The Mirror Effect: Corporate Social Responsibility, Corporate Social Irresponsibility and Firm Performance in Coordinated Market Economies and Liberal Market Economies
| Published date | 01 January 2019 |
| Author | Kent Walker,Na (Nina) Ni,Zhou Zhang |
| Date | 01 January 2019 |
| DOI | http://doi.org/10.1111/1467-8551.12271 |
British Journal of Management, Vol. 30, 151–168 (2019)
DOI: 10.1111/1467-8551.12271
The Mirror Eect: Corporate Social
Responsibility, Corporate Social
Irresponsibility and Firm Performance in
Coordinated Market Economies and Liberal
Market Economies
Kent Walker, Zhou Zhang1and Na (Nina) Ni2
Odette School of Business, University of Windsor, 401 Sunset Ave, Windsor, ON N9B 3P4, Canada, 1Faculty
of Business Administration, University of Regina, 3737 Wascana Pkwy, Regina, SK S4S 0A2, Canada, and
2Shenzhen Audencia Business School - Shenzhen University, No. 3688 Nanshan Road, Shenzhen, China
Corresponding author email: na.ni@szu.edu.cn
We investigate the classic management debate of agency versus institutional pressures
through the application of the varieties of capitalism literature.In particular, we examine
corporate social responsibility (CSR), corporate social irresponsibility (CSiR) and their
relationships with firm performance in two types of capitalist systems: coordinated mar-
ket economies (CMEs) and liberal market economies (LMEs). We note that while the
CSR literature has tended to develop a balanced view on the influence of agency and in-
stitutional pressures, the CSiR literaturehas tended to emphasize the influence of agency.
The latter appears to be a result of the fundamental attribution bias, where irresponsible
corporate behaviours are attributed to individual managers or organizations, rather than
the institutional environment. Our results,which include five years of data across 16 coun-
tries, show significantly greater CSR and significantly lower CSiR in CMEs compared
with LMEs. Further, we find a positive relationshipbetween CSR and firm performance
in CMEs but not LMEs, and a negative relationship betweenCSiR and fir m performance
in LMEs but not CMEs. Overall, our resultsdemonstrate the influence of the institutional
environment, suggesting that corporate behaviours mirror the externalenvironment.
Introduction
There is an on-going and classic debate within
the management literature thatattempts to explain
corporate behaviours through the dichotomy be-
tween agency choices and institutional pressures.
Kent Walker was supported by the Social Sciences and
Humanities Research Council of Canada [Projects #
813094]. Zhou Zhang was supported by the Leaders
Council Scholar research grant. Na Ni was supported by
the National Nature Science Foundation of the People’s
Republic of China [Projects # 71602121] and the Nature
Science Foundation of Guangdong Province [Project#
2017A030313410].
Interestingly, when we look at the corporate so-
cial responsibility (CSR) and corporate social ir-
responsibility (CSiR) literatures, we see that the
explanations for corporatebehaviour are inconsis-
tent and divided within this debate.
In particular, CSR is often explained with
a balanced application of the roles of agency
and the institutional setting. On the one hand,
by emphasizing factors at the managerial level,
recent studies have examined numerous predic-
tors of CSR such as managers’ personal values
(Hemingway and Maclagan, 2004), CEO po-
litical ideologies (Chin, Habrick and Trevi˜
no,
2013), CEO ethical leadership (Rego, Cunha and
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152 K. Walker, Z. Zhang and N. Ni
Pol ´
onia, 2017; Stahl and de Luque, 2014) and CEO
power (Walls and Berrone, 2015). On the other
hand, some studies have noted the role of institu-
tional pressures for CSR (Aguilera and Jackson,
2003; Amaeshi, Adegbite and Rajwani, 2016;
Gjølberg, 2009; Matten and Moon, 2008). Fur-
ther, if such institutional conditions are weak or
absent, then CSR may be considered unlikely to
occur (Amaeshi, Adegbite and Rajwani, 2016;
Campbell, 2007; McWilliams and Siegel, 2001).
