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
Date Written: May 2, 2017
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: Suggested Citation