Trade frictions and corporate social responsibility (CSR): evidence from the risk mitigation perspective

This paper applies resource-based theory and stakeholder theory to examine trade frictions as a motive for corporate social responsibility (CSR). Using trade remedy investigations as a proxy for trade friction, we find that trade frictions increase CSR engagement, and this effect is stronger for firms in highly competitive industries, SOE firms, and those located in provinces with low levels of social trust. A motivation-based mechanism analysis shows that trade frictions increase firms’ business risk, which strengthens incentives to engage in CSR as a risk-management response. The positive effect of trade frictions on CSR is stronger among high-risk firms, and CSR engagement subsequently reduces future business risk. Moreover, this effect is weakened for firms with higher levels of digital transformation or innovation investment, suggesting that CSR operates as one of several alternative strategies for managing trade-friction risks. Additional tests show that trade frictions reduce corporate value, while proactive CSR engagement can offset this negative effect. Overall, the findings indicate that trade frictions stimulate CSR engagement and provide new insights into the literature on the determinants of CSR.