Can Good Doers Perform Well? Novel Evidence From Corporate Innovation

ABSTRACT Corporate Social Responsibility (CSR) has received increasing attention due to its perceived positive impact on firm performance. However, this study examines the potential downsides of CSR, specifically its impact on corporate innovation, through the lens of Resource‐Based Theory (RBT) and Agency Theory. CSR practices often require substantial financial, human and organisational resources. When firms allocate resources to CSR initiatives that are not aligned with innovation objectives, these resources may be diverted from critical activities such as research and development (R&D), limiting the firm's capacity for innovation. Furthermore, CSR can deplete scarce resources, including skilled personnel, diminishing the firm's ability to capitalise on its innovation potential. Drawing on Agency Theory, this study also suggests that firms may engage in CSR to mitigate negative perceptions or to fulfil personal managerial incentives, such as enhancing reputations. These motivations can exacerbate the depletion of resources needed for innovation. Our findings indicate a detrimental effect of CSR on corporate innovation, with agency‐related issues further intensifying this negative impact. This study contributes new insights into the trade‐offs associated with CSR and its complex relationship with innovation.