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In recent decades, corporate social responsibility, or CSR, has become an increasingly important aspect of firms’ operations. For companies in emerging and transitional markets, where market-based institutions are relatively weak, governments have played a key role in driving CSR. A case in point is China, where the government has pushed CSR as a way of addressing rising social problems such as environmental pollution and social inequality. Off the back of this trend in CSR, a growing body of research has looked into how and whether governments are effective in improving CSR participation. Afterall, knowing how firms respond to government CSR initiatives informs policy making and has important implications on the sustainability of society and the environment. One way in which a government can influence CSR participation is through political endorsement and connection, since this can focus expectations and directly pressure firms. It is important to note, however, that there are conflicting findings over whether politically endorsed firms are indeed more socially responsible. Such conflicted findings could very well be due to most studies only looking at one type of CSR, despite firms potentially choosing to engage in one more than another.

Against this backdrop, a recent study by Xiaowei Rose Luo and Danqing Wang aimed to examine the relationship between political endorsement and firm engagement in different types of CSR simultaneously, hypothesizing that political endorsement can lead to firms in transitional markets engaging selectively in CSR. Based on a cost–benefit analysis, the authors use the idea of selective engagement to illustrate how firms strategically choose to do more in one type of CSR than another, arguing that it alleviates the tension between the need for legitimacy and the need for discretion.

Using a sample of over 1,000 private firms in China in the early 2000s, the study examined how political endorsement influenced their response to government expectations concerning two types of CSR: corporate philanthropy and environmental practices. The authors explain that private firms were chosen because they have a short history in China and are relatively lacking in legitimacy, while the early 2000s were selected since the social norms and regulations surrounding CSR were not yet well established. At the same time, corporate philanthropy and environmental practices were chosen for two main reasons. First, they were emphasized in the government’s guidelines as they addressed the pressing concerns of rising social inequality and environmental pollution, respectively. This allowed Luo and Wang to test the government’s influence on the firms’ actual engagement. Second, the two types of CSR represent the different constraints and costs on a firm. Specifically, compared to corporate philanthropy, environmental protection requires the modification of internal operations, and thus imposes greater constraints and costs. With this in mind, the authors proposed that politically endorsed private firms would choose to engage more in corporate philanthropy and less in environmental practices.

The findings revealed that this indeed was the case, and that the positive effect of endorsement in philanthropy was even stronger for firms that depend on state-owned firms for supplies. Such a result suggests that endorsed firms engage in CSR selectively in order to balance their need to maintain legitimacy and discretion. However, dependence on state-owned firms as customers does not moderate the positive effect of political endorsement—a finding, the authors point out, that is consistent with existing studies that show the continued dominance of government power over key resources for production. Luo and Wang go on to say that their results support the suggestion that different forms of political endorsement put firms under different amounts of interference and discretionary constraint. For example, firms that had won government awards engaged more in corporate philanthropy than environmental practices, but that firms with executives in political office were more likely to engage in both.

Not only does their study contribute to the existing body of research on CSR in transitional economies by suggesting how to reconcile the aforementioned conflicting findings on the CSR engagement of politically connected firms, it also provides a new perspective on firms’ strategic response to CSR. By uncovering selective engagement, Luo and Wang’s study deepens the understanding of how political endorsement impacts firms’ CSR as well as the role of the government in CSR in transitional economies. For instance, while the state can pressure firms to participate in CSR through political endorsement, companies tend to avoid substantial engagement in CSR activities that impose greater constraints over their discretion. Finally, the authors explain that their research can also be leveraged by policy makers to help design more effective influencing and monitoring channels to improve social inequality and environmental sustainability.