Skip to main content
SpringerLink
Log in

Exploring the Curvature of the Relationship Between HRM–CSR and Corporate Financial Performance

  • Original Paper
  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

This article contributes to the general literature on the relationship between corporate social performance and corporate financial performance, as well as to the emerging HRM–CSR literature, by exploring the curvature of the relationship between HRM–CSP and CFP. We advance conceptual arguments in favor of an inverted U-shaped relationship. Our results demonstrate a significant quadratic relationship between HRM–CSP and CFP. We provide evidence that this relationship is not linear or S-shaped but rather inverted U-shaped.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. We would like to thank an anonymous reviewer for highlighting this argument. We recognize that diminishing returns are not necessarily the result of objective mechanisms but can result from stakeholders' perceptions and induced effects in terms of attitudes and behaviors.

References

  • Aguilera, R. V., & Jackson, G. (2003). The cross-national diversity of corporate governance dimensions and determinants. Academy of Management Review, 28(3), 447–465.

    Google Scholar 

  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51.

    Google Scholar 

  • Arnold, H. J., & Feldman, D. C. (1982). A multivariate analysis of the determinants of turnover. Journal of Applied Psychology, 67(3), 350–360.

    Google Scholar 

  • Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4), 717–736.

    Google Scholar 

  • Barber, B. M., & Lyon, J. D. (1996). Detecting abnormal operating performance: The empirical power and specification of test statistics. Journal of Financial Economics, 41, 359–399.

    Google Scholar 

  • Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97(1), 71–86.

    Google Scholar 

  • Barnett, M. L., & Salomon, R. M. (2006). Beyond dichotomy: The curvilinear relationship between social responsibility and financial performance. Strategic Management Journal, 27(11), 1101–1122.

    Google Scholar 

  • Barnett, M. L., & Salomon, R. M. (2012). Does it pay to be really good? Addressing the shape of the relationship between social and financial performance. Strategic Management Journal, 33(11), 1304–1320.

    Google Scholar 

  • Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

    Google Scholar 

  • Becker, B. E., & Gerhart, B. (1996). The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal, 39(4), 779–801.

    Google Scholar 

  • Bhattacharya, C. B., Sen, S., & Korschun, D. (2008). Using corporate social responsibility to win the war of talent. Sloan Management Review, 49(2), 37–44.

    Google Scholar 

  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143.

    Google Scholar 

  • Bowen, D. E., & Ostroff, C. (2004). Understanding HRM-firm performance linkages: The role of the “strength” of the HRM system. Academy of Management Review, 29(2), 203–221.

    Google Scholar 

  • Brammer, S., & Millington, A. (2008). Does it pay to be different? An analysis of the relationship between corporate social and financial performance. Strategic Management Journal, 29(12), 1325–1343.

    Google Scholar 

  • Brammer, S., Millington, A., & Rayton, B. (2007). The contribution of corporate social responsibility to organizational commitment. International Journal of Human Resource Management, 18(10), 1701–1719.

    Google Scholar 

  • Caliguri, P., Mencin, A., & Jiang, K. (2013). Win-win-win: The influence of company-sponsored volunteerism programs on employees, NGOs, and Business Units. Personnel Psychology, 66, 825–860.

    Google Scholar 

  • Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967.

    Google Scholar 

  • Cappelli, P., & Singh, H. (1992). Integrating strategic human resources and strategic management. In D. Lewin, O. S. Mitchell, & P. Sherer (Eds.), Research frontiers in industrial relations and human resources (pp. 165–192). Madison, WI: Industrial Relations Research Association.

    Google Scholar 

  • Carmeli, A., Gilat, G., & Waldman, D. A. (2007). The role of perceived organizational performance in organizational identification, adjustment and job performance. Journal of Management Studies, 44(6), 972–992.

    Google Scholar 

  • Cascio, W. F. (1991). Costing human resources: The financial impact of behavior in organizations (3d ed.). Boston: PWS-Kent.

    Google Scholar 

  • Chadwick, C. (2007). Examining non-linear relationship between human resource practices and manufacturing performance. Industrial and Labor Relations Review, 60(4), 499–521.

    Google Scholar 

  • Chen, C., Patten, D. M., & Roberts, R. (2008). Corporate charitable contributions: A corporate social performance or legitimacy strategy? Journal of Business Ethics, 82(1), 131–144.

    Google Scholar 

  • Coffey, B. S., & Fryxell, G. E. (1991). Institutional ownership of stock and dimensions of corporate social performance: An empirical examination. Journal of Business Ethics, 10(6), 437–444.

    Google Scholar 

  • Cotton, J. L., & Tuttle, J. M. (1986). Employee turnover: A meta-analysis and review with implications for research. Academy of Management Review, 11(1), 55–70.

