Does engaging in corporate social responsibility activities influence firm performance? The moderating effects of risk preferences and performance measurement systems

Purpose: This paper aims to examine whether and how two firm-level factors jointly moderate the relation between corporate social responsibility (CSR) activities and firm performance: (1) the “alignment” between a firm's CSR activities and risk preferences and (2) performance measurement systems (PMS). Design/methodology/approach: Using survey responses from top managers of private Italian companies and matching archival data on the financial performance of these companies, the authors show that the positive effect of CSR activities on firm performance is contingent upon CSR–risk alignment, which creates competitive advantages, and the extent to which the firm's PMS are supportive of its strategic initiatives. Findings: The findings suggest that to extract economic benefits from CSR activities, firms must align CSR activities with their risk preferences and rely on PMS to overcome the causal ambiguity between CSR activities and competitive advantage. Originality/value: Overall, this study contributes to both the CSR–firm performance and consequences of PMS literature and holds significant practical implications.