Thus, the research has noted that desirable corpo-
rate behavioursmay be the result of internal and/or
external factors.
In contrast, CSiR is often explained with a
de-emphasis on institutional pressures in favour
of agency. As stated by Amaeshi, Adegbite and
Rajwani in their review of the literature (2016,
p. 136): ‘In other words, Corporate Social Irre-
sponsibility (CSIR) (Lawton et al., 2014) can only
be a matter of a corporate strategic choice (Child,
1972), and firms cannot be victims of some insti-
tutional incentives for irresponsibility’. Thus, un-
desirable corporatebehaviour is often explained as
the result of internal factors,or individual manage-
rial or organizational decision making, ratherthan
a consequence of the external environment.
These diering explanations suggest that the
CSiR literature has been subject to the fun-
damental attribution bias (Kelley and Michela,
1980). That is, attributing socially irresponsible
behaviours to the individual firm or manager
(agency), rather than as a result of the system of
which the firm is a part (institutional pressures).
To investigate the role of institutional pres-
sures to explain CSR and CSiR, we make use of
the varieties of capitalism (VoC) framework and
the liberal market economy (LME) and coordi-
nated market economy (CME) ideal-type catego-
rization. The former, LMEs, are characterized by
management-driven, top-down hierarchies, strong
competition policy and supply and demand, as
emphasized by neoclassical economics (Hall and
Soskice, 2001; Witt and Jackson, 2016). In con-
trast, CMEs are characterized by non-market re-
lationships and coordination, collaboration, and
strong networks and alliances among firms, some-
times referred to as ‘relational assets’ (Hall and
Soskice, 2001; Wittand Jackson, 2016). Firms may
have some characteristics of both, but will tend
to align with one more than the other based on
the country they operate in and the support of the
institutional environment.
Our research question is twofold.First, in which
type of market economy are corporations more
likely to engage in CSR and CSiR? Second, what
is the relationship to financial performance within
each type of market economy? We define CSR as
‘the attempt by companies to meet the economic,
legal, ethical, and philanthropic demands of a
given society at a particular point in time’ (Crane
and Matten, 2016, p. 50). This definition demon-
strates that CSR can dier between societies,
acting as a substitute or complement to the exist-
ing institutional environment (Rathert, 2016). In
contrast, we view CSiR as a conceptually distinct
construct from CSR (Antonetti and Maklan, 2016;
Godfrey, Merrill and Hansen, 2009), and define it
as ‘the set of corporate actions that negatively af-
fects an identifiable social stakeholder’s legitimate
claims (in the long run)’ (Strike, Gao and Bansal,
2006, p. 852). Similarly, but more directly, Herzig
and Moon (2013) define CSiR as the failure of
business to meet societal expectations.
Using data from Sustainalytics (www.
sustainalytics.com) over a 5-year time period
across 16 countries, we find that firms in CMEs
have 34% higher CSR and 26% lower CSiR on
average compared with firms in LMEs. Further,
we find a positive relationship between CSR and
firm performance in CMEs but not LMEs, and
a negative relationship between CSiR and firm
performance in LMEs but not CMEs.
The contributions of this research are threefold.
First, we contribute to the debate on agency ver-
sus institutional pressures by noting that firms in
CMEs tend to have higher CSR and lower CSiR
than firms in LMEs, providing support for the
strong influence of institutional pressures. This
also addresses another on-going debate in the
literature that CSR develops either as a substi-
tute for government limitations/inabilities requir-
ing corporations to fill the gap, or that it mirrors
the domestic institutional environment reflecting
the actions of the government (Campbell, 2007;
Gjølberg, 2009). Wefind support for the mirror ar-
gument, providing empirical evidence to suggest
that corporations mirror their institutional envi-
ronments.Second, the literature has tended to treat
CSiR as a symmetric concept with CSR; how-
ever, we and others argue that CSiR is an impor-
tant phenomenon in its own right (Chatterji and
Toel, 2010; Grin and Mahon, 1997; Lange and
Washburn, 2012). Compared with the number
of studies that have examined CSR, few studies
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