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The double-edged sword effect of government-initiated CSR on organizational profitability: Moderating roles of slack resources and competition intensity

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Abstract

This study aims to shed light on the bright and dark sides of government-initiated corporate social responsibility (CSR) on organizational profitability in emerging markets. Building on insights from agency theory, we investigate how a government-initiated campaign targeting poverty alleviation in China influences current profitability (i.e., financial performance) and potential profitability (i.e., innovation intensity) and further examine the moderating effects of slack resources and competition intensity. Based on a sample of 1,125 listed firms in China from 2016 to 2019, our study finds that government-initiated CSR promotes financial performance while decreasing innovation intensity. Moreover, the positive influence of government-initiated CSR on financial performance is weaker for firms with greater levels of slack resources. In addition, in fiercely competitive environments, the negative relationship between government-initiated CSR and innovation intensity becomes more adverse. By demonstrating the double-edged role of government-initiated CSR, our findings contribute to the CSR literature and provide managerial implications for executives.

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Data Availability

The data that support the findings of this study are available from the corresponding author, Mengyang Wang (wangmengyang@hust.edu.cn), upon reasonable request.

Notes

  1. The 17 goals are listed in:

    https://sdgs.un.org/publications/17-sustainable-development-goals-17-partnerships-17979

  2. World Bank Annual Report 2019, available at: https://openknowledge.worldbank.org/handle/10986/32333

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Supported by “the Fundamental Research Funds for the Central Universities”, HUST: 2019kfyXJJS042.

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Authors and Affiliations

  1. School of Management, Huazhong University of Science and Technology, Wuhan, China

    Ziyu Zhao & Mengyang Wang

  2. School of Business Administration, South China University of Technology, Guangzhou, China

    Qiyuan Zhang

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  1. Ziyu Zhao
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Correspondence to Mengyang Wang.

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Zhao, Z., Wang, M. & Zhang, Q. The double-edged sword effect of government-initiated CSR on organizational profitability: Moderating roles of slack resources and competition intensity. Asia Pac J Manag (2023). https://doi.org/10.1007/s10490-023-09905-5

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