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Corporate social responsibility, innovation and firm value

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  • Shahbaz Sheikh

Abstract

This study argues that corporate social responsibility (CSR) and firm innovation have long-term orientation and CSR is positively related to innovation. It explicitly recognises the endogeneity of CSR and innovation and uses 2SLS instrumental variable regressions to estimate the impact of CSR on innovation. Using a sample of 841 large US companies and 3,246 firm year observations for the period 1995-2006, it finds that CSR is positively associated with firm performance in innovation measured by patents and citations. Results also show that CSR strengths (concerns) have positive (negative) impact on innovation. Additional tests indicate that firm performance in innovation is positively related to industry adjusted Tobin's Q, suggesting that innovation is one of the channels through which CSR increases firm value. Overall, the empirical results indicate that CSR is a long-term strategic investment and its impact on firm value should be measured through its impact on firm innovation which is a good indicator of long-term value.

Suggested Citation

  • Shahbaz Sheikh, 2020. "Corporate social responsibility, innovation and firm value," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 14(3), pages 271-297.
    • Handle: RePEc:ids:ijbget:v:14:y:2020:i:3:p:271-297
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    Cited by:

    1. Abuselidze, George & Slobodianyk, Anna, 2020. "Social responsibility of business and government in the conditions of the COVID-19 pandemic," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 210.

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