Why Some Entrepreneurial Firms Seldom Invest in Corporate Social Responsibility

Abstract

Despite the rich literature on corporate social responsibility (CSR), prior studies have ignored a group of emerging and important entities: entrepreneurial firms. This paper aims to fill this gap by addressing the research question: why some entrepreneurial firms seldom invest in CSR. Employing real options logic, we examine the influence of uncertainties in the external environment and internal flexibilities of entrepreneurial firms on decisions of CSR investments. We propose that uncertainties in the external market will positively affect the decision of CSR practice. Given the specific characteristics of an entrepreneurial firm, we propose that there is a U-shaped relationship between firm slack resources and decisions of CSR investment, which is further moderated by the firm’s R&D investment decision and ownership structure. The hypotheses received strong support by using a longitudinal sample of 1,250 Chinese entrepreneurial firms during the period of 2010 to 2017.