The differentiated effects of CSR actions in the service industry

Abstract

Purpose– The purpose of this study is to attempt to explain why the impact of Corporate Social Responsibility (CSR) initiatives may be different and/or more important in service firms compared to manufacturing firms. CSR is becoming a common strategy, hence its extensive research. Central to it is the analysis of the effect of CSR on a firm’s performance, whose outcome depends on firm-specific and industry-related factors.Design/methodology/approach– The event study methodology is applied to all the 248 companies that have ever traded on the Spanish Stock Market between 1990 and 2007. A regression analysis examines potential different effects of CSR on service and goods firms.Findings– The results show that CSR activities have a positive impact on firm performance that is higher for service firms than for manufacturing firms. Actions related to the environment, responsible labor relationships and good corporate governance are especially important in the service context.Research limitations/implications– This research is focused on shareholders’ performance, but it does not consider other stakeholders, such as real consumer behavior or employees’ commitment and productivity.Practical implications– Service firms are likely to gain from focusing on some CSR activities (environment, employees and good corporate governance) and should use their responsible behavior as a valuable tool for public relations and differentiation in the market.Originality/value– This article is the first attempt to empirically test and explain why the relationship between CSR and firm performance may be different (more positive) for service vs manufacturing firms.