Does it pay to pay to be good? Exploring returns to CSR outsourcing

Firms are increasingly outsourcing CSR activities through highly complex arrangements involving a diverse array of actors, such as suppliers, NGOs, and governments. While the extant literature addresses the importance of trust and risk mitigation in contracting, it does not address how contemporary CSR outsourcing affects a firm’s transaction costs, risks, and stakeholder perceptions. In this chapter, we apply the guidelines of the contracting literatures to real-world examples of outsourced CSR to understand how firms may benefit when they outsource CSR activities. We find that the extant literature’s underlying assumptions about the nature of risk and transaction costs fall short of explaining these contemporary arrangements, which must account for the trade-offs created by involving different kinds of partners and their effects on a firm’s stakeholders. Based on these areas of incongruence between theory and phenomenon, we outline opportunities for researchers to address when and how firms may benefit from outsourcing CSR.