Product regulation decentralization and corporate social responsibility

Purpose This study examines whether product regulation decentralization affects corporate social responsibility (CSR). Design/methodology/approach Leveraging China’s staggered decentralization reform, which transferred product safety oversight from provincial to municipal governments, we estimate its causal impact on CSR using a difference-in-differences approach combined with entropy balancing. The sample includes Chinese A-share listed firms from 2010 to 2017. Findings The results indicate that product regulation decentralization significantly enhances firms’ CSR performance. It incentivizes local governments to issue more product safety regulations and strengthens firms’ compliance with these standards. This prompts firms to adopt CSR as a strategic response to heightened competition. These findings indicate that the decentralization of product regulation strengthens local governments’ capacity to enforce product safety. Enhanced enforcement reduces inter-firm disparities in product safety and encourages firms to expand their CSR engagement to gain a competitive advantage. The positive effect is more pronounced in less competitive environments but weaker among financially constrained firms. Furthermore, product regulation decentralization enhances all dimensions of CSR, including responsibilities toward shareholders, employees, suppliers, customers, consumers, the environment and society. Originality/value This study uncovers a novel regulatory mechanism through which product regulation decentralization shapes CSR, contributing to a deeper understanding of how institutional structures influence corporate sustainability in emerging economies.