Internal versus external CSR practices: The trade‐off in family firms

Firms face the challenge of choosing between corporate social responsibility (CSR) practices aimed at different stakeholders (internal and external). Striking the right balance is particularly complex in family firms (FFs), in which CSR practices become a vehicle to express their identity. Our goal is to study FFs' trade‐off between internal and external CSR practices compared to non‐FFs by drawing on the FF identity and socioemotional wealth perspectives. We analyze a panel of 423 European listed companies (3,918 observations) from 2008 to 2017. Our results show that FFs outperform non‐FFs in overall CSR, with FFs' stronger efforts in internal CSR driving their better CSR performance. We also find that FFs' prioritization of internal CSR is more pronounced when CSR credibility at a country level is lower. However, a greater exposure of the family name reverses FFs' preferences and leads them to prioritize external stakeholders' interests.