Corporate Social Responsibility as a Basis for Innovative Entrepreneurship Development

In the 20th century, societal transformation, personal success and well-being became increasingly correlated with knowledge and innovation, while information technology made global communication possible. Rifkin [1] defines the development and integration of the processes of different spheres of human activity as the third industrial revolution. In the 20th century, shared values and societal needs of consumers have driven the scale and financial profitability of entrepreneurial activity. Global business thinks in universal terms (for example, preserving the planet and natural resources, managing labour migration, demographic issues, healthcare, etc.). Entrepreneurship, its entry into the national, and later – global level, creates synergy in society to solve social problems. The result of understanding this reality was the concept of CSR – corporate social responsibility. The introduction of its principles contributes to the sustainable development of both the enterprise and the community, the region and humanity as a whole, while the concept of sustainable development provides for a harmonious combination of the social (people), environmental (planet) and financial (profit) components [2, 3].

In Western sources, the concept of CSR is often viewed within the framework of stakeholder theory, through the lens of an ever more complex business structure that appears as a network of interconnected relationships of an economic and social nature [4-6]. it is about balancing the interests of all actors, which promotes the win-win principle, where the system takes into account the needs of any one party and all actors in the socio-economic system benefit [7]. In this sense, the social responsibility practices of business are important in the long term, through effectively addressing the needs of all stakeholders. A free market is an important prerequisite for developing a socially responsible business and establishing a practice in which all participants in public relations benefit [6, 8]. This promotes sustainable development, innovation and equal opportunities for all market actors. The more liberal the society (no centralised power system, less control and coordination), the more the “invisible hand of the market” works, and the more realistic the win-win principle is [5, 9].

Studies on the role of CSR in business management show that social responsibility uses tools that are beneficial in management practices [10-12], and a criterion for its effectiveness. Although the definition of CSR uses the term “corporate”, it does not mean that this type of social activity is relevant only to large enterprises. Small and medium-sized enterprises need to adopt sustainable development practices systematically from the outset. At the same time, the choice of appropriate tools (PR campaigns, public reports, ethical programmes for employees and employee volunteering, responsible investment, corporate supervision, etc.) should be adapted to the size of the enterprise and will differ for small businesses and international corporations [13].

In the context of economic globalisation, the importance of innovation and innovative development, including scientific and technical innovation and innovative educational practices, is increasing [6, 14, 15]. From this perspective, effective CSR-based management is a long-term investment, including in human capital, and sets the stage for long-lasting and positive relationships between business and the external environment and for investments that serve the public good [16-18].

The internal and external benefits of introducing CSR compliant activities into the enterprise are highlighted. Among the external ones – a significant increase in the level of interest on the part of investors (easy access to business financing), creating a positive image of the enterprise, increasing competitiveness, customer loyalty, long-term and effective relationships with local communities, new opportunities and sales markets, innovations and technological solutions. Internal ones include, first and foremost, changing employee attitudes, increasing employee loyalty and trust, hence reducing turnover rates and improving employee skills. At the same time, it is important to understand that CSR does not benefit exclusively businesses or society, but creates a favourable environment for the development of existing markets and the creation of new ones [7].

The relevance of this study lies in addressing the underexplored aspect of corporate social responsibility (CSR) in the context of innovative entrepreneurial development. While most CSR research emphasizes environmental and communication or social issues, the relationship between the implementation of social responsibility principles and the innovative development of enterprises is often overlooked. The study aims to analyze the impact of CSR on creating an atmosphere both in society and within enterprises that fosters innovative development, serving as a crucial motivator for businesses to implement social responsibility strategies. As an interdisciplinary discourse in economic and social sciences, CSR encompasses both theoretical and practical aspects. This study, therefore, seeks to understand the systemic mechanisms of CSR and their role in promoting the innovative development of entrepreneurship, simultaneously addressing the needs of businesses and society. The purpose of this study is a theoretical and empirical analysis of the phenomenon of social responsibility as the basis for innovative development of entrepreneurship and an important tool for simultaneously meeting the needs of business and society.

