The state plays a major role in corporate social responsibility (CSR) in emerging and transitional economies and often influences firms through political connection, and hence knowing how firms respond to the state’s CSR initiatives can inform policy making and has important implication on the sustainability of society and environment. However, existent studies show conflicting results on politically connected firms’ CSR participation. We examine the relationship between political endorsement and firms’ engagement in different types of CSR simultaneously. Using a representative sample of more than 1,000 private firms in the early 2000s, we find that politically endorsed firms engage more in philanthropic donation, but less in environmental practices, which impose higher costs and constraints than philanthropy. This is consistent with our explanation that they attempt to maintain legitimacy and discretion through selective engagement in CSR. Our study contributes to research on CSR in transitional economies by reconciling conflicting findings about the CSR engagement of politically connected firms, provides a new lens to illuminate firms’ strategic response in CSR, and has important policy implications.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Examples include ‘The call for contributing to local schools’ by Qujing city’s municipal government, Yunnan province, 2003 (Qujing city municipal government official website, http://www.qj.gov.cn/zcfg/qjgfxwj/ellsnd/200610093648-1.html) and ‘The plan for environmentally sustainable development’ by Foshan city’s municipal government, Guangdong province, 2003 (Foshan city municipal government official website, http://www.foshan.gov.cn/zwgk/fsgb/fsrmzfwj/201009/t20100928_1871268.html).
‘Delegates of People’s Congress in Guangdong Province donated 0.6 billion RMB’ (http://npc.people.com.cn/GB/7359299.html).
The percentage of private firms in the whole sample (91%) was comparable with national statistics: the Ministry of Commerce reported that private firms accounted for 92% of firms nationwide in 2007 (http://www.gov.cn/ztzl/2007-08/10/content_712562.htm). The sampled firms’ profitability (pretax ratio of profit to fixed capital) was 25.2%, similar to the rate (between 20% and 25%) found in Bai et al. (2007).
Given the benefits of obtaining government awards, we can reasonably assume that firms are willing to disclose award information to the public through their own websites or news reports. Information collected on awards is therefore less likely to suffer from a downward bias.
Firms that did not report their donation amount are also coded as 0; omitting these firms from the analysis does not significantly alter our results.
When using the quartile measure, we test two ways of coding the categories for selective engagement. First, we consider firms that spent in the top 25 percentile (high) on corporate donation and in the bottom 25 percentile (low) on environmental protection as dedicated to philanthropy only (category 1). Second, we consider firms that spent in the top 25 percentile (high) on corporate donation and below median on environmental protection as dedicated to philanthropy only. Other categories are coded accordingly. The pattern of findings is the same as reported here.
We code firms that spent at the median level of their same-industry peers as in the above-median group. Coding them in the below-median group does not change our results.
Delegates to the two government bodies are elected directly at the county level and indirectly at the other three levels (prefectural, provincial and national level) by lower-level members. These are part-time positions. Although ‘election’ is involved in the process, political scientists have provided evidence that the candidacy is normally bestowed by the government; thus, there is much room for corporate leaders to strive for such a candidacy-cum-election (O’Brien 1994).
We also try coding them as 1 if state-owned firms were ranked within the top two, and our results remain unchanged.
To predict political endorsement, we include the control variables used in the main analysis and two more variables: the firm’s ownership history (i.e., whether the private firm was transformed from a state-owned enterprise) and the top executive’s past work experience in the government, which may enhance connection with the government and so facilitate obtaining endorsement (O’Brien 1994). In lieu of a measure for previous donations, the two variables of previous CSR plan and membership in CSR-promoting industrial associations provide a reasonable proxy, given the strong association between these variables and corporate donation (Galaskiewicz and Burt 1991).
Government awards are based on criteria different from awards that are determined by consumers or peers. Awards granted by the government or its agencies are based mostly on the impact that firms have on local development, whereas professional associations typically award firms based on their product or capability.
