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Corporate social responsibility and inventory policy

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  • Tribó, Josep A.
  • Surroca, Jordi
  • Barroso, Alicia
  • Barcos, Lucía

Abstract

In this article, we study the impact of implementing corporate social responsible (CSR) practices on a firm’s inventory policy. Our proposal is that there is an inverted U-shape relationship between firms’ CSR and their inventory levels. Two elements explain such proposal. First, stakeholders have different interests regarding the outcome of the inventory system. Specifically, we hypothesize that customers pressure firms to increase inventories; employees have conflicting views regarding inventories and, for this reason, they do not pressure firms in a particular direction; and environmental activists force firms to reduce inventories. The second reason is that there is different level of stakeholder proactiveness contingent on the intensity in the implementation of social responsible policies. In particular, we posit that for low levels of CSR, customers are more relevant, while for larger levels other stakeholders gain more importance. We test this theoretical prediction by crossing two databases, COMPUSTAT, for financial data, and KLD for data on social responsibility. Our final database contains data on 1881 different US companies for the period 1996-2006. The results found conform to our theoretical prediction. Our analysis will be helpful to strategic and tactical decision-making processes on inventory management and will allow researchers to offer concrete advice on the likely outcomes of various stakeholder relationship practices in order to improve the effectiveness of inventory systems. Additionally, the connection between CSR and inventory policies has interest at a macroeconomic level given that, on the one hand, there is a growing tendency for firms to behave in a socially responsible way. On the other, inventories are responsible for up to 87% of the total peak-to-trough movement in GDP. Thus, our results suggest that this tendency to incorporate the social dimension in firms’ strategy should smooth out the overall economic cycle given that firms apply more intensive CSR policies in the expansive periods (decreasing inventories) rather than during the downturns (increasing inventories).

Suggested Citation

  • Tribó, Josep A. & Surroca, Jordi & Barroso, Alicia & Barcos, Lucía, 2010. "Corporate social responsibility and inventory policy," INDEM - Working Paper Business Economic Series id-10-03, Instituto para el Desarrollo Empresarial (INDEM).
  • Handle: RePEc:cte:idrepe:id-10-03
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    References listed on IDEAS

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    Cited by:

    1. Panos Xidonas & Haris Doukas & George Mavrotas & Olena Pechak, 2016. "Environmental corporate responsibility for investments evaluation: an alternative multi-objective programming model," Annals of Operations Research, Springer, vol. 247(2), pages 395-413, December.
    2. Patricia Crifo & Marc-Arthur Diaye & Sanja Pekovic, 2016. "CSR related management practices and Firm Performance :," Post-Print hal-01278585, HAL.
    3. Crifo, Patricia & Diaye, Marc-Arthur & Pekovic, Sanja, 2016. "CSR related management practices and firm performance: An empirical analysis of the quantity–quality trade-off on French data," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 405-416.
    4. Bian, Junsong & Li, Kevin W. & Guo, Xiaolei, 2016. "A strategic analysis of incorporating CSR into managerial incentive design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 83-93.
    5. Ma, Peng & Shang, Jennifer & Wang, Haiyan, 2017. "Enhancing corporate social responsibility: Contract design under information asymmetry," Omega, Elsevier, vol. 67(C), pages 19-30.
    6. Shafat Maqbool, 2019. "Does corporate social responsibility lead to superior financial performance? Evidence from BSE 100 index," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(3), pages 219-231, September.
    7. Wenbin Sun & Shanji Yao & Rahul Govind, 2019. "Reexamining Corporate Social Responsibility and Shareholder Value: The Inverted-U-Shaped Relationship and the Moderation of Marketing Capability," Journal of Business Ethics, Springer, vol. 160(4), pages 1001-1017, December.
    8. Acquaye, Adolf A. & Yamoah, Fred A. & Feng, Kuishuang, 2015. "An integrated environmental and fairtrade labelling scheme for product supply chains," International Journal of Production Economics, Elsevier, vol. 164(C), pages 472-483.
    9. Modak, Nikunja Mohan & Kazemi, Nima & Cárdenas-Barrón, Leopoldo Eduardo, 2019. "Investigating structure of a two-echelon closed-loop supply chain using social work donation as a Corporate Social Responsibility practice," International Journal of Production Economics, Elsevier, vol. 207(C), pages 19-33.

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