Corporate Social Responsibility (CSR) in the context of this study is perhaps more accurately defined as a mechanism for running a business in harmony with the norms and values of society, within the framework of existing legislation and international standards, supporting economic and social development goals. The key idea is that business operates as a component of social space, so in order to operate successfully, market forces compel business to share common values with society and respond promptly to societal needs and demands. Thus, social responsibility is a resource for the transition of the economy from local production to global production. Such a transition is made possible by rethinking the primary purpose of entrepreneurship from profit-making to a balanced mission, a strategy for sustainable development based on universal values and needs. Practices of social responsibility of business become an impetus for the development of the entire society: each specific project within the CSR acts as a point of formation of common interest and interaction of various actors: from manufacturers and service providers to human rights defenders, environmentalists, representatives of the state and scientists.

The role of social responsibility for entrepreneurship is revealed by the negative consequences of the opposite phenomenon – irresponsibility, “corporate hypocrisy”. After all, the mechanism regulating the implementation of CSR practices by businesses is most effective under conditions of free market competition, where mutual trust, inclusiveness, generation of public value, and public display of systemic work in socially significant areas are the decisive criteria of partnership. When a business does not deliver on its promises to society or isolates itself from its demands, it loses reputation and credibility, and therefore its potential for development.

Particularly damaging to the reputation and long-term development of entrepreneurship is “corporate hypocrisy” – a situation in which a company creates a positive message that meets societal values and norms, but fails to deliver on its promise. Consequently, only a systematic CSR policy reflected in a public strategy, integrating economic, social and environmental factors, enables a business to be part of the universal community, developing together with society.

With the advent of the third industrial revolution, which led to the spread of digital technologies, corporations were forced to more transparent public communication, in particular in delivering value to society. Networking and social media became an influence on society and shape the reputation of firms or products almost instantly. CSR has gradually become a marker for the public: if a firm performs meaningful activities for society, it is positive; if it ignores them, it is negative. In order to meet the expectations of stakeholders, companies have become increasingly focused on harmonising public values in their internal and external business activities and on building a company mission in line with the real needs of society.

CSR as a phenomenon inherent in the free market encourages firms to develop fluid competencies to respond promptly to changes in the customs and needs of society. For a more effective return on investment and popularisation of the social responsibility philosophy among stakeholders, the company should also develop industry-specific competencies. Integration of sustainability in project management and technological innovation is a trend in modern entrepreneurship. It provides a shift from a traditional organisational strategy of profitability to an organisational strategy of sustainability, which in turn creates additional competitive advantage. The promotion of such integration practices within a particular society provides a transfer from a low-tech resource economy to a high-tech innovation economy. Competitiveness is enhanced by the quality of human capital (with increased productivity, involvement in continuing education, communication in a professional environment, the ability to generate innovation and modernise the enterprise), which in turn also leads to profit maximisation through increased value-added of goods.

Transformed into a competitive advantage, the idea of CSR is experiencing constant evolution, forcing companies to use the firm’s dynamic capabilities to uniquely address pressing social issues. The values shared by society and, therefore, by the businesses that cooperate with it, remain the key factor. The concept of social responsibility serves as a social contract, the content of which is determined primarily by society, which is responsible for the acceptance or non-acceptance of the activities carried out by business. Socially responsible business practices are therefore only possible in a society built on the principles of freedom and a market economy. Such a society regulates economic processes through non-profit organisations, reputation institutions, public ratings, etc. In the long run, CSR brings benefits to both society and business, it goes beyond deductions from companies to solve social issues and turns into a mutual exchange of values.

In the context of innovative entrepreneurship development, the synergy of business and society creates such a phenomenon as open innovation. It is no longer enough for developing companies to create new products or services or to improve existing ideas on their own. The success factor is cooperation with other parties, which results in a process of co-creation. That is, innovative development in liberal societies is inextricably linked to an open socio-economic environment in which knowledge and information freely circulate.

