This study examines the relationship between corporate social responsibility (CSR) and supply chain performance (SCP) in light of the political environment and organizational structure.
Using a large and longitudinal dataset of 910 manufacturing firms listed on the Bombay Stock Exchange (BSE) from 2015 to 2024, the study employs panel data regression to test the proposed hypotheses. All models control for year and industry effect. More importantly, we have addressed the potential endogeneity concern with two-step least squares with instrument variable.
The study reports a positive relationship between CSR and SCP [proxied by supply chain cash efficiency and sourcing, production and logistics (SPL) efficiency]. This relationship is further moderated by alignment between regional political power at the firm's headquarters location and political party (or coalition) as the central (Union) government. The findings are consistent with the possibility that unified political power is associated with additional positive externalities for firm operations through CSR. The study further reveals that organizational structure [proxied by business group (BG) affiliation] also moderates the CSR–SCP relationship negatively. It is to note that for BG firms, improved SPL efficiency has a lower supply chain cost ratio and therefore, enhances SCP. These findings indicate potential cost advantages arising from CSR initiatives within BG firms. Our results are robust after addressing endogeneity.
This study establishes the link between CSR and SCP while determining how political alignment and BG affiliation shape this relationship and thus offers novel institutional and organizational insights.
