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Darla Moore School of Business

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Doing the right thing

How Moore School faculty’s corporate social responsibility research sees the practice paying off for corporations

Multiple Moore School faculty members’ research explains the importance of socially responsible practices for companies’ images — and their bottom lines.

Corporate social responsibility is the business model companies large and small use to hold themselves accountable to their stakeholders and customers. CSR is largely judged by an organization’s environmental sustainability initiatives, philanthropic endeavors, ethical behaviors or their staff well-being considerations.

Examples of CSR include renewable or environmentally friendly energy practices; ensuring fair labor practices within their entities; increasing or emphasizing employee benefits; or on a smaller scale, supporting local charities and sponsoring neighborhood-unifying initiatives.


“Early research established that CSR impacts Corporate Financial Performance (CFP),” said Marc van Essen, associate dean of international programs and partnerships and international business professor. “My current research focuses on how and why CSR matters in positively influencing financial outcomes. Based on CSR research so far, the question still remains, ‘what are the key mechanisms through which CSR positively affects CFP?’”

In his Journal of Management Studies article “Strategic CSR: A concept building meta-analysis,” van Essen and his co-authors performed a large-scale study on the CSR/CFP relationship over the past five decades. They concluded that CSR enhances company performance through four key mechanisms: reputation, stakeholder reciprocation, innovation capacity and risk mitigation.

“Businesses with a strong CSR track record typically have better overall reputations,” van Essen emphasized. “Customers, for example, will derive more satisfaction from buying products from reputable organizations. Similarly, investors perceive CSR as a legitimate, positive signal of future profitability, which often results in increased investment and a higher stock market value.”

CSR encourages more positive and enduring relationships, so stakeholder reciprocation means that organizations take care of their stakeholders, and their stakeholders take care of them in return.

For example, employees who benefit from CSR activities are generally more satisfied and engage in favorable “citizenship” behaviors, van Essen said.

“In turn, local communities will engage in fewer protests, and governments will enforce more favorable regulations,” he said. “By cultivating more cooperative, productive and enduring stakeholder relationships, CFP is enhanced.”

For further enhancement, CSR increases innovation capacity of a firm. Sincere CSR organizations engage in frequent stakeholder dialogue and adopt a broader societal perspective, van Essen said.

“This affords them access to larger bodies of knowledge, enabling them to identify new opportunities for innovation,” he said. “CSR-based innovations, in turn, are likely to enhance CFP because businesses can use it to differentiate themselves from their competitors, reduce production costs and develop new business models.”

The final mechanism identified in van Essen and his co-authors’ strategic CSR research is risk mitigation.

“Many CSR activities such as pollution prevention and employee health and benefit programs directly reduce an organization’s overall risk exposure,” he explained. “But CSR reduces risk indirectly as well. When engaging with a broader range of stakeholders, organizations have access to more information and become more risk aware. As a result, they can better anticipate and mitigate risks.”

Through the four key mechanisms the researchers identified, they found that companies can create both social and financial value through CSR, including those activities that appear to further some social good. At the same time, the activities benefit the organization financially by either enhancing its reputation, increasing stakeholder reciprocation, improving innovation and/or mitigating risk, van Essen concluded.


Like van Essen’s focus on a company’s reputation after sharing its CSR efforts, international business professor Omrane Guedhami’s research has similar reputation implications. His research considers institutional factors like culture and media representations that contribute to a better understanding of what drives CSR practices for organizations and that CSR overall adds value to organizations.

Guedhami’s most recent CSR research shows that national culture, especially those nations that are more individualistic like the U.S., is a major driver of cross-country differences in firm-level environmental and social performance. Environmental and social performance is value-enhancing in individualistic countries.

In “National Culture and the Value Implications of Corporate Environmental and Social Performance” published in the Journal of Corporate Finance, Guedhami and his research team’s piece on national culture and CSR identifies channels that link a firm’s culture, their environmental and social (E/S) performance, and their overall worth.

“This research is important because the existing literature largely focuses on the value implications of environmental and social performance in the U.S., with little attention paid to the questions of why E/S performance varies across countries,” he said. “In this research, we uncover the role of the national culture dimension of individualism and delineate the country-and firm-level channels linking individualism to E/S performance and then those firm-level channels relating E/S performance to firm value.”

Another recent study by Guedhami and his co-authors examined whether CSR performance can impact shareholder wealth during down times like during the COVID-19 pandemic.

Their evidence in “Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic,” also published in the Journal of Corporate Finance, indicates CSR was not related to performance during the pandemic period.

