Variations in the Corporate Social Responsibility-Performance Relationship in Emerging Market Firms

Alvaro Cuervo-Cazurra (), Saptarshi Purkayastha () and Kannan Ramaswamy ()
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Alvaro Cuervo-Cazurra: D’Amore-McKim School of Business, Northeastern University, Boston, Massachusetts 02115
Saptarshi Purkayastha: Strategic Management Academic Group, Indian Institute of Management, Calcutta 700 104, India
Kannan Ramaswamy: Department of Management, Thunderbird School of Global Management, Arizona State University, Phoenix, Arizona 85004

Organization Science, 2023, vol. 34, issue 4, 1626-1650

Abstract: Corporate social responsibility (CSR) and its impact on performance have generated a debate that has evolved across several perspectives (shareholder, stakeholder, resource-based, and contingency). Building on the resource-based and contingency perspectives, we shed new light on this debate by analyzing the impact of CSR on performance in emerging market firms, advancing the idea that CSR is a mechanism that helps address market and government failures. We first argue that CSR’s three constituent dimensions (environmental, social, and governance) vary in their impact on performance because each dimension has a different mitigating effect on contextual failures that hobble emerging market firms. Specifically, we contend that social CSR has a larger effect on performance than either governance CSR or environmental CSR for emerging market firms, because the former helps build capabilities that more directly reduce the negative consequences of government failures in the provision of public goods and services that firms need to operate efficiently. We then provide additional depth to this idea by arguing that other mechanisms used for mitigating market failures in an emerging market context, namely firm-level business group affiliation and country-level government policy nudges, strengthen this differential influence of each of the three dimensions of CSR on performance. Analyses of a sample of 89 publicly traded Indian firms from 2007 to 2017 support these arguments.

Keywords: corporate social responsibility; business groups; policy; market failures; government failures; institutional economics; emerging markets (search for similar items in EconPapers)
Date: 2023
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