Different Types of Performance Feedback and their Distinct Influence on CSR Engagement

Abstract

Drawing on the behavioral theory of the firm, and particularly on performance feedback, we tested the influence of discrepancies between corporate financial performance and aspirations on the decision to engage in corporate social responsibility. Our findings highlight the importance of performance feedback in stimulating varying firm decisions when setting the level of their social engagement. Our empirical evidence shows that as financial performance rises above historical or falls below social aspiration, the firm’s engagement in CSR activities decreases, whereas as financial performance rises above social or falls below historical aspiration, the firm’s engagement in CSR activities increases. Our findings shed light on the underlying mechanisms that lead to opposing interpretations of achievement and variations in the perception of risk- an issue that has received very little attention in prior empirical research.