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Profit-Driven Corporate Social Responsibility as a Bayesian Real Option in Green Computing

  • Hemantha S. B. HerathEmail author
  • Tejaswini C. Herath
  • Paul Dunn
Original Paper

Abstract

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.

Keywords

Corporate social responsibility Green computing Investment decisions Real options, Bayesian decision framework 

Notes

Acknowledgements

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.

Supplementary material

10551_2017_3705_MOESM1_ESM.doc (532 kb)
Supplementary material 1 (DOC 531 kb)

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Copyright information

© Springer Science+Business Media B.V. 2017

Authors and Affiliations

  • Hemantha S. B. Herath
    • 1
    Email author
  • Tejaswini C. Herath
    • 2
  • Paul Dunn
    • 3
  1. 1.Department of Accounting, Goodman School of Business, Taro 240Brock UniversitySt. CatharinesCanada
  2. 2.Department of Finance, Operations, and Information Systems, Goodman School of Business, Taro, 322Brock UniversitySt. CatharinesCanada
  3. 3.Department of Organizational Behaviour, Human Resources, Entrepreneurship and Ethics (OBHREE), Goodman School of Business, Taro 414Brock UniversitySt. CatharinesCanada

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