Do peer firms affect corporate social performance?

Abstract

Abstract This article addresses whether, which and when peer firms matter for the focal firm’s corporate social performance (CSP), to modify the underlying assumption among prior studies that firms invest in CSP in isolation. Building on institutional isomorphism theory, legitimacy theory and knowledge spillover theory, we argue that the focal firm learns from peers in dealing with stakeholder demands due to uncertainty, while legitimacy pressure and knowledge spillover could help cope with uncertainty. Meanwhile, different from the leader-follower model, the followers are more prone to be affected by the average CSP level, due to restricted resources and abilities. Lastly, the more the uncertainty level is, the more obvious mimicking behaviors can be observed. By employing the instrumental variables regression, these arguments have been supported. Our study contributes to the state-of-the-art corporate social performance literature by introducing a critical, albeit widely neglected explanatory variable. In addition, we advance scientific knowledge on the thus far under-researched question in literature of inter-organizational imitation, namely which firms are emulated. The conclusions based on China can also provide important implications for other emerging countries with great uncertainty and initial stage of social responsibility fulfillment.