Scale and Scope: Idiosyncratic CSR Strategies and Their Impact on Firm Financial Outcomes

Abstract

Current research on CSR mainly treats CSR as an aggregated concept of scale, focusing on the overall goal of a firm’s CSR strategy while ignoring the idiosyncratic nature of CSR strategies. This paper contributes to the theorization of CSR by treating it as a two-facet concept of both scale and scope, and, thus, measuring it using a matrix of performance. The scope of CSR represents how a firm distributes its resources among different CSR activities to achieve the goals of its CSR strategy. Using a sample of firms in the US retail industry between 2000 and 2015, we investigate whether the influence of idiosyncratic CSR strategies on firm financial outcomes are different when the scale and scope of CSR strategies vary. Our results suggest that firms with a broad CSR scope are more likely to financially benefit from a high CSR scale, whereas firms with a focused CSR scope may not benefit from a high CSR scale at all. This effect is consistent through both the profitability enhancement and the risk reduction mechanisms of CSR. Considering CSR as a matrix of idiosyncratic strategies provides significant practical implications for managers to effectively implement CSR strategies to achieve distinct corporate objectives.