Assessing the Relationship between Corporate Social Responsibility and R&D Effectiveness of Firms

Abstract

Practices of corporate social responsibility often generate synergetic effects and improve financial and overall firm’s performance. However, in the high-tech industries, research and development (R&D) efficiency remains a key element of development strategy, and a shift towards sustainable activities can be considered as a trade-off. This study investigates the empirical link between corporate social responsibility practices and R&D effectiveness in R&D-intensive industries. Specifically, this research assesses the impact of environmental, social, and governance information disclosure, the availability of third-party rating, and long-termism on R&D returns. We employ the Hausman–Taylor estimator to analyze three R&D-intensive industries, namely pharmaceuticals, biotechnology and software, for the period from 2012 to 2019. Empirical results show that, in general, higher values of corporate social responsibility metrics are associated with the weaker R&D returns. The findings of this research might be meaningful for managers in making informed decisions with respect to corporate social responsibility practices.