Therefore, in a world with high competition and increased globalisation processes, building effective communication networks between business and society helps both solve social problems and introduce innovations. The very idea of co-evolution of business and society connects open innovation with sustainable development, that is, it leads to the adoption of balanced mutually beneficial decisions. Thus, the definition of CSR has evolved from the responsibility of entrepreneurship to society to a strategic tool that “generates opportunities, innovations, and competitive advantages for corporations – while solving pressing social problems” [19, 20]. This process is possible through the transfer of ideas and knowledge from stakeholders and other participants in the partnership to the company’s innovation process, which creates the need for co-evolution between technological innovation and social innovation. At the same time, the faster humanity develops, the greater the need for innovation in all areas of life, and the greater the awareness of the importance of a more responsible attitude towards nature and society. Scientists are exploring new and innovative concepts in responsible development, sustainable development, and green development.

The value of innovation in today’s world grows with “openness”, a process whereby innovation becomes the result of the co-creation of different actors, free access to new knowledge and additional resources. This creates a cyclical process of creation and implementation of innovation, resulting in the development of the company’s market advantage, its competitiveness in the global market, etc. In this sense, CSR practices are a pass, a kind of access to a common space where the interests of entrepreneurs and society are balanced. Modern technological innovations must be not only inclusive but also sustainable, because technological change is a response to social and economic demand. Sustainable innovation takes into account three criteria: economic efficiency, social benefit and environmental protection, balancing these components allows for scalable solutions and contributes to a realistic development strategy.

In the context of the Ukrainian economy, corporate social responsibility practices have been actively applied relatively recently, over the past decade [21, 22]. Similarly to the idea of sustainable development, CSR is seen as an additional factor contributing to the innovative development of not only large corporations, but also small and medium-sized businesses. “The study of enterprise innovation activity as a prerequisite for sustainable development of the national economy led to the following conclusions:

- the number of innovatively active enterprises in Ukraine tends to grow as a basis for competitiveness in the domestic and foreign markets, compliance with the requirements of the world market;

- innovative activity of business entities is characterised by an increase in the share of technological, information and product innovations, which highlights market trends;

- a characteristic feature of the innovation process of small enterprises is the advantage of marketing and process innovations, large – technological and product technologies, which justifies various mechanisms and tools for stimulating them” [23].

In this way, CSR acts as a resource for entrepreneurship because it does not require the same financial outlay as, for example, technological innovation. This is especially true for economies with a low level of investment activity. Social responsibility is becoming a form of non-financial capital aimed at strengthening the sphere of real production, and is an effective mechanism of market self-regulation, the use of which leads to the stability of global and national economies.

On 10 July 2019, the Innovative Development Strategy of Ukraine by 2030 was approved, which defines the goal of forming a highly developed socially oriented economy based on knowledge and innovation in Ukraine [24]. These same provisions are stipulated in the Sustainable Development Strategy “Ukraine-2020”, approved by Presidential Decree No. 5 of 12 January 2015 [25], action plans for the implementation of the Association Agreement with the EU, Ukraine’s commitments to achieve the national Sustainable Development Goals for the period until 2030. The European Innovation Scoreboard, which includes data on the countries of the European Community, candidate countries for EU membership and some other countries, assigned Ukraine to the “Emerging Innovator” group.

During the transformation of the post-Soviet economy into an innovation economy in Ukraine, for a long time, the centre of innovation were the institutions created or supervised by the state. Thus, the Innovative Development Strategy for the period up to 2030 states that, as of 2019, “in Ukraine there have been created and are functioning: 40 industrial parks (of which 31 are in the Register of industrial parks), 26 science parks, 16 technology parks, 2 innovation and technology transfer centres, 22 innovation centres, 38 commercialisation centres, 24 innovation business incubators, one investment and technology cluster, over 30 clusters, one innovation production association” [24].

Today, it can be argued that the institutional approach to innovation has exhausted itself, and its main goal – to preserve the innovation potential – has been achieved. According to the Bloomberg Innovation Index, 2018, Ukraine ranks 53rd among the 60 countries studied. At the same time, our state was the worst performer in terms of labour productivity (60th), ranked among the three outsiders in technological capability (58th) and had the 54th position for research and development expenditure in the gross domestic product. At the same time, it retains a high ranking of 28th for efficiency in higher education and 35th for patent activity, i.e., has the potential to develop. The low level of innovation activity can be seen in the number and financial performance of innovation projects, science and technology parks and their projects. From 2006 to 2018, only 16 innovative projects were registered, technology parks have not implemented projects for the last 10 years, and in 2017 only 40% of science parks implemented projects (amounting to UAH 9,266.360) [24].

