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Master Thesis

The Moderating Effect of Strategic Types on Corporate Social and

Financial Performance

Student Wei Ling / Student number 11651458

MSc. Business Administration, Strategy track

University of Amsterdam, Faculty of Economics and Business

Supervisor Dr. Pushpika Vishwanathan

University of Amsterdam, Faculty of Economics and Business Section International Strategy & Marketing

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Statement of originality

This document is written by Student Wei Ling who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the

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Tables of contents

Abstract ... 3

Introduction ... 4

Theory and Hypotheses... 8

Corporate Social Responsibility ... 9

Corporate Social Performance and Corporate Financial Performance ... 11

The Miles and Snow’s Typology of Strategic Types ... 13

The Moderating Effects of Strategic Types ... 15

Methodology ... 21

Data ... 21

Variables... 21

Statistical analysis ... 24

Hypotheses Testing: Moderation Analysis and Results ... 27

Discussion ... 30

Major findings ... 30

Managerial Implications ... 32

Limitations and future research ... 33

Conclusion ... 35

Reference ... 36

Appendix 1 ... 44

Appendix 2 ... 45

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Abstract

Corporate Social Responsibility (CSR) now is a common theme in Business Environment. Many companies engage in CSR activities and endeavor to improve their Corporate Social

Performance (CSP). Meanwhile, companies are seeking ways to generate positive financial benefits from CSR activities. This study adopts Miles and Snow’s (1978) typology of strategic types to examine the moderating effect of the strategic types on the CSP and corporate financial performance (CFP) relationship. Mainly relying on the absorptive capacity theory to differentiate the strategic types. With a cross-sectional five-year average data of 491 firms from 2012 to 2016. This study finds that the Prospector strategic type exerts the stronger positive influence on the CSP-CFP relationship than the Defender and the Analyzer strategic types. Furthermore, this study provides insights for companies to make a sounder decision, whether to engage in CSR activities by taking strategic types into consideration, or by adjusting organizational strategic types to generate higher financial outcomes from CSR activities.

Key words: Corporate social responsibility; Corporate social performance; Corporate financial performance; market-based CFP; accounting-based CFP; strategic types; stakeholder theory

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Introduction

Corporate social responsibility has obtained considerable academic and managerial attention for decades, and the concept has been put into use since the mid-1970s in the United States (Wood, 1991). Since the importance of corporate social responsibilities is increasing in a corporation’s portfolio, growing numbers of investors are valuing not only the financial performance, but also the social accountability of companies (Barnett & Salomon, 2006). Substantial studies have been conducted to examine the relationship between corporate social performance and corporate financial performance (e.g. Waddock & Graves, 1997; Margolis, Elfenbein & Walsh, 2009; Wang & Qian, 2011; Perrini, Russo, Tencati & Vurro, 2011). Although, the results of previous individual studies on the relationship between corporate social and financial performance remain scattered, the overall corporate social and financial performance are demonstrated to be positively and significantly related (Pava & Krausz, 1996; Margolis & Walsh, 2003; Orlitzky, Schmidt & Rynes, 2003; Anderson & Dejoy, 2011; Wang, Dou, Jia, 2016). Nevertheless, the CSR-CFP link is intricate, equivocal and nuanced. Earlier studies on CSR tried to search for a direct link between corporate social and financial performance (e.g. Cornell & Shapiro, 1987; Margolis & Walsh, 2001; Brammer and Pavalin, 2006). In reality, a large number of environmental and organizational factors have influences on CFP, the quest for a general relationship between CSR and CFP may be pointless (Anderson & Zeithaml, 1984). As a result, acknowledging the differences among organizations and their environmental conditions that may affect the CSR-CFP relationship, a contingency perspective on this relationship might yield a finer-grained outcome (Grewatsch & Kleindienst, 2017).

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With nearly a half century’s development, theoretical conception of CSR has been evolving, which can be generally termed as a rationalization of CSR, level of uncertainty with CSR has been decreasing, research on CSR has gradually moved from the discussion of its macro-level effects to the organizational-level analysis of its impact on firms’ financial performance (Lee, 2008). Concentrating on the contingency factors that may influence the CSR-CFP relationship, the research topics have shifted from the domain of whether it pays to engage in CSR activities to under which conditions it pays to be socially responsible (Grewatsch & Kleindienst, 2017). To test when does it pay by engaging in CSR activities involves incorporating the moderating variables that influence the CSP and CFP relationship, some studies called such variables as contingency factors. According to Aguinis and Glavas’s (2012) review on CSR literature at the institutional, organizational and individual levels of analysis, previous studies about the organizational contingency effects, that explain organizational circumstances under which the correlation between CSP and CFP changes, mainly rely on the financial resources (e.g. financial performance, slack resource, and lower debt level), firm size, or firms’ relationship with the public. There are some exceptions of contingency factors to these that focusing on organizational contextual factors (Wang, Dou & Jia, 2016; Wang & Bansal, 2012; Galbreath, 2010a). For example, Brower and Rowe (2017) focused on the impact of strategic orientations on corporate social performance, they classified strategic orientation into four categories: customer, competitor, influential coordinator and shareholder, through the lens of stakeholder theory. Tang, Hull and Rothenberg (2012) adopted the absorptive capacity theory to investigate how the CSR engagement strategy affects the benefits CSR offers and finds out that when firms engage in related CSR activities slowly and consistently, and take an internal to external path, firms can optimize the benefits from CSR

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activities. Hence, to help firms adjusting themselves to achieve better financial benefits from CSR activities, it is necessary to consider different organizational factors that influence this relationship.

This study attempts to demonstrate that firms with different organizational strategic types, the intensity of correlation between the corporate social and financial performance may differentiate. Following Miles and Snow’s typology of strategy, present study classifies organizations into four categories of strategic types among different industries: Prospectors, Analyzers, Defenders and Reactors, each type of strategy possesses three characteristics, including business diversification/innovativeness, operational efficiency, and managerial style (Miles & Snow, 1978). Importantly, some earlier studies examined each one of these factors, for example, Hull and Rothenberg (2008) found that firms with low innovativeness benefit more from CSR engagement; Waddock and Graves (1999) proposed the “good management theory” that attributes the positive CSP and CFP relationship to the managerial success. Isaksson and Woodside (2016) testified and supported that “good management” can support CSP to generate positive outcomes for CFP (Luo & Bhattacharya, 2009). So far,an integrative perspective of these three dimensions’ impact on the CSP-CFP link is missing. Since a company’s financial performance is related not only to one dimension of its capabilities, a combined effect of organizational capabilities on the CSP-CFP correlation may produce a more general view on the contingency factors of the focal relationship. Strategic types include different organizational capabilities which differentiate CFP in different aspects. This study tends to analyze the combining impact of three strategic dimensions that might differentiate corporate social performance and focused on the heterogeneity effect of different strategic types on the financial outcomes of CSR activities.

