This study investigates how firms adjust their resource base in response to rising labor costs and whether these adjustments influence corporate social responsibility (CSR) performance.
Using a sample of Chinese listed firms from 2010 to 2019, we examine the impact of minimum wage policies on CSR performance and explore the underlying mechanisms.
We find that higher minimum wages significantly reduce firms' CSR performance by increasing labor costs and lowering CSR investments. This negative effect is moderated by product-market power, local economic development, technological orientation and skilled labor risk. We also observe a strategic shift in CSR activities: tactical CSR (e.g. donations) declines, while strategic CSR (e.g. sustainability investments) remains unchanged.
This study provides novel insights into the ethical and strategic trade-offs firms face when responding to external cost pressures. By linking labor cost shocks to changes in CSR behavior, this study contributes to a deeper understanding of how economic mandates can indirectly shape corporate social engagement.
