Variations in the Corporate Social Responsibility-PerformanceRelationship in Emerging Market Firms

Abstract

Corporate social responsibility (CSR) and its impact on performance have gener-ated a debate that has evolved across several perspectives (shareholder, stakeholder,resource-based, and contingency). Building on the resource-based and contingency per-spectives, we shed new light on this debate by analyzing the impact of CSR on performancein emerging marketfirms, advancing the idea that CSR is a mechanism that helps addressmarket and government failures. Wefirst argue that CSR’s three constituent dimensions(environmental, social, and governance) vary in their impact on performance because eachdimension has a different mitigating effect on contextual failures that hobble emerging mar-ketfirms. Specifically, we contend that social CSR has a larger effect on performance thaneither governance CSR or environmental CSR for emerging marketfirms, because the for-mer helps build capabilities that more directly reduce the negative consequences of govern-ment failures in the provision of public goods and services thatfirms need to operateefficiently. We then provide additional depth to this idea by arguing that other mechanismsused for mitigating market failures in an emerging market context, namelyfirm-level busi-ness group affiliation and country-level government policy nudges, strengthen this differ-ential influence of each of the three dimensions of CSR on performance. Analyses of asample of 89 publicly traded Indianfirms from 2007 to 2017 support these arguments.