Acting with Impunity? The Performance Impact and Strategic Outcomes of Corporate Social Irresponsibility

Croxton, Nicola (2021). Acting with Impunity? The Performance Impact and Strategic Outcomes of Corporate Social Irresponsibility. PhD thesis The Open University.



Complex global challenges such as climate change and the 2008 financial crisis have pushed firms to adopt more socially responsible strategies. Yet many still display socially irresponsible behavior, and the demonstrable effect on firm performance and strategic growth has been scarcely researched. Consequently, this thesis aims to address the following overarching research question: does corporate social irresponsibility (CSiR) adversely affect performance and strategic growth or can firms act with impunity? Specifically, we examined the financial and non-financial outcomes of being socially irresponsible. Additionally, we analyzed whether corporate political activity (CPA) and corporate reputation moderate these relationships.

The thesis is comprised of three core chapters. In the first chapter we applied content analysis to systematically review the instrumental stakeholder theory (IST) literature to first, determine the current state of knowledge; and second, extend the theory into the nonmarket domain. Following from this review, in the second core chapter we draw on IST to conduct a quantitative analysis to determine the impact of CSiR on both market and corporate social performance, and the moderating role of CPA. Our findings suggest that CSiR does not seem to influence market-based performance measures. Meanwhile, it does diminish corporate social performance—a negative effect that is intensified by the firm engaging in financial and relational political activity. Finally, in the third core chapter we use IST and signaling theory to explore the firms’ ability to announce new mergers and acquisitions (M&As) in the aftermath of a CSiR event. Our results show that there is a partially significant negative relationship between firm involvement in CSiR and the increase in M&A announcements, which becomes nonsignificant when M&As are announced in developing economies. Moreover, whereas lobbying expenditures negatively moderate this relationship (consistent with the analysis in the previous chapter), corporate reputation exerts a positive moderating effect.

This thesis contributes theoretically to advancing IST and signaling theory literatures through engaging and applying these ideas in the nonmarket strategy domain. Empirically, the primary contribution of this thesis is in adding to extant research on the financial and non-financial outcomes of CSiR by using quantitative methods. Specifically, we developed a unique CSiR database from LexisNexis media publications, that formed the basis of the analyses in Chapters 3 and 4. Finally, the findings of this thesis have important implications for managers and leaders, who may extract valuable lessons about stakeholder management and the implications of CSiR, CPA, and corporate reputation.

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