Background

Time is a core ingredient in the strategic decisions of managers who must balance short- and long-term goals. Commensurately, the importance placed upon corporate social responsibility (CSR) varies according to the temporal orientation of countries, firms, and investors. While there has been a growing emphasis on the significance of a long-term perspective in academia and practice, understanding the interdependency between factors driving temporal preferences within organizations and society, and its impact on investors, remains limited.

Temporal Orientation and Corporate Social Responsibility

In our study, published in the Journal of Management Studies, we theorize whether and how a firm’s CSR is affected by the societal temporal orientation, its time horizon, and its investors’ time horizon.

We hypothesize and find that CSR rises when the national culture indicates long term orientation (LTO), a firm has a long-term horizon, and its investors seek long-standing returns. These results show that national culture reinforces the relationship between a firm’s long-term horizon and its CSR practices. Thus, a societal long-term mindset does not lessen the need for firms to engage in CSR but rather proactively drives firms to be adaptive to societal norms and the pressure stemming from LTO culture. This dynamic interplay reflects the temporality between institutions and organizations complements, which partly stems from the connection and interdependency between societal and organizational culture. In particular, the societal system impacts organizational practices which are reflected in the firm’s operations and further signify the critical nature of the cultural fit between society and the firm.

Further, our results show that the effects of temporal orientation are more pronounced in environmental CSR than in social CSR. This indicates that LTO culture strongly drives long-term-focused CSR, namely environmental CSR rather than social CSR. With finite resources, firms with a long-term horizon choose to allocate more on CSR activities with greater externalities and a longer-term commitment.

Implications for Managers and Policy Makers

This study shows that the time perspective of firms, investors, and societies matters in CSR decisions. The temporal preferences embedded in managers and investors at the firm, level and in societal values at the national level, interact and may prompt a firm to engage more in CSR, especially in the commitment to environmental improvement. Given the interdependency of these actors and their global presence, policy makers and managers need to understand and internalize environmental concerns along with time preferences of their global stakeholders in their CSR decisions.