Exploring the relationship between corporate social responsibility and firm innovation

This research investigates the link between corporate social responsibility (CSR) and firm innovation. Drawing upon the literatures on CSR and the knowledge-based view, we conceptualize that a firm's CSR programs enable it to build broader and deeper relationship networks with its stakeholders, facilitating the sharing and exchange of external knowledge of its stakeholders; in turn, stakeholders' external knowledge complements the firm's internal knowledge and promotes firm innovation. Using a large scale data set compiled from various archival sources, our empirical results show that firms with greater CSR activities exhibit higher innovativeness capability and launch more new products. Furthermore, we show that this positive relationship between CSR and firm innovation is stronger for firms with higher R&D investment and firms operating in more competitive markets. This research broadens current understanding of the business returns to CSR, suggesting that CSR can be a catalyst for innovation.