Some recent studies already shade lights on examining the level of corporate social responsibility under the impact of different strategic types. For example, Galbreath, (2010b) found

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that not all firms demonstrate CSR equally and tested that Prospectors and Defenders demonstrate a higher level of CSR than Analyzers, while Reactors demonstrated the lowest level of CSR. Brower and Rowe (2017) adopted four types of strategic orientation by classifying different groups of stakeholders, orientations: customer, competitor, inter-functional coordination, and shareholder and found that firms with stronger customer orientation exhibit higher levels of CSP in general. Both studies examined the direct relationship between CSR and organizational strategic types, however, they did not consider the CSP-CFP link under the impact of strategic types. Besides, Galbreath’s study uses a purpose-designed survey to define strategic types of firms. This study adopts a replicable methodology to measure each type of strategy based on existing research on Miles and Snow’s typology (i.e. Bentley, Omer, & Sharp, 2013), see appendix 1 part for detailed measure construction. For a detailed explanation of the characteristics of the Defender and the Prospector strategic types, please see appendix 2 and some examples for the Prospector and the Defender firms are provided in appendix 3.

The results of this study demonstrate that the Prospector firms’ CSP exerts a stronger positive impact on the firms’ market-based financial performance than the Defender and the Analyzer firms. While, there is no significantly differentiated moderating effect on the focal relationship between the Defender and the Analyzer strategic types. Moreover, a generally positive relationship between CSP and CFP is not supported by the results of this study. In general, this study contributes to the existing CSR literature from three aspects. Firstly, this research adds insights for a research question about “when” does it pay more by improving corporate social performance, and by introducing Miles and Snow’s strategy typology, which combines three organizational strategic characteristics, this study provides a more integrative contingency perspective on the CSP-CFP link. Also, this study contributes a small step to resolve the conflict

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interests between shareholders and agents with senior managers, there is a historical debate about the purposes of top managers for engaging in CSR (Navarro, 1988; Williamson, 1964), by demonstrating that corporations with certain strategic types, high social performance can actually contribute to the overall corporate wealth, this study draws a picture of the function or position of CSR in the corporate strategic plan for shareholders. Lastly, from a practical perspective, this study provides insights to help business managers adjusting their companies’ strategic orientation to improve the financial outcomes of CSR activities.

Theory and Hypotheses

This section will discuss the CSR field generally based on the stakeholder theory and explain the CSR engagement’s impact on CFP by examining the CSP and CFP correlation. Moreover, by adopting Miles and Snow’s typology of strategy, this study identifies the differences of the financial impact of CSP among different strategic types (i.e. the Prospector, the Analyzer, the Defender) and carefully compares the characteristics of each strategic type based on existing research and theories. Since each strategic type consists of three dimensions of organizational characteristics, i.e. business diversification, operational efficiency and management style, different strategic types are compared by evaluating the differences between each of the three dimensions. Besides, dynamic capabilities and absorptive capacity theory are applied to further demonstrate the differentiated moderating effects of strategic types on the CSP-CFP relationship.

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Corporate Social Responsibility

Four decades ago, corporate social responsibility (CSR) was derived as a joke and a disputation in expressions by the business and investment community (Lydenberg, 2005). Nevertheless, since the late 1990s, CSR was promoted and sanctioned universally among business communities, non-governmental organizations, societies and individuals (Boli & Hartsuiker, 2001; Lee, 2008). In fact, not only the outside perspective on CSR has changed, the CSR concept has also changed internally and gradually over time. “Corporate social responsibility means something, but not always the same thing to everybody” (Votaw, 1972, p. 25). Which means it is hard to find a general statement about the definition of CSR. In the lasted decade, Dahlsrud (2008) found that previous studies about CSR are more congruent in analyzing how CSR is constructed rather than conferring CSR definitions, in other words, CSR dimensions are commonly used for defining CSR.During the last two decades, CSR concept has been shaped more rationally with a wider range of organizational purposes, instead of general macro-social concepts, such as social reputation and stakeholder management (Lee, 2008). According to Dahlsrud’s study, five dimensions are demonstrated to be thoroughly and consistently developed, the environmental, social, economic, stakeholder and voluntariness dimension. These dimensions point out that business as a producer of economic wealth, has a broader impact than economics. Moreover, the KLD index, constructed by the Kinder, Lydenberg, Domini company, that exclusively focuses on the measurement of corporate social performance, adopts a variety of stakeholder concerns as dimensions. Eventually, each dimension of corporate social responsibility is related to a type of corporate stakeholder, which erects the fundamental theory, stakeholder theory, for this study in the CSR filed. In the following section, the author mainly discusses the theoretical support for CSR activities.

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This study adopts the stakeholder theory in analyzing CSR and its implication. The term “stakeholder theory” was first used by Ansoff (1965), which defines that the major objective of a firm is to gain the ability in maintaining the balance of the conflicting demands among multiple stakeholders (Roberts, 1992). While Freeman (1983) introduces the theory to a broader audience and extends the stakeholder concept of a corporate strategic planning model into a corporate social responsibility model of stakeholder management, which includes the external influences, the social issues. Based on Freeman’s model, Ullmann (1985) developed a conceptual foundation for studying CSR activities from stakeholder's perspective. Ullmann suggested and proved that CSR activities are beneficial in developing and maintaining satisfactory stakeholder relationships, by demonstrating that a corporate reputation that is termed as socially responsible is a part of the strategic plan in preserving stakeholder relationship. Additionally, Roberts (1992) tested that the stakeholder theory can explicate one specific aspect of CSR, the social responsibility disclosure from three dimensions, stakeholder power, strategic position and financial performance. Above all, the stakeholder theory is not only widely used for CSR field, also it is closely related and exerts strong effects on corporate social performance.

