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

53 Pages Posted: 18 Sep 2015 Last revised: 2 May 2017

Caroline Flammer

Boston University

Aleksandra Kacperczyk

Massachusetts Institute of Technology (MIT)

Date Written: May 2, 2017

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 by several U.S. states. Using a difference-in-differences methodology, we find that companies react to the increased threat of knowledge spillovers by increasing their CSR. This effect is stronger for companies i) closer to innovation hubs, and operating in industries that are ii) more R&D-intensive, iii) more competitive, and iv) have more attractive investment opportunities. Finally, we conduct a large-scale survey of knowledge workers that confirms the importance of CSR as a strategic tool to counter the risk of knowledge spillovers.

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 (May 2, 2017). 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

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