In this paper, we examine the relation between corporate social responsibility (CSR) and firm risk in controversial industry sectors. We develop and test two competing hypotheses of risk reduction and window dressing. Employing an extensive U.S. sample during the 1991-2010 period from controversial industry firms, such as alcohol, tobacco, gambling, and others, we find that CSR engagement inversely affects firm risk after controlling for various firm characteristics. To deal with endogeneity issue, we adopt a system equation approach and difference regressions (...) and continue to find that CSR engagement of firms in controversial industry sectors negatively affects firm risk. To examine the premise that firm risk is more of an issue for controversial firms, we further examine the difference between non-controversial and controversial firm samples, and find that the effect of risk reduction through CSR engagement is more economically and statistically significant in controversial industry firms than in non-controversial industry firms. These findings support the risk-reduction hypothesis, but not the window-dressing hypothesis, and the notion that the top management of U.S. firms in controversial industries is, in general, risk averse and that their CSR engagement helps their risk management efforts. (shrink)

In this study, we examine the empirical association between corporate social responsibility and information asymmetry by investigating their simultaneous and endogenous effects. Employing an extensive U.S. sample, we find an inverse association between CSR engagement and the proxies of information asymmetry after controlling for various firm characteristics. The results hold using 2SLS considering the reverse side of information asymmetry influencing CSR activities. The results also hold after mitigating endogeneity based on the dynamic panel system generalized method of moment. Furthermore, the (...) CSR–information asymmetry relation is amplified in high-risk firms due to managers’ efforts to build a good reputation. Last, we find that CSR engagement is inversely associated with reputational risk measure and lower predicted value of reputational risk is positively associated with lower information asymmetry measures. We interpret these results as supporting the stakeholder theory-based, reputation-building explanation that considers CSR engagement as a vehicle to build and maintain firm reputation thereby enhancing the information environment. (shrink)

This article presents the results of an inductive, interpretive case study. We have adopted a narrative approach to the analysis of organizational processes in order to explore how individuals in a financial institution dealt with relatively novel issues of corporate social responsibility (CSR). The narratives that we reconstruct, which we label 'idealism and altruism', 'economics and expedience' and 'ignorance and cynicism' illustrate how people in the specific organizational context of a bank ('Credit Line') sought to cope with an attempt at (...) narrative imposition. In particular, our work exemplifies how people in organizations draw on shared discursive resources in order to make sense of themselves and their organizations. We illustrate how many people within the bank found it hard to integrate the normative case for CSR with their version of a narrative identity which had, and continued to be, centred on economic imperatives for new initiatives. Our article demonstrates both the value of the analysis of shared narratives, and represents an attempt to deal adequately with the polyphony of organizational voices, in case studies of CSR. (shrink)

This study examines how the sell-side analysts interpret firms’ corporate social responsibility activities. Specifically, we examine the differential impact of overall, legal, and normative CSR on the analysts’ earnings forecast dispersion, stock return volatility, cost of equity capital, and firm value. Employing a sample of U.S. public firms during 1993–2009, we find that overall CSR intensities reduce analyst dispersion of earnings forecast, volatility of stock return and cost of capital , and increase firm value. However, its impact is reduced for (...) firms with better accounting and disclosure quality. When we disaggregate CSR into legal and normative CSR, we find that legal CSR decreases analysts’ dispersion, stock return volatility, and COC, while legal CSR increases firm value. The sell-side analysts tend to have less information asymmetry regarding the net benefits of pursuing CSR that is required by laws. We find, however, that the benefit of having normative CSR realized in 1 year lag such that analyst dispersion, stock return volatility, COC decrease, respectively, and firm value increases. Furthermore, we find that the benefit of normative CSR is offset for firms with higher accounting and disclosure quality. (shrink)

