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Socially responsible activities help create business value, develop strategic resources, and insure
against risks, but also cost money and distract management. These prior findings are mainly
based on established corporations and may not extend to new ventures in which the liability
of newness may suppress some positive effects and amplify some negative impacts of socially
responsible activities. New ventures whose strategic decisions have a long-term orientation,
however, are able to counteract their liability of newness and thereby generate net positive
economic returns. We tested these relationships by surveying the chief executive officers and
presidents and studying the signature Web sites of 149 new ventures. Copyright 2012 John
Wiley & Sons, Ltd.
INTRODUCTION
Considerable research has been directed to the
exploration of the economic benefits of corporate social responsibility (CSR). By furthering
social good and going beyond legal requirements,
CSR activities help create business value, develop
strategic resources, and insure against risks, but
also cost money, distract managers, and aggravate relationships between principals and agents
(Margolis and Walsh, 2003; Orlitzky, Schmidt, and
Rynes, 2003). On balance, though, the positive
effects of CSR activities generally outweigh the
negative, resulting in net neutral or positive economic returns (Margolis, Elfenbein, and Walsh,
2007; Margolis and Walsh, 2003; Orlitzky et al.,
2003).
Keywords: long-term orientation; corporate social responsibility; new ventures; financial performance
These findings are mainly drawn from established corporations; the context of new ventures
remains largely unexplored. This omission is quite
surprising, given that new ventures are a significant driver of the economic engine and have substantial social impacts. The founding rate of new
ventures each year represents almost a staggering 10 percent of the total business population
(Aldrich and Ruef, 2006), which serves to create half of all new jobs, drives major sources of
innovations, and contributes substantially to economic growth (Moutray, 2009). However, new
ventures have also been reported to disproportionately harm the environment (e.g., by creating
commercial wastes and carbon dioxide emissions)
(Worthington and Patton, 2005) and operate illegally more often than their established corporate
peers (Webb et al., 2009).
We redress this oversight by examining the economic returns of CSR activities for new ventures.
We argue that the liability of newness, which
arises from the short temporal existence of new
ventures, may impede some positive effects and
1136
resource systems that care for employees and nurture labor relationships, investing in infrastructure
development for local communities, and pursuing philanthropic initiatives (Aguilera et al., 2007;
McWilliams and Siegel, 2001).
A central area of inquiry in this field is whether
and how CSR activities affect firms economic
returns (Griffin and Mahon, 1997; Hillman and
Keim, 2001; Hull and Rothenberg, 2008; Mackey,
Mackey, and Barney, 2007; Margolis et al., 2007;
McWilliams and Siegel, 2000; Orlitzky et al.,
2003). Prior research suggests that CSR activities can have both positive and negative impacts
on firms financial performance (Waddock and
Graves, 1997).
First, there is business value that resides in the
interaction between CSR activities and business
strategies (Porter and Kramer, 2006). Consumers
have become aware of social and environmental
issues and developed preferences for products with
CSR attributes (Brown and Dacin, 1997; Luo and
Bhattacharya, 2006). As a result, a firm can create
a certain level of CSR by embodying its products
with CSR attributes (such as pesticide-free fruit)
or by using CSR-related resources in its production process (such as naturally occurring insect
inhibitors and organic fertilizers) (McWilliams
and Siegel, 2001: 119), thereby achieving successful differentiation from its competitors (Fombrun, Gardberg, and Barnett, 2000; Porter and
van der Linde, 1995). A firm may also employ
environmentally friendly technologies to reduce
the costs of energy consumption and waste recycling, thus realizing overall operating efficiency
(King and Lenox, 2002; Klassen and Whybark,
1999). Furthermore, the consumer base for products with CSR attributes is growing (Brown and
Dacin, 1997; Luo and Bhattacharya, 2006), suggesting the burgeoning of business opportunities
for firms that are able to create value through their
CSR activities.
Second, CSR activities help build strategic
resources, including stakeholder relationships and
positive CSR reputations. People classify themselves into social categories based on stereotypical
perceptions of themselves and others (Ashforth and
Mael, 1989). Therefore, firms that constantly pursue CSR activities are attractive to stakeholders
with a self-image of social responsibility (Turban
and Greening, 1997), leading to close stakeholder
relationships (Donaldson and Preston, 1995; Jones,
1995). Through CSR activities, a firm signals to the
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj
1137
1138
with clients, suppliers, and other stakeholders (Barringer and Greening, 1998; Bruderl and Schussler,
1990). By definition, newness is due to the short
time a new venture has existed. From a learning
perspective (Amit, 1986), this shortness of time
constrains the new ventures accumulated knowledge and capabilities, resulting in a liability of
newness.