    Google Scholar 

  • De la Cruz Déniz-Déniz, M., & De Saa-Pérez, P. (2003). A resource-based view of corporate responsiveness toward employees. Organization Studies, 24(2), 299–319.

    Google Scholar 

  • Deephouse, D. L. (1999). To be different, or to be the same? It’s a question (and theory) of strategic balance. Strategic Management Journal, 20(2), 147–166.

    Google Scholar 

  • Delery, J. E., & Doty, D. H. (1996). Modes of theorizing in strategic human resource management: Tests of universalistic, contingency, and configurational performance predictions. Academy of Management Journal, 39(4), 802–835.

    Google Scholar 

  • DeNisi, A. S., Wilson, M. S., & Biteman, J. (2014). Research and practice in HRM: A historical perspective. Human Resource Management Review, 24(3), 219–231.

    Google Scholar 

  • Dixon-Fowler, H. R., Slater, D. J., Johnson, J. L., Ellstrand, A. E., & Romi, A. M. (2013). Beyond “Does it Pay to be Green?” A meta-analysis of moderators of the CEP-CFP relationship. Journal of Business Ethics, 112(2), 353–366.

    Google Scholar 

  • Edmans, A. (2011). Does the stock market fully value intangible? Employee satisfaction and equity prices. Journal of Financial Economics, 101(3), 621–640.

    Google Scholar 

  • Edmans, A. (2012). The link between job satisfaction and firm value with implications for corporate social responsibility. Academy of Management Perspectives, 26(4), 1–19.

    Google Scholar 

  • Farooq, O., Payaud, M., Merunka, D., & Valette, F. P. (2014). The impact of corporate social responsibility on organizational commitment: Exploring multiple mediation mechanisms. Journal of Business Ethics, 125(4), 563–580.

    Google Scholar 

  • Fieller, E. C. (1954). Some problems in interval estimation. Journal of the Royal Statistical Society: Series B (Methodological), 16(2), 175–185.

    Google Scholar 

  • Flammer, C. (2015). Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), 2549–2568.

    Google Scholar 

  • Flammer, C., & Luo, J. (2017). Corporate social responsibility as an employee governance tool: Evidence from a quasi-experiment. Strategic Management Journal, 38(2), 163–183.

    Google Scholar 

  • Fombrun, C., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33(2), 233–258.

    Google Scholar 

  • Freeman, R. E. (1994). The politics of stakeholder theory. Business Ethics Quarterly, 4(4), 409–421.

    Google Scholar 

  • Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder theory and “The Corporate Objective Revisited”. Organization Science, 15(3), 364–369.

    Google Scholar 

  • Friedman, M. (1970). The social responsibility of business is to increase its profits. New York Times Magazine, 13, 32–33.

    Google Scholar 

  • Gavetti, G., & Levinthal, D. (2000). Looking forward and looking backward: Cognitive and experiential search. Administrative Science Quarterly, 45(1), 113–137.

    Google Scholar 

  • Gerhart, B., & Milkovich, G. T. (1992). Employee compensation: Research and practice. In M. D. Dunnette & L. M. Hough (Eds.), Handbook of industrial and organizational psychology 3 (pp. 481–569). Palo Alto, CA: Consulting Psychologists Press.

    Google Scholar 

  • Glavas, A., & Piderit, S. K. (2009). How does doing good matter? Effects of corporate citizenship on employees. Journal of Corporate Citizenship, 36, 51–70.

    Google Scholar 

  • Gond, J. P., Igalens, J., Swaen, V., & El Akremi, A. (2011). The human resources contribution to responsible leadership: An exploration of the CSR-HR interface. Journal of Business Ethics, 98(1), 115–132.

    Google Scholar 

  • Greening, D. W., & Turban, D. B. (2000). Corporate social performance as a competitive advantage in attracting a quality workforce. Business and Society, 39(3), 658–672.

    Google Scholar 

  • Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business & Society, 36(5), 5–31.

    Google Scholar 

  • Haans, R. F. J., Peters, C., & He, Z.-L. (2016). Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research. Strategic Management Journal, 37(7), 1177–1195.

    Google Scholar 

  • Hae-Ryong, K., Moonkyu, L., Hyoung-Tark, L., & Na-Min, K. (2010). Corporate social responsibility and employee-company identification. Journal of Business Ethics, 95(4), 557–569.

    Google Scholar 

  • Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: What’s the botton line? Strategic Management Journal, 22(2), 125–139.

    Google Scholar 

  • Hirschberger J., Lye JN. (2005). Inferences for the extremum of quadratic regression models. SSRN: http://ssrn.com/abstract=918626.