Many researchers believe the tremendous industrial development over the past two centuries is unsustainable because it has led to unintended ecological deterioration. Despite the ever-growing attention sustainable supply-chain management has received, most SSCM research and models look at the consequences, rather than the antecedents or motives of such responsible practices. The few studies that explore corporate motives have remained largely qualitative, and large-scale empirical analyses are scarce. Drawing on multiple theories and combining supply-chain and business ethics literature, we purport that (...) instrumental, relational, and moral motives are behind a firm’s engagement in SSCM practices. Specifically, we examine the links between corporate motives, SSCM practices, and firm performance. Using a sample of 259 supply-chain firms in Germany, we empirically test five hypothesized relationships. Our results reveal that relational and moral motives are key drivers, and that firms exhibiting high levels of moral obligations tend to outperform those primarily driven by amoral considerations. Findings of this study contribute to multiple literatures espousing sustainability management and can help policy makers, stakeholder groups, and scholars develop more robust strategies for encouraging firms to practice SSCM. (shrink)

Neoclassical and Austrian/evolutionary economic paradigms have different implications for integrating corporate social responsibility (corporate citizenship) and competitive strategy. porter's "Five Forces" model implicitly rests on neoclassical theory of the firm and is not easily reconciled with corporate social responsibility. Resource-based models of competitive strategy do not explicitly embrace a particular economic paradigm, but to the extent their conceptualization rests on neoclassical assumptions such as imperfect factor markets and profits as rents, these models also imply a trade-off between competitive advantage and (...) corporate social responsibility. Differences in Austrian/evolutionary economic model's assumptions about equilibrium, profits, and other economic concepts allow this paradigm to embrace alternative views of strategy such as the activities or dynamic capabilities views. These alternative views of strategy focus on learning and adaptation; they align more easily with corporate social responsibility. In practice this alignment comes about because social engagement facilitates the learning and adaptation that are a source of competitive advantage. Among the many business arguments for CSR such as improved employee morale/productivity or brand differentiation, this view prioritizes innovation. (shrink)

This study contributes to the corporate social responsibility, stakeholder theory, and executive succession literature by examining the effect of corporate social irresponsibility on strategic leadership turnover. We theorize that firms’ CSiR increases the likelihood of executive turnover. We also investigate the nature of succession and successor origin following CSiR. We further examine how the CSiR–CEO succession relationship is moderated by firm visibility to stakeholders and industry dynamism. Our results, based on a dataset of 248 U.S. public firms between 2001 and (...) 2008, provide evidence that firms’ CSiR affects what is conventionally seen as primarily a market-driven decision on executive turnover, especially when firms operate in a more dynamic industry. Research contributions and implications are discussed. (shrink)

Research suggests that international assignment experience enhances awareness of societal stakeholders, influences personal values, and provides rare and valuable resources. Based on these arguments, we hypothesize that CEO international assignment experience will lead to increased corporate social performance (CSP) and will be moderated by the CEO's functional background. Using a sample of 393 CEOs of S&P 500 companies and three independent data sources, we find that CEO international assignment experience is positively related to CSP and is significantly moderated by the (...) CEO's functional background. Specifically, CEOs with international assignment experience and an output functional background (e.g., marketing and sales) are positively associated with greater CSP. (shrink)

In this study, we examine the relation between corporate environmental responsibility and risk in U.S. public firms. We develop and test the risk-reduction, resource-constraint, and cross-industry variation hypotheses. Using an extensive U.S. sample during the 1991–2012 period, we find that for U.S. industries as a whole, CER engagement inversely affects firm risk after controlling for various firm characteristics. The result remains robust when we use firm fixed effect or an alternative measure of CER using principal component analysis or downside risk (...) measures. To address the concern of endogeneity bias, we use a system equations approach and dynamic system generalized methods of moment regressions, and continue to find that environmentally responsible firms experience lower risk. These findings support the risk-reduction hypothesis, but not the resource-constraint hypothesis, along with the notion that the top management in U.S. firms is generally risk averse and that their CER engagement facilitates their risk management efforts. Our cross-industry analysis further reveals that the inverse CER-risk association mainly comes from the manufacturing sector, whereas in the service sector, CER tends to increase firm risk. (shrink)

