Effect of organizational status on employment‐related corporate social responsibility: Evidence from a regression discontinuity approach

Abstract

AbstractResearch SummaryWe examine the effect of organizational status on employment‐related corporate social responsibility (CSR). As employees derive nonpecuniary benefits from both organizational status and employment‐related CSR, lower status firms may invest in nonpecuniary employment‐related CSR to compete in a status‐segmented labor market. We identify the effect using a regression discontinuity design (RDD) in the context of the Fortune 1000 rankings, as we contend that the 500th rank position marks an artificial breakpoint in status where quality follows a smooth distribution. We find that firms just failing to make the Fortune 500 perform significantly better in nonpecuniary employment‐related CSR. Our findings provide causal evidence for the labor market advantage of organizational status and a richer window into the strategic motivations behind CSR investments.Managerial SummaryWe examine one strategic investment that lower status firms make to compete in a status‐segmented labor market: employment‐based corporate social responsibility (CSR). We identify the effect using a regression discontinuity design (RDD) in the context of the Fortune 1000 rankings, as we argue that the 500th rank position creates a discontinuity in status at a precise location where quality differences can be assumed to follow a smooth distribution. We find that firms just failing to make it into the Fortune 500 perform significantly better in nonpecuniary employment‐related CSR as compared to firms just in the Fortune 500. The findings demonstrate that building a reputation for being socially responsible may offset differences in status and make a lower status organization more appealing to employees.