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Strategic Management Journal

Strat. Mgmt. J., 33: 11351153 (2012)


Published online EarlyView in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.1962
Received 8 July 2010; Final revision received 7 February 2012

SOCIAL RESPONSIBILITY IN NEW VENTURES:


PROFITING FROM A LONG-TERM ORIENTATION
TAIYUAN WANG1 * and PRATIMA BANSAL2
1

IE Business School, Madrid, Spain


Richard Ivey School of Business, The University of Western Ontario, London,
Ontario, Canada

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

Correspondence to: Taiyuan Wang, IE Business School,


C/Alvarez de Baena, 4, Madrid, 28006, Spain.
E-mail: Taiyuan.Wang@ie.edu

Copyright 2012 John Wiley & Sons, Ltd.

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

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T. Wang and P. Bansal

intensify some negative effects of CSR activities,


resulting in overall negative economic returns. We
also posit that new ventures whose strategic decisions have a long-term orientation, versus those
with a short-term focus, can attenuate the impacts
of their liability of newness by better integrating CSR attributes into their product features and
production processes, identifying implicit value
from stakeholder relationships developed through
CSR activities, seeking insurance-type benefits of
CSR investments, and reducing managerial distractions for the conduct of CSR activities. As these
mechanisms suggest, we found a negative relationship between CSR activities and financial performance for a sample of 149 new ventures, and that
this relationship was positively moderated by the
degree of these new ventures long-term orientation.
This study contributes to CSR research in two
ways. First, it brings new ventures directly into the
CSR spotlight, recognizing their difference from
established organizations and pointing to the need
for more thoughtful consideration of new ventures
in the world of CSR. Second, this study recognizes
the importance of time in CSR research, expressed
in a ventures newness and long-term orientation.
Notions of time have been virtually absent in
CSR research, despite the fact that time plays
an important role in CSR decisions (Slawinski
and Bansal, 2009). Our efforts at recognizing the
interplay between the more objective aspect of
time, reflected in a ventures newness, and the
more subjective aspect of time, reflected in a
ventures long-term orientation, potentially open
new avenues of CSR research.

THEORY AND HYPOTHESES


The economics of CSR
CSR refers to the firms consideration of, and
response to, issues beyond the narrow economic,
technical, and legal requirements of the firm
(Davis, 1973: 312). An activity is socially responsible only if it furthers the social good, outstrips
the firms economic goals, and goes beyond the
requirements of the law (McWilliams and Siegel,
2001). Typical CSR activities include developing products that have social and environmental features, adopting production methods that
reduce environmental impacts, employing human
Copyright 2012 John Wiley & Sons, Ltd.

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

Social Responsibility in New Ventures


public that it is a good corporate citizen, resulting in a positive CSR reputation (Fombrun and
Shanley, 1990). Positive CSR reputations enable
firms to obtain and sustain legitimacy (Bansal and
Roth, 2000), charge premiums for products and/or
services (Klassen and McLaughlin, 1996), recruit
and retain quality employees (Greening and Turban, 2000; Turban and Greening, 1997), and attract
investors and capital providers (Mackey et al.,
2007).
Third, CSR activities insure against corporate
risks (Godfrey, 2005; Godfrey, Merrill, and
Hansen, 2009). Because socially responsible firms
generally operate at standards beyond legal requirements (Carroll, 1991), their CSR activities may
prevent additional costs incurred to comply with
stricter industry standards or legal requirements
(Hart, 1995). Furthermore, CSR activities may
help avoid negative impacts of unexpected accidents (Bansal and Roth, 2000). If a socially responsible firm experiences a harmful event, the moral
capital it has accrued through CSR activities may
mitigate value degradation and negative sanctions
from major stakeholders (Godfrey, 2005; Godfrey
et al., 2009).
Along with these positive effects, CSR activities can also undermine economic returns by
adding costs, distracting managers, and/or creating
agency problems. First, the more resources a firm
deploys for its CSR activities, the fewer resources
it has available for its core business (McWilliams
and Siegel, 2001; Waddock and Graves, 1997).
Although a firm may build value by developing products with CSR attributes (Porter and van
der Linde, 1995), the research and development
(R&D) costs incurred may offset the economic
value earned (McWilliams and Siegel, 2000). A
firm that has limited access to financial capital may
also need to choose between CSR investments and
others that are more closely associated with keeping pace in the competitive environment, which, if
not tended, can result in competitive disadvantage
(Barney, 1991).
Second, CSR activities may distract managers
from their core duties. Managers responsibilities
mainly pertain to the firms business activities, and
they may be incapable of, or at least not competent at, pursuing CSR activities (Davis, 1973).
CSR requires building cooperation among different
stakeholders (Etzion, 2007; Hart, 1995), who often
differ in attitudes and beliefs about what and how
social and environmental issues should be solved
Copyright 2012 John Wiley & Sons, Ltd.

