A cross-country multilevel study of R&D, market openness, and corporate social inconsistency

Some evidence suggests that R&D may enhance a firm’s corporate social responsibility (CSR), whereas other studies show that R&D activities can shift resources away from CSR. To address this theoretical and empirical tension, we investigate the impacts of R&D on corporate social inconsistency (CSI), the within-firm variability of a firm’s effectiveness in addressing different environmental, social, and governance (ESG) practices. Building on evolutionary economics, we propose that R&D is positively related to CSI because the complementarity between R&D and CSI can create important synergies between a firm’s market and nonmarket strategies. Drawing on institutional economics, we also hypothesize that market openness, associated with competitive selection pressures, positively moderates the relationship between R&D and CSI because high selection pressure reinforces the need for cost-effective synergies by bundling R&D and CSI. Our hypotheses are empirically supported using multilevel data of 873 firms from 30 countries between 2008 and 2012.