Peer Effect on Corporate Social Responsibility

Abstract

This study explores a firm's response to institutional pressure from industry peers on their Social community spending. Social community spending is symbolic of the fulfillment of a firm's corporate social responsibility (CSR). The authors hypothesize that mimetic isomorphism occurs among firms in an industry and organizational characteristics, i.e., business group affiliation, ownership status (state-owned versus private), and firm size strengthen or weaken the influence of industry peers. The authors test the propositions on a pooled time-series cross-sectional data of firms in India, with 3,307 observations from 2009-2017 using Generalized Least Squares (GLS) random-effects model. The findings suggest industry peers have a positive influence on a firm's SCS, and this effect is stronger for state-owned enterprises and large firms and weaker for a business group affiliated firms which further aggravates with group size. This article establishes the positive role of the industry association in driving its member firm's SCS and offers an understanding of the contingencies in the above relationship.