Automation and corporate social responsibility

Abstract

Automation reshapes firms’ cost structures and enhances operational cost flexibility, potentially generating financial slack for investment in corporate social responsibility (CSR). We examine whether automation-driven cost flexibility is associated with CSR using a measure of “automation cost flexibility” (ACF). Firms with higher ACF exhibit stronger CSR performance, particularly in the Employee dimension. We provide evidence consistent with an economic mechanism in which higher ACF is associated with lower overall employment but higher wages, in line with automation altering workforce composition and facilitating greater allocation of resources toward employee-related outcomes. Our results are robust to matching analysis, an automation-related cost shock (the 2011 Thailand flood), and an alternative patent-based automation measure.