Is corporate social responsibility more valuable in disrupted industries?

Abstract

PurposeThe business world today is witnessing ever-growing disruption. This study highlights corporate social responsibility (CSR) as an effective strategy for firms in disrupted industries to consider in order to differentiate themselves and to increase their chance of survival facing disruption.Design/methodology/approachIn this study, the authors test the hypotheses using a multilevel modeling (MLM) design to capture the group and intergroup effects at the industry level and at the firm level. The empirical analysis is based on a panel sample of 1,193 firms over the 10-year period from 2010 to 2019.FindingsThe empirical analysis indicates that CSR has a positive impact on corporate financial stability and the effect is especially significant for firms in disrupted industries. Further investigation suggests that this positive effect largely runs through traits of the social pillar, such as human rights, employee relations, customer protection, product responsibility and community impact. The results are robust after controlling for other firm-specific characteristics and after addressing endogeneity concerns.Originality/valueThis study examines whether, and through which channel, CSR helps enhance corporate financial stability and mitigate bankruptcy risk in disrupted industries. To the best of the authors' knowledge, this study is the first attempt to explore the use of CSR as an effective strategic response to disruption. Further analysis indicates that the social capital built through CSR plays an important role in helping enhance corporate financial stability.