ABSTRACT
Corporate social responsibility (CSR), defined as “the broad array of strategies and operating practices that a company develops in its efforts to deal with and create relationships with its numerous stakeholders and the natural environment” (Waddock, 2004, p. 10), has moved from ideology to reality. More than 6,000 corporations across 135 different countries have adopted the United Nation’s Global Compact policy, committing to align their business operations with a set of standards of socially responsible behaviors. These widespread CSR efforts are driven not only by ideological thinking that firms can be positive forces for social change but also by the business returns that firms potentially reap from CSR engagement. Prior research has shown that CSR enables a firm to appeal to the socio-cultural norms of its institutional environment and contributes to its social legitimacy (Handelman and Arnold, 1999; Palazzo and Scherer, 2006; Scott, 1987). In turn, social legitimacy ensures the continuous flow of resources and sustained support from the firm’s internal and external stakeholders (Palazzo and Scherer, 2006; Pfeffer and Salancik, 1978; Sen and Bhattacharya, 2001), which ultimately results in enhanced firm financial performance (Luo and Bhattacharya, 2006; Margolis and Walsh, 2003).
