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How business strategy in non-financial firms moderates the curvilinear effects of corporate social responsibility and irresponsibility on corporate financial performance

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  • Chen, Chung-Jen
  • Guo, Ruey-Shan
  • Hsiao, Yung-Chang
  • Chen, Kuo-Liang

Abstract

Using the established distinction between corporate social responsibility (CSR) and corporate social irresponsibility (CSiR), this study proposes that there are U-shaped relationships between CSR and corporate financial performance (CFP) as well as between CSiR and CFP. Curvilinear relationships enlighten the coexistence of companies' positive and negative social engagements, both of which may have the potential to improve CFP. In addition, they help to explain the mixed results between social and financial performance previously discussed by researchers. Finally, cost leadership and differentiation strategies may positively moderate the relationship between CSR and CFP, and negatively moderate the relationship between CSiR and CFP. Our sample covers 1461 publicly traded non-financial service companies in the US with 6715 firm-year observations. The empirical results statistically support the U-shaped hypotheses and the moderating effects of cost leadership as well as differentiation strategies. The results also generate managerial and theoretical implications and highlight future research directions.

Suggested Citation

  • Chen, Chung-Jen & Guo, Ruey-Shan & Hsiao, Yung-Chang & Chen, Kuo-Liang, 2018. "How business strategy in non-financial firms moderates the curvilinear effects of corporate social responsibility and irresponsibility on corporate financial performance," Journal of Business Research, Elsevier, vol. 92(C), pages 154-167.
    • Handle: RePEc:eee:jbrese:v:92:y:2018:i:c:p:154-167
    DOI: 10.1016/j.jbusres.2018.07.030
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