This article tracks Corporate Social Responsibility (CSR) as an emergent organizational process that places the employee at its center. Predominantly, research on CSR tends to focus on external pressures and outcomes leading to a neglect of CSR as a dynamic and developing process that relies on the involvement of the employee as a major stakeholder in its co-creation and implementation. Utilizing case study data drawn from a study of a large multinational energy company, we explore how management relies on employees' (...) interaction with CSR as the process of initiation → implementation → maturation develops. Employee involvement grows from a minor element in the CSR initiation stage to a vital contributory factor in CSR's success in the later stages of the process. The article offers new insights into a processual and interactional approach to CSR that accounts for the actions of different actors involved at each stage. Most unusually, it also recognizes the dual impact this has on broader issues concerning the management and involvement of employees through CSR actions, and gaining legitimacy in the eyes of not only external stakeholders but internal too. (shrink)

We explore corporate environmental accountability by examining how carbon emissions affect voluntary climate-related information disclosure based on TCFD principles. Using computerized textual analysis to measure such climate-related disclosure, our results show that firms with higher levels of carbon emissions disclose more climate-related information. This relation is stronger in firms belonging to carbon-intensive industries, such as energy, materials, and utilities. We also examine this relationship at the category level for Governance, Strategy, Risk Management, and Metrics and Targets, finding that carbon emissions (...) drive disclosure in all categories except in Governance. Overall, our findings indicate that high carbon emitting firms appear to discharge their corporate accountability by increasing climate-related disclosure, consistent with legitimizing their potentially unethical actions and submitting to stakeholder and societal pressure. (shrink)

We aggregate different dimensions of corporate social responsibility (CSR) activities following the stakeholder framework proposed in Clarkson (Acad Manag Rev 20(1), 92–117, 1995) and present consistent evidence that CSR strengths targeting different stakeholders have their unique impact on firm risk and financial performance. Institutional CSR activities that target secondary stakeholders are negatively associated with firm risk, measured by total risk and systematic risk. Technical CSR that target primary stakeholders are positively associated with firm financial performance, measured by Tobin’s Q, ROA, (...) and cash flow returns. Our results, based on a sample of S&P 500 component firms over the period of 1995–2009, are consistent with the risk management view of “altruistic” CSR activities and with the stakeholder salience theory. We also show that the impact of CSR activities on risk varies with the ethical climate, as proved in our subsample analyses on pre- and post-Sarbanes–Oxley periods. Our empirical analyses mitigate possible omitted variables and endogeneity concerns that are often overlooked in previous research. Our findings are robust to alternative CSR measures, to alternative risk and performance measures, and to alternative estimation methods. (shrink)

The influence of corporate social performance on stakeholders is one of the focal issues in corporate social responsibility research. Using data of listed companies in China, this paper examines whether CSR behavior in the form of charitable donations garners a positive reaction from suppliers. Results derived from both level and change model regressions show that superior CSP makes it easier for a firm to obtain trade credit from suppliers, although the effect is significant only in non-state-owned enterprises. The results are (...) robust to various measures of CSP and endogeneity tests. The results support the strategic philanthropy view and apply stakeholder theory in supply chain, that strategic CSR can help firms to attract suppliers and consolidate cooperative relationships with them, which in turn benefits the firms in terms of more trade credit financing from suppliers. This paper also shows that state-owned enterprises and non-SOEs have different CSR intentions and use CSR to achieve strategic goals in different ways. The conclusions drawn from this study provide practical guidance on CSR strategy, suggesting that CSR activities can help a firm in transition economies to enhance its corporate image, establish and consolidate the good relationship with suppliers, and obtain economic benefits or achieve long-term business objectives. (shrink)

We examine the link between a firm’s environmental and social disclosures and measures of its risk including total, systematic, and idiosyncratic risk. While we do not find any link between a firm’s E and S disclosures and its systematic risk, we find a negative and significant association between these disclosures and a firm’s total and idiosyncratic risk. These are novel findings and are consistent with the predictions of the stakeholder theory and the resource-based view of the firm suggesting that firms (...) which make extensive and objective E and S disclosures promote corporate transparency that can help them build a positive reputation and trust with their stakeholders. This in turn can help mitigate the firms' idiosyncratic/operational risk. These findings are important for all corporate stakeholders including managers, employees, and suppliers who have a significant economic interest in the survival and success of the firm. (shrink)