  • Hitt, M. A., Bierman, L., Katsuhiko, S., & Kochhar, R. (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective. Academy of Management Journal, 44(1), 13–28.

    Google Scholar 

  • Holder-Webb, L., Cohen, J., Nath, L., & Wood, D. (2009). The supply of corporate social responsibility disclosures among U.S. firms. Journal of Business Ethics, 84(4), 497–527.

    Google Scholar 

  • Huselid, M. A. (1995). The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38(3), 635–672.

    Google Scholar 

  • Huselid, M.A., Becker, B.E. (1995). The strategic impact of high performance work systems. Working paper, Rutgers University.

  • Jensen, M. (2002). Value maximization, stakeholder theory, and the corporate objective function. Business Ethics Quarterly, 12(2), 235–256.

    Google Scholar 

  • Jo, H., & Harjoto, M. A. (2011). Corporate governance and firm value: The impact of corporate social responsibility. Journal of Business Ethics, 103(3), 351–383.

    Google Scholar 

  • Jones, D. A. (2010). Does serving the community also serve the company? Using organizational identification and social exchange theories to understand employee responses to a volunteerism programme. Journal of Occupational and Organizational Psychology, 83, 857–878.

    Google Scholar 

  • Kanter, R. M. (1999). From spare change to real change: The social sector as beta site for business innovation. Harvard Business Review, 77(3), 123–132.

    Google Scholar 

  • Kennedy, P. (1998). A guide to econometrics. Cambridge, MA: MIT Press.

    Google Scholar 

  • Lin, C., Lyau, N., Tsai, Y., Chen, W., & Chiu, C. (2010). Modeling corporate citizenship and its relationship with organizational citizenship behaviors. Journal of Business Ethics, 95(3), 357–372.

    Google Scholar 

  • Lind, J. T., & Medhlum, H. (2010). With or without U? The appropriate test for a U-shaped relationship. Oxford Bulletin of Economics and Statistics, 72(1), 109–118.

    Google Scholar 

  • Mahoney, L., & Roberts, R. W. (2007). Corporate social performance, financial performance and institutional ownership in Canadian firms. Accounting forum, 31(3), 233–253.

    Google Scholar 

  • Margolis, J.D., Elfenbein, H.A., Walsh, J.P. (2007). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Working Paper, p. 77.

  • Margolis, J. D., & Walsh, J. P. (2003). Misery lives companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268–305.

    Google Scholar 

  • McCabe, D. M. (2000). Global labor and worksite standards: A strategic ethical analysis of shareholder employee relations resolutions. Journal of Business Ethics, 23(1), 101–110.

    Google Scholar 

  • McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21(5), 603–609.

    Google Scholar 

  • Moore, G. (2001). Corporate social and financial performance: An investigation in the U.K. supermarket industry. Journal of Business Ethics, 34(3), 299–315.

    Google Scholar 

  • Morgeson, F. P., Aguinis, H., Waldman, D. A., & Siegel, D. S. (2013). Extending corporate social responsibility research to the human resource management and organizational behavior domains: A look at the future. Personnel Psychology, 66(4), 805–824.

    Google Scholar 

  • Newman, A., Nielsen, I., & Qing, M. (2015). The impact of employee perceptions of organizational corporate social responsibility practices on job performance and organizational citizenship behavior: Evidence from the Chinese private sector. International Journal of Human Resource Management, 26(9), 1226–1242.

    Google Scholar 

  • Newman, A., Qing, M., Hofman, P. S., & Zhu, C. J. (2016). The impact of socially responsible human resource management on employees’ organizational citizenship behavior: the mediating role of organizational identification. International Journal of Human Resource Management, 27(4), 440–455.

    Google Scholar 

  • O’Donohue, W., & Nelson, L. (2009). The role of ethical values in an expanded psychological contract. Journal of Business Ethics, 90(2), 251–263.

    Google Scholar 

  • Oh, W. Y., Chang, Y. K., & Martynov, A. (2011). The effect of ownership structure on corporate social responsibility: Empirical evidence from Korea. Journal of Business Ethics, 104(2), 283–297.

    Google Scholar 

  • Orlitzky, M., Schmidt, F. L., & Reyes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–411.

    Google Scholar 

  • Peterson, D. K. (2004). The relationship between perceptions of corporate citizenship and organizational commitment. Business and Society, 43(3), 296–319.

    Google Scholar 

  • Pfeffer J. 2009. Shareholders first? Not so fast… Havard Business Review July-August Issue.

  • Richard, O. C., & Johnson, N. B. (2001). Strategic human resource management effectiveness and firm performance. International Journal of Human Resource Management, 12, 299–310.

