Unravelling corporate social responsibility dynamics: how firms respond to the Chinese new environmental protection law

Although corporate social responsibility (CSR) is widely recognized as a multi-dimensional construct, it remains unclear whether these dimensions function as substitutes or complements to one another. This uncertainty arises because decisions regarding the allocation of resources to different CSR dimensions are simultaneous and interrelated. To address this issue, we use an exogenous shock, namely China’s new Environmental Protection Law (NEWL), to examine how changes in corporate environmental responsibility (CER) engagement impact other CSR activities. Our findings suggest that increased CER engagement crowds out product-related CSR activities, primarily due to the overall CSR strategy and heightened environmental attention from top management. This research provides empirical evidence on the interactions between various CSR dimensions and offers insights into how regulatory changes shape CSR resource allocation in China. Moreover, our paper enhances our understanding of firms’ strategic decisions in balancing different CSR activities in the context of government-driven CSR in developing countries.