Is Corporate Insider Power Always Bad and Corporate Social Responsibility Always Good?

Building on comparative capitalism literature and the notion of institutional complementarities, we examine whether increases in the concentration of power in organizations and the adoption of corporate social responsibility (CSR) practices reinforce each other by mutually increasing or decreasing financial performance. We propose that the direction and magnitude of such interaction are contingent on the country's institutional configuration: Corporations' adoption of antitakeover provisions in liberal market economies shields managers from the threat of hostile takeovers and, hence, empowers them to adopt long-term orientation in their decision-making. Then, allowing for higher CSR investments may ultimately enhance firm performance. In contrast, we argue that the adoption of antitakeover provisions in coordinated market economies combined with investments in CSR is likely to benefit managers and large shareholders at the expense of firms' overall financial performance. Overall, our theory and findings enhance our understanding of the performance effects of corporate governance and CSR practices by emphasizing the importance of their coherence within the different institutional environments.