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(Petts et al., 1999). Managers must reconcile these


differences to move the firm toward CSR, which
distracts them from their core duties.
Third, managers may pursue their own interests
through CSR activities at the cost of shareholder
wealth (Wright and Ferris, 1997), thereby creating
an agency problem (Eisenhardt, 1989). The pursuit of CSR activities can create substantial benefits to managers. Solving social and environmental
issues can improve managers public image, which
in turn helps them gain political power, public
respect, and future career opportunities (Wright
and Ferris, 1997). Meanwhile, the insurance-type
benefits of CSR may protect managers more than
shareholders: public embarrassment and harassment can ruin managers careers (Wright and Ferris, 1997), whereas shareholders can avoid such
unsystematic risks through their investment portfolios.
The above review of prior CSR research based
on established corporations suggests that CSR
activities have both positive and negative effects
on economic returns (Strike, Gao, and Bansal,
2006; Waddock and Graves, 1997). These effects,
however, may not apply to new ventures because
their strategic and organizational properties differ
substantially from those of established organizations (Hannan and Freeman, 1989; Stinchcombe,
1965).
New ventures: short of time for CSR
New ventures are for-profit organizations that have
existed for a short period of time since being
founded (Zahra, 1996).1 Although a specific time
criterion to discriminate new ventures from established organizations may seem arbitrary (Zahra,
Ireland, and Hitt, 2000), eight years is a commonly used benchmark (Atuahene-Gima and Li,
2004; Zahra, 1996). Generally speaking, such firms
are still in the entrepreneurial, or birth and growth,
stages of their life cycle (Miller and Friesen, 1984;
Quinn and Cameron, 1983).
New ventures suffer from the liability of newness (Stinchcombe, 1965); they lack sophisticated
operating processes and routines, systems and
structures for efficient internal communications,
and the knowledge to establish stable relationships
1

In this study, we exclude newly established social enterprises,


whose primary goal is to address social issues and for whom
economic returns are less relevant.
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T. Wang and P. Bansal

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.

they may not need to protect themselves through


CSR activities as established corporations often do.
The negative effects of CSR activities, however, may be intensified for new ventures through
two mechanisms. First, the capital costs associated
with CSR activities are often high (Brammer and
Millington, 2008), stifling new ventures efforts to
build economies of scale. Although overall costs
can be reduced by employing technologies that
consume less energy, generate less waste, or use
fewer materials (King and Lenox, 2002; Klassen
and Whybark, 1999), the benefits that accrue from
these lower costs take time to materialize, whereas
the capital costs are immediate. For example, a
new venture in our sample was grateful to the
government for its development of a waste treatment facility; the cost of developing such a facility
would have been impossible for this new venture
or any single small business to bear.
Second, newness may magnify the managerial
distractions from CSR activities. New ventures
often need to fully commit their resources and
capabilities to their core business activities, such
as product and market development, engineering,
manufacturing, and logistics (Barringer and Greening, 1998; Bruderl and Schussler, 1990). Because
founders and managers of new ventures may lack
the necessary skills (Davis, 1973), the pursuit
of CSR activities may distract them from core
business activities. Funding CSR activities may
also cause tensions and conflicts among divisions
that compete for organizational resources (Lewis,
2000), which may result in negative outcomes for
new ventures because they did not take the time to
develop trust among organizational members (Barringer and Greening, 1998; Bruderl and Schussler,
1990).
Certainly, we acknowledge that new ventures do
benefit from some CSR activities. A new venture
often relies on its local community for resources
(Peredo and Chrisman, 2006), and thus its support for local community may enhance its resource
endowment. New ventures often lack the financial capital to pay high salaries to attract top
talent. CSR activities, however, offer an alternative benefit with which to attract and retain quality employees willing to work for less money in
socially responsible firms (Greening and Turban,
2000; Turban and Greening, 1997). However, by
weighing the major negative impacts caused by
the liability of newness against these benefits, we
suggest that the overall effects of CSR activities
Strat. Mgmt. J., 33: 11351153 (2012)
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Social Responsibility in New Ventures


