Orchestrating corporate social responsibility in the multinational enterprise

Research Summary: Multinational enterprises (MNEs) invest significant resources in corporate social responsibility (CSR), but their attempts to build a global “social brand” may clash with the execution of operational strategies at a subsidiary level. Using a game-theoretic model, this research addresses the complex interplay of different contingencies that shape the coordination and control challenges facing MNEs when they implement global CSR strategies, including brand spillovers, the risk of public scandals caused by irresponsible behavior, the size of the MNE network, as well as the roles played by nongovernmental organizations and altruistic managers. Challenging the view of CSR as insurance against lapses of responsible conduct, our model shows that investment in social brands helps avoid irresponsible practices across the MNE network, thereby inducing subsidiaries to “walk the talk.” Managerial Summary: Global social brands are increasingly valuable to multinational enterprises (MNEs), which makes the control and coordination of responsible behavior across their network of foreign subsidiaries a relevant managerial challenge. Indeed, lapses of responsible conduct at the subsidiary level often generate reputational damage at the multinational level. This research explores several mechanisms that help MNEs manage this coordination and control challenge. First, it shows under what conditions MNEs can leverage their investments in social brands to induce responsible practices across their global network. Second, it illustrates how MNEs can exploit collaborations with nongovernmental organizations to reduce the costs of coordinating and controlling their subsidiaries. Finally, it identifies conditions under which MNEs benefit from hiring altruistic managers to run their subsidiaries.     

主动召回体现企业社会责任

目前，我国14岁以下儿童有3亿左右。而据调查，意外伤害是造成我国0至14岁儿童死亡的主要原因，其中玩具及儿童用品等导致的伤害已经占到儿童意外伤害的30％左右。可以说，儿童玩具是典型的可能对儿童健康和安全造成危害的产品。     

How CEO hubris affects corporate social (ir)responsibility

Grounded in the upper echelons perspective and stakeholder theory, this study establishes a link between CEO hubris and corporate social responsibility (CSR). We first develop the theoretical argument that CEO hubris is negatively related to a firm's socially responsible activities but positively related to its socially irresponsible activities. We then explore the boundary conditions of hubris effects and how these relationships are moderated by resource dependence mechanisms. With a longitudinal dataset of S&P 1500 index firms for the period 2001–2010, we find that the relationship between CEO hubris and CSR is weakened when the firm depends more on stakeholders for resources, such as when its internal resource endowments are diminished as indicated by firm size and slack, and when the external market becomes more uncertain and competitive. The implications of our findings for upper echelons theory and the CSR research are discussed. Copyright © 2014 John Wiley & Sons, Ltd.     

The differential effects of CEO narcissism and hubris on corporate social responsibility

Research Summary: While prior studies have predominantly shown that CEO narcissism and hubris exhibit similar effects on various strategic decisions and outcomes, this study aims to explore the mechanisms underlying how narcissistic versus hubristic CEOs affect their firms differently. Specifically, we investigate how peer influence moderates the CEO narcissism/hubris—corporate social responsibility (CSR). With a sample of S&P 1500 firms for 2003–2010, we find that the positive relationship between CEO narcissism and CSR is strengthened (weakened) when board‐interlocked peer firms invest less (more) intensively in CSR than a CEO's own firm; the negative relationship between CEO hubris and CSR is strengthened when peer firms are engaged in less CSR than a CEO's own firm. Managerial Summary: Some CEOs are more narcissistic while others may be more hubristic, but these two groups of CEOs hold different attitudes toward the extent to which their firms should engage in corporate social responsibility (CSR). Our findings with a large sample of U.S. publically listed firms suggest that narcissistic CEOs care more about CSR, but hubristic CEOs care less. Interestingly, when narcissistic CEOs observe their peer firms engaging in more or less CSR than their own firms, they tend to respond in an opposite manner; in contrast, hubristic CEOs will only engage in even less CSR when their peers also do not emphasize CSR. Our findings point to a fundamental difference between CEO narcissism and hubris in terms of how they affect firms' CSR decisions based on their social comparison with peer firms.     

Exploring open innovation practice in firm-nonprofit engagements: a corporate social responsibility perspective

This paper examines the concept of open innovation within the context of corporate social responsibility. It demonstrates how the practice of open innovation unfolds in inter-organizational collaborations that involve the voluntary or charitable sector, outlining the findings of an explorative collective case study of eight voluntary dyadic partnerships between corporate and nonprofit organizations in the United Kingdom, which have resulted in innovation outcomes. Two generic approaches to open innovation were witnessed: firstly, a more exploratory approach to dyadic engagement activities that resulted in an emergent innovation process, and secondly, a focused and pre-determined search activity to exploit the resources of the nonprofit partner that demonstrated a more planned innovation process. Two distinct boundary-spanning roles were identified: in dyads exhibiting few organizational linkages, the role was associated with formal responsibilities from senior management to 'manage' innovation opportunities and outcomes. In dyads exhibiting high linkages, there was no such formality; the role was a 'conduit' to facilitate search and exploration to locate opportunities for innovation through idea exchange. Overall, this research demonstrates the value of an open innovation approach driven by the need to address societal and social issues (rather than those purely economic). Such practice broadens a firm's 'search' activities and delivers innovations in exchange for enhanced social legitimacy – acting innovation capital for future enterprising activities and market advantage.     

