Search

This study examines firm strategic motivations to engage in corporate social responsibility (CSR) through the lens of peer effects. The concept of CSR has long intrigued management scholars; the literature is replete empirical analyses of corporate social performance (CSP) and has established a rich set of theories to explain why profit- oriented firms seek to voluntarily provide public goods beyond the requirements of law. Two prominent lines of research suggest that firms engage in CSR for profit motives and for ensuring legitimacy with stakeholders. However, many disagreements exist between studies in terms of the degree to which these motivations are conflicting or complementary, and the contextual drivers in which firms seek to improve performance. To address these concerns, in this study I develop a theoretical framework of firm strategic motivations based on performance feedback relative to a purposefully selected group of relevant peer firms. This framework yields a number of predictions regarding firm behavior that I test using an empirical model of peer effects based on tenets of the behavioral theory of the firm. The model uses instrumental variables estimation, based on unique properties of an innovative approach to industry peer group definition, to resolve endogeneity concerns not fully addressed by extant literature on performance feedback and aspirations. Results indicate that purposeful selection of peer groups based on relevant strategic context may uncover important aspects of firm behavior that are otherwise masked by generic definition of industry peers. The study also finds that the usage of conventional aggregate measures of CSP may likewise mask subtleties of firm strategic behavior that are evident along more narrowly defined dimensions of CSP. [ABSTRACT FROM AUTHOR]

This study finds evidence within a widely used dataset of independent corporate social performance (CSP) ratings that the actions of a firm's industry peers influence its subsequent choice of CSP. Using a unique empirical approach, I am able to separately identify endogenous peer effects from both exogenous firm characteristics and the strong path dependence in a firm's choice of CSP over time. The results indicate that firm behavior is subject to peer influence in the selection of CSP, supporting other emerging evidence of peer effects in the determination of non-market corporate strategies. This study is among the first to identify peer effects in CSP, and contributes to a notable research agenda on the drivers of corporate social responsibility. [ABSTRACT FROM AUTHOR]