Adegbite, E., Amaeshi, K., & Amao, O. (2012). The politics of shareholder activism in Nigeria. Journal of Business Ethics, 105(3), 389–402.
Amaeshi, K., Adegbite, E., Ogbechie, C., Idemudia, U., Kan, K. A. S., Issa, M., et al. (2016a). Corporate social responsibility in SMEs: A shift from philanthropy to institutional works? Journal of Business Ethics, 138(2), 385–400.
Amaeshi, K., Adegbite, E., & Rajwani, T. (2016b). Corporate social responsibility in challenging and non-enabling institutional contexts: Do institutional voids matter? Journal of Business Ethics, 134(1), 135–153.
Atkinson, L., & Galaskiewicz, J. (1988). Stock ownership and company contributions to charity. Administrative Science Quarterly, 33, 82–100.
Bai, C., Xie, C., & Qian, Y. (2007). China’s rate of return to capital. Comparative Studies, 28, 1–22.
Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. The Academy of Management Journal, 43(4), 717–736.
Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42(5), 488–506.
Bromley, P., & Powell, W. W. (2012). From smoke and mirrors to walking the talk: Decoupling in the contemporary world. The Academy of Management Annals, 6(1), 483–530.
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967.
Cheng, Z., Wang, F., Keung, C., & Bai, Y. (2017). Will corporate political connection influence the environmental information disclosure level? based on the panel data of a-shares from listed companies in Shanghai Stock Market. Journal of Business Ethics, 143(1), 209–221.
Christmann, P., & Taylor, G. (2001). Globalization and the environment: Determinants of firm self-regulation in China. Journal of International Business Studies, 32(3), 439–458.
Dickson, B. J. (2003). Red capitalists in China: The party, private entrepreneurs, and prospects for political change. Cambridge: Cambridge University Press.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.
Du, X. (2015). Is corporate philanthropy used as environmental misconduct dressing? Evidence from chinese family-owned firms. Journal of Business Ethics, 129(2), 341–361.
Du, X., Jian, W., Du, Y., Feng, W., & Zeng, Q. (2014a). Religion, the nature of ultimate owner, and corporate philanthropic giving: Evidence from China. Journal of Business Ethics, 123(2), 235–256.
Du, X., Jian, W., Zeng, Q., & Du, Y. (2014b). Corporate environmental responsibility in polluting industries: Does religion matter? Journal of Business Ethics, 124(3), 485–507.
Fisman, R., & Wei, S. J. (2004). Tax rates and tax evasion: Evidence from ‘missing imports’ in China. Journal of Political Economy, 112(2), 471–496.
Fiss, P. C., & Zajac, E. J. (2004). The diffusion of ideas over contested terrain: The (non) adoption of a shareholder value orientation among German firms. Administrative Science Quarterly, 49(4), 501–534.
Fiss, P. C., & Zajac, E. J. (2006). The symbolic management of strategic change: Sensegiving via framing and decoupling. The Academy of Management Journal, 49(6), 1173–1193.
Galaskiewicz, J. (1997). An urban grants economy revisited: Corporate charitable contributions in the twin cities, 1979-81, 1987-89. Administrative Science Quarterly, 42(3), 445–471.
Galaskiewicz, J., & Burt, R. S. (1991). Interorganization contagion in corporate philanthropy. Administrative Science Quarterly, 36, 88–105.
Gao, Y., & Hafsi, T. (2015). Government intervention, peers’ giving and corporate philanthropy: Evidence from Chinese private SMEs. Journal of Business Ethics, 132(2), 433–447.
Ge, J. H., & Zhao, W. (2017). Institutional linkages with the state and organizational practices in corporate social responsibility: Evidence from China. Management and Organization Review, 13(3), 539–573.
Greenwood, R., Raynard, M., Kodeih, F., Micelotta, E. R., & Lounsbury, M. (2011). Institutional complexity and organizational responses. The Academy of Management Annals, 5(1), 317–371.
