The Moderating Effect of Cultural Values on the Relationship between Corporate Social Performance and Firm Performance

Abstract

Using two national culture dimensions, we show a strong interaction effect between culture and firms’ corporate social performance (CSP), which significantly influences firm performance. Specifically, firm performance is higher in those firms where CSR initiatives are congruent with the cultural environment. CSP has a negative impact on firm performance for those firms domiciled in countries which are individualistic and favor flexibility. These findings are amplified for those firms with low levels of foreign influence in terms of institutional ownership and sales. Using a data set covering 5,334 firms from 41 different countries, our results show that culture and CSR initiatives have a powerful interaction effect in determining firm performance, suggesting that CSP’s impact is dependent upon the culture of the country where the firm resides.

Keywords: Cultural values, corporate social performance, firm performance

JEL Classification: A13, D22, D63, M14