The Pressure Behind Corporate Social Performance: Ownership and Institutional Configurations

Abstract

Research summary: Drawing on the “varieties of capitalism” literature, we develop an actor-centered framework that explains firm-level corporate social performance (CSP) by emphasizing the importance of considering owners’ and other stakeholders’ motives towards CSP — which can be instrumental, relational or moral — and their salience in the national institutional setting. Results from an international panel show that investment company (government) ownership has a stronger negative (positive) relationship with CSP in liberal markets, in which owners are the key stakeholder, as compared to coordinated markets, which counterbalance the interests of multiple stakeholders. Family and company ownership have weaker links to CSP across institutional settings. We discuss implications for research and practice and argue that CSP policies may hold more relevance in liberal rather than coordinated market economies.

Managerial summary: Existing debates focus on the impact of corporate social performance (CSP) on firm outcomes. Less is known about the motives and pressures behind CSP, which may explain its variability across firms and institutional settings. We argue that powerful owners’ motives are important for explaining CSP in liberal markets, where shareholders are the most important stakeholder, as compared to coordinated markets, which confer prominence to multiple stakeholders. Owners’ motives are not homogeneous and depending on the type of owners the link between ownership concentration and CSP can be negative (for investment companies) or positive (for governments). In coordinated markets, owners have a weaker impact on CSP, which is mostly attributable to their lower salience relative to stakeholders, rather than to a change in their motives.

Keywords: corporate governance, corporate social performance, ownership, stakeholders, institutions

JEL Classification: G34, M1, M14, M4, F23