Strategy Corporate Social Responsibility and Investment Efficiency: The Role of Substitute and Complement

This article investigates the relationship between corporate social responsibility (CSR) and investment efficiency from a strategic perspective. Taking into account the competitive strategy between firms, we proposed an adjusted competitive strategy measure and fitted CSR with a competitive strategy such as strategic CSR and examined the impact of competitive strategy on CSR and the sensitivity of investment to free cash flow. The results show that firms engage in CSR strategically. The stronger the strategic substitutes in which a firm competes, the more likely it is to engage in CSR activities. The weaker the strategic substitutes and complements in which a firm competes, the better its CSR performance. However, strategic CSR and corporate strategy do not have a synergistic effect in mitigating overinvestment. The results suggest that strategic CSR performance eliminates the sensitivity of investment to free cash flow. CSR can be a powerful tool to link corporate strategy and social sustainability, which has the potential to create a win-win situation for both the firm and society.