Long Range Planning xxx (2014) 1e11

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Long Range Planning

journal homepage: http://www.elsevier.com/locate/lrp

Managing Responsibly in Tough Economic Times: Strategic

and Tactical CSR During the 2008e2009 Global Recession
Pratima Bansal, Guoliang F. Jiang, Jae C. Jung
In constrained economic times, organizations can either withdraw their socially responsible activities or maintain d even expand d
them to meet heightened stakeholder needs. The 2008e2009 global recession offers a natural experiment through which to understand
corporate social responsibility (CSR) in a tight economy. In this paper, we suggest that tactical, rather than strategic, forms of CSR will
more likely be withdrawn. Tactical CSR comprises transactional activities with short time horizons and relatively few organizational
resources. Strategic CSR comprises activities with long time horizons, large resource commitments and signicant structural adjustments.
We argue that rms will withdraw both tactical and strategic CSR during a recession due to severe resource scarcity and heightened
uncertainty in the macro economy. Strategic CSR, however, would more likely endure through a recession than tactical CSR, since strategic
CSR activities are often routinized. Although strong corporate nancial performance (CFP) can counteract the negative impact of a
recession, we argue that this tempering effect will be stronger for strategic CSR than tactical. We nd support for these hypotheses,
drawing data from 1,666 U.S. companies for the period between 2003 and 2009.
2014 Published by Elsevier Ltd.

Introduction
During the 2008e2009 global recession, Intel Corporation lost 42% of its share price over 2008, and 90% of its net income
from Q4 2007 to Q4 2008. Yet, just days before releasing its fourth-quarter losses in 2008, Intel announced a new commitment
to education and development in less-developed countries, which included $100 million for global education programs and
the purchase of 1.3 billion kilowatt hours of renewable-energy certicates (Delevingne, 2009). This commitment to nonessential, yet socially responsible, activities is contrary to what most analysts would expect of a company confronting signicant
nancial losses in a volatile nancial market.
The 2008e2009 global recession (hereafter called the Recession) created more nancial losses in the stock market than in
any other period since the economic depression of the 1930s. Investor nervousness infected all aspects of the economy, as
businesses downsized or shut down, putting people out of jobs. Consumers reduced spending, resulting in high inventories
and signicant corporate nancial losses. The Recession was marked by considerable uncertainty about the depth of the losses
and the time that markets would take to recover. Corporations faced the very real question of whether they could maintain
their commitment to corporate social responsibility (CSR).
Managers tend to view such an adverse business environment as a threat, because they cannot control the situation and
are likely to face corporate losses (Dutton and Jackson, 1987; Ocasio, 1995; Staw et al., 1981). One of the common responses is
retreating into core activities. As rms struggle to maintain basic operations, nonessential activities, which can include socially responsible activities, might be dropped if they are not baked into operations. It is not surprising that most people
expected rms to withdraw their social commitments during the Recession (Skapinker, 2009; Economist, 2009). Our analysis
of the STATS (formerly KLD) data of 1,666 U.S. companies from 2003e2009 conrmed this general expectation.
To explain the Recession's impact on CSR, we discriminate between strategic and tactical CSR. We label socially responsible
activities that require relatively substantial time and resource commitments and that impact organizational structure as
strategic CSR; and we label more transient and incremental activities as tactical CSR. As a baseline hypothesis, we argue that
the general economic malaise accompanying recessions contributes to a decline in both strategic CSR and tactical CSR. In a
more nuanced portrait, however, we expect that the decline would be greater for tactical CSR because the commitments are
less structural and routinized than they are with strategic CSR. We also argue that a rm's nancial performance can
counteract the negative effect of the Recession on CSR. Of the two types of CSR, the moderating inuence of corporate
nancial performance (CFP) is greater on strategic CSR than on tactical CSR.
http://dx.doi.org/10.1016/j.lrp.2014.07.002
0024-6301/ 2014 Published by Elsevier Ltd.

Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
During the 2008e2009 Global Recession, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2014.07.002

P. Bansal et al. / Long Range Planning xxx (2014) 1e11

Our empirical analysis supported these hypotheses. We found that rms withdrew both tactical and strategic CSR during
the Recession, but that rms with strong CFP were more likely to maintain, and sometimes even increased, their strategic CSR
commitments. This nding supports the anecdotal evidence that some companies maintained and even expanded their
commitment to CSR during the Recession (Berns et al., 2009).
In this research, we show that there is value in discriminating between tactical and strategic CSR to explain socially
responsible activities in tough economic times. More than that, however, we hope to seed future research to apply strategic
and tactical CSR to a wider range of contexts.
Strategic versus tactical corporate social responsibility
Prior research has largely treated CSR as a formative construct, composed of diverse socially responsible activities. Most studies
use an inclusive and general d rather than specic d denition of CSR (Carroll, 1979, 1999; Dahlsrud, 2008; Wood, 1991), and
empirical work tends to apply broad measures of CSR (Baron et al., 2011; Barnett and Salomon, 2012; Waddock and Graves,1997).
Generally, socially responsible rms are seen as those responding to the needs and desires of stakeholders, not only including
shareholders, but also customers, employees, suppliers, governments, and communities. In this paper, we argue that discriminating between tactical and strategic responsible actions can lead to new insights into rms' CSR behaviors.
Tactical CSR is dened as corporate social activities oriented towards improving stakeholder relationships in the shortterm, requiring fewer resources. In contrast, strategic CSR is dened as corporate social activities that require long time
horizons, large resource commitments, and signicant adjustments to organizational structures. We draw on the competitive
dynamics literature (Chen et al., 1992; Connelly et al., 2010; Hambrick et al., 1996) for insights into strategic and tactical CSR.
Although both tactical and strategic actions create shareholder value, tactical actions can create nancial value in the short
term for corporations. Tactical actions often require fewer resources, and do not require major procedural or structural
modications. As a result, tactical actions can be implemented relatively quickly. In practice, tactical activities tend to be easy
to understand and implement, and are often reversible. However, since these actions often involve fewer resources and are
not idiosyncratic to the rm, these actions are easily imitated by competitors and their competitive advantage quickly eroded
(Smith et al., 1991).
In contrast, strategic actions involve signicant rm- or context-specic resource commitments over a sustained period of
time, which requires a deep understanding of the phenomena. The longer time horizons and signicant resource commitments for strategic actions often result in major structural reconguration in the organization, or realignment in the relationship between the organization and its environment (Thompson, 1967). Therefore, strategic actions are more difcult to
implement and reverse than tactical actions, and can offer rms a competitive advantage. However, given the complexity of
strategic actions, their impacts often take a long time to manifest.
We depart from the general consensus in recent CSR literature, which argues that CSR in general takes a long-term
orientation. Rather, we argue that some socially responsible activities are tactical and can secure a temporary advantage
expediently (Gao and Bansal, 2013). For example, donating a small percentage of prots to charities or supporting special
purpose NGOs (e.g., affordable housing, access to healthcare, K-12 education and famine relief) can be planned and executed
quickly. Firms can even decide to initiate new, or to supplement prior, donations within the last few weeks of year end in
order to report an appealing achievement to the media and through its annual CSR report.
In this regard, Chen et al. (2008) posit that corporate charitable contributions might be used to quickly remedy a negative
business image. Using KLD data, Chen et al. (2008) showed that worse performers in the environmental and product safety
areas were more likely to make charitable contributions, and the extent of their giving was larger than better performers. Gan
(2006) similarly reported that the rate of corporate giving signicantly increased when rms were scrutinized by government
through widely reported court cases. On the other hand, implementing strategic CSR in, for instance, labor relations, workforce
diversity or corporate governance, affects a rm's core competences, requiring important changes to organizational structure.
Once introduced and implemented, strategic initiatives such as environmental management systems or corporate governance
practices, tend to have a long-lasting effect on the rm's evolutionary trajectory and cannot be easily reversed. Due to the
complexity and signicance of these activities, strategic CSR often entails ongoing and regular interactions with stakeholders.
The different strategic orientations of CSR may inuence the decision-making process (Kacperczyk, 2009; Kang, 2013).
Corporate decision makers, particularly those working for publicly held companies, are pressured to meet short-term investor
expectations to attract and retain impatient capital (Jacobs, 1991; Marginson and McAulay, 2008). Managers' compensation
and job security are often inuenced by their rm's short-term nancial performance, but rarely affected by its social performance (Burns and Kedia, 2006). As a result, managers tend to overvalue short-term results relative to those that accrue
over the longer term, thus underinvesting in strategies such as research and development and managerial training (Laverty,
1996; Levinthal and March, 1993; Souder and Bromiley, 2012).
Hypothesis development
The effect of the Recession on CSR
The U.S. economy deteriorated considerably during the Recession. Employment declined at twice the rate of all previous
postwar recessions (Auguste et al., 2011). Consumer disposable income dropped dramatically, resulting in numerous housing
Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
During the 2008e2009 Global Recession, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2014.07.002

