Dynamic Capability and Strategic Corporate Social Responsibility Adoption: Evidence from China

Abstract

An increasing number of studies have proposed that corporate social responsibility (CSR) performance depends on how companies apply their resources and capabilities to implement CSR. A firm’s ability to integrate, build, and reconfigure internal and external competencies to respond to environmental changes is its dynamic capability. Implementation of CSR at the strategic level will contribute to a firm’s sustainability. However, the research on strategic CSR is incipient. This study explores possible mechanisms to investigate how dynamic capability influences the performance of strategic CSR in China. By analyzing 134 Chinese listed companies in the period 2017–2019, in this study, we found that firms with a high level of dynamic capability were less likely to adopt strategic CSR practices, and had a low strategic CSR adoption performance. The results confirmed the loss aversion channel, indicating that firms with a high dynamic capability level were loss averse and that managers had a decreasing sensibility in decision-making and allocated fewer company resources in CSR projects. These results can help companies to better understand the dynamic capability and how dynamic capability contributes to the adoption of strategic CSR and performance over time. The policy implications of the study are also discussed.