The Relationship between Firm Innovation and Corporate Social Responsibility

Abstract

Firm innovation creates an informational asymmetry between the firm and outside stakeholders. Since CSR activities have been shown to reduce asymmetries and risk we surmise that firms use discretionary CSR activities to reduce the asymmetries from innovation. We study an innovation intense industry (technology) and find results that support the hypothesis that firms use CSR to signal long term viability of innovative activities.