The liability of newness may weaken some positive effects and intensify some negative effects
of CSR activities on new ventures financial performance. First, newness may inhibit new ventures ability to realize economic returns from
CSR investments. To create business value through
CSR, a firm needs to incorporate social and environmental properties into product features (Porter
and van der Linde, 1995). Such product development often consumes substantial resources
(McWilliams and Siegel, 2001) and depends on
the firms previous innovation capabilities (Cohen
and Levinthal, 1990). Because new ventures have
existed for only a short period of time and often
have capital constraints (Stinchcombe, 1965), they
need time to develop the resources and capabilities
required for incorporating social and environmental innovations into product features.
Second, newness may restrict new ventures
abilities to harvest the benefits from stakeholder
relationships and positive reputations arising from
CSR. A firms ability to generate economic returns
from its stakeholder relationships relies on its
stakeholder influence capacity, which helps to
identify, act on, and profit from opportunities to
improve stakeholder relationships through CSR
(Barnett, 2007: 803). A firm builds its stakeholder influence capacity by accumulating knowledge about its key stakeholders, which is a pathdependent process that takes time to be realized
(Barnett, 2007). Similarly, newness makes it difficult for new ventures to build a positive CSR
reputation because efforts at quickly building an
image as an upstanding corporate citizen generally
fail (Fombrun et al., 2000: 102).
Third, newness may make the insurance type
benefits from CSR activities irrelevant for new
ventures. Unlike large established firms that are
carefully monitored by the public (Ullmann, 1985),
new ventures may escape public scrutiny and, thus,
their unexpected accidents may not be caught by
the watchful eye of the public (Jenkins, 2004,
2006). Furthermore, new ventures may even
operate illegally (Webb et al., 2009), implying
Copyright 2012 John Wiley & Sons, Ltd.
1139
CSR investments. As a result, firms with a longterm orientation tend to choose a technology that
will endure and emphasize continuous innovation,
even though doing so may involve greater shortterm costs.
Second, firms with a long-term orientation tolerate or even encourage the development of strategic resources that do not offer explicit short-term
value (Hamel and Prahalad, 1989, 1994), allowing
these firms to identify implicit value from complex
stakeholder relationships built from CSR activities.
Rouse and Daellenbach (1999) found that a companys drivers developed a close relationship with
the customers to whom they delivered products,
but the immediate value of this relationship was
not apparent. If the firm had emphasized short-term
profitability and outsourced its delivery services, a
choice that was irresponsible to its drivers, the firm
would have lost this valuable relationship with its
customers. This example suggests that, compared
with firms that focus on short-term profitability,
firms with a long-term orientation can draw value
from stakeholder relationshipsvalue that is often
implicit and difficult to identify (Barnett, 2007).
Third, firms with a long-term orientation draw
on a greater body of information in decision making, which helps to realize more of the insurance
type benefits associated with CSR activities. For
example, a fishing company in our sample indicated on its Web site that by actively participating in the collection of marine data for scientific research, it understood the potential issues
in the marine environment. As a result, the company was able to develop and adopt fishing activities that will not harm the marine environment,
thereby avoiding fines and generating sustainable
returns. Meanwhile, firms with a long-term orientation often operate well beyond current legal
requirements, avoiding the compliance costs that
come with stricter laws.
Fourth, firms with a long-term orientation reduce
CSR-related managerial distractions by aligning
the interests and motivation of different stakeholders, who may otherwise hold different or even
conflicting attitudes and beliefs about what and
how social and environmental issues should be
solved (Petts et al., 1999). For example, a firm
in our sample successfully engaged local investors
to collectively support the development of technology companies in the region by presenting a
vision that the whole community would benefit
substantially from these technology firms over the
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj
1140
Measures
Financial performance
In the questionnaire (see Appendix), we measured
financial performance through a nine-item, sevenpoint scale that was validated in prior research
(Stam and Elfring, 2008). The nine items included
sales level (P1), market share (P2), sales growth
(P3), cash flow (P4), ability to fund business
growth from profits (P5), return on assets (P6),
return on equity (P7), return on sales (P8), and
overall firm performance/success (P9). Also using
Dun & Bradstreets database, Ling, Zhao, and
Baron (2007) found such a performance scale to
be positively and significantly related to objective
data, suggesting good consistency.
2
1141
1142
Table 1.
