Corporate Social Responsibility and the Balanced Scorecard
The current research investigates two factors (i.e. Psychological Distance, Level of Peer Participation) that influence managers' decisions about investing in Corporate Social Responsibility (CSR) projects. Furthermore it has been proposed that the effectiveness of the balanced scorecard (BSC) as a Strategic Performance Measurement System (SPMS) for integrating CSR into a company's strategy and enhancing CSR investment decisions needs to be tested. Derived from psychology and social science studies, the current study suggests that, in practice, managers are often influenced by irrelevant factors, leading to suboptimal decisions. In particular, managers' CSR investment intention tends to be lower when (1) the outcome of CSR projects occurs in the distant future or at a distant location, or (2) level of peer participation is low, specifically when other companies in the same primary industry have not participated in similar CSR projects. The current study predicts that decision makers' investment intentions can be enhanced when they have integrated strategy information (i.e. fully integrating CSR with existing business), because strategy integration can enhance their understanding of causal linkages among CSR practice and ultimate business outcomes. Furthermore the effectiveness of strategy integration is expected to be greater when the outcome of CSR projects occurs in the distant (vs. near) future or at a distant (vs. near) location, or when level of peer participation is low (vs. high). The above predictions are tested using two experimental studies. Study 1 examines the joint effect of Psychological Distance and Strategy Integration on the manager's investment intention in the proposed CSR projects. Study 2 tests the joint effect of Level of Peer Participation and Strategy Integration on the manager's decision making. Results from these two studies in general support the hypothesized propositions. Implications for both CSR and BSC literatures are discussed.