When few give to many and many give to few: Corporate social responsibility strategies under India's legal mandate

Abstract

Research Summary: We investigate firms' corporate social responsibility (CSR) strategies under India's 2013 legal mandate. We study 12,086 firms and 86,755 projects from 2014 to 2017. Using an abductive approach, we examine firms’ choices of social causes, geographic locations, implementation channels, and number of projects through four theoretical lenses. Firms adopt two main CSR strategies: the first and most common has a narrow focus, while the second, pursued by few (typically leading firms and State-owned enterprises), is broader. Both strategies appear primarily driven by instrumental stakeholder concerns. While the second leads to stronger differentiation and holds greater potential for social impact, neither strategy leverages firms’ comparative efficiency over nonprofit actors. These insights shed light on how firms address grand challenges and can inform CSR regulations. Managerial Summary: After India passed a law making corporate social responsibility (CSR) mandatory in 2013, firms had to decide how to spend the funds they were required to disburse. We examine their choices regarding their projects' target social causes, geographies, implementation channels, and how many projects to pursue. We find that they typically adopted one of two strategies: most firms chose a narrow focus on similar projects, whereas leading firms and State-owned enterprises typically adopted a broader and more distinctive approach. Both choices appear primarily driven by the desire to satisfy firms' stakeholders rather than efficiency considerations, but the broader strategy holds greater potential for social impact. Our paper identifies actions firms and governments can take to enhance the benefits of legal mandates for CSR.