Ukraine is currently experiencing an unstable competitive position, and state institutions should focus on removing obstacles to the creation of a national innovation ecosystem, liberalisation and transparency of relations in this area. According to the Global Innovation Index, in 2018 Ukraine ranked at the highest position in the last seven years, 43rd place, having improved by seven places since last year, while in the previous year Ukraine had risen by six points due to its high innovation efficiency ratio - the ratio of innovation output to innovation resources [24].

Sustainable development of the state requires favourable conditions for entrepreneurial activity. Innovative development is primarily associated with the creation of a common social (network) space, “which would stabilise society on the basis of social values inherent in the citizens of the country” [26]. This allows society to evolve in the long term towards both freedom and the preservation of traditional values. The role of public institutions goes beyond economic growth or social development ambitions and is to protect the public interest by implementing policies in financial and economic systems without interfering with free-market dynamics. The state must be the balancing factor for the triple bottom line (social, environmental, and financial benefits) in a given economy.

The main condition for innovative development is the realisation of the inclination of a free individual to knowledge, creativity, the desire to do new things; it has been proved that “there is a close connection between the personal motivation of an individual to create a new product and the development of the innovative economy of the country as a whole. It is believed that the increase in the level of competitiveness of the country must be based on developing an effective system of supporting the innovative activity of people and introducing an innovative concept for society” [27, 28]. Thus, structural transformations in the economic and social spheres realise the potential of human capital and create a favourable environment for innovatively active entrepreneurship.

The UNIT.City [29] Innovation Park, which opened in Kyiv in 2017, is a clear example of how socially responsible business provides the conditions for innovative entrepreneurial development, sustainable development of society and the national economy. This project was planned as a nationwide one (a programming school and co-working space UNIT.Factory started operating in Kharkiv in 2019, while Lviv is implementing a plan to build an analogue of the Kyiv park - LvivTech.City). UNIT.City it is the embodiment of the concept of “Silicon Valley”, localised to the realities of the Ukrainian market and updated in accordance with the needs of Ukrainian society. According to the information provided on the official website “UNIT.City – it is an ecosystem that promotes innovative entrepreneurship and research, as well as the creation of companies that are successful in the global market” [29]. The project is designed according to the principles of green construction (planet), contributes to the development of Ukrainian start-ups, creating jobs and minimising brain drain (people), is an efficient business with powerful instruments of return on investment (profit).

The concept of sustainable development is manifested primarily through environmental friendliness, which is one of the main principles that both investors and engineers of the park, as well as residents, adhere to. UNIT.City is developed according to international smart city standards, prioritising safety, the environment, energy efficiency, residents’ health, etc. The B12 business campus received LEED v.4 Silver Core & Shell certification from the U.S. Green Building Council (USGBC). According to the administration, energy-efficient equipment is being installed in the park: heat pumps, air-recovery ventilation machines, LED lighting, automated engineering systems, water-efficient plumbing, a car park with electric vehicle chargers, a landscape watering system, a ban on smoking in and around buildings, two-stage air purification, a waste sorting system: paper waste is recycled into napkins, packaging and toilet paper, while polyethene and plastic are resold to other companies in the park [29].

On the basis of UNIT.City innovative ideas are being implemented for start-ups that have the potential to grow into socially responsible businesses, for example: Effa – eco-friendly toothbrushes made exclusively from paper, Delfast – electric bikes that set world records for speed and range, Caer Sidi – reusable digital contactless business card, SolarGaps – smart blinds with solar panels, etc. [29]. The main development driver for these start-ups is the opportunity to access the park’s infrastructure and knowledge and technology exchange platform, to create a productive space for creation, open innovation, knowledge and technology exchange by the founders of the park, and to form an ecosystem that aims at cooperation between big business, start-ups, and society. Since open innovations are closely linked to learning and research, the founders of the park assign an important role to educational projects: A unit school of business, a Win-win club start-up centre and a Sector X Acceleration hub, with conference and event rooms available for residents.

