Journal of Business Ethics

, Volume 118, Issue 2, pp 395–412 | Cite as

Corporate Social Responsibility and Its Impact on Firms’ Investment Policy, Organizational Structure, and Performance

  • Otgontsetseg Erhemjamts
  • Qian Li
  • Anand Venkateswaran
Article

Abstract

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.

Keywords

Corporate social responsibility Firm performance Investment policy Organizational strategy 

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Copyright information

© Springer Science+Business Media Dordrecht 2012

Authors and Affiliations

  • Otgontsetseg Erhemjamts
    • 1
  • Qian Li
    • 2
  • Anand Venkateswaran
    • 3
  1. 1.Bentley UniversityWalthamUSA
  2. 2.Dillard College of Business AdministrationMidwestern State UniversityWichita FallsUSA
  3. 3.College of BusinessNortheastern UniversityBostonUSA

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