University of Utah, United States

When does CSR build trust? Authenticity and trust in the implementation of LGBT-friendly practices in U.S. firms

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Abstract

When does corporate social responsibility (CSR) build trust? Prior work argues that CSR can build trust between firms and their stakeholders by demonstrating a concern for stakeholder interests. This paper argues that such effects are contingent on the economic benefits associated with a particular CSR investment. When a firm engages in CSR with known economic benefits, stakeholders learn little about that firm’s concern for stakeholders since firms who are concerned only with shareholder wealth maximization will also make these investments. When a firm engages in CSR with unknown benefits, however, it more clearly signals a concern for stakeholder interests and is therefore more likely to help develop trust. We test our arguments in the context of same-sex domestic partner benefits in U.S. firms. We examine whether firms that implement these benefits before the economic benefits of doing so are well established generate higher employee productivity and firm performance.