This paper studies the influence of an organization’s time perspective on triple bottom line deployment through sustainable innovativeness. Although academics increasingly consider sustainable innovation to be an essential element in deploying the triple bottom line, the degree of an organization’s sustainable innovativeness remains limited. Using ten inductive case studies based on the triangulation of data from multiple-respondent interviews and secondary data, this study shows that an organization’s time perspective plays a crucial role in explaining the organization’s degree of sustainable innovativeness (...) and improvement of triple bottom line outcomes. Specifically, organizations with a longer planning horizon, higher tolerance of uncertainty, and greater ability to learn from the past develop a higher and increasing degree of sustainable innovativeness, allowing trade-offs between triple bottom line dimensions to be mitigated. (shrink)

The World Bank recently noted: “Social license to operate has traditionally referred to the conduct of firms with regard to the impact on local communities and the environment, but the definition has expanded in recent years to include issues related to worker and human rights”. In this paper, we examine a factor that can influence the kind of work conditions that can facilitate or obstruct a firm’s attempts to achieve the social license to operate. Specifically, we examine the empirical association (...) between a company’s employee practices and the religiosity of its local community by investigating their fixed and endogenous effects. Using a large and extensive U.S. sample, we find a positive association between the “employee friendly” practices of a firm and the religiosity of the local community after controlling for several firm characteristics. In addition, after mitigating endogeneity with the dynamic panel system generalized method of moment and after employing several other econometric tests, we still find a robust positive association between the religiosity of the local community and employee-friendly practices. Since recent research has shown that the firm’s treatment of its stakeholders is a key to achieving an SLO, and since employees constitute a highly significant stakeholder group, we interpret our results as supporting the view that religion is an important influence on the kinds of employee practices that can increase the likelihood that a firm will acquire the SLO. (shrink)

Using the behavioral agency model, we analyze how two compensation design characteristics, pay-performance sensitivity and duration of CEO compensation, affect corporate social performance. We find that the performance sensitivity of CEO pay is negatively associated with poor social performance but also negatively affects strong social performance. These results suggest that pay-performance sensitivity increases the relevance of potential negative consequences of poor social performance. However, the ‘insurance’ benefits of strong social performance may also become less relevant. With respect to the duration (...) of CEO compensation, we find that it reduces poor social performance. This finding confirms arguments that a long-term compensation time horizon increases the perceived threat that the negative effects of poor social performance will become visible. With our findings, we integrate behavioral agency theory with the traditional stakeholder views. (shrink)

The literature on antecedents of corporate social responsibility strategies of firms has been predominately content driven. Informed by the managerial sense-making process perspective, we develop a contingency theoretical framework explaining how political ideology of managers affects the choice of CSR strategy for their firms through their CSR mindset. We also explain to what extent the outcome of this process is shaped by the firm’s internal institutional arrangements and external factors impacting on the firm. We develop and test several hypotheses using (...) data collected from 129 Chinese managers. The results show that managers with a stronger socialist ideology are likely to develop a mindset favouring CSR, which induces the adoption of a proactive CSR strategy. The CSR mindset mediates the link between socialist ideology and CSR strategy. The strength of the relationship between the CSR mindset and the choice of CSR strategy is moderated by customer response to CSR, industry competition, the role of government, and CSR-related managerial incentives. (shrink)

Ethical codes have been hailed as an explicit vehicle for achieving more sustainable and defensible organizational practice. Nonetheless, when legal compliance and corporate governance codes are conflated, codes can be used to define organizational interests ostentatiously by stipulating norms for employee ethics. Such codes have a largely cosmetic and insurance function, acting subtly and strategically to control organizational risk management and protection. In this paper, we conduct a genealogical discourse analysis of a representative code of ethics from an international corporation (...) to understand how management frames expectations of compliance. Our contribution is to articulate the problems inherent in codes of ethics, and we make some recommendations to address these to benefit both an organization and its employees. In this way, we show how a code of ethics can provide a foundation for ethical sustainability, while addressing management intentions and employees’ ethical satisfaction. (shrink)