on economic returns for new ventures tend to be
negative.
Hypothesis 1: There is a negative relationship
between CSR activities and financial performance among new ventures.
The importance of long-term orientation
In the previous section, we argued that new ventures are likely to experience negative economic
returns for their CSR activities because of the
liability of newness. The notion of newness is
based on an objective view of time, which is often
referred to as clock time (Mosakowski and Earley, 2000: 797). In this section, we suggest that
the impacts of newness are contingent upon the
new ventures temporal orientation, a subjective
perspective of time reflected in the temporal depth
of its strategic decisions (Ancona, Okhuysen, and
Perlow, 2001; Fiegenbaum, Hart, and Schendel,
1996; Lee and Liebenau, 1999).
A firms temporal orientation can range from
being short to long; strategic decisions with a
short-term orientation emphasize efficiency,
whereas decisions with a long-term orientation
emphasize effectiveness (Covin and Slevin, 1989;
Venkatraman, 1989). Although long-term effectiveness and short-term efficiency may not be
mutually exclusive, they often reflect different
strategic priorities and require different organizational processes (Hamel and Prahalad, 1989,
1994). By building a vision that directs resource
allocation and inspires organizational members to
achieve competitive advantage in the future (Brews
and Purohit, 2007; Grant, 2003), firms with a longterm orientation often engage in activities that do
not necessarily generate immediate returns, such
as investing in R&D (Miller and Friesen, 1982;
Venkatraman, 1989), spotting trends in consumers
preferences that may lead to new markets (Connor, 1999; Narver, Slater, and MacLachlan, 2004),
and developing strategic resources that do not have
explicit short-term value (Hamel and Prahalad,
1989, 1994).
Firms with a long-term orientation can offset
the liability of newness in the pursuit of CSR
by making strategic decisions that better realize
the benefits of CSR activities. First, a long-term
orientation widens the firms field of vision, which
enables the firm to recognize the potential value of
Copyright 2012 John Wiley & Sons, Ltd.

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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
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T. Wang and P. Bansal

long run. This example suggests that, guided by


a vision rather than prodded by short-term considerations (Fiegenbaum et al., 1996), firms with
a long-term orientation can align the interests of
internal and external stakeholders, facilitating the
implementation of CSR.
The above discussion suggests that a longterm orientation may attenuate the major negative
impacts of the liability of newness and, thus, can
help new ventures realize economic returns from
CSR activities. Therefore, as long-term orientation
increases, the negative relationship between CSR
and new venture performance (Hypothesis 1) will
decrease in its magnitude, or even become positive, if the long-term orientation is strong enough.
Put differently, a long-term orientation can be considered a positive factor that alters or reverses the
relationship between CSR and new ventures financial performance.
Hypothesis 2: The relationship between CSR
activities and financial performance among new
ventures is positively moderated by the degree
of new ventures long-term orientation.

DATA AND METHODS


Sample
The sample was drawn from Dun & Bradstreets
2008 Guide to Canadian Manufacturers Directory. Manufacturers are particularly relevant to
this study because they often have substantial
social and environmental impacts (Williamson,
Lynch-Wood, and Ramsay, 2006). We defined
new ventures as firms eight years old or younger
(Atuahene-Gima and Li, 2004; Zahra, 1996). We
excluded firms that had fewer than 10 employees
because such small firms often do not have a welldefined strategy (Covin, Green, and Slevin, 2006).
We also excluded diversified firms because of the
variance in the social and environmental properties
of their different products (McWilliams and Siegel,
2001). Based on these criteria, we identified 846
new ventures with valid contact information for
chief executive officers (CEOs) or presidents.
Data sources
Data for long-term orientation and financial performance were collected through a survey targeted
Copyright 2012 John Wiley & Sons, Ltd.

