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Choosing Beyond Compliance Over Dormancy: Corporate Response to India's Mandatory CSR Expenditure Law

Published online by Cambridge University Press:  10 March 2023

Shalini Jain Open the ORCID record for Shalini Jain [Opens in a new window] ,
Naman Desai ,
Viswanath Pingali  and
Arindam Tripathy
Shalini Jain
Affiliation:
University of Washington, Tacoma, US
Naman Desai
Affiliation:
Indian Institute of Management Ahmedabad, India
Viswanath Pingali*
Affiliation:
Indian Institute of Management Ahmedabad, India
Arindam Tripathy
Affiliation:
University of Washington, Tacoma, US
*
Corresponding author: Viswanath Pingali (viswanath@iima.ac.in)
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Abstract

This article examines whether firms engaged in high levels of voluntary CSR (corporate social responsibility) alter their strategic choices in response to detrimental public policy – specifically India's Companies Act (2013) that mandates qualifying firms to spend 2% of their three-year average net profits on CSR. Drawing on the concept of organizational dormancy, we argue that firm capabilities, political awareness, exposure to political pluralism, and ownership identity may explain choice heterogeneity among these firms. Our key and non-intuitive finding is that even in the absence of discretionary choice in determining optimal CSR expenditure, firms are less likely to choose dormancy and instead embrace and even surpass the stipulations of the law in their CSR contributions. Also, politically aware firms are more likely to opt for dormancy over compliance. Managerial and policy implications are discussed.

Keywords

CSR regulationdetrimental public policyIndiaorganizational dormancy
Type
Article
Information
Management and Organization Review , Volume 19 , Issue 3 , June 2023 , pp. 594 - 623
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press on behalf of The International Association for Chinese Management Research

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Footnotes

ACCEPTED BY Senior Editor Rajiv Krishnan Kozhikode

References

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