Competing for government procurement contracts: The role of corporate social responsibility

Research Summary: This study examines whether corporate social responsibility (CSR) improves firms’ competitiveness in the market for government procurement contracts. To obtain exogenous variation in firms’ social engagement, I exploit a quasi‐natural experiment provided by the enactment of state‐level constituency statutes, which allow directors to consider stakeholders’ interests when making business decisions. Using constituency statutes as instrumental variable (IV) for CSR, I find that companies with higher CSR receive more procurement contracts. The effect is stronger for more complex contracts and in the early years of the government‐company relationship, suggesting that CSR helps mitigate information asymmetries by signaling trustworthiness. Moreover, the effect is stronger in competitive industries, indicating that CSR can serve as a differentiation strategy to compete against other bidders. Managerial Summary: This study examines how companies can strategically improve their competitiveness in the market for government procurement contracts—a market of economic importance (15–20% of GDP). It shows that companies with higher social and environmental performance (CSR) receive more procurement contracts. This effect is stronger for more complex contracts, in the early years of the government–company relationship, and in more competitive industries. These findings indicate that firms’ CSR can serve as a signaling and differentiation strategy that influences the purchasing decision of government agencies. Accordingly, managers operating in the business‐to‐government (B2G) sector could benefit from integrating social and environmental considerations into their strategic decision making.     

Variations in ownership behavior and propensity to diversify: a study of the Indian corporate context

The relationship between ownership and diversification has been the focus of renewed debate between financial economists and strategic management scholars. While financial economists hold that manager‐controlled firms tend to reflect higher levels of diversification, strategy researchers argue that ownership and diversification are not systematically related. In throwing light on this debate, this study uses a fine‐grained definition of ownership groups to explore how the different objectives and monitoring predispositions of distinct ownership groups might influence diversification strategy. The empirical examination is set in India to offer a striking contrast from the predominantly U.S.‐based studies that have shaped the ongoing debate. Findings show that diverse ownership groups adopt different postures in monitoring and/or influencing organizational diversification. While some ownership groups are closely associated with focused strategies, and some encourage diversification, others are quite indifferent. These results suggest that the context‐specific variation among ownership groups is germane to our understanding of diversification strategy. Copyright © 2002 John Wiley & Sons, Ltd.     

The impact of corporate social responsibility on investment recommendations: Analysts' perceptions and shifting institutional logics

We explore the impact of corporate social responsibility (CSR) ratings on sell‐side analysts' assessments of firms' future financial performance. We suggest that when analysts perceive CSR as an agency cost they produce pessimistic recommendations for firms with high CSR ratings. Moreover, we theorize that, over time, the emergence of a stakeholder focus shifts the analysts' perceptions of CSR. Using a large sample of publicly traded U.S. firms over 15 years, we confirm that, in the early 1990s, analysts issue more pessimistic recommendations for firms with high CSR ratings. However, analysts progressively assess these firms more optimistically over time. Furthermore, we find that analysts of highest status are the first to shift the relation between CSR ratings and investment recommendation optimism. Copyright © 2014 John Wiley & Sons, Ltd.     

Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility

Research summary : We explore the effect of the interplay between a firm's external and internal actions on market value in the context of corporate social responsibility (CSR). Specifically, drawing from the neo‐institutional theory, we distinguish between external and internal CSR actions and argue that they jointly contribute to the accumulation of intangible firm resources and are therefore associated with better market value. Importantly, though, we find that, on average, firms undertake more internal than external CSR actions, and we theorize that a wider gap between external and internal actions is negatively associated with market value. We confirm our hypotheses empirically, using the market‐value equation and a sample comprising 1,492 firms in 33 countries from 2002 to 2008. Finally, we discuss implications for future research and practice. Managerial summary : Companies often accumulate intangible assets by taking internally and externally oriented CSR actions. Contrary to popular beliefs, the data show that they undertake more internal than external ones: firms do more and communicate less. How does a potential gap (i.e., a misalignment) between internal and external CSR actions affect a firm's market value? We find that although together (the sum of) internal and external actions are positively associated with market value, a wider gap has negative implications. In other words, firms do not realize the full benefits of their internal actions when such actions are not externally communicated to key stakeholders, and to the investment community in particular. This negative association with market value is particularly salient in CSR‐intensive and the natural resources and extractives industries. Copyright © 2015 John Wiley & Sons, Ltd.     

The informational relevance of corporate social responsibility: evidence from DS400 index reconstitutions

This study examines the relationship between corporate social responsibility and financial performance by analyzing the intra‐industry wealth impact of additions and deletions to the Domini Social 400 index. Results from the event study analysis indicate that additions to the index generate a positive share price response for the announcement firm and a negative response by rival firms. The opposite reaction is observed for index deletions. Additionally, the share price response is more pronounced for informationally opaque industries. Our study highlights the importance of external monitoring agencies in providing meaningful information that helps resolve investor uncertainty regarding the quality of a firm's relationships with its primary stakeholders. Copyright © 2011 John Wiley & Sons, Ltd.     

