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Journal of Business Ethics

, Volume 117, Issue 1, pp 67–83 | Cite as

Do Non-socially Responsible Companies Achieve Legitimacy Through Socially Responsible Actions? The Mediating Effect of Innovation

  • Belen Blanco
  • Encarna Guillamón-Saorín
  • Andrés GuiralEmail author
Article

Abstract

This study investigates the effects on organization’s financial performances of, first, the extent to which the organizations are involved in controversial business activities, and second, their level of social performance. These companies can be considered non-socially responsible given the harmful nature of the activities they are involved in. Managers of these companies may still have incentives to pursue socially responsible actions if they believe that engaging on those actions will help them to achieve legitimacy and improve investors’ perception about them. We develop a comprehensive methodology to investigate these corporate social performance (CSP)-related effects in a complex but specific setting. To this end, we analyze a sample of 202 US firms for the period 2005–2008 using a novel method in this area: partial least squares. Our results indicate that, contrary to the general findings in prior literature, companies involved in controversial business activities which engage in CSP do not directly reduce the negative perception that stakeholders have about them. Instead, we found evidence of a positive mediation effect of CSP on financial market-based performance through innovation.

Keywords

Corporate social performance Financial performance Controversial activities Innovation intensity Partial least squares 

Notes

Acknowledgments

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2012-S1A3A2-2012S1A3A2033412). Encarna Guillamon-Saorin acknowledges financial contribution from the Spanish Ministry of Science and Innovation (ECO2010-19314) and Comunidad Autonoma de Madrid (SEJ2008-00059-003/SEJ2011-00088-001). Belen Blanco acknowledges financial assistance from the Spanish Ministry of Innovation and Science (ECO2010-19314, ECO2008-06238- C02-01/ECON, SEJ2007-67582-C02-02/ECON, ECO2009-10796 and Consolider Grant #2006/04046/002). Andrés Guiral acknowledges financial contribution from the Spanish Ministry of Innovation and Science (research projects SEJ2004-00791ECON, SEJ2007-62215/ECON/FEDER, SEJ 2006-14021, ECO2010-17463 ECON-FEDER).

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Copyright information

© Springer Science+Business Media Dordrecht 2012

Authors and Affiliations

  • Belen Blanco
    • 1
  • Encarna Guillamón-Saorín
    • 2
  • Andrés Guiral
    • 3
    Email author
  1. 1.Universidad de NavarraPamplonaSpain
  2. 2.Universidad Carlos III de MadridMadridSpain
  3. 3.Yonsei University School of BusinessSeoulSouth Korea

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