Toward an Understanding of CSR

Theory and Field Experimental Evidence

Abstract

Corporate social responsibility (CSR) has been on the business landscape for more than half a century. Advocates of CSR argue that such activities can increase long-term profits and social well-being, while critics argue that CSR serves as a major distraction. Social scientists and business scholars are largely divided on the value of CSR, with most of the focus on the demand side. We develop a theory and a tightly-linked field experiment to explore the supply side of CSR. Our natural field experiment, in which we created our own firm and hired actual workers, generates a rich data set on worker behavior and responses to CSR incentives. We use these data to estimate a structural principal-agent model, allowing us to answer a wide array of questions related to the supply side value of CSR. The results show that CSR induces large selection effects on productivity. While female workers produce higher quality output by default, CSR incentives induce a substantial quality response from male workers. This causes a convergence in output quality across genders. Beyond its practical import, our approach has broad methodological implications, from analyzing the impact of virtually any non-pecuniary incentive, such as workplace amenities and flexible hours, to understanding behavior in any principal-agent setting.

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