A tale of two signals: Partner CSR versus CSI and alliance formation

• Main Authors: YU, Qiwen, CUYPERS, Ilya R. P., WANG, Heli
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: corporate social responsibility; corporate social irresponsibility; alliance formation; Business Law, Public Responsibility, and Ethics; Organizational Behavior and Theory; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7499; https://ink.library.smu.edu.sg/context/lkcsb_research/article/8498/viewcontent/AMJ_2022_0862_av.pdf
• Institution: Singapore Management University

This study outlines two signaling mechanisms—trust and spillover—through which a potential partner’s corporate social responsibility (CSR) and corporate social irresponsibility (CSI) affect alliance formation. Extending a key insight in signaling theory that positive and negative signals are conceptually distinct, we propose that which mechanism is dominant in explaining alliance formation varies between CSR and CSI. Specifically, we argue that the dominant signaling mechanism for CSR is the trust mechanism, through which CSR signals the moral character of a potential partner, which is used by the focal firm to infer the partner’s trustworthiness. In contrast, CSI negatively affects alliance formation primarily through a spillover mechanism: CSI signals a potential partner’s moral character to a firm’s external stakeholders. Stakeholders’ negative assessments based on this signal might then spill over to the focal firm if it forms an alliance with that partner. We further identify two contingency factors—namely, proximity and media coverage—that help verify the dominant signaling roles of partner CSR and CSI. Using a sample of alliances formed by high-tech firms between 1995 and 2016, we find support for our predictions.