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

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  • Hemantha S. B. Herath

    (Brock University)

  • Tejaswini C. Herath

    (Brock University)

  • Paul Dunn

    (Brock University)

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.

Suggested Citation

  • Hemantha S. B. Herath & Tejaswini C. Herath & Paul Dunn, 2019. "Profit-Driven Corporate Social Responsibility as a Bayesian Real Option in Green Computing," Journal of Business Ethics, Springer, vol. 158(2), pages 387-402, August.
    • Handle: RePEc:kap:jbuset:v:158:y:2019:i:2:d:10.1007_s10551-017-3705-1
    DOI: 10.1007/s10551-017-3705-1
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    Cited by:

    1. James R. Barth & Hemantha S. B. Herath & Tejaswini C. Herath & Pei Xu, 2020. "Cryptocurrency valuation and ethics: a text analytic approach," Journal of Management Analytics, Taylor & Francis Journals, vol. 7(3), pages 367-388, July.

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