Industry and community peers as drivers of corporate social responsibility in India: The contingent role of institutional investors

Abstract

The extant research has widely investigated the various institutional antecedents of corporate social responsibility (CSR). However, the role of peer groups on the firm’s CSR has received relatively less attention. To this end, the present study examines the CSR of the firms due to the mimetic isomorphism mechanism arising among ‘industry peers’ (i.e., peer firms which operate in the same industry) and ‘community peers’ (i.e., peer firms with their headquarters located in the same geographical area). The study examines CSR along two dimensions: CSR engagement level and CSR spending. The study examines the fixed effects regression on a balanced panel data, collected from the annual reports and CMIE Prowess database of 321 listed firms from 2015 to 2018 in India. The results indicate that both the industry and the community peers positively influence the CSR engagement level and CSR spending of the firms. However, community peers’ effect is stronger than the industry peers’ on both dimensions. The divergence from peer groups’ mean CSR spending negatively moderates the peer group and CSR relationships. The results further indicate that institutional investors reduce the mimetic isomorphic (shouldn’t it be isomorphic mimetic) pressure on the firm. The study contributes by proposing a measurement index of CSR engagement level. Managers can develop appropriate business policies for a firm’s CSR activities based on ‘industry’ and ‘community’ peer firms.