to the CEOs and presidents of these new ventures,


the most knowledgeable individuals with respect
to their firms strategic intents and performance
criteria (Miller and Friesen, 1984). Small and new
enterprises generally do not publicize their financial reports (Dess and Robinson, 1984) and tend
to have a variety of performance criteria that may
not be fully reflected by their financial reports
(McWilliams and Siegel, 2001). Therefore, using a
survey to collect data for new ventures long-term
orientation and financial performance was not only
practical but also appropriate.
We made several efforts to assure a response
from the CEO or president of the firm. Our
questionnaire was addressed directly to the CEO
or president by using the individuals name, not
merely the title. The CEO or president was under
no obligation to respond and could discard the
questionnaire if he or she did not wish to complete
it. A number of the completed questionnaires contained written comments on our study and were
signed and dated by the CEOs or presidents, indicating their personal participation.
Given that different respondents may prefer different types of surveys (Kaplowitz, Hadlock, and
Levine, 2004), we used both mail and online questionnaires to encourage responses. From June to
October 2008, five rounds of contacts (invitation letter, first-round questionnaire, fax reminder,
second-round questionnaire, and phone call
reminder) (Dillman, 2007) generated 204 responses
(42 online and 162 by mail). Eight questionnaires
contained significant missing values, resulting in
196 usable data points (response rate = 23%).
We found no evidence of response bias (Armstrong and Overton, 1977) by testing for the differences in (a) response rates across industries and
regions; (b) age, sales, and number of employees between responding and nonresponding firms;
and (c) all variables in the survey between early
and late responding firms and between online and
mail responding firms. We found no evidence for
common method bias from the method-factor test
(Liang et al., 2007).
We drew CSR data from these firms signature
Web sites following the approach taken in prior
research (Chapple and Moon, 2005). Trying to
connect with general audience and key stakeholders, companies use their Web sites to report CSR
considerations and activities (Esrock and Leichty,
1998). Companies signature Web sites generally
contain information consistent with other corporate
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Social Responsibility in New Ventures


archival documents such as annual reports (Bansal,
2005; Maignan and Ralston, 2002), suggesting the
validity of using Web sites to collect CSR data
(Chapple and Moon, 2005). By drawing on different data sources for CSR and for long-term
orientation and financial performance, our design
further avoids common method bias (Podsakoff
et al., 2003).
Immediately after the 196 firms responded to
the survey, the first author searched the Internet and found 149 of these firms had signature Web sites, from which the author saved
all the introductory Web pages, including About
Us, History, and Mission and Vision Statements. Guided by previous studies comprehensive descriptions of CSR activities (Aguilera et al.,
2007; Carroll, 1991; Margolis and Walsh, 2003;
McWilliams and Siegel, 2001; Orlitzky et al.,
2003), the author and two well-trained research
assistants (Ph.D. candidates in management) independently read the saved Web pages to seek information about these firms CSR activities.2
The final sample included 149 new ventures,
representing 18 industries (categorized by twodigit Standard Industrial Classification [SIC]
codes) in the manufacturing sector (SIC: 2039).
On average, these new ventures were 5.4 years old,
employed 46 people, and generated nine million
Canadian dollars in sales.

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

Empirical results reported in the paper were based on the


authors coding. The coding of the two research assistants was
used to examine interrater reliability.

Copyright 2012 John Wiley & Sons, Ltd.

1141

Long-term orientation (LTO)


We measured long-term orientation using a fouritem, seven-point scale that was validated in prior
research (Miller and Friesen, 1982; Venkatraman,
1989). The four items were: 1) As your firm
defines strategies, you generally emphasize longterm (over 5 years) goals and strategies (LTO1);
2) Your firms criteria for resource allocation
largely reflect long-term considerations (LTO2);
3) Your firm emphasizes basic research to build
future competitive advantage (LTO3); and 4) As
your firm defines strategies, your major concern
is how to build future competitive advantage
(LTO4).
Corporate social responsibility (CSR)
We measured CSR by counting the number of
discrete activities that a firm pursued. From each
of the 149 firms Web pages (About Us, History, and Mission and Vision Statements), the
first author and a research assistant independently
identified discrete CSR activities. We employed
the following criteria to ensure the validity of this
count measure. First, we focused on statements
that indicated specific CSR activities and excluded
broad statements (such as We are committed to
protecting the earth), which, we reasoned, could
exist in the absence of real activities. Second, we
excluded statements suggesting that the firms core
business was to fulfill specific social or environmental needs. For example, a firm in our sample produced a type of equipment that helped its
customers reduce energy consumption. Although
reducing energy consumption is CSR-related, the
nature of the firms business does not indicate the
firm pursued a CSR activity; it just addressed a particular need of its customers. Third, we excluded
statements suggesting the firms intention to do
something socially responsible or environmentally
friendly (will do statements). For example, a firm
in our sample claimed it would pursue the ISO
14001 environmental standard. Although pursuing
the ISO 14001 standard is a specific CSR activity,
the firm had not yet done so. By excluding such
will do statements, this CSR measure also helped
control for, or at least reduce, the reverse causality
(i.e., financial performance leads to CSR), given
that firms with better financial performance are
more likely to have the intention to pursue CSR
activities (Orlitzky et al., 2003).
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Table 1.

