003).
Table 5: Cross Loadings
Thus, the risk of any problem related to multicollinearity is not present. After that, we conducted
regression tests for the inner model. Results indicate that the overall model fitness is 31%, which is
represented through the value of R squared and depicts a good model fit. In addition to the above test,
another test was performed for calculating the F
(F squared values, which represent the contribution of
individual variables to R squared. The F squared values for each variable should be at least 0.02 for a
minimum contribution, greater than 0.15 for a moderate contribution, and greater than 0.35 for a high
contribution. Our data results showed that F squared values for all variables were above the threshold
value, which means that all variables contributed to R squared.
4.2 Common Method Variance Assessment
Harman’s single-factor test has been used to identify the presence of common method variance
issues. From the analysis, the result indicated that the first and the largest factor only account for
39.50% of the variance, which is below the threshold of 50%. Therefore, no one single factor that is
apparent accounts for the majority of the variance. In this case, we can be assured that the issue of
common method variance is not substantial (Podsakoff et al., 2003).
4.3 Path Coefficients
Table 6 presented below summarizes the acceptance of the hypotheses and our overall regression
results. The bootstrapping method was used with 5000 re-samples and a t-test was employed. Also, the
Q Squared (Geisser Criterion value) is 0.14 i.e. greater than 0 (zero) being its minimum value, which
implies that the latent variables in the model have a high predictive ability (Yi, et al, 2011).
EE 4
EE 5
Khalid Rasheed Memon, Bilqees Ghani and Saima Khalid
Table 6: PLS Structural Model Results
Table 6 clearly shows all the regression (direct and indirect) paths, their significance levels, and
the standard deviation values of all the variables. The first path as per our first hypothesis is from
corporate social responsibility to employee engagement, i.e. a direct relationship, which has been
proved to be positive and significant at p<0.001 (H1 accepted). Likewise, to prove the mediation of
employee trust between corporate social responsibility and employee engagement, we should see two
paths (one from CSR to Trust, and the other from Trust to EE).
Table 6 indicates that the relationship between CSR and Trust is positive, significant at p<.001,
and the relationship between Trust and EE is also significant, positive at p<0.05. This supports our
second hypothesis that there exists a mediation of employee trust. Moreover, we tested the moderating
effect of leader-member exchange on the direct path (from CSR and Trust). Results show that none of
the moderation is proved, with p=0.00 (H3 rejected).
This study explores the impact of corporate social responsibility on the engagement of employees
working in the FMCG and Telecom sectors of Pakistan. Further, we explored whether employees' trust
in their organization and immediate supervisor/leader plays any role in getting these employees
engaged based upon their firm’s corporate social responsibility towards them. In addition to this, the
moderating effect of leader-member exchange was tested to identify whether they aid in affecting
employee trust through corporate social responsibility.
The outcome of our study highlights that CSR activities intended for employees are just like
organizational investments that ultimately result in amplification of constructive work-related
behaviors, i.e. work engagement, and organizational trust. The internal CSR is an imperative gauge of
management’s sensitivity about the comfort and safety of employees. Employees smell these clues and
extend their support in gratitude for the well-being activities carried out in their interest. This in-turn
leads employees to reciprocatory behavior of thankfulness in the form of dedicated, committed, and
high-performance work at the organization.
Our results from, for instance, hypothesis 1 and hypothesis 2 are consistent with other studies on
corporate social responsibility, conducted in a Pakistani context (M. Farooq et al., 2014; O. Farooq et
al., 2013) showing that taking corporate social responsibility initiatives, showing care and concern for
employees lead towards the development of trust and then getting employees engaged. It has been
found, however, that due to a lack of support for employees, the moderating effect is not as desired and
the same has not played its role in moderating employees’ behavior towards the development of
organizational or leader trust. This shows that employees in the Pakistani environment are more
concerned about activities that are performed directly for them instead of other employees or external
stakeholders, probably due to having low economic status and Pakistan being a developing nation.
