The Mirror Effect: Corporate Social Responsibility, Corporate Social Irresponsibility and Firm Performance in Coordinated Market Economies and Liberal Market Economies

Abstract

We investigate the classic management debate of agency versus institutional pressures through the application of the varieties of capitalism literature. In particular, we examine corporate social responsibility (CSR), corporate social irresponsibility (CSiR) and their relationships with firm performance in two types of capitalist systems: coordinated market economies (CMEs) and liberal market economies (LMEs). We note that while the CSR literature has tended to develop a balanced view on the influence of agency and institutional pressures, the CSiR literature has tended to emphasize the influence of agency. The latter appears to be a result of the fundamental attribution bias, where irresponsible corporate behaviours are attributed to individual managers or organizations, rather than the institutional environment. Our results, which include five years of data across 16 countries, show significantly greater CSR and significantly lower CSiR in CMEs compared with LMEs. Further, we find a positive relationship between CSR and firm performance in CMEs but not LMEs, and a negative relationship between CSiR and firm performance in LMEs but not CMEs. Overall, our results demonstrate the influence of the institutional environment, suggesting that corporate behaviours mirror the external environment.

Corporate social responsibility and competitive advantage: A developing country perspective

“…Corporate social responsibility (CSR) has attracted substantial research interest over recent decades examining the issue from different angles (Kuada & Hinson, ; Long, ; Nyuur, Ofori, & Debrah, ; Okpara & Wynn, ). Most studies have broadly acknowledged that CSR leads to sustainable development (Miska, Szőcs, & Schiffinger, ); effective stakeholder management (Walker, Zhang, & Ni, ); employee engagement and retention (Mushtaq, ; Opoku‐Dakwa, Chen, & Rupp, ); and company reputation (Aqueveque, Rodrigo, & Duran, ; Currás‐Pérez, Dolz‐Dolz, Miquel‐Romero, & Sánchez‐García, ; Marin, Rubio, & Maya, ; Porter & Kramer, ). However, studies that examined the role of CSR on firm competitiveness have yielded mixed, contradictory, and inconclusive findings (Flammer, ; Hassel, Nilsson, & Nyquist, ; Marin et al, ; Nelling & Webb, ).…”

“…Second, although studies have hinted the moderating role of firm strategy and firm size on CSR and firm competitiveness, we still do not know whether organizational structure has moderating effect on this relationship. Additionally, there are recent calls for more research to ensure greater understanding on whether, how and why CSR activities create value, particularly in different institutional settings (Currás‐Pérez et al, ; Du et al, ; Walker et al, ). In response to these calls, this study further seeks to examine whether or not firm strategy, firm size, and firm structure moderate the influence of CSR on firm competitiveness.…”

Is evil rewarded with evil? The market penalty effect of corporate environmentally irresponsible events

“…Studies have explored the relationship between corporate social responsibility or environmental responsibility performance and financial performance from the perspective of stakeholder theory, agency theory, and signal transmission theory (Walker, Zhang, & Ni, 2019;Groening, 2018;Ramchander, Schwebach, & Staking , 2012;Orlitzky, Schmidt, Rynes, & Rynes, 2003); the main line of logic in these studies is how to make enterprises more responsible for society or for the environment. In contrast to corporate environmental responsibility, environmental irresponsibility has received little attention (Lin, Zeng, & Wang, 2016).…”

“…As the subject of economic activities, enterprises are the suppliers of products and services, and they are also the perpetrators of many environmental problems. Corporate environmental responsibility is an important part of social responsibility; it can be a measure of whether and how well enterprises promote the growth of overall environmental welfare in accordance with social expectations and environmental regulations (Walker et al, ; Jiang, ). Most scholars blame irresponsible behaviours on the profit‐seeking nature of enterprises; enterprises in China generally pursue the “maximization of economic benefits,” prioritize real economic interests, and neglect sustainable development (Yang & Yang, ).…”

“…The existing research suggests that corporate environmental irresponsibility has not received much attention; most scholars explore the relationship between corporate environmental irresponsibility and economic consequences and corporate social responsibility (Hirunyawipada & Xiong, 2018;Li, Li, & Dong, 2018;Ghoul, Guedhami, Kim, & Park, 2018;Du, Chang, Zeng, Du, & Pei, 2016). The main focus of these studies is how enterprises can be more accountable for environmental responsibility (Russell, Russell, & Honea, 2016;Walker, Zhang, & Ni, 2019). Yang and Yang (2017) argue that corporate environmental irresponsibility may cause greater losses to society than the social benefits that arise from the fulfilment of environmental responsibilities.…”