Relationship Between Technological Innovation, Corporate Social Performance, and Corporate Financial Performance

  • Megumi SutoEmail author
  • Hitoshi Takehara
Part of the Advances in Japanese Business and Economics book series (AJBE)


This chapter investigates the relationship between technological innovation, corporate social performance (CSP), and corporate financial performance (CFP) of Japanese manufacturing firms. Firms that aggressively focus on research and development have to build investors’ trust and manage firm risk, including financial and social risks, since most such firms need to raise capital steadily. To achieve this risk reduction, managers of firms with technological competitiveness use activities related to their CSR as one of the instruments to manage firm risk. Empirical evidence presented in this chapter shows that both firm-level innovation and CSP are negatively associated with firm risk, which is evaluated in the stock market. Furthermore, results from the mediation analysis suggest that corporate social responsibility works as a mediator to explain the negative association between firm-level innovation and firm risk. This finding implies that mangers of firms with aggressive corporate innovative activities should be more conscious of corporate social activities in the long run to maintain the trust of participants in the capital market.


  1. Acs, Z.J., and D.B. Audretsch. 1988. Innovation in large and small firms: An empirical analysis. The American Economic Review 78 (4): 678–690.Google Scholar
  2. Aupperle, K.E., A.B. Carroll, and J.D. Hatfield. 1985. An empirical examination of the relationship between corporate social responsibility and profitability. Academy of Management Journal 28 (2): 446–463.Google Scholar
  3. Baron, R.M., and D.A. Kenny. 1986. The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology 51: 1173–1182.CrossRefGoogle Scholar
  4. Boutin-Dufresne, F., and P. Savaria. 2004. Corporate social responsibility and financial risk. Journal of Investing 13: 57–66.CrossRefGoogle Scholar
  5. Cochran, P.L., and R.A. Wood. 1984. Corporate social responsibility and financial performance. Academy of Management Journal 27 (1): 42–56.Google Scholar
  6. El Ghoul, S.E., O. Guedhami, C.Y. Kwok, and D.R. Mishra. 2011. Does corporate social responsibility affect the cost of capital? Journal of Banking and Finance 35 (9): 2388–2406.Google Scholar
  7. Gregory, A., R. Tharyan, and J. Whittaker. 2013. Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics 124: 633–657.CrossRefGoogle Scholar
  8. Hall, B., A. Jaffe, and M. Trajtenberg. 2005. Market value and patent citations. The Rand Journal of Economics 36 (1): 16–38.Google Scholar
  9. Hirschey, M., V. Richardson, and S. Scholz. 2001. Value relevance of nonfinancial information: The case of patent data. Review of Quantitative Finance and Accounting 17: 223–235.CrossRefGoogle Scholar
  10. Ide, S., and H. Takehara. 2016a. Value relevance of patent information: Evidence from Japanese manufacturing firms. Gendai Finance 37: 1–17 (in Japanese).Google Scholar
  11. Ide, S., and H. Takehara. 2016b. Dissemination of patent information into stock price: Evidence from Japan. Securities Analysts Journal 54 (10): 68–77 (in Japanese).Google Scholar
  12. Jiao, Y. 2010. Stakeholder welfare and firm value. Journal of Banking & Finance 34 (10): 2549–2561.CrossRefGoogle Scholar
  13. Mishra, D. 2017. Post-innovation CSR performance and firm value. Journal of Business Ethics 140: 285–306.CrossRefGoogle Scholar
  14. Mishra, S., and S.B. Modi. 2013. Positive and negative corporate social responsibility, financial leverage, and idiosyncratic risk. Journal of Business Ethics 117: 431–448.CrossRefGoogle Scholar
  15. Orlitzky, M., and J. Benjamin. 2001. Corporate social performance and firm risk: A meta analytic view. Business and Society 40 (4): 369–396.CrossRefGoogle Scholar
  16. Orlitzky, M., F.L. Schmidt, and S.L. Rynes. 2003. Corporate social and financial performance: A meta-analysis. Organization Studies 24 (3): 403–411.CrossRefGoogle Scholar
  17. Pandit, S., C.E. Wasley, and T. Zach. 2011. The effect of R&D inputs and outputs on the relation between the uncertainty of future operating performance and R&D expenditures. Journal of Accounting, Auditing and Finance 26 (1): 121–144.CrossRefGoogle Scholar
  18. Salama, A., K. Anderson, and J.S. Toms. 2011. Does community and environmental responsibility affect firm risk? Evidence from UK panel data 1994–2006. Business Ethics: A European Review 20 (2): 192–204.CrossRefGoogle Scholar
  19. Suto, M., and H. Takehara. 2016. The link between corporate social performance and financial performance: Empirical evidence from Japanese firms. International Journal of Corporate Strategy and Social Responsibility 1 (1): 4–25.CrossRefGoogle Scholar
  20. Ullman, A. 1985. Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of U.S. firms. Academy of Management Review 10 (3): 540–577.Google Scholar
  21. Van Beurden, P., and T. Gossling. 2008. The worth of values—A literature review on the relation between social and financial performance. Journal of Business Ethics 82: 407–424.CrossRefGoogle Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  1. 1.Waseda UniversityTokyoJapan
  2. 2.Waseda UniversityTokyoJapan

Personalised recommendations