Strategic motivations for corporate social responsibility: profitability or legitimacy?

Management research has broadly categorized strategic motivations for corporate social responsibility (CSR) as profit-seeking or legitimacy, which are at times conflicting and complementary. The nature of firm motivations has significant implications for firm-level and societal outcomes yet is not directly observable. In this study I theorize that strategic motivations may be inferred based on observed performance relative to context-specific groups of relevant peer firms. I integrate economics and strategic management traditions to develop both a theoretical framework and an empirical model of peer effects and their underlying strategic motivations, and employ a novel instrumental variables estimation that exploits unique aspects of a recent innovation in dynamic industry classification. Results indicate that firms select referent peers based on strategic context and shed new light on the multi-dimensional nature of CSR strategies, revealing subtleties of firm behavior often masked by traditional empirical approaches. Contributions to theory and opportunities for future research are highlighted.