Effect of organizational status on employment-related corporate social responsibility: Evidence from a regression discontinuity approach

Abstract

We examine the effect of organizational status on employment-related corporate social responsibility (CSR). As employees derive nonpecuniary benefits from both organizational status and employment-related CSR, lower status firms may invest in nonpecuniary employment-related CSR to compete in a status-segmented labor market. We identify the effect using a regression discontinuity design (RDD) in the context of the Fortune 1000 rankings, as we contend that the 500th rank position marks an artificial breakpoint in status where quality follows a smooth distribution. We find that firms just failing to make the Fortune 500 perform significantly better in nonpecuniary employment-related CSR. Our findings provide causal evidence for the labor market advantage of organizational status and a richer window into the strategic motivations behind CSR investments. We examine one strategic investment that lower status firms make to compete in a status-segmented labor market: employment-based corporate social responsibility (CSR). We identify the effect using a regression discontinuity design (RDD) in the context of the Fortune 1000 rankings, as we argue that the 500th rank position creates a discontinuity in status at a precise location where quality differences can be assumed to follow a smooth distribution. We find that firms just failing to make it into the Fortune 500 perform significantly better in nonpecuniary employment-related CSR as compared to firms just in the Fortune 500. The findings demonstrate that building a reputation for being socially responsible may offset differences in status and make a lower status organization more appealing to employees.