Abstract
Few studies examine how firms make strategic decisions over time. In this study, we test whether a firm undertakes corporate social responsibility (CSR) activities as a function of its life-cycle stage. Drawing on prior CSR research that finds ethical concerns and opportunistic behavior to be two key motivations that underpin CSR activities, we hypothesize that firms in their growth stage are positively associated with CSR, while firms in stage of decline are less likely to invest in CSR. The empirical findings of our study—derived by leveraging a sample of South Korean listed firms—are consistent with these predictions. We further find that in the growth stage, group-affiliated firms are more engaged in CSR than are unaffiliated firms. Given that affiliated firms can share the resources of other group-member firms, this evidence supports the slack resource hypothesis. Overall, our results indicate that firms have different CSR strategies, depending on their life-cycle stage.
Highlights
Firms develop over their life cycle, but there has been little research on how firms make strategic decisions over time
Leveraging corporate life-cycle models used in prior research, we expect that growth-stage firms are more likely to engage in corporate social responsibility (CSR) activities: firms in this stage require both a sound ethical reputation and strong financial performance, if they are to survive
We do expect decline-stage firms to be less likely to engage in CSR activities; rather, they are more likely to engage in more “extreme” adjustments, such as restructuring and mergers and acquisitions
Summary
Firms develop over their life cycle, but there has been little research on how firms make strategic decisions over time. Leveraging corporate life-cycle models used in prior research, we expect that growth-stage firms are more likely to engage in CSR activities: firms in this stage require both a sound ethical reputation and strong financial performance, if they are to survive. They need to build trust with external stakeholders [2] and achieve the financial success essential to firms starting new businesses. Given that slack resources constitute an important factor in whether or not CSR activities are undertaken, we interpret these results : affiliated firms in the growth stage share the resources of other group-member firms, and this enables them to have a positive CSR relationship.
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