T. Wang and P. Bansal


Examples of discrete CSR activities

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.
...

Based on these criteria, 145 discrete CSR items


were identified by the first author and the research
assistant. Next, the second author inspected these
items and eliminated seven items that were not
considered to be sufficiently discrete and specific,
resulting in 138 CSR activities pursued by 47
new ventures. These CSR activities can be categorized into five groups, including community,
employee relations, environment, products &
production, and other stakeholders (Table 1),
which generally align with the five major types of
CSR activities reported in the Kinder, Lydenberg,
Domini (KLD) social screens (Hillman and Keim,
2001; Waddock and Graves, 1997). For each firm,
we added all its discrete CSR activities and used
a formative index to measure its CSR.
To investigate the moderating effect of longterm orientation on the relationship between CSR
activities and new ventures financial performance,
we formed an interaction term by multiplying
the four indicators of long-term orientation and
the formative index of CSR. These items were
Copyright 2012 John Wiley & Sons, Ltd.

centered before being multiplied in order to reduce


multicolinearity (Aiken and West, 1991).
Control variables
Recently, CSR researchers have paid increasing
attention to CSR disclosure, which refers to a
firms self-reported CSR information without confirming real CSR activities (Maignan and Ralston, 2002; Ullmann, 1985). Because self-reported
CSR information is not audited (Gray, Kouhy, and
Lavers, 1995), a firm may use CSR disclosure to
present its beliefs and attitudes toward social and
environmental issues, which may diverge from its
actual CSR activities. Furthermore, a firm may
use CSR disclosure to advertise the CSR attributes
of its products and/or services, and such advertising may overstate the firms real CSR efforts
(McWilliams and Siegel, 2000). Thus, it is optimal
to control for the effect of CSR disclosure, given
that our hypotheses are developed on the basis of
CSR activities.
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj

Social Responsibility in New Ventures


Table 2.

1143

CSR keywords and frequency of appearance

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

We measured CSR disclosure by examining the


number of times that CSR keywords appeared
on these firms Web sites (About Us, History,
and Mission and Vision Statements pages). The
first author and another research assistant independently read each of the 149 firms Web sites,
recorded sentences that reflected the firms CSR
considerations and activities, and identified CSR
keywords from these sentences. We did not distinguish between a keywords different forms (e.g.,
responsibility, responsible, and responsibly) and
tenses (e.g., recycle and recycled ), but listed different keywords that possess similar meanings (e.g.,
donate and sponsor). As shown in Table 2, we
identified 57 CSR keywords, which appeared a
total of 403 times on these firms Web sites.3
We measured CSR disclosure
using the formula

N

Ti /K, where N is the numCSRDisclosure =
i=1

ber of different CSR keywords that appeared on


the firms Web site, Ti , is the number of times
3

Seven words were identified by only the author or the research


assistant, including commitment, exceed, goodwill, quality, stakeholders, surpass, and training. We reexamined these words in
their contexts and decided to treat exceed and surpass (e.g.,
in terms of industry standards and legal requirements) as CSR
keywords. The other five words are not CSR related.
Copyright 2012 John Wiley & Sons, Ltd.

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

that keyword i appeared, and K is the number of


total general words on the firms Web site. We
divided by K because firms that have large Web
sites are likely to include more CSR keywords than
firms that have small Web sites. The intraclass correlation coefficient for CSR disclosure coded by
the author and by the research assistant was 0.90,
suggesting good interrater reliability (Shrout and
Fleiss, 1979).
We also controlled for several variables collected from Dun & Bradstreets database. Firms
operating in different industries may have different benefits and pressures for the pursuit of
CSR activities (Hull and Rothenberg, 2008; Russo
and Fouts, 1997). We used 17 dummy variables
to control for the differences in the 18 industries. Regional regulations and policies may affect
CSR decisions of local firms (Campbell, 2007).
We used two dummies to control for these ventures places of origin (i.e., Western, Central, and
Eastern Canada). Different markets may have different social and institutional requirements for
CSR (Campbell, 2007). We used two dummies
to control for these firms market scope, which
captured the countries to which the new ventures sell, including only the Canadian market, the
North American market (Canada and the United
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj

1144

T. Wang and P. Bansal

States), and the global market (Canada, the United


States, and at least one other country). Large firms,
which are generally older, may realize economies
of scale from their CSR investments (McWilliams
and Siegel, 2001). We controlled for firm size (log
of sales and log of number of employees) and firm
age (number of years since the firm was established).
It may be innovation rather than CSR that
actually contributes to financial performance (Luo
and Bhattacharya, 2006; McWilliams and Siegel,
2000). To exclude this possibility, we controlled
for product and process innovations collected from
the survey. As shown in the Appendix, the survey items Inno Prd1 and Inno Prd2 capture the
degree and amount of product innovation, and
items Inno Prc1 and Inno Prc2 reflect the degree
and amount of process innovation. If a firm did
not have product or process innovation, zero was
assigned to the corresponding items.

