Firm performance: the interactions of corporate social performance with innovation and industry differentiation

The impact of corporate social performance on firm financial performance has been examined previously with mixed results. This study examines the possibility that corporate social performance enhances financial performance by allowing the firm to differentiate, and that this effect may be moderated both by innovation, which also drives firm differentiation, and the level of differentiation in the industry. Hypotheses concerning both direct and moderating effects are developed and tested using secondary data. Our results support both innovation and the level of differentiation in the industry as moderators for a positive relationship between corporate social performance and financial performance: corporate social performance most strongly affects performance in low‐innovation firms and in industries with little differentiation. Copyright © 2008 John Wiley & Sons, Ltd.