Mind the Gap: The Interplay Between External and Internal Actions in the Case of Corporate Social Responsibility

Thursday February 4, 2016
  • Article

Abstract

We explore the effect of the interplay between a firm’s external and internal actions on market value in the context of corporate social responsibility (CSR). Specifically, drawing from the neo-institutional theory, we distinguish between external and internal CSR actions and argue that they jointly contribute to the accumulation of intangible firm resources and are therefore associated with better market value. Importantly, though, we find that, on average, firms undertake more internal than external CSR actions, and we theorize that a wider gap between external and internal actions is negatively associated with market value. We confirm our hypotheses empirically, using the market-value equation and a sample comprising 1,492 firms in 33 countries from 2002 to 2008. Finally, we discuss implications for future research and practice.

 

Citation

Hawn, O. and Ioannou, I. (2016), Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility. Strategic Management Journal, 37: 2569–2588. doi:10.1002/smj.2464

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