Berman et al., (1999) introduced two main motivations, a. the moral or ethical motivation and, b. the strategic management or instrumental motivation, to engage in CSR for organizations based on stakeholder theory. Such viewpoints are also supported by various studies related to the CSR field (Evan & Freeman, 1983; Bowie, 1994; Wicks, Gilbert, & Freeman, 1994; Freeman, 1994; Phillips, 1997; Friedman, 1970; Freeman, 1984; Adler, 1992; Donaldson & Preston, 1995; Quinn & Jones, 1995). They found that both stakeholder management and CSR engagement are part of a firm’s strategic approach. By improving stakeholder management, the company’s social performance is positively affected as well. With an emphasis on the financial impact of these

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motivations for engaging in CSR activities, this study examines the moderating effects of Miles and Snow’s strategic typology on the CSP-CFP relationship. Each strategic type represents a complete set of organizational characteristics, including the entrepreneurship, the engineering and the administrative problem sets, these problems sets will be explained when introducing the Miles and Snow typology. To achieve higher positive financial outcomes from CSR activities, organizations need understand their current strategic positions and adjust themselves accordingly based on the understanding of their standing points, the strategic types will be discussed in detail later in the hypotheses development part.

Corporate Social Performance and Corporate Financial Performance

According to Wood (1991), CSP can be defined as ‘a business organization's configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships.’ Such definition indicates the significant position of CSP in the business world. Firms are under intensifying pressure to increase their social performance as well as financial performance (Grow, Hamm, & Lee, 2005). Although the CSP and CFP relationship tends to be complex, intrinsic and nuance, even Margolis and Walsh, (2003) and Ullmann, (1985) expressed that the relationship is too complex to be found. Continuously increasing academic and managerial studies that probing such relationship are conducted by researchers. Wang, Dou & Jia, (2016) conducted a meta-analysis of the CSR-CFP link based on 42 precious studies with 119 effective sample size, they demonstrated a positive relationship between CSP and CFP, more specifically, prior social performance positively influences the subsequent financial performance. This study tends to examine the overall CSP’s impact on the firms’ financial performance from a contingency perspective.

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The overall CSP consists of eight dimensions, community, diversity, employee relations, environment, product, South Africa, Military, and nuclear power. These dimensions are constructed by the KLD company and widely used in measuring CSP. Some studies found that under certain circumstances, engaging in CSR activities can play as a buffer for the firm’s financial performance when companies are enduring negative influences or can reduce the risks when encountering new challenges (Godfrey, 2005; Barnett & Salomon, 2006). Which is also called as an “insurance-like” effect for corporate financial performance as well as for stakeholder value (Godfrey, 2005; Godfrey et. al., 2009). Godfrey et. al. (2009) further indicated that studies based on a single proxy or a monolithic construct may fail to demonstrate differentiated effects of CSR on CFP. And they suggested that future studies need to investigate in the dynamics and details involved in the CSR process. Importantly, firm characters deserve careful examination when probing the CSP and CFP link. Since there is not such consensus on the direct relationship between CSP and CFP, many studies try to build a theoretical approach to connect the two performances. For example, Waddock and Graves (1997) proposed a quality of management hypothesis to support the theoretical explanation of the correlation between CSR and CFP. Since then many studies follow the quality of management construct to explain the focal relationship (Lev et al., 2006). Therefore, it can be proposed that CSP and CFP are closely correlated from a contingency perspective.

There is a consensus that a firm’s external and internal stakeholders, such as employees, consumers, suppliers and the media are prone to respond favorably to companies that are engaging in CSR activities (Agle, Mitchell & Sonnenfeld, 1999). This study proposes that by engaging in CSR activities, firms can strengthen their relationship with stakeholders. Brammer and Millington, (2008) found that high CSP is positively related to long-run CFP, while low CSP is positively

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related to the short-term CFP. Which means, CSR is like a long-term investment for firms, by improving CFP, firms can attain longer-range financial feedbacks from such investment. Turban and Greening (1997) found that firms’ CSP is positively related to their reputation and their attractiveness to prospective employees. Moreover, Klassen and Whybark (1999) demonstrated that CSR activities can revive and fortify the differentiated characteristics of products in the market, for example, environmental friendliness, which in turn will generate competitive advantages for firms. And the competitive advantage is proved to positively moderate the CSP and CFP relationship (Saeidi et. al.,2015) Above all, these favorable responses and benefits can be converted into part of firms’ intangible resources, hence, to improve firms financial performance (Surroca, Tribo & Waddock, 2010).

Hypothesis 1: Corporate Social Performance generally exerts positive effects on Corporate Financial Performance across a broad range of industries.

The Miles and Snow’s Typology of Strategic Types

The contingency factor in this study is organizational strategic types. The Miles and Snow’s typology is one of the best-known conceptualization of business strategy, which is useful in categorizing and understanding the types of strategy to be followed by organizations (McDaniel & Kolari, 1987). This typology analyzes how organizations interact with their environment considering different internal factors, consisting of business diversification/innovativeness, operational efficiency, management style (Aragon-Sanchez and Sanchez-Marin, 2005; in Heiens & Pleshko, 2010), thus to build a theoretical framework for different strategic types of

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organizations (i.e. Prospectors, Analyzers, Defenders, Reactors). According to Miles and Snow (1978), a firm’s strategy is adjusted following different organizational development periods to keep in line with its situation in the market or industry. For example, as a new entree in an industry, a firm might initially choose to be a market pioneer by taking challenges and seeking for opportunities, as a firm growing mature, it may change to focus more on improving operational efficiency and keeping costs down. When the market endures new industrial regulations or challenges, such firm needs to adjust its strategy to cope with the changes. To sum up, firms need to continuously update their strategies in accordance with the changes in the environment. The Prospector firms maintain high innovativeness and lead changes in their industries (DeSarbo et al. 2005). And because of their pioneer position in the product market, prospector firms tend to have more flexible organizational structure and more complex coordination and communication mechanisms than the other two types of firms (Hambrick, 1983). While firms categorized as defenders focus on limited product-market domains, their primary governance perspective is to be highly cost-efficient. Besides, defender firms are reluctant to changes such as responding to new product or market opportunities, in other words, defender firms lack ability in reallocating and reconfiguring resources. Last but not the least, analyzer firms tend to combine the features of prospector and defender firms, which means simultaneously exploring new products or market domains and defending their current position (DeSarbo et al. 2005).