P. Bansal et al. / Long Range Planning xxx (2014) 1e11

foreclosures. Government tax revenues were slashed, leading to the closure of essential public services, such as re departments, postal ofces, and public schools.

pez-Gamero et al.,
One of the dening characteristics of any recession is resource scarcity in the business environment (Lo
2008; Sharma, 2000). When the recession is on a massive scale, as in 2008e2009, nearly all parts of a rm's business
ecosystem are affected. Most rms are unable to shield themselves from the vagaries of such signicant economic events.
Firms are dependent on the whole business ecosystem for resources (Wang et al., 2008), and the pool of available resources
shrinks considerably. With lower income, consumers reduce spending, which shrinks the demand for goods and services,
which reverberates throughout the supply chain. The focal rm's economic health deteriorates. In non-recessionary times,
rms can smooth shifts in demand by drawing resources from investors, banks and governments, in the forms of equities,
loans and subsidies. However, the breadth and depth of the recession deates resource pools, inhibiting rms from recovering
quickly from such crises.
Moreover, the Recession was so widespread that there was much uncertainty about the scale and duration of the crisis.
Such crises are more manageable if a recovery is in sight. In fact, the Recession began as a localized set of events in the U.S.,
and spread quickly across the world to Europe and Asia. Even at the time of this writing, several years after the Recession
technically ended in 2009, no clear consensus has developed for the future of the world economy.
We hypothesize that rms pulled back on their CSR efforts during the Recession because of the deated pool of resources
and heightened uncertainty. Not only did rms have fewer resources available for non-core activities, there was a general
milieu of loss, unpredictability and uncontrollability (Dutton and Jackson, 1987; Ocasio, 1995). The widespread perception of
threat seemed to impact the whole business community, not just individual rms. In such adverse situations, managers tend
to respond by focusing on internal issues and limiting information ows, in order to gain more control over the situation
(Ketchen and Palmer, 1999; Ocasio, 1995; Staw et al., 1981).
Socially responsible activities, on the other hand, demand managerial attention to a broader range of external issues and
problems that encompass diverse stakeholders (Freeman, 1984). One group of stakeholders (e.g., suppliers) might have interests dissimilar to other groups (e.g., consumers, governments and communities), requiring managers to respond to conicting expectations. Divergent stakeholder interests limit managerial control and render uncertain the outcomes of socially
responsible activities. Thus, competing stakeholder demands tax the information processing resources of rms and challenge
their ability to execute effectively on CSR. However, it is in favorable business situations that managers have the capacity and
willingness to process wider varieties of information, thus making socially responsible activities more likely (Sharma, 2000).
Because CSR has an external orientation and demands heavier information processing, we hypothesize:
Hypothesis 1: Firms reduced both tactical and strategic CSR during the Recession.
The effect of the recession on tactical and strategic CSR
We expect to nd distinctly different patterns of tactical and strategic CSR during the Recession. Examples of strategic CSR
include supporting indigenous sovereignty, land and culture; improving the human and labor rights performance of suppliers; increasing employee diversity; ensuring product safety; and implementing healthy corporate governance. Since these
activities require enduring interactions with stakeholders, strategic CSR is often routinized into operating procedures and
policies, and top management team decision-making processes (Roome and Wijen, 2006). These routines reect shared
beliefs and accumulated knowledge within the organization and ensure continuity in organizational behaviors (Becker, 2005;
Becker and Knudsen, 2005; Nelson and Winter, 1982; Yuan et al., 2011). These routines would have ensured that strategic CSR
did not uctuate erratically during the Recession, even though rms were forced to focus on core activities and nancial
performance. Once introduced and implemented, strategic CSR activities are not easily reversed and they have a long-lasting
effect on the rm's evolutionary trajectory. The complexity and strategic signicance of these activities suggests that strategic
CSR will more likely be retained during economic cycles to support enduring stakeholder relationships.
In contrast, tactical CSR activities, such as philanthropic donations, are much easier to reverse during a recession. Tactical
CSR activities do not require rm-specic resources and capabilities, nor do they involve signicant organizational structural
adjustments. Commitments to stakeholders are fragile, so they may be easily withdrawn or replaced. Relevant routines tend
to be less complex and weakly tied to corporate operations. A rm will nd it much easier to pull corporate resources out of
tactical CSR commitments and direct them to other core activities in a time of crisis (Falck and Heblich, 2007; Mahoney and
Thorne, 2005).
Hypothesis 2: Firms reduced tactical CSR more than strategic CSR during the Recession.
The moderating effect of nancial performance
Even though prots declined signicantly during the Recession, the relative losses among rms varied. Some rms did not
suffer to the same degree as others. We predict that corporate nancial performance (CFP) would attenuate the decline in CSR
during the Recession. A rm's CFP provides slack resources that can be allocated to future organizational strategies. Seminal
studies point to the close association between CFP and slack resources. Cyert and March (1963, 54) argue that success feeds
slack, viewing slack resources as the supply of uncommitted resources. Similarly, Bourgeois's (1981) well-accepted
Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
During the 2008e2009 Global Recession, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2014.07.002

