Abstract
PurposeThis paper aims to examine whether and how two firm-level factors jointly moderate the relation between corporate social responsibility (CSR) activities and firm performance: (1) the “alignment” between a firm's CSR activities and risk preferences and (2) performance measurement systems (PMS).Design/methodology/approachUsing survey responses from top managers of private Italian companies and matching archival data on the financial performance of these companies, the authors show that the positive effect of CSR activities on firm performance is contingent upon CSR–risk alignment, which creates competitive advantages, and the extent to which the firm's PMS are supportive of its strategic initiatives.FindingsThe findings suggest that to extract economic benefits from CSR activities, firms must align CSR activities with their risk preferences and rely on PMS to overcome the causal ambiguity between CSR activities and competitive advantage.Originality/valueOverall, this study contributes to both the CSR–firm performance and consequences of PMS literature and holds significant practical implications.
Highlights
Corporate social responsibility (CSR) has received significant attention in the business media (e.g. KPMG, 2015) and academic literature (Huang and Watson, 2015; Moser and Martin, 2012)
We investigate the role of performance measurement systems (PMS) in the relationship between CSR activities, risk preferences and firm performance
In this study, we examine how risk preferences and PMS moderate the relation between CSR activities and firm performance through the perspective of resource complementarity
Summary
Corporate social responsibility (CSR) has received significant attention in the business media (e.g. KPMG, 2015) and academic literature (Huang and Watson, 2015; Moser and Martin, 2012). 2.1 Corporate social responsibility activities and firm performance CSR is broadly defined as the range of obligations that businesses have to society, including economic, ethical, legal and philanthropic (Aguinis and Glavas, 2012; Carroll, 1979, 1999; Matten et al, 2003; Matten and Moon, 2020; McWilliams and Siegel, 2001). Many studies have documented the relation between CSR activities and firm performance in the management literature, with early evidence suggesting mixed results (Griffin and Mahon, 1997; Margolis and Walsh, 2003; McWilliams and Siegel, 2001). The authors conclude that the original findings may not generalize to alternate samples
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