ANALYSES AND RESULTS


We tested the two hypotheses using the partial least
squares (PLS),4 which permits variables to have
both antecedents and consequences in the model
(Barclay, Higgins, and Thompson, 1995). A firms
decision to pursue CSR activities may be based
on its belief that CSR will help improve financial
performance, and firms with better financial performance can better afford CSR investments. Prior
research has noted that large established firms in
some industries are likely to achieve economies of
scale from CSR investments (Hillman and Keim,
2001; Hull and Rothenberg, 2008; Waddock and
Graves, 1997). Therefore, CSR may be endogenous to factors such as industry, firm size, and
firm age. The use of PLS simplifies the modeling
of CSR as an endogenous variable.
The measurement model
The descriptive statistics and correlations of all the
measurement items except dummies of different
industries, places of origin, and market scope are
listed in Table 3. Items used to measure the same
factor were highly correlated. CSR activities and
CSR disclosure had a high correlation (r = 0.64, p
< 0.001), which was still lower than the cut value
4

Multiple regressions generated qualitatively identical results.

Copyright 2012 John Wiley & Sons, Ltd.

0.70 (Nunnally, 1978), suggesting that they were


likely to have captured different things. However,
such a high correlation may cause multicolinearity,
leading to biased results. We checked variance
inflation factors (VIFs) for all the variables and
found that the highest VIF was 2.55. Therefore,
multicolinearity was not an issue (Paetzold, 1992).
To examine the reliability, convergent validity,
and discriminant validity of these measures, we
conducted a PLS model by using the independent
and control variables to predict CSR and financial
performance. As shown in Table 4, reliability and
convergent validity were evidenced by the loadings for all items being well above 0.70 on their
respective factors (Nunnally, 1978), and by the
high average variance extracted and Cronbachs
alpha (Barclay et al., 1995). The loadings of these
items on their factors were much higher than their
cross-loadings on other factors, which were all
lower than the cut value 0.70, suggesting satisfactory discriminant validity (Barclay et al., 1995).
The structural model
Figure 1 provides the standardized path coefficients of the structural model, in which CSR was
endogenous and predicted by firm size, firm age,
long-term orientation, and dummies of industry,
places of origin, and market scope. Firms generally report what they actually do (Abrahamson and
Park, 1994; Chapple and Moon, 2005), and, thus,
there should be a path from CSR activities to CSR
disclosure.
The path from CSR activities to financial performance was negative and significant (Beta =0.25,
p < 0.05), supporting Hypothesis 1. We calculated the unstandardized path coefficient of CSR
activities by B = Beta SDP ERF /SDCSR , where
Beta is the standardized coefficient, and SD P ERF
and SD CSR are the standard deviations of financial
performance and CSR (Bring, 1994). The unstandardized coefficient of CSR was 0.14, suggesting
that each CSR activity was related to a 0.14point
decrease in the 17 performance scale. The standard deviation of financial performance was 1.26
(Table 4). The 0.14-point decrease in the 17 performance scale is equivalent to 0.11 standard deviations (0.14/1.26), which included approximately
nine percent of firms in the sample. Thus, as a new
venture pursued one more CSR activity, its perceived financial performance compared with competitors would be ranked nine percentiles lower.
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj

Copyright 2012 John Wiley & Sons, Ltd.