Community
We give at least 10 percent of our profits back to the community.
We contribute to the development of a local business association.
We help to develop an educational program of a local school.
We open communication about site operations and productions to the community.
...
Employee relations
We build an equal working environment that is free of harassment and discrimination.
We develop a facility that enables us to operate at minimum risk to employees.
We develop a working environment that emphasizes work relationships.
We foster teamwork, support ongoing people training and development, and provide effective communication.
...
Environment
We implement the ISO 14001 standard to address environmental issues.
We pack shipments with biodegradable materials.
We develop and implement an active downgrade scheme.
We develop a facility that enables us to reduce emissions.
...
Products & production
We use GMO-free (genetically modified organisms) ingredients for our products.
We produce products using recycled materials.
We produce products using natural materials.
We implement the HACCP (Hazard Analysis and Critical Control Points) in our production.
...
Other stakeholders
We support charitable organizations, locally and internationally.
We continuously donate products to fund-raising events.
We sponsor kids programs, sports teams, school trips, and so on.
We raise Canadian kids awareness for families in Africa through our programs.
...
1143
CSR keywords
Frequency
CSR keywords
Frequency
Accountability
Biodegradable
Bio-fuel
Charity
1
4
1
3
Exceed (standard)
Fair
Fundraising
Future (generation,
society, environment)
Global warming
GMO-free (genetically
modified organisms)
Green/Greener
HACCP (hazard analysis
and critical control
points)
Harmful
Hazard/hazardous
Health
Honest
Integrity
ISO14001
Nature
Non-invasive
Nontoxic
Organic
Philanthropy
18
5
1
6
Community
Conservation
18
5
Contamination
Corporate citizenship
Donation
Downgrade
Drug-free
Earth
Eco- (system, friendly)
Emission
Energy
Enrich
Environment
Equality
Ethics
3
2
4
1
2
4
4
4
16
2
75
1
4
CSR keywords
Frequency
Power
Preservation
Recycle
Renewable
4
4
23
1
Responsibility
Reuse
11
3
16
3
Risk
Safety
1
31
2
2
20
4
9
2
24
3
2
4
1
Security
Sponsor
Stewardship
Surpass (standard)
Sustainability/sustainable
Trans-fat-free
Transparency
Trees
Trust/trusted
Waste
Wellbeing
5
1
1
1
5
1
1
3
9
18
1
1
2
1144
1
1
1
1
0
0
0
0
1
1
2
1
1
1
1
1
1
0.06
0.11
0.10
0.17
0.01
0.02
0.00
0.06
0.07
0.07
0.05
0.02
0.01
0.04
0.03
0.02
0.02
0.03
0.02
0.07
0.02
0.17
0.03
0.04
0.03
0.03
0.02
0.15
0.11
0.07
0.04
0.01
0.06
0.01
0.04
0.00
0.85
0.04 0.07
0.03 0.10
0.64
10
11
12
0.00
0.01
Note: Correlations of 0.17 or higher were significant at p < 0.05, two-tailed tests.
1.65
1.62
1.64
1.44
2.26
2.14
2.38
2.36
1.32
1.31
1.22
1.31
1.49
1.39
1.44
1.35
1.32
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
5.19
8
16
4.14
3.95
4.19
4.99
3.81
4.02
3.52
3.66
4.80
4.71
5.15
4.63
4.72
4.65
4.64
4.72
5.03
0
1
0
0.0742
0.93
2.01
2.25
1.72
5.40
0.93
Max
2.40 6.18
Min
0.0094 0.0153 0
1.00
S.D.
3.33
Mean
1. Number of
employees
2. Sales
3. Age
4. CSR
activities
5. CSR
disclosure
6. LTO1
7. LTO2
8. LTO3
9. LTO4
10. Inno Prd1
11. Inno Prd2
12. Inno Prc1
13. Inno Prc2
14. P1
15. P2
16. P3
17. P4
18. P5
19. P6
20. P7
21. P8
22. P9
Table 3.
0.18
0.24
0.21
0.08
0.05
0.13
0.12
0.07
0.16
13
0.80
0.67
0.56
0.52
0.49
0.52
0.53
0.61
14
0.55
0.46
0.41
0.45
0.47
0.48
0.52
15
0.42
0.42
0.40
0.40
0.43
0.53
16
0.80
0.68
0.68
0.72
0.76
17
19
20
21
0.74
0.76 0.88
0.74 0.85 0.83
0.75 0.77 0.81 0.86
18
1146
Table 4.
