Research tidbits: Impact of CSR on firms

A selection of interesting articles we found recently considering the impact of CSR on firms.

Positive link between CSR and financial performance stronger in developed world: Meta-analysis. 
The relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) has long been a central and contentious debate in the literature. However, prior empirical studies provide indefinite conclusions.

The purpose of this study is to review systematically and quantify the CSR–CFP link in a meta-analytic framework. Based on 119 effect sizes from 42 studies, this study estimates that the overall effect size of the CSR–CFP relationship is positive and significant, thus endorsing the argument that CSR does enhance financial performance.

Furthermore, this work sheds light on the causal relationship between CSR and CFP. Subsequent financial performance is associated with prior social responsibility, while the reverse direction is not supported. This finding supports the instrumental stakeholder theory. As predicted, the meta-analysis results indicate that the measurement strategies of the two key constructs of CSR and CFP explain some variations of the CSR–CFP relationship. Last, this study examines the moderating effect of the environmental context on the CSR–CFP link.

This work proposes that CSR in the developed world, with a relatively mature institutional system and efficient market mechanism, will be more visible than CSR in the developing world. The results show that the CSR–CFP relationship is stronger for firms from advanced economies than for firms from developing economies.

Read more at: Wang, Q., Dou, J. & Jia, S. 2016. A meta-analytic review of Corporate Social Responsibility and corporate financial performance: The moderating effect of contextual factors.
Business & Society, 55(8).

Corporate social performance and economic cycles 
Do firms respond to changes in economic growth by altering their corporate social responsibility programs? If they do respond, are their responses simply neglect of areas associated with corporate social performance (CSP) or do they also cut back on positive programs such as profit sharing, public/private housing programs, or charitable contributions?

In this paper, Harrison & Berman argue that because CSP-related actions and programs tend to be discretionary, they are likely to receive less attention during tough economic times, a result of cost-cutting efforts. However, the various CSP performance areas vary in terms of their resource requirements and their influence on financial performance (short- and long-term), which suggests that firms may respond differently depending on area. Consequently, in addition to examining CSP concerns separately from positive actions and programs (CSP strengths), the authors also examine the influence of economic growth across the five areas of diversity, employee relations, the environment, product quality/safety, and the community.

Based on data from 837 firms over 15 years, the results suggest that firms neglect some areas associated with CSP during economic downturns, resulting in increased concerns about community and employee relations, product safety/quality, and the environment. However, this relationship does not apply to positive actions and programs. Instead, firms tend to increase their positive CSP programs in areas such as diversity, employee relations, and the environment during periods of slow economic growth and reduce them when the economy picks up. Harrison & Berman offer potential explanations for the findings and discuss their importance to research on CSP.

Read more at: Harrison, J.S. & Berman, S.L. 2016. Corporate social performance and economic cycles.
Journal of Business Ethics, 138(2), 279–294.

Good neighbours but bad employers: two faces of Corporate Social Responsibility programs
Using two firm-level datasets in Korea, Jung & Kim analysed the effects of corporate social responsibility (CSR) on employment relations. They propose that participation in corporate social activity may not necessarily reflect an ethical commitment to do “the right thing,” but instead can be associated with mobilizing internal resources to offset the costs imposed by external CSR involvement undertaken because of social pressure.

Analysis of the two datasets showed similar results. The results demonstrate that socially responsible actions facilitate employer tendency to use performance-based pay and efficiency-based work practices. The researchers also find that CSR has a negative association with employment growth and increased labour flexibility through contingent employment. These findings shed light on the internal impact of CSR involvement on a firm’s employment policies with respect to resource allocation.

Read the paper in full for free: Jung, H. & Kim, D. 2016. Good neighbors but bad employers: Two faces of Corporate Social Responsibility programs. 
Journal of Business Ethics, 138(2), 295–310.

The relationship between ethical organisational culture and organisational innovativeness: comparison of findings from Finland and Lithuania
The paper explores the interrelations between ethical organisational culture and organisational innovativeness in two different socio-cultural contexts, Finland and Lithuania. According to the Global Innovation Index 2013, Finland ranked 6th and Lithuania 40th in terms of the national capacity to produce innovations. Prior research by Riivari and Lämsä (J Business Ethics 124:1–17, 2014) and Riivari et al. (Eur J Innov Manag 15:310–331, 2012) argues the importance of the ethical dimension of organisational culture in fostering the organisational capacity to innovate.

In this paper, a different context is taken to test hypothesised differences between the two multidimensional phenomena. The paper discusses the findings of 2 surveys in Finnish and Lithuanian public organisations (respectively, nFI = 477 and nLT = 757). Data analysis shows that ethical organisational culture affects organisational innovativeness, in particular, process and behaviour innovativeness in both organisations.

The findings suggest that some ethical virtues such as congruency of management, discussability and clarity can be explained by an institutional rather than socio-cultural context. However, the effect of transparency and sanctionability in the Finnish organisation and congruency of supervisors, supportability and feasibility in the Lithuanian organisation rests on peculiarities of a socio-cultural context.

Read more at: Pučėtaitė, R., Novelskaitė, A., Lämsä, AM. et al. 2016. The Relationship Between Ethical Organisational Culture and Organisational Innovativeness: Comparison of Findings from Finland and Lithuania. 
Journal of Business Ethics, 139(4), 685–700.

Post-innovation CSR performance and firm value
Analysing a sample of 13,917 US firm–years from 1991 to 2006, Mishra finds that more innovative firms demonstrate high corporate social responsibility (CSR) performance subsequent to a successful innovation. These high-CSR innovative firms enjoy significantly higher valuation post-innovation.

These findings imply that firms with demonstrated potential growth opportunities, as evident from the number of registered patents and their citations, benefit by strategically investing more in CSR activities; that is, CSR investment entails ‘doing well by