According to Conant et al., (1990), each dimension (i.e. business diversification/ innovativeness, operational efficiency, management style) of strategic types defines the original strategic ‘problem and solution’ sets in Miles and Snow, (1978) (i.e. the entrepreneurial problem, the engineering problem and the administrative problem) sequentially. The entrepreneurial ‘problem and solution’ set defines an organization’s product and market and its orientation toward

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the market. The engineering ‘problem and solution’ set focuses on the operationalization of management’s solution to the entrepreneurial problem. And the administrative ‘problem and solution’ set is designed to reduce organizational uncertainty and to rationalize and stabilize the organizational structure and policy processes. Firms involve in all three problems and solution sets simultaneously, Miles and Snow described them sequentially to give a better illustration for each of the dimensions of strategic types.

Importantly, according to Miles and Snow (1978), the Reactor is considered as a “residual” strategy, only when the other three strategies are inappropriately pursued, the Reactor arises, besides, the Reactor is an unstable kind of strategy, a firm cannot continue to behave like a reactor, unless it exists in a “protected” environment such as a highly regulated industry indefinitely. Moreover, Reactors are generally considered unviable and eliminated from studies since they lack consistent strategic approaches to solve problems (Shortell and Zajac, 1990; Conant et al., 1990; Blackmore & Nesbitt, 2013). This study also omits the examination for reactor firms and focus on the other three more viable types.

The Moderating Effects of Strategic Types

This study is not the first research literature adopting Miles and Snow’s strategic typology to explore different strategic types’ impact on CSP, Galbreath, (2010b) has examined the differences in levels of CSP among firms with different strategic types (i.e. Prospectors, Analyzers, Defenders, and Reactors). The findings demonstrate that prospector and defender firms show higher CSP than analyzer firms, while reactor firms show the lowest level of CSR. Nevertheless, strategic types not only influence CSP, but also allow firms to differentiate themselves and ultimately strengthen their competitiveness and improve firm performance (DeSarbo, Anthony, Song & Sinha, 2005). In the

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following part, various studies regarding each dimension of strategic types’ (i.e. 1. innovativeness, 2. operational efficiency and 3. management style) influence on the CSP and CFP relationship will be discussed.

Many strategic capabilities, including the three dimensions mentioned above, can be identified in business, some studies examined one of the capabilities or dimensions of strategic types’ effect on the CSP and CFP relationship. For example, Hull and Rothenberg (2008) proved that companies with low-innovation and little diversification, corporate social performance most strongly affects firm performance. Besides, McWilliams and Siegel (2000) demonstrated that innovation is a significant driver of firm performance. Because according to Porter (1980, 1996), companies that are differentiated from others in a positive way can typically achieve better financial outcomes, such companies maintain competitive advantages. And innovation is one way that companies use to differentiate from others. However, they argue that a high level of CSP is shown to be another way that firms use to differentiate themselves. Therefore, innovation diminishes the significance of the CSP and CFP relationship, in other words, innovation dampens CSP’s impact on CFP. However, Luo and Bhattacharya, (2006) and Blumentritt and Danis, (2006) indicated that firms’ innovativeness is a positive affecting factor for the CSP-CFP relationship. Which contradicts to the studies previously mentioned that propose that CSP has a weaker impact on CFP under higher innovativeness level (McWilliams & Siegel, 2000; Hull & Rothenberg 2008; Tang et. al., 2012). And among the three strategic types, the Prospector firms own the highest level of innovativeness. Therefore, it cannot be concluded that whether the Prospector strategic type has a stronger influence on the CSP and CFP relationship than the Defender and the Analyzer based on the innovativeness dimension.

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Then, the author looks at the second dimension of strategic types, the differences in operational efficiency’s impact on the focal relationship. For example, Tang et. al. (2012) found that when firms engage in CSR activities slowly and consistently, and focus on related dimensions, it is more likely to produce positive financial outcomes for these firms. McWilliams and Siegel (2000) further indicated that CSP most strongly influences CFP for firms in industries with little differentiation. Which is in line with their findings of innovation’s moderating effect on CSP-CFP link. Because firms tend to compete by anticipating new market opportunities and products and through innovation (Miles & Snow, 1978). In other words, by engaging in diversified market places, such firms’ (i.e. Prospector firms) CSP may have less influence on CFP than those firms (i.e. Defender firms) focusing on narrowed market domains. Moreover, according to Day, (1994) higher organizational operational efficiency reduces costs, improves consistency in delivery, therefore, increases organizational competitiveness and improves financial performance. Following this dimension, it can be proposed that by engaging in CSR activities the Defender firms can produce higher financial outcomes than the Prospector and Analyzer firms.

Last but not the least, Day, (1994) also indicates that high organizational management flexibility (the third dimension of strategic types) allows firms to have better market sensing, channel and customer linking, such capabilities enable firms to respond speedily to market and customer changes, as a result, supporting management capabilities and benefiting firms’ performance. The Prospector firms own the most flexible organizational structure and management style, which can contribute to the capabilities for improving CFP.

Above all, firms with different strategic types show the distinguished level of innovativeness or business diversification, operational efficiency, and organizational management style. And each dimension of strategic types has an impact on the CSP and CFP relationship. Thus,

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strategic types can define the relatedness between CSP and CFP and moderate the strength of the relationship. However, by investigating each dimension of strategic types, a general conclusion of each strategic type’s effects on the CSP and CFP relationship can hardly be derived, therefore, the author takes advantage of the integrated characteristics of each strategic type to examine whether there are differentiated effects of each strategic type on the focal relationship.

Firms are viewed as a cohesive and integrated system in dynamic interaction with their environment in the Miles and Snow (1978) typology (Blumentritt & Danis, 2006). When dealing with the three problem and solution sets as mentioned above (i.e. entrepreneurial, engineering, administrative), each type of firms formulates their own adaptive cycle, which determines their adaptability to the external environment. Accordingly, the Prospector firms possess the highest level of “organizational agility” or “adaptability” to environmental dynamism, and the Analyzer firms’ organizational adaptability is stronger than the Defender firms (Conant et al., 1990; Miles & Snow, 1978). According to Teece, Peteraf & Leih, (2016), such characteristics of prospector firms demonstrate strong dynamic capabilities. And firms’ high dynamic capabilities have a positive influence on firms’ performance (Lin & Wu, 2014). Among the three types of strategy, the Prospector shows the strongest dynamic capabilities. Therefore, the Prospector firms may have a stronger positive effect on CFP than the Defender and the Analyzer firms. Also, there are studies examining the link between Miles and Snow’s typology and firms’ performance, the results show that the Prospector strategic type shows a stronger positive effect on firm performance than the Defender and Analyzer strategic types (Grimmer, Miles & Grimmer, 2017; Moore, 2005).

