The Impact of Competitive Strategies on Performance of Banking Sector; The Mediating Role of Corporate Social Responsibility and Operational Excellence

This study examined the mediating role of corporate social responsibility practices and the nexus between the operational excellence of competitive strategies, and performance, for Islamic banks operating in Pakistan. Particularly, two competitive strategies, namely, the cost-sensitive strategy and the differentiation strategy were considered. This study employed a structured questionnaire to collect the data from 512 respondents (361 from fully-fledged Islamic banks, FFIBs, and 151 from Islamic window banks, IWBs). A partial least square–structural equation modeling approach was employed to test the hierarchal component model. As a robustness check, the Gaussian copula approach was used to address the endogeneity issue, and the Partial least square prediction-oriented segmentation approach was adopted to explore the unobserved heterogeneity. The findings showed evidence of complementary partial mediation between competitive strategies and bank performance, channeled through operational excellence. However, corporate social responsibility (CSR) practices partially mediated the relationship between cost-sensitive strategy and bank performance. This study is worthwhile for managers, policy makers and regulatory authorities concerned with religiously conscious corporations.