Age
CSR
activities
CSR
disclosure
LTO
Product
innovation
Process
innovation
Financial
performance
2.46
0.93
0.92
0.91
5.40
2.01
NA
NA
0.93
2.25
NA
NA
0.0094
0.0153
NA
NA
4.34
1.31
0.86
0.70
3.92
2.02
0.90
0.82
3.59
2.30
0.96
0.93
4.68
1.26
0.96
0.77
0.91
0.99
0.06
0.09
0.05
0.08
0.07
0.15
0.01
0.03
0.01
0.04
0.05
0.11
0.10
0.07
0.02
0.06
0.02
0.05
0.01
0.03
0.04
0.07
1.00
0.01
0.00
0.03
0.02
0.02
0.09
0.09
0.01
0.07
0.07
0.07
0.06
0.03
0.15
0.10
0.17
0.16
0.14
0.10
0.03
0.10
0.01
1.00
0.64
0.09
0.08
0.03
0.12
0.24
0.14
0.01
0.01
0.02
0.06
0.08
0.06
0.02
0.06
0.06
0.06
0.08
0.05
0.09
0.04
0.10
0.09
0.80
0.81
0.87
0.86
0.18
0.23
0.14
0.15
0.18
0.26
0.13
0.23
0.25
0.23
0.25
0.22
0.26
0.03
0.01
0.03
0.18
0.08
0.15
0.11
0.26
0.23
0.83
0.98
0.34
0.38
0.24
0.28
0.31
0.13
0.17
0.15
0.14
0.07
0.16
0.03
0.07
0.07
0.03
0.07
0.17
0.13
0.15
0.07
0.27
0.39
0.93
1.00
0.15
0.21
0.16
0.06
0.05
0.05
0.04
0.01
0.14
0.02
0.07
0.13
0.05
0.06
0.16
0.19
0.22
0.27
0.08
0.23
0.03
0.12
0.85
0.78
0.79
0.90
0.89
0.90
0.91
0.92
0.93
Mean
Standard deviation
Cronbachs alpha
Average variance extracted
Number of employees
Sales
Age
CSR activities
CSR disclosure
LTO1
LTO2
LTO3
LTO4
Inno Prd1
Inno Prd2
Inno Prc1
Inno Prc2
P1
P2
P3
P4
P5
P6
P7
P8
P9
0.02
0.06
0.00
0.64
1.00
0.09
0.09
0.02
0.10
0.09
0.07
0.10
0.06
0.06
0.07
0.01
0.06
0.04
0.05
0.04
0.06
0.06
Note: Age, CSR activities, and CSR disclosure were measured by single items and did not have meaningful Cronbachs alpha and
average variance extracted.
Long-term
orientation
0.14
0.27**
0.30***
-0.25*
CSR activities
(26%)
0.64***
Financial
performance
(32%)
-0.03
CSR disclosure
(40%)
0.05
0.20*
Firm size
0.10
Firm age
0.19*
0.16
Inno_prd
0.04
Inno_prc
1147
DISCUSSION
By incorporating the liability of newness and longterm orientation into the positive and negative
effects of CSR activities for new ventures, this
study offers several implications. First, it suggests
that newness may mitigate some positive effects of
CSR activities and intensify some negative effects,
resulting in overall negative economic returns for
new ventures. This finding supports the emerging view that time matters to CSR (Slawinski
and Bansal, 2009), a view that has been largely
neglected in the existing CSR literature. New ventures need time to develop products that have
social and environmental features, to identify and
build value from complex stakeholder relationships
through CSR activities, and to obtain insurance
type benefits of CSR investments. They also need
time to reduce additional costs and managerial distractions associated with CSR activities.
Second, this study also supports the view that
a long-term orientation matters to new ventures.
We found that a long-term orientation had a direct
positive effect on new ventures financial performance. Strategic reference point theory suggests
that temporal orientation plays a critical role in
decision making, and relatively new organizations
generally have shorter strategic reference points
(Fiegenbaum et al., 1996). Many new ventures
may not have a long-term orientation. Instead,
they confront various short-term challenges, and
their survival is constantly under threat (Miller and
Friesen, 1984; Quinn and Cameron, 1983), leading to decisions that emphasize the present and
overlook the future. Without a long-term orientation, these ventures may not emphasize innovation
(Miller and Friesen, 1982; Venkatraman, 1989) or
develop strategic resources (Hamel and Prahalad,
1989, 1994), which are often necessary for superior
financial performance.