    Google Scholar 

  • Roberts, R. (1992). Determinants of corporate social disclosure: An application of stakeholder theory. Accounting, Organizations and Society, 17(6), 595–612.

    Google Scholar 

  • Rodell, J. B. (2013). Finding meaning through volunteering: Why do employees volunteer and what does it mean for their jobs? Academy of Management Journal, 56(5), 1274–1294.

    Google Scholar 

  • Russell, J. S., Terborg, J. R., & Powers, M. L. (1985). Organizational performances and organizational level training and support. Personnel Psychology, 38, 849–863.

    Google Scholar 

  • Shen, J., & Benson, J. (2016). When CSR is a social norm: How socially responsible human resource management affects employee work behavior. Journal of Management, 42(6), 1723–1746.

    Google Scholar 

  • Shen, J., & Zhu, J. H. (2011). Effects of socially responsible HRM on employee organizational commitment. International Journal of Human Resource Management, 22(15), 3020–3035.

    Google Scholar 

  • Sundaram, A., & Inkpen, A. (2004). The corporate objective revisited. Organization Science, 15(3), 350–363.

    Google Scholar 

  • Surroca, J., Tribo, J. A., & Waddock, S. (2010). Corporate responsibility and financial performance: The role of intangible resources. Strategic Management Journal, 31(5), 463–490.

    Google Scholar 

  • Suto, M., & Takehara, H. (2016). The link between corporate social performance and financial performance: Empirical evidence from Japanese firms. International Journal of Corporate Strategy and Social Responsibility, 1(1), 4–25.

    Google Scholar 

  • Turban, D. B., & Greening, D. W. (1997). Corporate social performance and organizational attractiveness to prospective employers. Academy of Management Journal, 40(3), 658–672.

    Google Scholar 

  • Turker, D. (2009). How corporate social responsibility influences organizational commitment. Journal of Business Ethics, 89(2), 189–204.

    Google Scholar 

  • Vandenberg, R. J., Richardson, H. A., & Eastman, L. J. (1999). The impact of high involvement work processes on organizational effectiveness. Groups and Organization Management, 24(3), 300–339.

    Google Scholar 

  • Villalonga, B. (2004). Intangible resources, Tobin’s q, and sustainability of performance differences. Journal of Economic Behavior & Organization, 54(2), 205–230.

    Google Scholar 

  • Voegtlin, C., & Greenwood, M. (2016). Corporate social responsibility and human resource management: A systematic review and conceptual analysis. Human Resource Management Review, 26(3), 181–197.

    Google Scholar 

  • Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303–319.

    Google Scholar 

  • Weber, J., & Gladstone, J. (2014). Rethinking the corporate financial-social performance relationship: Examining the complex, multistakeholder notion of corporate social performance. Business and Society Review, 119(3), 297–336.

    Google Scholar 

  • Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.

    Google Scholar 

  • Wu, M. L. (2006). Corporate social performance, corporate financial performance, and firm size: A meta-analysis. Journal of American Academy of Business, 8(1), 163–171.

    Google Scholar 

  • Zhao, X., & Murrell, A. J. (2016). Revisiting the corporate social performance link: A replication of Waddock and Graves. Strategic Management Journal, 37(11), 2378–2388.

    Google Scholar 

Download references

Acknowledgements

The authors would like to thank the LIPHA research laboratory of the Université Paris Est and ESSCA School of Management for their support and for the funding provided for this study. We also thank the company VIGEO-EIRIS, which made its database available to us under the VIGEO-EIRIS/ESSCA partnership. In addition, we extend special thanks to the editor Valérie Swaen and to the anonymous reviewers for their comments, advice, and suggestions. Any remaining errors are, naturally, the sole responsibility of the authors.

Author information

Authors and Affiliations

  1. Laboratoire LIPHA Paris Est, Université Paris Est, Site de senart – 36/37 Rue Georges Charpak, 77567, Lieusaint, France

    Olivier Meier

  2. INSEEC School of Business and Economics, INSEEC U., 27 Avenue Claude Vellefaux, 75010, Paris, France

    Philippe Naccache

  3. ESSCA School of Management, 1 Rue Joseph Lakanal, 49000, Angers, France

    Guillaume Schier

Authors
  1. Olivier Meier
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Philippe Naccache
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Guillaume Schier
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Guillaume Schier.

Ethics declarations

Conflict of interest

The authors declare that they have no conflict of interest.

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix

Appendix

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Meier, O., Naccache, P. & Schier, G. Exploring the Curvature of the Relationship Between HRM–CSR and Corporate Financial Performance. J Bus Ethics 170, 857–873 (2021). https://doi.org/10.1007/s10551-019-04332-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-019-04332-3

Keywords

Search

Navigation