Firms’ corporate social responsibility behavior: An integration of institutional and profit maximization approaches

Abstract

Understanding firms’ behavior across countries – a key concern in the international business literature – requires the joint consideration of both institutional influences and firms’ profit maximization goals. In the corporate social responsibility (CSR) area, however, researchers have utilized theories that take into account only one or the other – institutional theory, which explains CSR as legitimacy-seeking activities in line with national-level institutions, or economic-based approaches that consider CSR effects only in terms of firm profitability. While an institutional argument implies convergence in CSR behavior among firms in similar institutional contexts, profit maximization logic treats CSR as a firm-specific behavior. We integrate these perspectives by demonstrating the moderating effects of firms’ economic motivations for seeking legitimacy on the relationship between institutional environment and CSR responsiveness. We argue that variations in firms’ economic visibility and economic vulnerability can bring about differences in their need for societal goodwill, and in turn, their legitimacy seeking. Findings on a database of apparel firms’ employee-related CSR across 23 countries support this overall argument. The integration of such fundamentally different theoretical perspectives allows us to contribute new theoretical insights to international business on the influence of national institutions on firms’ behavior.