Journal of Entrepreneurship Research

Journal of Entrepreneurship Research

The Role of Innovation, Differentiation Strategy, and Corporate Social Responsibility in the Profitability of Companies Listed on the Tehran Stock Exchange

Document Type : Research Article

Author
Behrooz Badpa
Assistant Prof., Department of Accounting, Faculty of Literature and Humanities, Ilam University.
10.22034/jer.2025.2049637.1244
Abstract
Introduction: In today's complex economic environment, a company's profitability and long-term sustainability hinge upon selecting and implementing an effective competitive strategy. To secure customer satisfaction, firms must strategically leverage knowledge, managerial capabilities, and employee expertise to drive innovation and deliver differentiated products and services. Concurrently, corporate social responsibility (CSR) has emerged as a source of competitive advantage, enabling socially-oriented companies to gain legitimacy within both society and the marketplace while contributing to sustainable development goals through enhanced customer satisfaction. This study investigates the impact of innovation, differentiation strategy, and CSR on corporate profitability. Furthermore, it examines the moderating role of differentiation strategy in the relationship between CSR and company profitability.
Methodology: The statistical population of this study comprised all companies actively listed on the Tehran Stock Exchange. A sample of 166 firms was selected through screening, and their data were analyzed over a ten-year period from 2013 to 2022. Multiple regression analysis was employed to test the research hypotheses, utilizing Excel and Eviews software for data analysis.
Findings:  The results, confirmed at a 95% confidence level, demonstrate that innovation exerts a significant positive effect on both differentiation strategy and return on assets (ROA). Additionally, differentiation strategy and corporate social responsibility each have a significant positive impact on ROA. Recognizing the conceptually distinct nature of CSR compared to innovation and differentiation strategy, the analysis of competitive strategy's moderating role revealed that differentiation strategy significantly moderates the relationship between corporate social responsibility and return on assets.
Conclusion/ Implications: This research provides several actionable insights for corporate stakeholders. It is recommended that company managers foster innovation in products, services, and production processes through comprehensive employee training, investment in modern machinery and equipment, and cultivation of an organizational climate that encourages collaborative thinking and synergy. Shareholders and financial analysts are encouraged to disclose information regarding the company's competitive strategy to investors, enabling more informed securities trading decisions. Marketing managers should continuously monitor market trends and evolving customer preferences, developing strategic plans to meet and exceed customer expectations by leveraging consultant expertise and adopting contemporary marketing approaches. Furthermore, analysts should incorporate corporate social responsibility indicators when determining share trading values. Finally, companies should establish dedicated committees to oversee social responsibility activities in alignment with their mission and vision, ensuring strategic coherence and accountability.
Keywords
Innovation
Differentiation Strategy
Social Responsibility
Profitability
Competitive Market

Subjects

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  • Receive Date 01 January 2025
  • Revise Date 15 April 2025
  • Accept Date 16 April 2025