Beacons not burdens: Business groups and corporate social performance around the world

Abstract Research Summary Prior studies on business groups (BGs) have predominantly focused on the impact of group affiliation on financial performance. In contrast, we argue that BG affiliates will outperform standalone firms in terms of corporate social performance (CSP) and that this effect will be positively moderated by the strength of formal and informal institutions. Moreover, we examine also differences among BGs and hypothesize that diversification and hierarchy of the group will negatively affect the CSP of affiliates. Employing a panel of 4368 firms from 43 countries between 2003 and 2016 and a propensity score matching approach in our regressions, we find robust support for these predictions. Our findings advance two distinct strands of literature on BGs and, respectively, corporate social responsibility. Managerial Summary BG are a common organizational structure in many countries. Despite this, we still do not know much about them beyond their financial performance. In this study, we focus on examining the impact of BG affiliation on non‐financial performance (i.e., CSP) in the light of growing societal grand challenges. Using an international dataset of several thousands of firms, we find out that BG affiliates exhibit superior CSP results compared to non‐affiliated firms. These positive effects of affiliation are increased in environments with strong formal and informal institutions but reduced within groups that are more diversified and hierarchical. Our findings showcase the importance of BGs in tackling some of today's grand challenges and provide support for more nuanced approaches to study BGs across countries.