Doing Well by Doing Good, Uniquely: Materiality and the Market Value of Unique CSR Strategies

Corporate social responsibility (CSR) has become a strategic decision for organizations. The capacity to invest in several distinct CSR categories at varying levels (e.g., environmental innovation, diversity, community) leaves firms with a multitude of patterns from which to choose. However, the question of whether market returns to CSR are defined by individual-level positioning choices or by industry-level conditions––particularly the materiality of distinct categories of CSR––remains unresolved. Drawing on the literature arguing that stakeholders are crucial enablers of value creation and capture, we theorize that unique CSR strategies more effectively promote stakeholder engagement by helping firms develop differentiated and unrivaled positions with key stakeholders. Thus, we argue that CSR uniqueness is positively associated with market value. Yet we also argue that uniqueness can be constrained by materiality: in industries in which a higher number of CSR categories are considered material, firms have fewer degrees of freedom to successfully differentiate from competitors; hence, the market returns to unique CSR positioning are negatively associated with the number of CSR categories deemed material to the industry. Using a novel measure of uniqueness of CSR strategies and a database containing environmental, social, and financial information of 2,093 firms between 2002 and 2017, we find strong support for our hypotheses. To shed further light on the mechanisms driving the role of materiality, we examine the 2010 BP Deepwater Horizon oil spill.