P. Bansal et al. / Long Range Planning xxx (2014) 1e11

denition of slack resources includes not only actual but also potential resources that allow an organization to adapt successfully to internal and external pressures for change. In a resource-decient environment like the Recession, managers must
meet the urgent needs of nancial stakeholders, such as shareholders and creditors, and are forced to focus on core business
activities (Brammer and Millington, 2004; Ketchen and Palmer, 1999). Yet, strong CFP at the rm level can mitigate resource
constraints at the macro level during the Recession, and allow resources to ow beyond core business activities to non-core
activities, such as CSR (Audia and Greve, 2006; McGuire et al., 1988; Nohria and Gulati, 1996; Singh, 1986; Ullmann, 1985). We,
therefore, hypothesize:
Hypothesis 3a: Corporate nancial performance (CFP) positively moderates the relationship between the Recession and CSR;
the higher the CFP, the less the negative impact of the Recession on tactical and strategic CSR.
Even though rms with higher CFP are less likely to withdraw CSR during the Recession, there is an additional question of
whether the type of CSR matters. We argue that rms with higher CFP will still favor strategic initiatives over tactical.
Strategic CSR is better suited to rms that can wait for long-term benets to materialize, whereas tactical CSR is better suited
to rms seeking immediate rewards. Tactical CSR is quickly executed, requires less resource commitment over time, and offers
quick returns. For example, philanthropic donations can generate positive media coverage and win immediate stakeholder
praise, both of which are particularly salient in times of general economic stress. However, such actions are often quite
eeting d unsustained donations are quickly forgotten, the media cycle moves on. Strategic CSR investments are often
sustained and game changing. For example, rms that promote the indigenous culture, language, and human rights of local
people can impact the lives of local communities for centuries to come. Firms with low CFP tend to prefer the lower costs,
greater exibility and quick returns of tactical CSR. High CFP, reecting a larger pool of resources, extends the rm's time
horizon because it allows the rm to wait longer before recuperating its investments in socially responsible activities (Audia
and Greve, 2006; Nohria and Gulati, 1996; Singh, 1986).
We predict that the positive moderating effect of CFP on the Recession will be stronger for strategic CSR than tactical CSR.
Since the resource pool is severely depleted in a recessionary business environment, managers tend to reluctantly allocate the
signicant resources needed for strategic CSR. Strong CFP often provides the slack needed for these additional resources, thus
relieving any internal resistance to strategic CSR. In comparison, nancial performance will only weakly moderate the
relationship between tactical CSR and the Recession, because of the shorter time horizon and relatively smaller resource
commitment. Therefore, we predict:
Hypothesis 3b: The positive moderating effect of corporate nancial performance (CFP) on the relationship between the
Recession and CSR is greater for strategic CSR than for tactical CSR. In other words, rms with higher CFP are less likely to
reduce their strategic CSR than their tactical CSR during the Recession.
Method
Sample and data
We tested our hypotheses using CSR data from the MSCI ESG STATS (STATS) database, for the period between 2003 and
2009. The STATS database (formerly KLD) provides environmental, social, and governance ratings for publicly traded companies. The database was rst published in 1991, and its coverage expanded signicantly in 2001 and in 2003. The database
rates company's strengths and concerns in the following subdomains: Community, Environment, Diversity, Employee Relations, Human Rights, Product Quality and Safety, and Corporate Governance. The ratings are based on a wide range of data
sources, including public disclosures, expert assessment, and company survey. For instance, a rm's strength in the subdomain of Community is assessed on eight separate items: 1) charitable giving; 2) innovative giving; 3) support for housing;
4) support for education; 5) non-US charitable giving; 6) volunteer programs; 7) community engagement; and 8) other
community strength. A 1 indicates the rm demonstrated strength in a particular area; a 0 indicates otherwise.
We use the 2003e2009 data period because, according to the National Bureau of Economic Research, the Recession
ofcially ended in June 2009 (NBER, http://www.nber.org/cycles.html). We also choose this particular period because STATS
expanded its coverage in 2003 and modied its rating scheme in 2010. Therefore, the 2003e2009 editions provide the most
comparable CSR data. We drew rms' nancial data from Compustat. We combined variables from the STATS and Compustat
data sets using unique CUSIP numbers assigned to each company.
Measures
Dependent variables
We created two dependent variables d Tactical CSR and Strategic CSR d and modeled them separately to explore their
differences. The three authors of this paper carefully reviewed all CSR items in the STATS database, for the period between
2003 and 2009, to identify which items t the denition of tactical CSR and strategic CSR. Based on several rounds of discussion, we classied several items in the Community domain as tactical CSR because these activities tend to be short-term
oriented and less resource intensive. These tactical CSR items in the STATS data emphasize philanthropic donations; that is,
whether the company has given 1% or more of trailing three-year net earnings before taxes to charity, or whether it donated
Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
During the 2008e2009 Global Recession, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2014.07.002

