The relationship between firm productivity, firm size and CSR objectives for innovations

Abstract

We examine how a firm’s productivity level is related to its potential corporate social responsibility (CSR) objectives for innovations, and whether this relationship is affected by firm size. Two CSR objectives for innovations are examined: a firm’s objective of reducing environmental impacts, and an objective of improving health or safety of the employees. Firm size is measured by the number of employees. A data set comprising Norwegian manufacturing firms with or without innovation activity is used. The estimation results show that the predicted probability of adopting the objective of reducing environmental impacts has a significant negative effect on the productivity level among large firms while this effect is not significant among small firms. The predicted probability of adopting the objective of improving health or safety of the employees has no significant effect on the productivity level of small or large firms. These results indicate that whether ‘it pays to be green’ or not, depends on firm size. The article offers a resource argument in order to explain the different results between small and large firms.