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

0.02 0.08 0.08


0.02 0.08 0.08 0.73
0.02 0.02 0.01 0.52 0.54
0.09 0.11 0.09 0.47 0.45 0.72
0.09 0.24 0.09 0.13 0.07 0.26 0.22
0.01 0.14 0.07 0.16 0.12 0.25 0.25 0.70
0.07 0.01 0.10 0.13 0.10 0.13 0.02 0.29 0.32
0.07 0.01 0.06 0.14 0.10 0.12 0.03 0.26 0.40 0.90
0.02 0.07 0.05 0.23 0.23 0.18 0.19 0.08 0.21 0.13
0.01 0.03 0.02 0.31 0.31 0.21 0.29 0.09 0.26 0.17
0.08 0.06 0.02 0.07 0.18 0.19 0.26 0.21 0.28 0.16
0.09 0.01 0.03 0.20 0.23 0.25 0.31 0.07 0.09 0.06
0.06 0.07 0.01 0.24 0.25 0.31 0.33 0.01 0.13 0.01
0.11 0.03 0.02 0.23 0.27 0.27 0.33 0.00 0.17 0.07
0.09 0.03 0.03 0.28 0.32 0.28 0.32 0.02 0.16 0.05
0.06 0.03 0.01 0.21 0.27 0.27 0.32 0.08 0.04 0.04
0.07 0.01 0.00 0.29 0.38 0.36 0.35 0.01 0.13 0.15

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

Descriptive statistics and correlations

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

Social Responsibility in New Ventures


1145

Strat. Mgmt. J., 33: 11351153 (2012)


DOI: 10.1002/smj

1146
Table 4.

T. Wang and P. Bansal


The measurement model
Size

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

Figure 1. The structural model


Notes:
1) Dummies of industry, places of origin, and market scope were examined but not included to save space.
2) Numbers in brackets were variance explained.
3) Standardized path coefficients, p < 0.10, p < 0.05, p < 0.01, p < 0.001, two-tailed tests.
Copyright 2012 John Wiley & Sons, Ltd.

Strat. Mgmt. J., 33: 11351153 (2012)


DOI: 10.1002/smj

Social Responsibility in New Ventures


The path from the interaction term to financial
performance was positive and significant (Beta =
0.30, p < 0.001), supporting Hypothesis 2. The
interaction term explained six percent additional
variance of financial performance. Therefore, this
interaction term should be included; otherwise,
the model would have generated biased results
(Cortina, 1993). We also checked the robustness
of this interaction effect. We replicated our analyses for the 47 firms that had at least one CSR
activity, and found that the interaction term of
long-term orientation and CSR activities was positive and marginally significant (Beta = 0.21, p <
0.10). We conducted subgroup analyses by separating the 47 firms that had at least one CSR
activity (Group A) from the 102 firms that did not
pursue any CSR activities (Group B). Long-term
orientation exhibited a stronger effect on financial performance for Group A (Beta = 0.45, p
< 0.01) than for Group B (Beta = 0.14, p =
0.28).
The positive interaction effect suggests that
firms with a low level of long-term orientation
(meanone standard deviation) had a strongly
negative relationship between CSR activities and
financial performance (Beta = 0.55), while firms
with a high level of long-term orientation (mean +
one standard deviation) exhibited a positive slope
for this relationship (Beta = 0.05). More intuitively, our data show that new ventures with both
high levels of long-term orientation and CSR activities had the highest level of financial performance
(5.07 in the 17 scale), while those with a high
level of CSR but a low level of long-term orientation had the lowest level of financial performance
(3.65 in the 17 scale).
Although not hypothesized, the significant effect
of long-term orientation on financial performance
deserves further interpretation (Beta = 0.27, p
< 0.01). The corresponding unstandardized coefficient of long-term orientation was 0.26, which
means that one point in the 17 long-term orientation scale is related to a 0.26-point increase in the
17 performance scale. The 0.26-point increase in
the 17 performance scale is equivalent to 0.21
standard deviations (0.26/1.26), which included
approximately 16 percent of firms in the sample. Therefore, as a new venture increased one
point in its 17 long-term orientation scale, its perceived financial performance compared with competitors would be ranked approximately 16 percentiles higher.
Copyright 2012 John Wiley & Sons, Ltd.

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

T. Wang and P. Bansal

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.

