Corporate Social Responsibility and Economic Performance: Theoretical Insights and Empirical Evidence From Italian Firms

ABSTRACT This paper provides a theoretical and empirical analysis of the potential effects of corporate social responsibility (CSR) practices on the economic performance of Italian firms. Drawing on a panel dataset of 1808 manufacturing and service firms observed over the period 2014–2023, the study examines the effect of CSR engagement on key economic indicators, including revenues, profits, and added value. Employing a difference‐in‐differences estimator, the empirical results reveal that firms actively pursuing CSR initiatives tend to exhibit lower economic performance relative to firms that have not adopted such strategies. We also develop a theoretical model based on a Hotelling framework, which demonstrates that CSR investments may reduce firm performance under specific conditions related to product differentiation, cost increases, and quality enhancements. These findings contribute to the ongoing discourse on CSR's influence on corporate economic performance, offering context‐specific insights for the Italian market and informing managerial and policy decisions regarding the strategic balance between CSR investments and economic objectives.