Hannan, M. T., & Freeman, J. (1984). Structural inertia and organizational change. American Sociological Review, 49(2), 149–164.
Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161.
Hillman, A. J., Zardkoohi, A., & Bierman, L. (1999). Corporate political strategies and firm performance: Indications of firm-specific benefits from personal service in the US Government. Strategic Management Journal, 20(1), 67–81.
Jiang, L., Lin, C., & Lin, P. (2014). The determinants of pollution levels: Firm-level evidence from Chinese manufacturing. Journal of Comparative Economics, 42(1), 118–142.
Kennedy, M. T., & Fiss, P. C. (2009). Institutionalization, framing, and diffusion: The logic of TQM adoption and implementation decisions among US hospitals. The Academy of Management Journal, 52(5), 897–918.
Khanna, T., & Palepu, K. G. (2010). Winning in emerging markets: A road map for strategy and execution. Boston: Harvard Business Press.
Kraatz, M. S., & Block, E. S. (2008). Organizational implications of institutional pluralism. In R. Greenwood, C. Oliver, R. Suddaby, & K. Sahlin-Andersson (Eds.), The SAGE handbook of organizational institutionalism (pp. 243–275). Thousand Oaks, CA: Sage.
Li, H., Meng, L., & Zhang, J. (2006). Why do entrepreneurs enter politics? Evidence from China. Economic Inquiry, 44(3), 559–578.
Li, S., Song, X., & Wu, H. (2015). Political connection, ownership structure, and corporate philanthropy in China: A strategic-political perspective. Journal of Business Ethics, 129(2), 399–411.
Lin, N. (2011). Capitalism in China: A centrally managed capitalism (CMC) and its future. Management and Organization Review, 7(1), 63–96.
Lin, C., & Ho, Y. (2011). Determinants of green practice adoption for logistics companies in China. Journal of Business Ethics, 98(1), 67–83.
Lounsbury, M. (2007). A tale of two cities: Competing logics and practice variation in the professionalizing of mutual funds. Academy of Management Journal, 50(2), 289–307.
Luo, X. R., Wang, D., & Zhang, J. (2017). Whose call to answer: Institutional complexity and firms’ CSR reporting. Academy of Management Journal, 60(1), 321–344.
Ma, D., & Parish, W. L. (2006). Tocquevillian moments: charitable contributions by Chinese private entrepreneurs. Social Forces, 85(2), 943–964.
MacLean, T. L., & Behnam, M. (2010). The dangers of decoupling: The relationship between compliance programs, legitimacy perceptions, and institutionalized misconduct. Academy of Management Journal, 53(6), 1499–1520.
Marquis, C., & Qian, C. (2014). Corporate social responsibility reporting in China: Symbol or substance? Organization Science, 25(1), 127–148.
Maung, M., Wilson, C., & Tang, X. (2016). Political connections and industrial pollution: Evidence based on state ownership and environmental levies in China. Journal of Business Ethics, 138(4), 649–659.
McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Manage. J., 21(5), 603–609.
Meng, X., Zeng, S., & Tam, C. M. (2013). From voluntarism to regulation: A study on ownership, economic performance and corporate environmental information disclosure in China. Journal of Business Ethics, 116(1), 217–232.
Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. The American Journal of Sociology, 83(2), 340–363.
Moon, J., & Shen, X. (2010). CSR in China research: Salience, focus and nature. Journal of Business Ethics, 94(4), 613–629.
Nakamura, M., Takahashi, T., & Vertinsky, I. (2001). Why Japanese firms choose to certify: A study of managerial responses to environmental issues. Journal of Environmental Economics and Management, 42(1), 23–52.
Nee, V. (1992). Organizational dynamics of market transition: Hybrid forms, property rights, and mixed economy in China. Administrative Science Quarterly, 37(1), 1–27.
O’Brien, K. J. (1994). Chinese people’s congresses and legislative embeddedness. Comparative Political Studies, 27(1), 80–107.
Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16(1), 145–179.