Red,blue, and purple firms: Organizational political ideology and corporate social responsibility

Research summary : Why do firms vary so much in their stances toward corporate social responsibility (CSR )? Prior research has emphasized the role of external pressures, as well as CEO preferences, while little attention has been paid to the possibility that CSR may also stem from prevailing beliefs among the body politic of the firm. We introduce the concept of organizational political ideology to explain how political beliefs of organizational members shape corporate advances in CSR . Using a novel measure based on the political contributions by employees of Fortune 500 firms, we find that ideology predicts advances in CSR . This effect appears stronger when CSR is rare in the firm's industry, when firms are high in human capital intensity, and when the CEO has had long organizational tenure . Managerial summary : Why do firms vary in their stances toward corporate social responsibility (CSR )? Prior research suggests that companies engage in CSR when under pressure to do so, or when their CEOs have liberal values. We introduce the concept of organizational political ideology, and argue that CSR may also result from the values of the larger employee population. Introducing a novel measure of organizational political ideology, based on employees' donations to the two major political parties in the United States, we find that liberal‐leaning companies engage in more CSR than conservative‐leaning companies, and even more so when other firms in the industry have weaker CSR records, when the company relies heavily on human resources and when the company's CEO has a long organizational tenure . Copyright © 2016 John Wiley & Sons, Ltd.     

Product recalls,corporate social responsibility,and firm value: Evidence from the Chinese food industry

Product recalls frequently occur in the Chinese food industry, which is closely linked to public health and social security and attracts significant attention from the government, media, and public. We manually collect food recalls from listed firms in China from 2008 to 2016 and use an event study methodology to investigate the economic consequences of product recalls. First, we find that product recalls result in significantly negative abnormal returns for listed firms. Second, the level of corporate social responsibility (CSR) mitigates the negative effect of food recalls on the wealth of shareholders. Our results are robust to different specifications and measures. This study provides timely evidence and important policy implications for the ongoing food safety crisis in China. The government should release appropriate policies to improve firms’ product quality and activities on CSR in the food industry, which in turn helps the firms obtain benefits.     

The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis

Do shareholders gain when managers disperse corporate resources through activities classified as corporate social responsibility (CSR)? Strategy scholars have recently developed a theoretical model that links such activities to shareholder value when a firm suffers a negative event; we test key portions of this theory of the ‘insurance‐like’ property of CSR activity. We posit that such activity leads to positive attributions from stakeholders, who then temper their negative judgments and sanctions toward firms because of this goodwill. We extend the risk management model by theorizing that some types of CSR activities will be more likely to create goodwill and offer insurance‐like protection than other types. We delineate several firm and event specific characteristics that we expect to influence the link between CSR activities and an insurance effect. We then test our model using an event study of 178 negative legal/regulatory actions against firms throughout the 11 years from 1993–2003. We find that participation in institutional CSR activities—those aimed at a firm's secondary stakeholders or society at large—provides an ‘insurance‐like’ benefit, while participation in technical CSRs—those activities targeting a firm's trading partners—yields no such benefits. We conclude by considering the implications of our findings for future theorizing and research into the economic value of CSR engagement. Copyright © 2008 John Wiley & Sons, Ltd.     

The impact of product market competition on corporate environmental responsibility

Although the mainstream of current thinking in the business literature recognizes that firms should invest in environmental responsibility, the theory on how product market competition affects firms’ environmental responsibility remains undeveloped. Using cost-benefit analysis, we hypothesize that the relationship between product market competition (i.e., differential industry-level competition and heterogeneous firm-level market power) and corporate environmental responsibility (CER) will be curvilinear. We find support for this hypothesis through an empirical test on a panel of 792 listed manufacturing companies from 2006 to 2008 in China. The results show that (1) either too much or too little industrial competition and (2) either too much or too little firm-level market power lead to lower environmental responsibility. Our results reveal that CER is strategically chosen and related to competitive situations.     

Sales force reactions to corporate social responsibility: Attributions, outcomes, and the mediating role of organizational trust

Corporate social responsibility (CSR) is gaining momentum among researchers and practitioners. In spite of this extensive interest, systematic research regarding the effects of CSR on other stakeholder groups, besides consumers, remains sparse. Based on a field study in a global Fortune 500 consumer packaged goods company, we examine sales force attitudinal and behavioral outcomes of company's partnership with a United Nations (UN) philanthropic organization. Specifically, we seek to examine whether sales force perceptions of CSR motives influence their evaluation of CSR actions. Findings indicate that egoistic-driven motives negatively influence salesperson trust in the company, whereas stakeholder- and values-driven motives positively influence salesperson trust; however, strategic-driven attributions do not have an influence on salesperson trust. The results further reveal the mediating role of trust in the relationship between sales force attributions and outcomes including loyalty intentions and positive word-of-mouth.