This study fills an important gap in the literature by providing causal evidence of the impact of relaxing financial constraints on corporate social responsibility (CSR). To isolate this causal link, we examine the enactment of anti-recharacterization laws in some U.S. states, an exogenous shock that has strengthened creditor rights and eased financial constraints of the treated firms. Our difference-in-difference analysis suggests that relaxing financial constraints leads to higher CSR. This evidence is more pronounced in financially constrained firms, firms with more (...) analyst dispersion and increased volatility of cash flows. We also find that the most impacted firms are those with increased post-shock debt financing. In sum, our evidence suggests that easing access to external finance drives corporate goodness, in particular in firms that value external financing. (shrink)

Firms engage in social responsibility activities for diverse reasons. This study focuses on understanding firms' instrumental motivations for engaging in socially responsible activities. We suggest that the instrumental motivations underlying firms' corporate social responsibility engagement are associated with their market, learning, and risk-related behaviors; thus, we identify market orientation, learning orientation, and risk-taking attitudes as three constructs that influence firms' CSR engagement. This research was conducted in the Norwegian firewood sector, in which CSR expectations are high and in which we (...) expect CSR engagement to be encouraged by both instrumental and normative motivations. The firms in this study are micro-firms with fewer than 10 employees and represent an important but highly neglected segment of firms in CSR research. Data obtained from 230 firms were analyzed using structural equation modeling. Our results indicate that market orientation, learning orientation, and risk-taking attitudes affect social responsibility toward different stakeholder groups in different ways. In some cases, the size and age of firms also affect these relationships. (shrink)

In this paper, the process for firms to decide whether or not to invest in corporate social responsibility is treated from a real option perspective. We extend the Husted framework with an important extra parameter that allows us to understand the timing of CSR investment and explain why some companies drag their feet over CSR investments. Our model explicitly allows for the impact of the opportunity cost of delaying the CSR investment decision, providing firms with tools to determine the optimal (...) moment of exercising the CSR investment option. We illustrate our timing model through a case study and analyze governmental support strategies for CSR from a real options perspective. (shrink)

The role of uncertainty within an organization’s environment features prominently in the business ethics and management literature, but how corporate investment decisions should proceed in the face of uncertainties relating to the natural environment is less discussed. From the perspective of ecological economics, the salience of ecology-induced issues challenges management to address new types of uncertainties. These pertain to constraints within the natural environment as well as to institutional action aimed at conserving the natural environment. We derive six areas of (...) ecology-induced uncertainties and propose ecology-driven real options as a conceptual approach for systematically incorporating these uncertainties into strategic management. We combine our results in an integrative investment framework and illustrate its application with the case of carbon constraints. (shrink)

Corporate social responsibility involvement and disclosure has been becoming increasingly popular among US public firms, including those that qualify as real estate investment trusts. This paper aims to discover the relationship between CSR involvement and potential determinants such as growth opportunities, profitability, visibility, and agency costs. Types of CSR involvement are assessed in terms of environmental, community, and governance disclosures and are quantified using word count from the company’s voluntary disclosure. Our results support the hypothesis that CSR has a strategic (...) element and that REITs have greater CSR involvement when they have greater growth and investment opportunities. When the type of disclosure is broken into subcategories, the results show that not all dimensions of CSR are alike: environmental, community, and governance CSR disclosures appear to be motivated by different sets of incentives and reasons. (shrink)

In this article we explore the conceptual relationship between corporate social responsibility (CSR) orientation and real option reasoning. We argue that the firm's attitude, communication, and behavior toward CSR will act as significant determinants to the firm's sensemaking approach to real options; that is, if and how it (the firm) acknowledges, receives, and manages strategic real options. Integrating the previous work of Basu and Palazzo with Barnett, we propose a new model that extends the influence of CSR orientation/character to general (...) strategic decision making while simultaneously developing the attention‐based view to real options. (shrink)