To further prove whether the Prospector strategic type exerts a stronger moderating effect on the CSP and CFP relationship than the other two strategic types, this study adopts the Absorptive Capacity (ACAP) theory. Since given the limited resources and capacity, how fast and

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how much a firm can benefit from its CSR activities is constrained by its absorptive capacity and complementary resources (Zahra & George, 2002). Also, Tang et. al., (2012) introduced absorptive capacity as the main factor that affects the CSP-CFP relationship. Absorptive capacity is defined as “… refers not only to the acquisition or assimilation of information by an organization but also the organization’s ability to exploit it. Therefore, an organization’s absorptive capacity does not simply depend on the organization’s direct interface with the external environment. It also depends on the transfers of knowledge across and within subunits that may be quite removed from the original point of entry.” by Cohen and Levinthal (1990), which is the most widely cited definition of absorptive capacity. The absorptive capacity theory provides us with a perspective on how to engage in CSR activities could generate more financial outcomes. According to Zahra and George, (2002), ACAP can be divided into two subsets, potential and realized absorptive capacity. The potential aspect of ACAP refers to the strategic flexibility and the degree of freedom of adapting and evolving in a dynamic environment. While the relationship between ACAP and innovative benefits and other organizational outcomes is seen as the realized aspect of ACAP in creating competitive advantages. The Prospector firms are demonstrated to have strongest ACAP among the three strategic types at the beginning of this paragraph. So that the author proposes that the firms with the highest level of absorptive capacity engender the most rounded complementary resources that pertain to generate financial benefits from CSR activities (Zahra & George, 2002).

Hypotheses 2: The strategic types moderate the CSP and CFP relationship, specifically, firms with the Prospector strategic type show positively stronger impact on the CSP-CFP relationship than firms with the Analyzer and the Defender strategic types.

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Accordingly, the Reactor firms possess a higher level of ACAP than the Defender firms. Because the Analyzer combines the feature of the Prospector and the Defender, which means the Analyzer firms hold a medium degree of ACAP between the Prospector and the Defender. Therefore, the Analyzer firms’ CSP may have a stronger influence on CFP than the Defender firms. Yet, the Analyzer firms own higher business diversification, but a lower degree of operational excellence than the Defender firms, both characteristics determines the how a firm engages in an activity. Vermeulen and Barkema (2002) found that the way a company involves new activities significantly influence how much knowledge can be attained and ultimately affect how much benefits can be generated from such activities. They found that firms benefit less with a broad product scope, and a fast speed in expansion negatively moderates the firms’ profitability. This means the financial benefits vary because of the pace, rhythm and scope a firm involves in new products or markets, which is related to the operational efficiency dimension of strategic types. Besides, their study’s objectives are multinational corporations (MNC), that the samples in this study are also MNCs. And the author assumes that the firm’s capabilities and characteristics in managing core businesses wouldn’t change when it comes to managing CSR activities. Since the Defender firms’ strategic type is demonstrated to focus on narrowed product domains and they put more emphasis on improving cost-efficiency by developing related technologies (Miles & Snow, 1987), such characteristics of defender firms can strongly contribute to the economic benefits generated from CSR. Although, the Defender firms show a lower level of absorptive capability than the Analyzer firms, the Defender firms may generate a higher level of financial benefits by engaging in the same activities as the Analyzer firms. Therefore, the financial outcomes of the Defender and the Analyzer firms cannot be significantly differentiated.

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Hypotheses 3: The Defender strategic type shows a similar moderating effect on the CSP and CFP relationship as the Analyzer strategic type.

Methodology

Data

The sample of this study consists of Fortune 500 companies from 2012 to 2016 among diversified industries. We work as a team with our thesis supervisor to collect data from different databases for each of our research. This study uses KLD data set constructed by Kinder, Lydenberg, Domini, Inc. as proxies for corporate social performance (CSP). The corporate financial data (CFP) data is gathered from Compustat database, including two dependent variables, accounting-based CFP (firm sales) and market-based CFP (TOBIN Q), three control variables, firm assets (log total assets), firm size (log revenues) and industry specification (SIC codes), also, the moderators are formulated by using several of the CFP data, including research and development expenses, sales, number employees (log employees) and revenues (log revenues). For this study, only companies that are involved in corporate social responsibility activities and have both valid CSP and CFP data are selected. The final data set includes 82.80% (491 out of 593) of the Fortune 500 companies from the year 2012 to 2016.

Variables

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The independent variable is corporate social performance (CSP). Which are the direct outcomes of CSR activities. This study uses CSP scores from the MSCI ESG KLD STATS database, which is one of the longest continuous data of ESG available. The KLD database has also been used for previous studies, such as Graves and Waddock (1994), Waddock and Graves (1997) and Berman et. al., (1999). According to this data set CSP score is constructed of three main aspects, environmental, social and governance. To avoid the credulity problems existed in using the KLD data set for a certain direction, this study calculated the KLD ratings as a single measure. Firstly, each year’s CSR score is generated by calculating the points using the strength minus the concerns, a similar method is also used by Waddock and Graves (1994) and Berman et. al. (1999). Then, by averaging five years scores, from the year 2012 to 2016, the averaged CSP scores for each firm is generated.

Dependent Variable

The dependent variable is corporate financial performance (CFP). This study includes two dependent variables, accounting and market based financial performance. According to Grewatsch and Kleindienst, (2017), they reviewed 32 prominent studies out of 274 potentially relevant articles about the mediators and moderators of the CSP-CFP relationship and found that both accounting and market-based CFP were used for analyzing the CSP-CFP link. For the articles about the moderating relationship, some studies use only accounting-based CFP (e.g. Hull & Rothenberg, 2008; Ruf et al., 2001; Van der Laan et al., 2008), some use only market-based CFP (e.g. Baird et al., 2012; Godfrey et al., 2009; Jayachandran et al., 2013) and others use both (e.g. Tang et al., 2012; Busch & Hoffmann, 2011; Kim & Statman, 2012). For this study, the author chooses to analyze both financial performance’s relationship with CSP under the impact of strategic types. Tobin Q is the ratio between the market value of the firm’s assets and the replacement value of

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those assets and was assessed as an indicator of the firm’s effectiveness from an investment (Wolfe, 2003). Therefore, Tobin’s Q is used to measure Market-based financial performance. From the literature mentioned before, most of the studies use ROA (return on assts: net income/total assets) to measure accounting-based financial performance. Since organization strategy decides the allocation of resources to build up the company’s competitive advantages, ROA represents the most direct effectiveness of results from the allocation of the resources (Hull & Rothenberg, 2008). Thus, this study also adopts ROA as accounting-based financial performance. Finally, all the CFP data also uses a five-year, from 2012 to 2016, averaged number.