although CSR activities and CSR disclosure were


highly correlated, CSR disclosure was not significantly related to financial performance. This finding accords with our theoretical hypotheses that
actual CSR activities, rather than CSR disclosure,
affect new ventures financial performance.
Findings of this study can also inform management practice. A long-term approach to CSR
can help new ventures profit from their CSR
activities, while short-termism can do new ventures a disservice. Thus, firms with a long-term
orientation should consider pursuing CSR activities, which will ultimately enhance their financial performance. Decision makers who take a
moral approach to CSR often believe that pursuing CSR activities is just the right thing to do
(Bansal and Roth, 2000; Donaldson and Preston,
1995). These decision makers should formulate
their firms strategic decisions by emphasizing a
long-term orientation, which is likely to lead to
profitable outcomes for CSR initiatives.
Limitations and future research
The limitations of this study, especially in regards
to its sample and data sources, deserve attention.
Our sample contained only new ventures, making
it impossible to empirically compare the differences in the economic returns of CSR activities
between new and established firms. Consequently,
we can only speculate on the contributions of our
work to prior work on established firms. We have
merely cracked open a door on the importance of
objective and subjective time in the relationship
between CSR and financial performance, and we
hope future researchers will place more emphasis on the differences between established and
new ventures approaches to and results from CSR
activities.
Further, we measured long-term orientation and
financial performance by surveying CEOs and
presidents and measured CSR by counting discrete
CSR activities from ventures Web sites. Although
CEOs and presidents represented the most informative individuals in these new ventures (Miller
and Friesen, 1984), and Web sites are generally
considered reliable data sources for CSR activities
(Chapple and Moon, 2005; Maignan and Ralston,
2002), our data were essentially self-reported. We
encourage future researchers to seek third-party
sources and longitudinal data to build further reliability in the data and validity in the findings.
Strat. Mgmt. J., 33: 11351153 (2012)
DOI: 10.1002/smj

Social Responsibility in New Ventures


This research builds on the CSR theory from
new ventures liability of newness (Stinchcombe,
1965). At the same time, we acknowledge that
many new ventures are established to explore and
exploit entrepreneurial opportunities (Barringer
and Greening, 1998; Covin and Slevin, 1990;
Zahra et al., 2000). By targeting new markets,
offering new products and services, and/or implementing new operations, new ventures may break
the equilibrium in the marketplace (Davidsson,
2004), creating substantial economic and social
impacts (Kirzner, 1973). Thus, an important direction for future research is to develop CSR theory
that accounts for the entrepreneurial aspects of
new ventures. Consumers awareness of social and
environmental issues has been increasing (Brown
and Dacin, 1997; Luo and Bhattacharya, 2006),
suggesting emerging opportunities that can be pursued through CSR activities. Future studies that
examine the nature of CSR-related business opportunities and how new ventures identify, evaluate,
and exploit (Shane and Venkataraman, 2000) such
opportunities will make important theoretical contributions and practical implications.
Final thoughts
Organizations temporal orientation offers the
opportunity to cast new light on CSR. In what
seems to be an increasingly fast-paced world,
in which firms face ever-increasing pressures for
quick returns, many new ventures are likely to
be reticent to invest in CSR. New ventures that
anticipate being around for a while take a longterm orientation in strategic decisions and make the
social investments to connect themselves to society. These firms build the foundation for a more
sustainable and responsible society. We, therefore,
suggest that objective time (newness) and subjective time (long-term orientation) point to potential parameters that can fuel new CSR research,
improving our understanding of the conditions and
contexts that will allow business and society to
work synergistically.

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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Social Responsibility in New Ventures

1153

APPENDIX: Survey Questionnaire


Financial performance
Please evaluate your firms performance in the last year by choosing a number between 1 and 7, where 1 means that
your firm was much worse and 7 means that your firm was much better than major competitors.
5
6
7
2
4
3
1
P1. Sales level
6
7
2
4
5
3
1
P2. Market share
6
7
2
4
5
3
1
P3. Sales growth
2
4
5
6
7
3
1
P4. Cash flow
2
4
5
6
7
3
1
P5. Ability to fund business growth from profits
2
4
5
6
7
3
1
P6. Return on assets (ROA)
4
5
6
7
2
3
1
P7. Return on equity (ROE)
4
5
6
7
2
3
1
P8. Return on sales (ROS)
5
6
7
4
3
1
2
P9. Overall firm performance/success
Long-term orientation (LTO)
LTO1. As your firm defines strategies, you
generally emphasize the immediate future.

LTO2. Your firms criteria for resource


allocation mainly focus on short-term
issues.

Your firms criteria for resource allocation


largely reflect long-term considerations.

LTO3. Your firms ultimate goal is to


increase short-term profitability.

Your firm emphasizes basic research to build


future competitive edge.

LTO4. As your firm defines strategies, your


major concern is how to harvest temporary
profits.

As your firm defines strategies, you generally


emphasize long-term (over 5 years) goals and
strategies.

As your firm defines strategies, your major


concern is how to build future competitive
advantage.

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

Copyright 2012 John Wiley & Sons, Ltd.

Strat. Mgmt. J., 33: 11351153 (2012)


DOI: 10.1002/smj

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