Recent research suggests that corporate social responsibility is institutionalised amongst multinational corporations. Yet CSR scholarship faces considerable challenges. An agreed definition is lacking, even amongst researchers adopting aligned approaches. Studies remain heavily focused on making a business case for CSR, despite its widespread acceptance into business practice. Few studies examine CSR’s on-ground implications for the communities it purports to help, favouring instead a macro-level focus. And concerns about CSR’s sincerity, motivations and ethics perpetuate questions about its integrity. This article argues (...) that new institutionalism is well placed to respond to these core challenges for CSR, and that new institutionalist perspectives can complement and enrich other common theoretical approaches. It contributes a social mechanism-based framework for CSR, identifying and exploring the key social mechanisms that institutionalise it; namely, discourse, mimesis, normative learning and coercion. Understanding CSR as an institution facilitates new and different explorations of its causes and effects and opens new avenues for scholarly inquiry. Illustrative examples from a 3.5-year study of CSR in the global mining industry are presented to explore the implications of CSR as an institution and to suggest pathways for innovative research. (shrink)

Although enterprise risk management (ERM) has many benefits for corporations, there has been virtually no discussion of the extent to which its practice may be said to constitute corporate social responsibility. This article presents a prima facie case for the convergence of the two and examines this case through a consideration of four possible objections or challenges. The conclusion of this article is a tempered optimism that ERM has the significant, but as yet untapped, potential to constitute socially responsible activity, (...) which, if realized, would enable Adam Smith's invisible hand of the marketplace to have an expanded sweep. (shrink)

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. (shrink)

Managing stakeholders is an important managerial aspect of corporate social responsibility. Employee stakeholder is one of the primary stakeholders that are critical to a company. Previous studies have shown inconclusive findings regarding the performance impact of managing this stakeholder, with some identifying little impact while others finding a positive association. This study further explores this issue in the context of foreign companies' subsidiaries in China. A potential mediating mechanism (i. e., customer orientation) between employee stakeholder orientation and performance (both financial (...) performance and innovation performance) was proposed; a sample of 103 Chinese subsidiaries of foreign companies which have new product development responsibilities was used to test hypotheses. A subsidiary's employee orientation was found to show a significant positive relationship with its product innovation performance, but no significant relationship with its financial results. Moreover, employee orientation showed a significant indirect relationship with both performance outcomes through customer orientation. (shrink)

This study investigates the persuasive advertising and informative advertising effects of CSR initiatives on corporate reputation and brand equity based on the evidence from the life insurance industry in Taiwan. The study finds, first, policyholders’ perceptions concerning the CSR initiatives of life insurance companies have positive effects on customer satisfaction, corporate reputation, and brand equity. Second, the advertising effects of the CSR initiatives on corporate reputation are only informative. Third, the impacts of CSR initiatives on brand equity include informative advertising (...) and persuasive advertising effects. This study contributes the literature by explicit defining the advertising effects of CSR initiatives. Following the first step made by McWilliams et al. (Journal of Management Studies 43(1):1–18, 2006 ), the hypotheses of this study crystallize their conceptual framework. The obtained results in this research first identify the informative advertising effects and persuasive advertising effects of CSR initiatives. (shrink)

Integrating corporate social responsibility (CSR) initiatives in business is one of the great challenges facing firms today. Societal stakeholders require much more from the firm than pursuing profitability and growth. But these societal stakeholders often simply assume that increased societal expectations can easily be accommodated within efficiently run business operations, without much attention devoted to process issues. We build upon the core—periphery thesis to explore potential avenues for firms to add recurring CSR initiatives to their existing business practices. Based on (...) Siggelkow's (Admin Sei Quart 47: 125-159, 2002) analysis of organizational change, we conceptualize seven major patterns of CSR initiative adoption. We develop a new organizing framework showing how a firm can integrate CSR initiatives in business. Within the new framework, each of the seven patterns represents an idiosyncratic path through which recurring CSR initiatives can be included as practices into conventional operations. We also explore the nature of the resulting internal fit between recurring CSR initiatives and business practices. (shrink)

This article outlines the results of an inquiry into the nature of entrepreneurial commitment to social responsibility as a business philosophy. Findings show that the respondents, as a group, reported a strong orientation to this view. Several social responsibility topics emerge in a position of special prominence to entrepreneurs, and their preferences for these topics do not widely vary. Furthermore, the degree of attachment to social responsibility, as an operational construct, correlates with several demographic and psychographic dimensions.