Moderating Variables

The moderating variables are the three strategic types, the Prospector, the Analyzer and the Defender. This study adopts a replicable methodology to measure each strategic type based on existing research on Miles and Snow’s typology (i.e. Bentley, Omer, & Sharp, 2013). According to Bentley et al. (2013), the strategic type is constructed of six variable measures (see appendix one). Due to the lack of data, this study uses four out of the six variable measures, (1) Ratio of research and development to sales (RDS5); (2) Ratio of employees to sales (EMPS5); (3)Change in total revenue (REV5); (4) Employee fluctuations (r(EMP5)). Marketing to sales (SGA5) and Capital intensity (CAP5) are missing. Since all the six variable measures are built upon the organization’s rate of change, so using four of them can highly represent the original measure’s precision. According to Hambrick (1983), the organization’s rate of change is the key dimension of strategic typology, regarding the organization’s product and market (Bentley et al., 2013). The strategic types are divided by the scores accumulated by the four dimensions used for this study (see appendix one), all variables are measured per company-year based on the rolling prior five-year average and the strategic types are ranked by percentile, the top 1/3 is the Prospector, and the

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bottom 1/3 is the Defender, the Analyzer is in the middle part of 1/3. Each measure’s score ranges from 1 to 5 and there are four measures. Thus, the total score will be 20, and the Defender firms (4–9); the Analyzer firms (10–14); the Prospector firms (15–20). All the four variable measures are formulated using the data from CFP data set.

Control Variables

There are a number of reasons identified by researchers for the failure of testing the significance of the CSR-CFP relationship, including the failure of controlling some variables, such as firm size, corporate assets, industry specification (Cochran & Wood, 1984). These variables can directly influence the financial performance of firms. To reduce the side effects of these variables, this study controls the firm size (log revenues), corporate assets (log assets) and the firms’ industry specification (SIC codes). By classifying all firms’ industries, it shows that four industries dominant the sample, 1. Manufacturing; 2. Transportation, Communications, Electric, Gas and Sanitary service (Utilities), 3. Retail; 4. Finance. Therefore, only these four industries are controlled when running the analysis. Data for the control variables is also part of the CFP data set which is gathered from Compustat database.

Statistical analysis

Firstly, I checked the missing values by excluding cases listwise. There is no missing data, which means that only cases that had no missing data in any variables were analyzed. After this, I run an analysis for data screening. The results show that, firstly, the independent variable, control variables and the moderating variables are not highly correlated with each other. So, the variables are multicollinearity. Then, the value of Durbin-Watson of CSP and market-based CFP is 2.180, for CSP and accounting-based CFP, Durbin-Watson is 1.998, which means the IVs and DVs are

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independent of each other. Next, both scatterplots look like random arrays of dots, so the spread of the residuals is fairly constant at each point of the predictor variables. Afterwards, from both normal P-P plots of regression standardized residual graphs, data dots fall close to the ideal diagonal line. This shows that values of the residuals are normally distributed. Finally, the outliers are checked, no influential case biases the two models.

The mean, standard deviation and correlations of the studied variables are provided in table 1. Table 1 shows that CSP is significantly positively related to market-based CFP (r = 0.140, p < 0.01), but insignificantly related to accounting-based CFP. Strategic types are significantly positively related to market-based CFP (r = 0.267, p < 0.01) and accounting-based CFP (r = 0.106, p < 0.05). Also, firm asset is a strong predictor of both accounting and market-based CFP (r = -0. 192, p < 0.01; r = -0.094, p < 0.05). Firm size is a strong predictor of accounting-based CFP (r = 0.146, p < 0.01), but not for market-based CFP. While industry specification is a strong predictor for market-based CFP (r = -0.156, p < 0.01), but not for accounting-based CFP. As a result, the correlations between the independent and dependent variables are generally significant.

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26 T able1: M eans, St andard De viat ions, C orrelati ons Va ria bles Me ans SD 1 2 3 4 5 6 7 1.S tra teg ic t y p es 2.00 0.70 - 2.C S P 1.49 1.93 0.020 - 3.Ma rke t-ba se d C F P 1.14 0.90 .267 ** .140 ** - 4.Ac counti n g -ba se d C F P 0.05 0.06 .106 * 0.024 .556 ** - 5.F irm a ssets 4.27 0.60 -.391 ** .100 * -.192 ** -.094 * - 6.F irm si ze 4.11 0.60 -.357 ** 0.086 0.025 .146 ** .649 ** - 7.S IC c ode s 4656.71 1796.80 -0.077 0.021 -.156 ** 0.003 .146 ** 0.048 - **. C orr elation i s si g nific ant at the 0.01 le ve l (2 -ta il ed). *. Cor re la tion is si g nif ic ant a t the 0.05 le ve l (2 -ta il ed) .

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Hypotheses Testing: Moderation Analysis and Results

Before running the moderation analysis, the independent variable, CSP scores are standardized, since the moderators, strategic types are categorical, they do not need to be standardized, but are coded into dummy variables to run the linear regression for the categorical data. In general, the moderation regression analysis results include four models, in which the last model was used as the final evidence to demonstrate the hypotheses. The regression analysis was run with four steps, 1. including the control variables, industry specification, firm assets and firm size; 2. adding the independent variable, CSP; 3. adding the moderating variables, strategic types; 4. adding the interactions between the independent variable and the moderating variables, to test the moderation analysis. Since the moderating variables are three categorical variables, the author chooses Analyzer as a reference variable to facilitate the interpretation of the results.