P. Bansal et al. / Long Range Planning xxx (2014) 1e11

25% or more of its charitable giving to support NGOs involved with affordable housing, access to healthcare, K-12 education,
hunger relief and/or other services to disadvantaged communities. These activities can be quickly adjusted if necessary and
they rarely require rms to adjust organizational structures or build long-term relationships with stakeholders. There is also
evidence that CSR activities in the form of charitable giving do not coalesce with other types of CSR efforts and that charitable
contributions are often viewed with skepticism as a quick remedy to improve corporate image (Chen et al., 2008; Gan, 2006;
ussl, 2011). The Community domain also includes participation in community programs, such as support youth
Muller and Kra
job training and public housing. Although these activities may require long time horizons, they have little impact on rms'
core organizational structure and strategies. As a result, the Community domain largely reects tactical activities that require
limited resources and can be adjusted relatively quickly.
On the other hand, we nd that items in other domains of the STATS database involve greater resource commitment
and more long-term orientation than those in the Community domain. These activities yield long-term strategic benets
based on relationships with key stakeholders including consumers, employees and investors. The implementation of strategic
CSR not only has a direct effect on the costs of the rm, but also has a strategic effect by altering critical organizational
conditions, such as human capital structure, competitive positioning and access to nance (Cheng et al., 2014; Peloza and
Shang, 2011).
Tactical CSR is thus measured as the sum of all a rm's strengths in the Community domain and Strategic CSR is measured
as the sum of all its strengths in six other domains (Environment, Diversity, Employee Relations, Human Rights, Product
Quality and Safety, and Corporate Governance). Some rms in the STATS data were rated as having no strengths in any
domains (0s for all strength items) during the entire studied period. It is possible the rating system failed to uncover the
social performance of these rms, so the value may represent missing rather than zero (Baron et al., 2011). Given the ambiguity of this data point, we removed these companies from our sample (7,888 rm-year observations for 1,382 companies).
In order to test Hypothesis 2 about the relative magnitude of the impact of the Recession on tactical CSR and strategic CSR,
we created Strategic CSR as the percentage of total CSR (Ratio hereafter) as the ratio of Strategic CSR to the sum of Tactical CSR
and Strategic CSR. We predict that the ratio would increase during the Recession when rms withdrew more from tactical CSR
than they did from strategic CSR. Some rms in the STATS data were rated as having no positive strengths in any domain (0s
for all strength items) during a calendar year. As a result, the ratio will be indenable because the denominator is zero. We
assigned a zero to the ratio variable in such cases.
Independent variables
While the Recession ofcially began in December 2007 (NBER, http://www.nber.org/cycles.html), it crested in 2008 with
bankruptcies, bailouts and sales of large nancial institutions, such as Lehman Brothers, Merrill Lynch and AIG. Therefore, we
assume the Recession had little impact on corporate social strategy in 2007. Accordingly, we create a binary variable d
Recession d by dividing the study period into two: the pre-Recession period, referring to the years from 2003e2007, and the
Recession period from 2008e2009. Prior CFP is measured as return on assets (ROA) lagged by one year. We winsorized ROA at
the 0.5% and 99.5% levels to minimize distortion caused by outliers (Muller and Kr
aussl, 2011).
Control variables
The STATS data provide exclusionary screens to identify and evaluate rms whose social ratings may be affected by the
controversial industries in which they operate (i.e., alcohol, gambling, rearms, tobacco, military and nuclear power). We thus
create Exclusion as the sum of STATS controversial business indicators. Some rms in the STATS data were rated as having no
strengths or concerns in any domain during a calendar year. We include a dummy variable d Rating Absence d to identify
these rm-year observations. We also include a linear time trend variable d Trend d for each year of the studied period to
capture any population-level trend effects (Bansal, 2005).
We control for rm-level factors that might inuence rms' CSR efforts. Institutional pressures for engaging in socially
responsible activities tend to be stronger for larger rms due to their high visibility (Stanwick and Stanwick, 1998;
Udayasankar, 2008). We thus include Firm Size measured as the logarithm of total assets. We also include the industry
Herndahl-Hirschman Index (HHI), based on rms' annual sales using the Fama-French industries classication, to account
for the impact of industry concentration on rm corporate social efforts (Fama and French, 1997). Because rms are less likely
to invest in CSR under nancial stress, we include Debt Ratio measured as the ratio of long-term liabilities to total assets
(Waddock and Graves, 1997). We include two additional measures of nancial slack, which provides rms with greater
latitude to explore diverse socially responsible activities (Singh, 1986; McGuire et al., 1988). SAG e Sales Ratio was calculated
as the ratio of selling, general, and administrative expenses to sales. Equity e Debt Ratio was calculated as the ratio of equity to
total liabilities. After removing cases with missing values, the nal sample includes 8,819 rm-year observations for 1,666
rms. Time-varying nancial variables are lagged by one year.
Estimation approach
The cross-sectional time-series nature of the data allows for a panel analysis. The Breusch-Pagan test conrmed the existence of heteroskedasticity due to Recession and Prior CFP. Thus, a panel analysis is appropriate. The Hausman test rejected
the assumption that the random error associated with each cross-sectional unit was orthogonal to other regressors
(Hausman, 1978). Therefore, a random effects model is not appropriate. Thus, we t our panel data using a xed effects model,
Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
During the 2008e2009 Global Recession, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2014.07.002

