The empirical relationship between a firm’s social performance and its financial performance is still not well established in the literature. Despite more than 30 years of research and more than 100 empirical studies on the issue, the results are still mixed. We argue that the heterogeneous results found in previous studies are not due exclusively to problems related with the measurement instruments or the samples used. Instead, we posit that a more fundamental problem related with the endogeneity of social strategic (...) decisions could be driving most of the empirical findings. We show that, using a panel data of 658 firms from 1991 to 2005, how some of the results found in previous research change, and some are even reversed when endogeneity is properly taken into account. (shrink)

This study examines the determinants of corporate social responsibility (CSR) and its implications on firms’ investment policy, organizational strategy, and performance. First, we find that firms with better performance, higher R&D intensity, better financial health, and firms in new economy industries are more likely to engage in CSR activities, while riskier firms are less likely to do so. We also find U-shaped relation between firm size and CSR, indicating that either very small or very large firms exhibit high levels of (...) CSR strengths and concerns. Next, we find that firms’ CSR strengths relate favorably with their investments, organizational strategy, and performance, whereas CSR concerns and firm attributes are by and large negatively related. Using a 2SLS procedure, we verify that the CSR–performance relation is robust to corrections for endogeneity through reverse causation and/or biases introduced by time varying omitted variables. Finally, we find that the CSR–firm attributes relation is strengthened when the CEO’s incentives are below the sample median, suggesting that CSR participation is especially important when monetary incentives are lower than benchmark levels. (shrink)

The contribution of this work is a classification of corporate social action underlying the Social Ratings Data compiled by Kinder Lydenburg Domini Analytics, Inc. We compare extant typologies of corporate social action to the results of our exploratory factor analysis. Our findings indicate four distinct latent constructs that bear resemblance to concepts discussed in prior literature. Akey finding of our research is that positive and negative social action are both empirically and conceptually distinct constructs and should not be combined in (...) future research. Additionally, we recommend that some prior research results be reconsidered to determine whether these newly derived measures might clarify some previous findings. (shrink)

In spite of extensive research on corporate social responsibility (CSR) and its link with economic and social performance, few studies have investigated the institutional determinants of CSR. This article draws upon neo-institutional theory and comparative institutional analysis to compare the influence of different institutional environments on CSR policies of European firms. On the basis of a dataset of European firms, we find that firms from the more liberal market economies of the Anglo-Saxon countries score higher on most dimensions of CSR (...) than firms in the more coordinated market economies (CMEs) in Continental Europe. This result lends support to the view of voluntary CSR practices in liberal economies as being a substitute for institutionalized forms of stakeholder participation. Meanwhile, CSR tends not to mirror more institutionalized forms of stakeholder coordination. Instead, in CMEs, CSR often takes on more implicit forms. Our analysis also shows that national institutional and sectoral-level factors have an asymmetric effect - strongly influencing the likelihood of firms adopting 'minimum standards' of CSR, but having little influence on the adoption of 'best practices'. (shrink)

Carroll (1991) encouraged researchers in Social Issues Management (SIM) to continue to measure Corporate Social Performance (CSP) from a variety of different perspectives utilizing a variety of different measures. In addition, Wolfe and Aupperle (1991) (and others) have asserted that there is no, single best way to measure CSP and that multiple measures and perspectives help develop the field. However, Pfeffer (1993) suggest that a lack of consistent measurement has constrained organization studies (and by implication, the field of social issues (...) management,) in its development as a field. It may be in the best interest of social issues management researchers to try to development a common body of measures and data. Recently, Kinder, Lydenberg and Domini & Co. (KLD — a social choice investment advisory firm) has made available their social performance database. The KLD data have potential to become a widely accepted set of CSP measures. The purpose of this paper is to present a construct validity study comparing the KLD data to other measures of CSP. (shrink)