Mandatory corporate social responsibility and firm performance in emerging economies: An institution-based view

Abstract

Leveraging theoretical insights from Mike W. Peng's institution-based view, this paper examines how mandatory corporate social responsibility investment regulations impact on firm performance in emerging economies, such as India. We thus first discuss the overview of India's statutory provisions and disclosure guidelines related to corporate social responsibility, which became effective from the financial year 2014–2015. Then, because in the emerging economy, formal institutional environments such as the rule of law greatly influence a firm's strategic decisions and performance, we propose a contingency framework of the impact of mandatory corporate social responsibility investment on a firm's overall performance, i.e., firm-specific advantages, financial outcome, and competitive advantage. In this way, we also explore how corporate social responsibility implementing intermediary agencies’ mediating role with third-party contractual terms will moderate the relationship between the focal firm's social investment agendas and performance. In so doing, the study contributes to and advances understanding of the institution-based perspective on the relationship between the focal firm's mandatory social investment and performance in emerging economies and brings the institution-based view into the mainstream of corporate social responsibility literature. Taken together, the novelty of our work is to study the association between sustainable social agendas and firm-specific and competitive advantages, as well as the mediating role of registered social intermediary agencies.