UNIT.City hosts specialised platforms dedicated to the innovative development of various, including socially important, economic sectors (e.g., AGRITECH UNIT – a platform to support agri-tech business) and healthcare technology (NODUS – a neuro-rehabilitation research and development centre). The Innovation Park has a sharing code, which, according to the founders, means that residents of the town give each other access to their laboratories and facilities. For example, Sensorama, a company specialising in virtual and augmented reality, gives other residents access to their laboratory. UNIT.City as of 2021, had 110 residents and became an example of a community of like-minded people who share common values.

The case study under consideration offers the following conclusions:

1. In over 30 years of independence and a market economy, Ukrainian society has shown itself capable of generating citizens with a values-based worldview and ready for innovative thinking and social business.

2. Ukraine has the demand for innovation and the potential to move from outsourcing in technology to creating a national product and even attracting developers from other countries to work in Ukraine.

3. UNIT.City is the embodiment of transfer to a new economic order, a unique for the post-Soviet space example of compliance with global economic trends, adapted to the peculiarities of the national market.

4. The ecosystem reflects the essence of sustainable innovation (people, planet, profit) and is an example of an established community that has implemented the idea of social responsibility as a starting point for innovative entrepreneurship development.

5. The focus on universal issues and demands (green energy, eco-technology, etc.) creates the conditions for UNIT.City-based start-ups to enter global markets.

Thus, in today’s world, given growing digitalisation and globalisation, as well as increased competition in both local and global markets, the basis for innovative development is primarily a free market economy and a balance between the interests of business and society (win-win), regulated by citizens and non-profit organisations, which in the long term opens new development opportunities for business and provides competitive advantages, while allowing society to meet primary needs and develop in line with its established values and norms. Corporate social responsibility practices create an enabling environment for inclusive innovation, sharing knowledge, technology and expertise, reinforcing the importance of non-financial capital and opening opportunities for small and medium-sized businesses to access global markets.

The results of this study, which focus on social responsibility as a basis for innovative entrepreneurship development, provide insight into the co-dependency of business and society and the link between CSR practices and innovative development. These findings align with and expand upon existing literature in several ways. Firstly, Ar and Abbas [19] emphasized the role of CSR projects in supporting multinational enterprises' reputation-building efforts, which resonates with the idea presented in this study that public communication for the purpose of implementing CSR demonstrates a business's commitment to societal values, norms, and traditions. Wei et al. [30] and Carroll and Brown [31] provide an overview of CSR concepts, research, and issues, and our study contributes by highlighting the importance of open innovation in sustainable development, as supported by Payán-Sánchez et al. [32].

Odewale [16] discusses the consideration of sustainability in project management and technological innovation for organizational strategy, while Potocan [33] addresses the connection between technology and CSR. Our research further substantiates these findings by suggesting that CSR practices can be a driving force for increasing competitiveness, productivity, and added value of goods and services while introducing innovation. Raiko and Podrez [34] argue that social responsibility is a tool for managing the sustainable development of an industrial enterprise. This notion is consistent with our conclusions that implementing CSR practices can lead to sustainable development and co-evolution with society for both large corporations and small-to-medium-sized businesses.

Furthermore, Wei et al. [30] and Ragulina et al. [26] highlight the impact of CSR on banks' financial performance and the relationship between CSR and innovative activities. Rongbin et al. [13] explore the relationship between environmental CSR and green innovative behavior, while Tao and Mao [7] investigate the link between CSR and corporate performance in small and medium-sized enterprises. These studies align with our findings that emphasize the importance of CSR in fostering innovative development. Finally, Ramdhan et al. [10] discuss the role of internal CSR in employee well-being and job performance, while Maali et al. [11] investigate the mediating effect of CSR on the relationship between corporate governance and sustainability performance. Li [35] examines the impact of CSR on enterprise performance. These studies complement our research by highlighting the various ways CSR can contribute to the success of businesses and the well-being of their employees [36].

Overall, this study provides a more comprehensive understanding of the role of CSR in promoting innovative entrepreneurship development. However, it is important to note that the research is primarily based on the Ukrainian context, which may limit its applicability to other settings. Future research directions include investigating CSR as a mechanism for the innovative development of entrepreneurship, analyzing case studies from Ukrainian and global perspectives, and examining the interdisciplinary discourse on social responsibility.