This paper argues that research on the business case for corporate social responsibility (CSR) must account for the path dependent nature of firm-stakeholderrelations, and develops the construct of stakeholder influence capacity (SIC) to fill this void. SIC helps to explain why the effects of CSR on corporate financial performance (CFP) vary across firms and across time, therein providing a missing link in the study of the business case. This paper distinguishes CSR from related and confounded corporate resource allocations and from (...) corporate social performance (CSP), then incorporates SIC into a model that explains how acts of CSR are transformed into CFP through stakeholder relationships. This paper also develops a set of propositions to aid future research on the contingencies that produce variable financial returns to investments in CSR. (shrink)

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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)

This article studies how financial investors respond to firms' corporate social responsibility (CSR) performance in terms of their investing behaviors, and how such behaviors change contingent on an event that provokes their attention and concerns to CSR. Using the melamine contamination incident in China as a natural experiment, it is found that neither the individual investors' nor the institutional investors' behaviors are influenced by firms' CSR performance before the incident. Nevertheless, in the post-event period, institutional investors' behaviors are significantly influenced (...) by firms' CSR performance that exceeds a certain threshold. Furthermore, such an effect diminishes for a better CSR performance. In comparison, the authors do not find any effects of CSR performance on individual investors, either before the event or after the event. Finally, firms' performance and investors' behaviors jointly affect firms' stock returns after the event but not before the event. This article reconciles the mixed findings in the literature on the effect of firms' CSR performance on their financial performance by showing that such an effect exists in a contingent manner. Furthermore, the authors show that a too low or a too high CSR performance could lead to undesirable responses from investors. Therefore, managers should pay attention to optimizing firms' CSR activities. (shrink)