Modeling firm heterogeneity in corporate social performance and financial performance

Article history: Received 1 August 2015 Received in revised form 1 December 2015 Accepted 1 February 2016 Available online 17 March 2016 Prior research on the association between corporate social performance (CSP) and corporate financial performance (CFP) includes conflicting perspectives and inconclusive findings as to whether or not CSP has a positive, negative, or neutral associationwith CFP.WhileWang's (2015)meta-analysis confirms the relationship between CSP and CFP to be significant and positive, in some contexts CSP and CFP associate negatively; CSP may need to receive “good management” support to yield positive financial outcomes (Luo & Bhattacharya, 2009). The study here tests and supports the perspective that “goodmanagement” occurs in configurations (i.e., business models) with high CSP to indicate high CFP. A configurational theoretical stance implies that recipes of bad management with high or low CSP are likely to associate with low CFP. Configurational analysis supports this theoretical perspective. Building from complexity theory, a configurational analysis includes the propositions that complexmultiple recipes lead to the same outcome (equifinality tenet) whereby variables (ingredients) found to associate causally in one configuration may be absent in another recipe or even inversely related in a third recipe associatedwith this same outcome. The present study employs amixedmethods research design (using surveys of senior executives, independent CSP firm assessments using ESG factors (environment, social (or human rights), and governance), and analysis of corporate annual reports of 82 mostly highly-global Swedish firms). The study overcomes the mismatch between case-level theory proposals and variable-based data analyses that is widespread in the relevant literature. The study's findings support the core tenets of complexity theory. © 2016 Elsevier Inc. All rights reserved.