Does It Pay to Be Virtuous? Examining Whether and Why Firms Benefit From Their CSR Initiatives

Formally defined as discretionary business practices and contributions of corporate resources intended to improve societal well-being (Korschun, Bhattacharya, and Swain 2014); corporate social responsibility (CSR) is increasingly present in consumer consciousness. In fact, we often see consumers seeking out and supporting brands that they perceive as contributing to the greater societal good, incentivizing brands to engage in CSR (Hughes 2016). While CSR is increasingly important to brand strategy, specific guidance on the nature of activities that a brand should undertake, and a documentation of the ensuing returns, are lacking. Detecting potential differences in consumer response to CSR activities might have been challenging in prior research for three important reasons. First, prior work has typically not distinguished between particular types of CSR investment (Jayachandran, Kalaignanam, and Eilert 2013). Second, research has centered around financial performance measures such as firm market value and stock response - which are more separated from direct consumer involvement (Luo and Bhattacharya 2006; Mishra and Modi 2016). Third, other work has focused on documenting the influence of CSR campaigns by looking at measures of consumers’ intentions and attitudes (Chernev and Blair 2015). To our knowledge, our paper forms the first attempt at leveraging field data to offer direct empirical support for the existence of benefits to firms from engaging in different types of CSR, because of direct consumer response.