Caroline Flammer

Corporate Social Responsibility and the Allocation of Procurement Contracts: Evidence from a Natural Experiment

Research Summary: This study examines whether corporate social responsibility (CSR) improves firms’ competitiveness in the market for government procurement contracts. To obtain exogenous variation in firms’ social engagement, I exploit a quasi‐natural experiment provided by the enactment of state‐level constituency statutes, which allow directors to consider stakeholders’ interests when making business decisions. Using constituency statutes as instrumental variable (IV) for CSR, I find that companies with higher CSR receive more procurement contracts. The effect is stronger for more complex contracts and in the early years of the government‐company relationship, suggesting that CSR helps mitigate information asymmetries by signaling trustworthiness. Moreover, the effect is stronger in competitive industries, indicating that CSR can serve as a differentiation strategy to compete against other bidders. Managerial Summary: This study examines how companies can strategically improve their competitiveness in the market for government procurement contracts—a market of economic importance (15–20% of GDP). It shows that companies with higher social and environmental performance (CSR) receive more procurement contracts. This effect is stronger for more complex contracts, in the early years of the government–company relationship, and in more competitive industries. These findings indicate that firms’ CSR can serve as a signaling and differentiation strategy that influences the purchasing decision of government agencies. Accordingly, managers operating in the business‐to‐government (B2G) sector could benefit from integrating social and environmental considerations into their strategic decision making.This study examines whether corporate social responsibility (CSR) influences the allocation of procurement contracts. To obtain exogenous variation in companies’ social engagement, I exploit a quasi-natural experiment provided by the enactment of state-level constituency statutes, which allow directors to consider stakeholders’ interests when making business decisions. Using constituency statutes as instrumental variable (IV) for CSR, I find that companies with higher CSR receive more procurement contracts. The effect is stronger for more complex contracts and in the early years of the government-company relationship, suggesting that CSR helps mitigate information asymmetries by signaling non-opportunistic behavior and trustworthiness. In addition, I find that the effect is stronger in competitive industries, indicating that CSR can serve as a differentiation strategy to compete against other bidders.

Does Product Market Competition Foster Corporate Social Responsibility

This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi-natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference-in-differences methodology, I find that companies react to tariff reductions by increasing their engagement in CSR. This finding supports the view that CSR is a valuable resource that allows companies to improve their competitiveness. I further argue and provide evidence that the increase in CSR depends on the institutional environment as well as CSR- and firm-specific characteristics. Specifically, I find that the increase in CSR is larger for companies operating in industries where the CSR-sensitivity of customers is higher such as the business-to-consumer sector and durable experience goods markets. I also find that companies focus their additional CSR investments on their core stakeholders such as customers and employees. Finally, I find that the increase in CSR, albeit smaller, remains significant for companies facing higher financing constraints.

Corporate Green Bonds

This study examines corporate green bonds, a new financial innovation in the corporate landscape. I document that the issuance of corporate green bonds has become more prevalent over time, particul...

Corporate Social Responsibility as a Defense against Knowledge Spillovers: Evidence from the Inevitable Disclosure Doctrine

In this study, we theorize and empirically examine whether companies respond to the threat of knowledge spillovers by strategically increasing their engagement in corporate social responsibility (CSR). To obtain exogenous variation in the threat of knowledge spillovers, we exploit a natural experiment provided by the rejection of the inevitable disclosure doctrine (IDD) by several U.S. states between 1991 and 2013. Since the doctrine prevents employees with valuable know-how from working for a competitor in the immediate future, the doctrines rejection facilitates knowledge appropriation by rivals. Using a difference-in-differences methodology, we find that companies react to the increased threat of knowledge spillovers by increasing their CSR. We further provide evidence that the increase in CSR is stronger for companies i) located closer to innovation hubs as well as companies operating in industries that are ii) more R&D intensive, iii) more competitive, and iv) have more attractive investment opportunities. Overall, these results are consistent with the notion that CSR serves as a strategic tool to mitigate the risk of knowledge spillovers.

The Risk of Knowledge Spillovers and Corporate Social Responsibility: Evidence from the Inevitable Disclosure Doctrine

In this study, we theorize and empirically examine whether companies respond to the threat of knowledge spillovers by strategically increasing their engagement in corporate social responsibility (CSR). To obtain exogenous variation in the threat of knowledge spillovers, we exploit a natural experiment provided by the rejection of the inevitable disclosure doctrine (IDD) by several U.S. states between 1991 and 2013. Since the doctrine prevents employees with valuable know-how from working for a competitor in the immediate future, the doctrines rejection facilitates knowledge appropriation by rivals. Using a difference-in-differences methodology, we find that companies react to the increased threat of knowledge spillovers by increasing their CSR. We further provide evidence that the increase in CSR is stronger for companies i) located closer to innovation hubs as well as companies operating in industries that are ii) more R&D intensive, iii) more competitive, and iv) have more attractive investment opportunities. Overall, these results are consistent with the notion that CSR serves as a strategic tool to mitigate the risk of knowledge spillovers.

Corporate Social Responsibility and the Prevention of Knowledge Spillovers: Evidence from the Inevitable Disclosure Doctrine

In this study, we theorize and empirically examine whether companies respond to the threat of knowledge spillovers by strategically increasing their engagement in corporate social responsibility (CSR). To obtain exogenous variation in the threat of knowledge spillovers, we exploit a natural experiment provided by the rejection of the inevitable disclosure doctrine (IDD) by several U.S. states between 1991 and 2013. Since the doctrine prevents employees with valuable know-how from working for a competitor in the immediate future, the doctrines rejection facilitates knowledge appropriation by rivals. Using a difference-in-differences methodology, we find that companies react to the increased threat of knowledge spillovers by increasing their CSR. We further provide evidence that the increase in CSR is stronger for companies i) located closer to innovation hubs as well as companies operating in industries that are ii) more R&D intensive, iii) more competitive, and iv) have more attractive investment opportunities. Overall, these results are consistent with the notion that CSR serves as a strategic tool to mitigate the risk of knowledge spillovers.