Employee‐oriented corporate social responsibility, innovation, and firm value

This study investigates whether and how non‐pecuniary employee rewards based on corporate social responsibility (CSR) in association with human resource management (HRM) affect firm value. In the context of Japanese manufacturing firms for the 2006–2019 period, the regression results provide several important findings. Non‐pecuniary rewards work individually and synergistically with pecuniary rewards to enhance employee motivations for innovation, through which the CSR‐HRM nexus increases firm value. However, non‐employee perception of employee‐oriented CSR negatively moderates the relationship between innovation and firm market value. In the Japanese market, investors are fully aware about the CSR‐HRM effect on employee motivations and highly concerned with risk due to conflicts of interest between employees and non‐employee stakeholders. This suggests the importance of stakeholder engagement to link organizational innovation capability with firm value. These findings provide useful implications for the alignment of CSR strategies with HRM policies for optimizing innovation performance for corporate sustainable development.