Table 2 shows the moderation analysis results with market-based CFP as the dependent variable. In Model 2, when adding the CSP variable, the results show that the independent variable CSP is significantly positively related to the market-based CFP, and R square changes from 19.5% to 21.3%, which means, adding CSP explains extra 1.8% of the whole sample. Besides, when adding the moderating variables and the interaction variables in Model 4, the significance of CSP’s impact is attenuated and became insignificant, therefore, Hypothesis 1 that states CSP has generally positive impact on CFP is not supported, with the market-based CFP as the dependent variable. Also, Model 4 tests the differentiated moderating effects of strategic types on the focal relationship. The interaction term of CSP*Analyzer was chosen as the reference variable; thus, the author compares the moderating effect of the Prospector and the Defender with the reference variable. The interaction term of CSP*Prospector shows that the Prospector strategic type has a slightly significantly stronger positive moderating effect on the CSP and market-based CFP

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relationship compared with the Analyzer (B = 0.092, p < 0.05). As for the Defender strategic type, the interaction term CSP*Defender shows that the moderating effect is insignificantly different from the Analyzer (B = -0.028, p > 0.1). Therefore, the Prospector strategic type exerts slightly significantly stronger positive moderating effect on the focal relationship than both the Analyzer and the Defender, and the results support Hypothesis 2. Finally, Hypothesis 3 that states the Defender strategic type has a similar moderating effect as the Analyzer on the focal relationship is also proved from the results, with the market-based CFP as the dependent variable.

Additionally, Table 3 shows the moderation analysis results with accounting-based CFP as the dependent variable. As we can see in all models, the independent variable CSP is not significantly related to the accounting-based CFP which disproves Hypothesis 1. And the interaction terms of CSP*Defender and CSP*Prospector do not show significantly differentiated moderating effects with the reference variable. Therefore, Hypothesis 2 is disproved, but Hypothesis 3 is supported, with the accounting-based CFP as the dependent variable.

Table 2. Regression analysis results, with Market-based CFP (TOBQ) as the Dependent variable

Model 1 Model 2 Model 3 Model 4

Variables Beta SE Beta SE Beta SE Beta SE

Manufacturing 0.127* 0.099 0.129* 0.098 0.106* 0.096 0.123* 0.097 Utilities -0.017 0.127 -0.016 0.125 0.008 0.123 0.012 0.123 Retail 0.193*** 0.136 0.204*** 0.135 0.202*** 0.132 0.210*** 0.132 Finance -0.327*** 0.143 -0.309*** 0.142 -0.289*** 0.140 -0.291*** 0.139 Firm assets -0.001 0.106 -0.020 0.106 0.011 0.104 0.022 0.104 Firm size 0.012 0.137 0.011 0.136 0.069 0.135 0.049 0.136 CSP 0.137** 0.037 0.126** 0.036 0.100 0.046 Defender -0.094* 0.093 0.108* 0.093 Prospector 0.173*** 0.090 0.168*** 0.089 CSP x Defender -0.028 0.090 CSP x Prospector 0.092* 0.095 F 19.556*** 18.719*** 18.115*** 15.411*** R square 0.195 0.213 0.253 0.261 Notes:* p <0.05, ** p < 0.01, ***p < 0.001. N = 491

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Table 3. Regression analysis results, with Accounting-based CFP (ROA) as the Dependent variable

Model 1 Model 2 Model 3 Model 4

Variables Beta SE Beta SE Beta SE Beta SE

Manufacturing 0.276*** 0.007 0.277*** 0.007 0.266*** 0.007 0.275*** 0.007 Utilities 0.071 0.009 0.072 0.009 0.081 0.009 0.083 0.009 Retail 0.173** 0.009 0.176** 0.009 0.172** 0.009 0.176** 0.010 Finance 0.117 0.010 0.122* 0.010 0.129* 0.010 0.127* 0.010 Firm assets -0.288*** 0.007 -0.292*** 0.007 -0.281*** 0.007 -0.275*** 0.007 Firm size 0.319*** 0.010 0.319*** 0.010 0.347*** 0.010 0.337*** 0.010 CSP 0.034 0.003 0.029 0.003 0.016 0.003 Defender -0.014 0.007 -0.012 0.007 Prospector 0.124* 0.008 0.108* 0.006 CSP x Defender -0.014 0.006 CSP x Prospector 0.046 0.007 F 12.574*** 10.858*** 9.244*** 7.658*** R square 0.135 0.136 0.147 0.150 Notes:* p <0.05, ** p < 0.01, ***p < 0.001. N = 491

To sum up, the results of this study does not show that the CSP has a significantly direct impact on CFP (market-based and accounting-based CFP), therefore, Hypothesis 1 suggested that CSP has generally positively influence on CFP is not supported. But such result is still in accordance with the idea that there is no consensus of the direct correlation between CSP and CFP and support the contingency perspective. Nevertheless, this study adopts the strategic types as the contingency factors (moderating variables) and demonstrates that strategic types exert a differentiated impact on the strength of the CSP-CFP relationship. Particularly, they only have differentiated influence on between the CSP and market-based CFP, but not for accounting-based CFP. And the Prospector strategic type has a significantly stronger positive influence on the focal relationship, and moderating effects between the Defender and the Analyzer are not significantly

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differentiated. Therefore, Hypothesis 2 and Hypothesis 3 about the moderating effects are supported.

Discussion

This study was initiated to examine the financial outcomes of CSR activities from a contingency perspective, and to understand how strategic types could moderate the corporate social and financial performance. In this discussion section, the author first reviews the research process and the major findings of this study. Then, the author presents the managerial implications of the findings. Lastly, the author identifies the limitations and provides the recommendations for future research.

Major findings

For decades, there has been considerable debate about the effects of CSR engagement on firm performance, especially financial performance. Researchers have hoped to substantiate that there is a financial incentive for for-profit organizations to engage in CSR activities (Pava & Krausz, 1996; Margolis & Walsh, 2003; Orlitzky, Schmidt & Rynes, 2003; Wang, Dou, Jia, 2016). It is broadly believed among the stakeholder theory scholars that stakeholders exert a strong effect on corporate social performance (Ullmann, 1985; Roberts, 1992), and by promoting firms’ social performance, various firm stakeholders respond favorably to these companies (Agle, Mitchell & Sonnenfeld, 1999). However, researchers are expanding their attentions from focusing on exogenous elements to investigating endogenous organizational factors, indicating that the

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strength of the CSR-CFP relationship is subject to the organizations’ capabilities and complementary resources (Zahra & George, 2002; Tang et. al., 2012).

