Nature and relationship between corporate social performance and firm size : a cross-national study

Purpose: Firm size has been identified as one of the most important correlates with corporate social performance (CSP). Both conceptual and empirical research has been done to try to explicate and determine this relationship; however, the results from both theoretical and empirical research have indicated a mixed and sometimes inconsistent relationship because of endogeneity between firm size and CSP. This paper aims to add to the body of knowledge by identifying and addressing some of the limitations in determining the relationship between firm size and CSP. Design/methodology/approach: Using the Arellano–Bond method to control for the endogeneity, this study tests the relationship between CSP and firm size using a panel of 380 public companies of various sizes; in various industry types; and across 19 countries in North America, Europe and Asia over a six-year period. Findings: The results of the study show that firm size positively influences CSP and its subcomponents when endogeneity has been controlled for. Research limitations/implications: This study lends support for the theory of the firm framework that CSP attributes are embedded in the production process that leads to higher economies of scale, and the resource-based view of firms where firms that possess valuable and inimitable resources in CSR can lead to a sustainable competitive advantage over competitors. This suggests that as firms grow in size, they can leverage their resources to achieve greater economies of scale that will lead to better CSP over time. Originality/value: This study addresses the potential endogeneity problem between firm size and CSP and offers a broader testing context.