Institutionalization of firm’s commitment to CSR—a mimetic isomorphism perspective

Abstract

The purpose of the study is to investigate whether internal and external institutional environmental conditions play a role in the institutionalization of strategic commitment to corporate social responsibility (CSR) among Indian firms in the wake of the mandatory CSR norms or not (where the firms of certain size and profitability are mandated to spend on CSR). The study examines the fixed effects regression on balanced panel data collected from the annual reports and Prowess database of Bombay Stock Exchange-listed firms. Our results show that both internal and external institutional environments play a major role in diffusing a strategic commitment to CSR among firms. Furthermore, we find that firms indulge in frequency, outcome, and trait-based imitations while learning from peer firms to attain legitimacy from their stakeholders. Overall, our findings show that vicarious learning through imitation plays an important role in making firms truly committed to CSR instead of just donating money or greenwashing. To the best of our knowledge, our study is among the pioneering attempts to look at the impact of both internal and external environments on institutionalizing CSR commitment among firms in India.