Following this research stream, this study explores the organizational variables that can influence the benefit of CSR activities. More specifically, this study adopts strategic types as moderating variables and uses absorptive capacity theory to differentiate the strategic types effects on the focal relationship. The author uses Miles and Snows’ typology of strategy, which is widely accepted and used in related research fields to avoid extra themes than the main topic of this study, besides, the author finds out that there are existing studies examining Miles and Snow’s typology and formulating a measurement construction for the theoretical typology (e.g. Bentley et al., 2013). Therefore, this study follows such measurement construction and categorize all the sample firms into different strategic types based on existing researches.

The major findings of this study support the notion that the relationship between corporate social and financial performance is better explained when taking contingency factors into consideration. The results of the interaction analysis revealed that the Prospector firms generate relatively higher market-based financial benefits than the Analyzer firms by engaging in CSR activities and the Defender firms’ ability in generating financial benefits from CSR activities has no big difference with the Analyzer firms. This means the strategic characteristics of the Prospector firms can better foster the CSR activities in producing more economic benefits than the Defender and the Analyzer firms.

Finally, the results of this study do not show that there is a direct relationship between CSP and CFP. Although the first hypothesis is not supported, such finding demonstrates that in CSR field, there is no consensus about the direct relationship between CSR and CFP. Nonetheless, by adding moderating factors, the focal relationship is affected. Thus, the independent variable is

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proved to indirectly influence the dependent variable. The contingency perspective on the focal relationship is supported. Also, this study demonstrates that organizational conditions, such as strategic types need to be considered to gain a thorough understanding of the effects of CSR on firms’ financial performance.

Managerial Implications

Based on the major findings, the strategic characteristics of the Prospector firms can better foster the CSR activities in producing more economic benefits than the Defender and the Analyzer firms. And the main character of a Prospector strategic type firm is being adaptive to new markets and challenges. Since firms’ strategic types are formulated through a serious of internal operations, and such operations are largely organizations’ reactions to the external business environment. Therefore, it takes a serious of actions for a certain strategic type to come into being. On the one hand, to be adaptive to the external environment, an organization needs a flexible organizational structure and entrepreneurial spirits among the employees to deal with the uncertainties. On the other hand, to create such organizational atmosphere, the organization’s leaders can provide employees with more independent rights of choices-making and to pursue certain innovative activities, etc.

Additionally, the agency problems between shareholders and agents (senior managers) are concerns for shareholders when senior managers take actions to engage in CSR activities, because shareholders may worry about the purposes of the managers, and the financial consequences of such activities. According to Navarro, (1988) and Williamson, (1964), agency problems arise because corporate principles are commonly associated with owners or shareholders and senior managers, and the two parties’ interests may differ. Agency perspectives on CSP argue that when

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senior managers dominate the activity, they may opportunistically take advantage of corporate resources to pursue objectives that benefit their own utility that unlikely to enhance the returns to companies. As a result, good social performance may come with financial costs. Nevertheless, this study finds that when the Prospector firms engage in CSR activities, they are more likely to generate higher positive market-based financial benefits than the Analyzer and Defender firms. Therefore, no matter what the senior managers’ purposes are, the shareholders can take the companies’ strategic types into consideration when making decisions regarding engaging in CSR activities depending on their financial goals, whether to boost market value for the company or improve accounting-based financial performance (e.g. profits). For example, for the Prospector firms, by engaging in CSR activities, their market-based financial performance will be positively affected.

Limitations and future research

Just like other researches, there are some limitations of this study that could be interesting research topics for future studies. The author uses Miles and Snow’s typology of strategic types as moderators for analyzing their moderating effects on the CSP and CFP relationship. And the typology is a theoretical construction for strategic types. So, this study adopts the measurement construction formulated by Bentley et. al. (2013) to quantify the strategic types and classify the companies into each strategic category. However, using such measurement construction to categorize companies is not without noise, besides, this study misses two out of the six measurement variables. Future studies can include the other two variables to see whether it will yield the same results. Moreover, this study finds that CSR activities do not show direct influence on CFP, which is not in accordance with previous studies’ findings, for example, Tang et. al. (2012) and Orlitzky et al. (2003) found that CSR activities have a stronger effect on accounting-based

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financial performance than on market-based financial performance. Furthermore, the results of the two analyses of CSP and market-based CFP and CSP and accounting-based CFP yield inconsistent findings. The relationship between CSP and market-based CFP is significantly moderated by strategic types, however, the accounting-based CFP is not directly related to CSP nor do the strategic types influence the insignificant relationship. The reasons for the difference are not identified in this study; therefore, future studies can shade lights on why there is such difference between market and accounting financial performance.

Moreover, the author only compares the differentiated effects of different strategic types on the focal relationship, but to what extant each strategic type influences the financial outcomes of CSR activities should be interesting to investigate in the future. The author thinks that examining this issue can provide more specific directions for top managers to make sound decisions regarding engaging in CSR activities. Additionally, the sample data is restricted to Fortune 500 companies, which cannot represent companies that are engaging in CSR generally. Such multinational corporations (MNCs) encounter stronger exogenous influential factors, such as media, government and society’s voices than small and medium-size enterprises (SMEs) and MNCs’ organizational characteristics are also differentiated from SMEs, thus, for SMEs, their abilities in producing economic outcomes from CSR activities may be different from the companies in this study. For future studies, a broader range of company types can be included in analyzing their strategic types’ influence on the CSR-CFP relationship.

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Conclusion

This study shows that firms with distinct strategic types produce different financial outcomes in response to the corporate social performance. It underlines the importance of considering an integrative effect of organizational contextual factors (i.e. strategic types), including innovativeness, business diversification, operational efficiency and management style, vis-a-vis organizational quantifiable characteristics like firm size, slack resources, CEO tenures, etc., on the relationship between corporate social and financial performance as every firm is different and these strategic characteristics can influence the financial outcomes by engaging in CSR. The results of this study support the contingency perspective on the CSP-CFP relationship, by demonstrating that the Prospector firms possess stronger ability in generating market-based financial benefits than the Analyzer and the Defender firms, while the Analyzer and the Defender firms do not show significantly differentiated financial performance in response to their social performance. Hence, these findings answer the research question: what the moderating effect of strategic types is on the relationship between CSP and CFP. Furthermore, it demonstrates that it is necessary to take organizations’ strategic types into accountant to identify the financial consequences of CSR activities. Future researches can reinforce the argument presented here by further developing a finer-grained construction for strategic types and making a more accurate classification for firms or further exploring the organizational factors that might influence the financial outcomes of CSR activities.

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