More importantly, we found that a long-term
orientation positively moderated the relationship
between CSR activities and financial performance,
suggesting that a long-term orientation magnifies
the value of the benefits that accrue from CSR
activities. We speculate that a long-term orientation enables firms to recognize and realize economic returns of CSR through developing responsible products, building more enduring stakeholder
relationships, insuring themselves from risks, and
reducing managerial distractions from CSR activities. Short-termist firms, on the other hand, may
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj
1148
treat CSR as a tactical activity, which may undermine the benefits that could accrue from their CSR
activities.
Third, this study highlights the importance of
discriminating between CSR activities and disclosure. Some scholars treat a firms self-reported
CSR information as its CSR disclosure (Gray
et al., 1995), which may be used by the firm to
present its beliefs and attitudes toward CSR or to
advertise the CSR attributes of its products and/or
services. Beliefs and attitudes toward CSR mainly
reflect a firms moral identity, that is, its desire to
be a moral player and to be seen as such by others (Aquino and Reed, 2002; Reed and Aquino,
2003). Social identity theory (Ashforth and Mael,
1989) suggests that a firm with a moral identity may have attracted socially responsible stakeholders (Turban and Greening, 1997), resulting in
an image of a good corporate citizen (Fombrun
and Shanley, 1990). However, this positive image
can easily disappear (Fombrun et al., 2000) if the
firm does not pursue the expected CSR activities (Donaldson and Preston, 1995; Jones, 1995).
CSR advertising may also help to build a positive
CSR reputation related to quality, reliability, and
honesty (McWilliams and Siegel, 2000). However,
such a positive reputation cannot be sustained if
the firms products do not support the advertised
CSR attributes. Therefore, CSR beliefs, attitudes,
and advertising, without actual CSR activities, are
unlikely to build sustainable stakeholder relationships and positive CSR reputations, and thus may
not substantially affect financial performance.
CSR research has extensively relied on selfreported CSR information. For example, the widely
used KLD social screens are primarily based on
companies responses to questionnaires and CSR
reports (Waddock and Graves, 1997), which are
generally not audited (Gray et al., 1995). Although
it is necessary to use self-reported CSR information to measure CSR, activities should be filtered
from beliefs and attitudes. One approach we suggest is to identify discrete and specific CSR activities. Reporting discrete and specific CSR activities
inaccurately risks the firms legitimacy because
such activities can be easily scrutinized (Chapple and Moon, 2005). In contrast, CSR disclosures
that are not supported by activities can be merely
advertising or even greenwashing. In this study,
we controlled for CSR disclosure to ensure that
we were not capturing beliefs, attitudes, or advertising, but actual CSR activities. We found that
Copyright 2012 John Wiley & Sons, Ltd.
ACKNOWLEDGEMENTS
We thank Stewart Thornhill for his generous support for collecting the survey data. We are indebted
to Jijun Gao for his advice during the initial development of this research. An early version of this
Copyright 2012 John Wiley & Sons, Ltd.
1149
paper was presented in the internal research seminar at IE Business School. We thank David Bach,
Manuel Becerra, Peter Bryant, Karl Cock, Cristina
Cruz, Luis Diestre, Daniel Fernandez, Rachida
Justo, Garen Markarian, Pablo Martin de Holan,
Hana Milanov, and Juan Santalo for their constructive comments. We also thank Ryan Raffety,
Natalie Slawinski, and Jianyun Tang for reading
this paper and providing valuable feedback. Further, we deeply appreciate the guidance of Editor, Will Mitchell, and two anonymous reviewers
during the review process; this paper benefited
tremendously from their constructive and thoughtful comments.
This research was partly funded by the Social
Sciences and Humanities Council of Canada (grant
#410-2008-2233).
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DOI: 10.1002/smj
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Product innovation
In the past three years, has your firm developed new lines of products/services? If yes:
Inno_Prd1: How much did these new lines of products/services differ from other companies products/services?
Very similar 1 2 3 4 5 6 7 Much newer
Inno_Prd2: Compared with major competitors, has your firm introduced fewer or more such new lines of
products/services?
Much fewer 1 2 3 4 5 6 7 Much more
Process innovation
In the past three years, has your firm developed new processes/operating technologies? If yes:
Inno_Prc1: How much did these new processes/operating technologies differ from other companies processes/operating
technologies?
Very similar 1 2 3 4 5 6 7 Much newer
Inno_Prc2: Compared with major competitors, has your firm introduced fewer or more such new processes/operating
technologies?
Much fewer 1 2 3 4 5 6 7 Much more
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