P. Bansal et al. / Long Range Planning xxx (2014) 1e11

Table 1
Descriptive statistics and bivariate correlations
Variable
1
2
3
4
5
6
7
8
9
10
11
12
13

Mean

S.D.

Min

Max

Tactical CSR
0.16 0.50
0
4
Strategic
1.68 1.99
0
18
CSR
Ratio
0.73 0.42
0
1.00
Recession
0.35 0.48
0
1
Prior CFP
0.03 0.13

3.68
0.64
Trend
2006.6
1.69 2004
2009
Exclusion
0.07 0.28
0
2
Rating
0.04 0.19
0
1
Absence
Firm Size
7.33 1.68
2.42
14.59
Debt Ratio
0.17 0.19
0.00
3.68
HHI
0.06 0.06
0.01
0.78
SAG-Sales
0.40 5.35
0.00 422
Ratio
Equity-Debt
2.88 27.73
1083
1406
Ratio

10

11

12

0.523

0.070 0.415

0.010 0.073 0.103
0.053 0.073 0.001
0.096

0.004 0.094 0.127 0.830
0.076
0.039 0.100 0.024 0.012 0.034 0.012

0.064
0.169
0.348
0.046
0.009
0.077
0.008
0.415 0.440 0.059 0.057 0.093 0.069

0.041
0.022
0.047 0.042
0.119 0.034
0.016 0.046 0.003 0.033 0.016 0.032
0.003
0.016
0.025
0.002
0.048
0.007
0.016
0.006
0.006

0.014
0.029

0.107
0.069
0.061 0.012 0.169
0.269
0.020
0.058 0.040
0.024 0.043
0.015 0.028
0.006

0.014
0.022

0.009

0.045 0.033
0.028
0.004

N 8,819.
Correlation with absolute values greater than 0.015 are signicant at the p < 0.05.

