Strategic Determinants of CSR: Analysis of Internal Markets of Business Groups for Intangible Assets

Abstract

We posit the existence of an intra-group internal market for the exchange of strategic resources and competencies generated by CSR engagements of business group affiliate firms. We show that due to this group-wide sharing of the benefits of CSR, on average the business group affiliated firm spends less on CSR relative to standalone firms for achieving similar outcomes. We analyze the transferability of the resources generated by CSR spending and affiliate structural factors – strategic centrality and appropriability by owner – to explain the intra-group distribution of CSR spending. We test the model using a unique 14 year long panel data-set of firms in India and find broad support for the salient predictions of the model.