Research has shown the great impact of organizational support in the form of organizational trust
and social relationships between supervisor and subordinates for the perception of having a safe
environment and the development of psychological empowerment, enabling an employee to display
extra-role behaviors like work engagement and voice behavior (Raub & Robert, 2012). It is very
unfortunate that in countries like Pakistan, where we have an authoritarian and bureaucratic style of
dealing, employees do not trust their supervisor/leaders and this has a lesser effect on their overall work
The domino effect of our research advances the underlying theories on the relationship between
CSR, organizational trust, LMX, and employee engagement. Our study finds support in the existing
literature that employee oriented activities of care and concern performed through internal CSR at the
place of work influences organizational trust (Cropanzano & Mitchell, 2005; Mount et al, 2006;
T Statistics
CSR -> Trust
CSR LMX Trust -> Trust
Trust -> EE
Int. Journal of Business Science and Applied Management / Business-and-Management.org
Colbert et al, 2004; Liu et al, 2010; Yu & Choi, 2014; Fischer et al, 2020), leading towards work
engagement and extra-role behaviors ((Antonaki & Trivellas, 2014; Seibert et al, 2011; Morrisson,
2011; Liu et al, 2010). Similarly, we found support for CSR oriented organizational trust (Zulfiqar et al,
2019; M. Farooq et al., 2014; O. Farooq et al., 2013; Yu & Choi, 2014; Mallory & Rupp, 2014).
Therefore, we argue that being a socially responsible organization, whether internally or externally,
develops in employees the sense of trust in an organization that the organization is reliable and will not
deceive people on personnel issues too. This in turn advances the feeling of personal care, concern, and
safety through perceived organizational support, resulting in the development of a higher level of
feelings of it being obligatory to perform reciprocatory actions. Due to this feeling, the employee in
exchange performs the acts of discretionary job behaviors, displaying a high level of performance and
greater loyalty to the organization through work engagement.
Unlike previous studies that incorporated social identity theory (Zulfiqar et al, 2019; O. Farooq et
al, 2013; M. Farooq et al, 2014), our study employed social exchange theory to test the above-discussed
relationships. Results revealed numerous important findings and thus contributed to the theory in
multiple ways. Most of the previous studies have measured the performance as compared to the
employee’s engagement behavior through individual personality traits and have declared emotional
stability and conscientiousness as the predictor of performance criteria in almost all trades (Barrick &
Mount, 2005; Colbert et al., 2004; Mount et al, 2006; Rothmann & Coetzer, 2003).
Contrary to previous studies which have focused on other constructs for measuring the effect of
corporate social responsibility, for instance affective organizational commitment (O. Farooq et al.,
2013), organizational identification and knowledge sharing behavior (M. Farooq et al., 2014), our study
has focused on the broader construct of employee engagement. Also, the construct of trust has been
measured as trust in the organization and trust in the leader/supervisor, whereas, previous studies have
mostly not conducted empirical studies by taking both dimensions of this construct into account since
this kind of trust enhances employees' motivation towards extra-role behaviors and work engagement
(Tyler, 2003)
The findings of our proposed model offer insights into the value of internal CSR activities, which
can develop understanding among researchers and practitioners as to how the internal dimension of
CSR can be a prime gauge of helpful employee behavior. The study provides adequate support for the
application of social exchange theory as an academic archetype in accepting the probable mechanism
between the internal dimension of CSR and employee behavior. Further, social exchange theory is a
significant motivational frame for the elucidation of the specific engagement of employees in
discretionary behaviors, since these behaviors are neither obligatory nor recognized by the firm's
prescribed reward systems. For such behaviors, social exchange is analogous and can refer to the
common interactions that are continuously evolving with no time limit and are based on social benefits.
(Zulfiqar et al, 2019)
This study proposes a model based on the significantly important construct of employees’ trust,
developed as a result of perceived organizational support (through internal CSR activities) and leader-
member exchange, being the fundamental element of the relationship between corporate social
responsibility and employee engagement. This empirically tested model within the context of Pakistan
provides important implications for researchers as well as practitioners. Through this study, the
emphasis has been on the relationship between corporate social responsibility and employee
engagement through the social exchange perspective and considering “trust” as the critical element, and
it has been proposed that corporate social responsibility plays a major part in gaining employees’ trust
in organizations as well as leaders. Further, it is proposed that employees may perceive corporate social
responsibility as good for identification purposes, but for their personal interest and engagement
employees need internal support and care through internal corporate social responsibility. However,
concepts such as leader-member exchange may not be of much importance in deriving trust, especially
in Pakistani culture.