Oliver, C., & Holzinger, I. (2008). The effectiveness of strategic political management: A dynamic capabilities framework. Academy of Management Review, 33(2), 496–520.
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row.
Ring, P. S., D’Aunno, T., Bigley, G. A., & Khanna, T. (2005). Perspectives on how governments matter. Academy of Management Review, 30(2), 308–320.
Roberts, P. W., & Dowling, G. R. (2002). Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23(12), 1077–1093.
Shaver, J. M. (1998). Accounting for endogeneity when assessing strategy performance: Does entry mode choice affect FDI survival? Management Science, 44(4), 571–585.
Shen, Yan, & Yao, Yang. (2010). CSR and competitiveness: The role of corporate social responsibility in the competitiveness and sustainability of the Chinese private sector. Beijing: Foreign Languages Press.
Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610.
Terlaak, A., & King, A. A. (2006). The effect of certification with the ISO 9000 quality management standard: A signaling approach. Journal of Economic Behavior & Organization, 60(4), 579–602.
Tian, Z., Gao, H., & Cone, M. (2008). A study of the ethical issues of private entrepreneurs participating in politics in China. Journal of Business Ethics, 80(3), 627–642.
Waddock, S. A., & Graves, S. B. (1997). The corporate social performance financial performance link. Strategic Management J., 18, 303–319.
Wang, H., & Jin, Y. (2007). Industrial ownership and environmental performance: Evidence from China. Environmental & Resource Economics, 36(3), 255–273.
Wang, H., & Qian, C. (2011). Corporate philanthropy and corporate financial performance: The roles of stakeholder response and political access. The Academy of Management Journal, 54(6), 1159–1181.
Wang, R., Wijen, F., & Heugens, P. P. (2018). Government’s Green Grip: Multifaceted state influence on corporate environmental actions in China. Strategic Management Journal, 39(2), 403–428.
Westphal, J. D., & Zajac, E. J. (1998). The symbolic management of stockholders: Corporate governance reforms and shareholder reactions. Administrative Science Quarterly, 43, 127–153.
Westphal, J. D., & Zajac, E. J. (2001). Decoupling policy from practice: The case of stock repurchase programs. Administrative Science Quarterly, 46(2), 202–228.
Yin, J., & Quazi, A. (2018). Business ethics in the Greater China Region: Past, present, and future research. Journal of Business Ethics, 150(3), 815–835.
Yin, J., & Zhang, Y. (2012). Institutional dynamics and corporate social responsibility (CSR) in an emerging country context: Evidence from China. Journal of Business Ethics, 111(2), 301–316.
Zeng, S., Xu, X., Yin, H., & Tam, C. M. (2012). Factors that drive chinese listed companies in voluntary disclosure of environmental information. Journal of Business Ethics, 109(3), 309–321.
Zhang, J., Marquis, C., & Qiao, K. (2016). Do political connections buffer firms from or bind firms to the Government? A study of corporate charitable donations of Chinese firms. Organization Science, 27(5), 1307–1324.
Zhang, R., Rezaee, Z., & Zhu, J. (2010a). Corporate philanthropic disaster response and ownership type: Evidence from Chinese firms’ response to the Sichuan earthquake. Journal of Business Ethics, 91(1), 51–63.
Zhang, R., Zhu, J., Yue, H., & Zhu, C. (2010b). Corporate philanthropic giving, advertising intensity, and industry competition level. Journal of Business Ethics, 94(1), 39–52.
Zhao, M. (2012). CSR-based political legitimacy strategy: Managing the state by doing good in China and Russia. Journal of Business Ethics, 111(4), 439–460.
Conflict of interest
The authors declare that they have no conflict of interest.
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Luo, X.R., Wang, D. Are Politically Endorsed Firms More Socially Responsible? Selective Engagement in Corporate Social Responsibility. J Bus Ethics 170, 535–555 (2021). https://doi.org/10.1007/s10551-019-04367-6
- Corporate social responsibility
- Political endorsement
- Transitional economy