The relationship between a firm's pre-recall product and environment CSR efforts and post-recall market share

Abstract

Firms are frequently engaged in corporate social responsibility (CSR) activities. The prevailing view is that CSR efforts can protect firms from the negative consequences of adverse firm events such as product recalls. The present research challenges that view by demonstrating that CSR efforts may increase or decrease customers' unfavorable reactions to a product recall and that the relationship differs in different CSR domains. Using data from the automobile industry, the authors find that post-recall market share has a non-linear relationship with pre-recall CSR efforts in both product and environment domains but in different directions. The post-recall market share has an inverted U-shaped relationship with pre-recall product CSR but a U-shaped relationship with pre-recall environment CSR. The study provides guidance to managers regarding the use of CSR in different domains to manage the impact of adverse events in both B2B and B2C settings.