Profit-Driven Corporate Social Responsibility as a Bayesian Real Option in Green Computing
The idea that socially responsible investments can be viewed in terms of real options is relatively new. We expand on this notion by demonstrating how real option theory, within a Bayesian decision-making framework, can be used by managers to help when making green technology investment decisions. The Bayesian decision framework provides a more flexible approach to investment decision making because it adjusts for new information. Responding to a call for multidisciplinary and multifaceted research in environmental sustainability, this paper integrates ethics, finance, and information technology by viewing investments in environmentally friendly technology as a profit-driven CSR real option. Our model provides managers with the analytic tool needed to make the business case for CSR initiatives providing an opportunity for firms to create economic, social, and ecological solutions that benefit all stakeholders. The practical applicability of our model is demonstrated in an illustrative case scenario based on real data.
KeywordsCorporate social responsibility Green computing Investment decisions Real options, Bayesian decision framework
The authors acknowledge the research funding support from IIIA (Grant No. 336-332-033). Dr. Hemantha Herath acknowledges research funding from the Social Sciences and Humanities Research Council (SSHRC) of Canada (Grant No. 410-2009-1398). The usual disclaimers apply. We would like to thank David Cullum, Andreas Paulisch, and Harry Serabian for their helpful input. We would also like to thank the senior editor, Professor Greg Shailer, and two anonymous reviewers for their helpful comments.
Compliance with Ethical Standards
Conflict of interest
The authors declare that they have no conflict of interest.
Human and Animal Rights
This article does not contain any studies with human participants or animals performed by any of the authors.
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