which allows us to control for unobserved rm attributes. We obtained estimates with robust variance specication to account for potential within-group serial correlation.
Results
Table 1 provides descriptive statistics and correlations for the variables. All the variance ination factors (VIFs) of individual variables were below ve, indicating that multicollinearity is unlikely to bias the estimation results (Kennedy, 2003).
Table 2 reports the results of a series of regression models. Models 1 and 3 examine the main effect of the Recession on tactical
and strategic CSR. Models 2 and 4 introduce their interaction terms with CFP. Model 5 examines the relative magnitude of the
impact of the Recession on tactical CSR and strategic CSR with Ratio as the dependent variable. F-statistics of all ve models
are signicant at the 0.001 level.
Hypothesis 1 predicted that the Recession would have a negative impact on rms' tactical and strategic CSR. The coefcient estimates on Tactical CSR and Strategic CSR in Models 1-4 consistently show a signicant and negative impact of the
Recession. Therefore, Hypothesis 1 is supported.
Hypothesis 2 suggested that rms withdrew from tactical CSR more signicantly than they did from strategic CSR during
the Recession. The positive and statistically signicant coefcient estimate on Recession in Model 5 indicates that the ratio
between strategic CSR and total CSR is higher during the Recession. The result indicates that Tactical CSR declined more during
the Recession than Strategic CSR. Thus, Hypothesis 2 is supported.
We further explored the raw data to examine the magnitude of the impact of the Recession and the robustness of our
ndings. We compared Tactical CSR and Strategic CSR, respectively, in the pre-Recession and Recession periods. We used the
Table 2
Fixed-effects regressions with robust variance
Variable

Model 1

Model 2

Tactical CSR
Recession
Recession X Prior CFP
Prior CFP
Trend
Exclusion
Rating Absence
Firm Size
Debt Ratio
HHI
SAG-Sales Ratio
Equity-Debt Ratio
Number of obs
Number of groups
R-squared
F-statistics

0.03** (0.01)
0.00 (0.02)
0.01y (0.00)
0.13* (0.07)

0.06** (0.02)
0.01 (0.01)
0.00 (0.02)

0.14 (0.35)
0.96 (1.03)

0.03 (0.03)
8,819
1,666
0.85
3.58**

Model 3

Model 4

Strategic CSR

0.03** (0.01)
0.05 (0.03)

0.03 (0.02)
0.01* (0.00)
0.13* (0.07)

0.06** (0.02)
0.01 (0.01)
0.00 (0.02)

0.15 (0.36)
0.96 (1.04)

0.02 (0.03)
8,819
1,666
0.85
3.27**

0.05y (0.03)
0.20* (0.1)
0.13** (0.01)
0.13 (0.25)

0.71** (0.04)
0.00 (0.05)

0.06 (0.11)
0.28 (2.06)
0.22 (0.75)
0.33y (0.19)
8,819
1,666
0.87
57.56**

Model 5
Ratio

0.08** (0.03)
0.57** (0.17)

0.11 (0.16)
0.14** (0.01)
0.13 (0.25)

0.71** (0.04)

0.01 (0.05)

0.06 (0.11)
0.08 (2.09)
0.26 (0.64)
0.39* (0.18)
8,819
1,666
0.87
52.08**

0.02* (0.01)

0.01 (0.05)
0.02** (0.00)
0.04 (0.04)

0.66** (0.03)
0.01 (0.02)

0.02 (0.06)
0.08 (0.76)
0.06 (0.42)
0.24 (0.16)
8,819
1,666
0.50
82.25**

yp < .10; *p < .05; **p < .01. (standard deviation in parentheses).

Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
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P. Bansal et al. / Long Range Planning xxx (2014) 1e11

Table 3
T-test of changes in tactical CSR and strategic CSR

Change in Tactical CSR

Change in Strategic CSR
Difference

Observations

Mean

1,473
1,473
1,473

0.005
0.380

0.384

t
16.8, degrees of freedom 1,472.

We can reject the hypothesis that difference is less than or equal to zero at p < 0.001.

