Corporate Social Responsibility and Technological Innovation

Abstract

In this study we investigate whether corporate social responsibility (CSR) initiatives contribute to corporate innovation success. We hypothesize that CSR enhances innovation because CSR initiatives help foster a culture for employees to be creative, enhance firms’ access to external financing, and form an enthusiastic and effective workforce. Using patents and citations to measure innovation outcomes, we find that a firm’s overall social performance is associated with more and better quality innovation after controlling for time-varying firm and industry characteristics, year fixed effects, industry fixed effects, potential omitted variables, and endogeneity of CSR decision. We also find that CSR strengths and concerns affect innovation asymmetrically — only strengths matter for innovation outcomes. Although distinct constructs, all individual dimensions of CSR are found to influence innovation success in one way or another. Our analyses further indicate that culture, access to financing, and effective workforce are the underlying sources for CSR to promote innovation.