The internal CSR is all about dealing with employees in a socially responsible way and it can find
out the method employees will perform in the organization. Employees are very much adaptive; they
examine and read the indications in the work environment and build up attitudes. This means that when
employees perceive that the organization has an attitude of care and concern for them, employees will
reciprocate with the same helpful behavior and will be inclined by heart to perform their
responsibilities for the achievement and growth of their organization. Similarly, an organization with a
high CSR reputation and high ethical principles and practices is considered a trustworthy business
collaborator and a highly regarded member of the business community. CSR conveys a heartening
signal and suggests to its employees that the organization is considerate about them. Internal CSR
Khalid Rasheed Memon, Bilqees Ghani and Saima Khalid
amplifies employees' self-esteem, sanguinity and a sense of positive reception, resulting in elevated
work engagement (Zulfiqar et al, 2019).
This study encourages practitioners to experience new methodologies of conveying the feelings of
concern, care, and protection through various human resource interventions, supervisor/ leader
mentoring behaviors, and communication system are the most effective drivers of employee
engagement leading towards employee performance as well as gaining the trust of employees
(Bedarkar & Pandita, 2014). Further, employees may be involved in the goal-setting process and
suggestions can be offered for improvement, if required, during review sessions. Similarly, training and
development activities like on the job training, rotations, educational opportunities, and involvement in
the decision-making process will surely develop a sense of shared ownership (Vlachos, 2009; Knezović
et al, 2020; Ghani & Memon, 2020). Accordingly, employees will perform reciprocally and will go
beyond their work obligations, provided they receive a sense of meaningfulness, safety, and availability
as proposed by Kahn (1990).
As this particular study is only within the context of Pakistan (a developing country), with a
limited number of respondents, the study cannot be generalized to developed country settings and the
results may vary with different contexts and countries, especially the moderating effect of leader-
member-exchange. The same may be extended to the other Asian countries, especially developing
south Asian countries with a similar infrastructure and economic conditions and geographical settings
to compare and further authenticate the results of the said study.
The authors propose that surveys or interviews with co-workers may be carried out to know the
exact reaction and dealing in a practical situation for testing how individuals with different personality
traits behave under those circumstances and control the situation. Accordingly, the validity of these
personality traits and the expected performance can be measured; weak and strong relations can be
found as well. Similarly, a survey regarding employees’ engagement can be filled in through their peers
and supervisors instead of self-reported questionnaires to compare both results and differences in
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Questionnaire items used in the study
(To be measured through Likert scale ranging from 1-5, 1 strongly disagree to 5 strongly agree)
Internal CSR
1. My company encourages its employees to participate in the voluntary activities
2. My company policies encourage the employees to develop their skills and careers
3. The management of my company is primarily concerned with employees’ needs and wants
4. My company implements flexible policies to provide a good work and life balance for its employees
5. The managerial decisions related with the employees are usually fair
6. My company supports employees who want to acquire additional education
Leader Member Exchange
1. I like my supervisor very much as a person.
2. My supervisor is the kind of person one would like to have as a friend
3. My supervisor is a lot of fun to work with.
4. My supervisor defends my work actions to a superior, even without complete knowledge of the issue
in question.
5. My supervisor would come to my defense if I were attacked by others.
6. My supervisor would defend me to the others in the organization, if I made an honest mistake.
7. I do work for my supervisor that goes beyond what is specified in my job description.
8. I am willing to apply extra efforts, beyond those normally required, to meet my supervisor's work
9. I do not mind working my hardest for my supervisor.
10. I am impressed with my supervisor’s knowledge of his/her job.
11. I respect my supervisor’s knowledge and competence on the job.
12. I admire my supervisor’s professional skills
Employee’s trust (Trust in organization and leader)
1. I am usually given an honest explanation for decisions
2. My views are considered when decisions are made
3. My needs are taken into account when decisions are made
4. The authorities try hard to be fair to their employees
5. My supervisor gives me honest explanations for decisions
6. My supervisor considers my views when decisions are made
7. My supervisor takes account of my needs
Employee Engagement
1. At work, I feel full of energy.
2. In my job, I feel strong and vigorous.
3. When I get up in the morning, I feel like going to work.
4. I can continue working for very long periods at a time.
5. In my job, I am mentally very resilient.
6. At work, I always persevere, even when things do not go well.
7. I find the work that I do full of meaning and purpose.
8. I am enthusiastic about my job.
9. My job inspires me.
10. I am proud of the work I do.
11. I find my job challenging.
12. Time flies when I’m working.
13. When I am working, I forget everything else around me.
14. I feel happy when I am working intensely.
15. I am immersed in my work.
16. I get carried away when I’m working.
17. It is difficult to detach myself from my job.