Does it Pay to Be Really Good? Addressing the Shape of the Relationship between Social and Financial Performance

Strategic Management Journal, Forthcoming

40 Pages Posted: 9 Jun 2011  

Michael L. Barnett

Rutgers Business School, Newark & New Brunswick

Robert M. Salomon

New York University (NYU) - Department of Management and Organizational Behavior

Date Written: June 7, 2011

Abstract

Building on Barnett’s (2007) theoretical argument that a firm’s ability to profit from social responsibility depends upon its stakeholder influence capacity (SIC), we bring together contrasting literatures on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) to hypothesize that the CSP-CFP relationship is U-shaped. Our results support that hypothesis. We find that firms with low CSP have higher CFP than firms with moderate CSP, but firms with high CSP have the highest CFP. This supports the theoretical argument that SIC underlies the ability to transform social responsibility into profit.

Keywords: corporate social performance, corporate financial performance, stakeholder influence capacity

Suggested Citation

Barnett, Michael L. and Salomon, Robert M., Does it Pay to Be Really Good? Addressing the Shape of the Relationship between Social and Financial Performance (June 7, 2011). Strategic Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1860985

Michael L. Barnett (Contact Author)

Rutgers Business School, Newark & New Brunswick ( email )

NJ
United States

HOME PAGE: http://www.business.rutgers.edu

Robert M. Salomon

New York University (NYU) - Department of Management and Organizational Behavior ( email )

44 West 4th Street
New York, NY 10012
United States

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