“This lack of correlation suggests a potential disconnect between firms’ CSR orientation or ratings and their actual actions in the vein of CSR,” Guedhami said. “We conclude that investors can distinguish between genuine CSR and firms engaging in cheap talk.”

In CSR-related research prior to the COVID-19 pandemic, Guedhami and his research team looked at the impact of CSR on firms’ interactions with customers and competitors and whether CSR can reduce the costs of firms’ high leverage, i.e., high long-term debt-to-assets ratio relative to its industry.

They found in their study that CSR can reduce losses in market shares growth for highly leveraged firms.

“By reducing adverse behavior by customers and competitors, CSR helps highly leveraged firms keep customers and guard against rivals’ possible predation,” Guedhami said. “Our results support the risk management role of CSR and improve our understanding of the channels through which CSR affects firm value.”

In related CSR research focusing on perceptions, Guedhami and his co-authors investigated the role of media in influencing firms’ engagement in CSR activities. Considering 42 countries between 2003-2012, the research team found compelling evidence that firms engage in more CSR activities in countries where media has more freedom, like in the U.S. and in the U.K.

“In additional analyses, we find that the positive relation between media freedom and CSR engagement is stronger for better governed firms and larger firms, which suggest important policy implications,” Guedhami said. “Since a free media can affect reputations of firms, managers and directors, we conclude that media freedom increases firms’ incentives to engage in CSR activities.”


Similar to Guedhami’s research on CSR from the media’s — or popular opinion’s — perspective, international business associate professor Stanislav Markus and his co-author recently researched how CSR can help mitigate the complexities and institutional risks for firms under populism.

Populism, the political approach that appeals to “the pure people” versus the “corrupt elite,” needs further research, Markus writes in his scholarly paper, “Populist Syndrome and Nonmarket Strategy,” published in the Journal of Management Studies.

“More than two billion people live under populist regimes,” Markus explained. “The populism ideology gives rise to the ‘anti-system politics,’ which are increasingly experienced in advanced and developing democracies.”

Markus and his co-author suggest “political ties and CSR activities, aimed at the populist leadership, bureaucrats, political opposition and societal stakeholders, minimize risk under populism.”

Modern-day examples of populism include former U.S. President Donald Trump’s call to radicalize conservative voters or Mexico President Andrés Manuel López Obrador’s assault on democratic institutions under the banner of fighting bureaucratic elites, Markus added.

What unites these examples of politicians being populist is their “anti-elite/anti-enemy” stance and ideology. As Markus’s research explains, who counts as “elite/enemy” varies strongly across populist populations; it is a broad umbrella term that can encapsulate multiple meanings.

CSR activities can create collaboration between firms and government officials on certain economic, environmental and social issues. In turn, politicians may be more willing to collaborate with firms that have strong CSR records to encourage the perception the government is concerned with those same issues.

“Given populist leaders' claim to represent the will of the people, firms' ability to cultivate independent support among the people (as defined by the populist regime) can become a crucial tool of influence and risk mitigation,” Markus said.


Priyank Arora, management science assistant professor, and his co-authors published “When do Appointments of Corporate Sustainability Executives Affect Shareholder Value?” in the Journal of Operations Management.

Tatiana Kostova, Carolina Distinguished Professor, Buck Mickel Chair and international business professor, and her co-authors published “Walking the walk or talking the talk? Corporate social responsibility decoupling in emerging market multinationals” in the Journal of International Business Studies.

Donald “D.J.” Schepker, management associate professor, and his co-author published “Antecedents of Corporate Social Performance: The Effects of Task Environment Managerial Discretion” in the Social Responsibility Journal.

Matthew Souther, finance associate professor, and his co-author published “Stakeholder Value: A Convenient Excuse for Underperforming Managers?” in the Journal of Financial and Quantitative Analysis.

Andrew Spicer, international business professor, and his co-authors published “More than an umbrella construct: We can (and should) do better with CSR by theorizing through context” in Business and Society.


Students also learn the nuances of corporate social responsibility in their IB and other courses.

As an example, international business clinical associate professor David Hudgens weaves CSR themes throughout his international business courses, including IBUS 301: Introduction to International Business and IBUS 310: Globalization and Business.

The courses consider the range of themes and questions around corporate social responsibility with respect to addressing dilemmas in social, economic, political and environmental contexts of global markets. They explore the roles of international business stakeholders, which include a range of communities directly and indirectly related to a firm's business, Hudgens said.

“Also, we dedicate a full third of the semester to address non-market strategies using cases that illustrate and highlight the challenges of managing enterprise in the socio-cultural and political complexities of global value chains, and thus, CSR is central to each of these topics,” he said.

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