Can corporate social responsibility mitigate the liability of newness? Evidence from China

Plain English Summary A critical challenge haunting new ventures is the liability of newness (LoN), and new ventures are believed to have quite limited strategic discretion to overcome this liability due to their heightened resource constraints. Focusing on this topic, we examine the feasibility of corporate social responsibility (CSR) as a strategy for new ventures to cope with LoN. Long considered to demand considerable resource commitment, CSR is implicitly assumed to be unavailable to this group of firms. However, by revisiting the affordability of CSR activities and exploring CSR-related benefits for new ventures, we discover that CSR engagement serves as a useful strategy to mitigate LoN. Moreover, family-owned or nascent new ventures in particular are highly advised to recognize the strategic worth of CSR efforts. If new ventures aim to deal with this liability, they should consider incorporating certain strategies, such as CSR engagement, which is regarded as available mostly to established companies, into their tool kits. This paper examines whether engagement in corporate social responsibility (CSR) activities mitigates the liability of newness (LoN) faced with new ventures and thus contributes to their financial performance. We theorize that investments in CSR are especially beneficial for young firms confronted with this liability. Undertaking CSR activities can serve as a balanced solution to both the internal and external contingencies associated with LoN without incurring considerable costs and thereby lead to the better performance of new ventures. In addition, we further investigate the boundary conditions of CSR in mitigating LoN and identify family ownership and firm age as two important determinants of the worth of CSR engagement. CSR is expected to create more value for family-owned or nascent new ventures. Taking Chinese private firms as our sample, we find supportive empirical evidence.