Corporate Social Responsibility as a Defense against Knowledge Spillovers: Evidence from the Inevitable Disclosure Doctrine

63 Pages Posted: 18 Sep 2015 Last revised: 21 Sep 2018

See all articles by Caroline Flammer

Caroline Flammer

Boston University

Aleksandra Kacperczyk

Massachusetts Institute of Technology (MIT); London Business School

Date Written: September 8, 2018

Abstract

We examine whether companies respond to the threat of knowledge spillovers by strategically increasing their engagement in corporate social responsibility (CSR). To obtain exogenous variation in the threat of knowledge spillovers, we exploit a natural experiment provided by the rejection of the inevitable disclosure doctrine (IDD) by several U.S. states. Using a difference-in-differences methodology we find that, following the rejection of the IDD, companies significantly increase their CSR. Our proposed rationale is that CSR helps mitigate knowledge spillovers by i) reducing employees' propensity to join a rival firm, and ii) reducing employees' propensity to disclose the firm's valuable knowledge even if they join a rival firm. Evidence from a laboratory experiment, an online experiment, and a survey of knowledge workers is supportive of these arguments.

Keywords: knowledge spillovers, corporate social responsibility, inevitable disclosure doctrine, difference-in-differences

JEL Classification: M1, M5

Suggested Citation

Flammer, Caroline and Kacperczyk, Aleksandra, Corporate Social Responsibility as a Defense against Knowledge Spillovers: Evidence from the Inevitable Disclosure Doctrine (September 8, 2018). Available at SSRN: https://ssrn.com/abstract=2661881 or http://dx.doi.org/10.2139/ssrn.2661881

Caroline Flammer (Contact Author)

Boston University ( email )

Boston University Questrom School of Business
595 Commonwealth Avenue, Office 634A
Boston, MA 02215
United States

HOME PAGE: http://sites.bu.edu/cflammer/

Aleksandra Kacperczyk

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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