mean of Tactical CSR (Strategic CSR) from 2005e2007 as pre-Recession Tactical CSR (Strategic CSR). We used the mean of
Tactical CSR (Strategic CSR) from 2008e2009 as during-Recession Tactical CSR (Strategic CSR). We then compared the percentage of change in Tactical CSR (Strategic CSR) using t-tests. We assigned a zero to the case where pre-Recession CSR was
zero. Table 3 reports the result of the t-tests. The cross-sectional nature of this analysis does not reect the general trend of
shifts in CSR over the years. Nevertheless, the result is consistent with our theoretical prediction: there was a small decline in
Tactical CSR and an increase in Strategic CSR following the onset of the Recession. Therefore, we are condent that the
Recession had a greater negative impact on tactical CSR than on strategic CSR. The result remained same if we dropped the
observations where pre-Recession CSR is zero.
Hypothesis 3a predicted that rms with higher nancial performance are more likely to maintain their CSR during the
Recession. Hypothesis 3b further argued that the positive moderation effect of high nancial performance will be stronger for
strategic CSR than tactical CSR. The estimation results for Models 2 and 4 reveal interesting patterns. The coefcient estimates
on the interaction between Recession and Prior CFP was not signicant for tactical CSR in Model 2. However, the interaction
term is statistically signicant with the anticipated positive sign in Model 4. The result indicates higher nancial performance
is correlated with higher Strategic CSR during the Recession, while high nancial performance did not mitigate the negative
impact of the Recession on Tactical CSR. Therefore, Hypothesis 3a is partially supported and Hypothesis 3b is supported.
Additional analysis based on the estimation results from Model 4 shows that when Prior CFP is set to its mean, Strategic CSR
declined by 1% during the Recession. However, when Prior CFP is set to its mean plus one standard deviation, Strategic CSR
increased by 4% during the Recession. Figure 1 illustrates the changes in Strategic CSR at different levels of Prior CFP. It is also
worth noting that estimation results in Models 1 and 3 show that Prior CFP was not signicantly related to tactical CSR but was
positively related to strategic CSR. The result implies that the positive effect of CFP on CSR was not evident for all types of
socially responsible activities. The positive effect was particularly signicant for strategic CSR, which involves signicant
resource and time commitment.
Among the control variables, Trend has a positive effect on both tactical and strategic CSR. The result is consistent with our
expectation that most rms gradually improved their CSR over time due to the increasing attention society paid to CSR in
general. We found an interesting relationship with respect to rms operating in controversial industries (alcohol, gambling,
rearms, tobacco, military and nuclear power). These rms tend to have more tactical CSR than other rms but not strategic
CSR, suggesting these rms tend to concentrate on activities like charitable giving. We conjecture that these CSR efforts are
particularly important for these rms because their symbolic value can prove very effective in maintaining a positive
corporate image (Laufer, 2003). Equity e Debt Ratio is positively related to strategic CSR but not tactical CSR. It is possible rms
are more likely to sustain long-term CSR relationships with strategic stakeholders when they are well capitalized. However,
this is not a necessary condition for them to engage in tactical CSR. We did not nd signicant impact of other organizationlevel factors on CSR.

Figure 1. The interaction effect between Recession and Prior CFP on Strategic CSR

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P. Bansal et al. / Long Range Planning xxx (2014) 1e11

Discussion
This study tested the effect of the Recession on CSR. A deated pool of resources and heightened uncertainty are key
characteristics of a recessionary business environment. Such a hostile situation tends to be perceived as a threat; managers
prefer to focus on internal issues and limit their information ows in order to feel more in control of the situation. As CSR
often requires an external orientation and addressing stakeholders with contested positions, we hypothesized that rms
would reduce their overall CSR during the Recession.
However, we also argued the impacts would be different based on tactical and strategic CSR. We argued that strategic CSR,
more so than tactical CSR, will endure through a recession because of the routines associated with strategic CSR. In addition,
we argued that CFP can help to counteract the general negative impact of the Recession on CSR, especially strategic CSR.
Strategic CSR can resist the resource reallocation processes that are often associated with recessions, since strategic CSR is
often routinized within companies. We supported these ndings with our empirical analysis of 1,666 U.S. companies over the
2003 to 2009 period.
Contributions of this study
This study makes several contributions. First, we showed empirically that rms reduced their CSR during the Recession.
The evidence answers the question: Did rms maintain their commitment to CSR during the Recession? Arguably, socially
responsible activities are most needed in a time of crisis (Berns et al., 2009). Yet, rms are also most likely to reduce their
commitment to social responsibility during this time because resources allocated to non-core business activities are difcult
to justify (Skapinker, 2009; Economist, 2009). This argument supports the view that resource availability in the business
environment is important to rms pursuing socially responsible activities (McGuire et al., 1988; Udayasankar, 2008; Ullmann,
1985; Waddock and Graves, 1997).
Our second contribution is related to discriminating between tactical and strategic CSR. Prior research has largely treated
CSR as a generalized construct that includes the range of activities that address stakeholder needs, beyond those of shareholders (Carroll, 1979, 1999; Dahlsrud, 2008; Wood, 1991). Such a perspective is also reected in the common CSR measures,
which merely aggregate CSR activities; e.g., different dimensions of the STATS database (Baron et al., 2011; Barnett and
Salomon, 2012; Waddock and Graves, 1997). This all-encompassing approach has the advantage of attracting the attention
of a wide range of audiences, such as practitioners, researchers and policy-makers (e.g., Margolis and Walsh, 2003). Yet, it
implicitly assumes that although CSR varies in form, it takes the same inputs and produces the same outcomes.
Drawing from the competitive dynamics literature, we argued that tactical CSR creates stakeholder value in the short-term
and requires fewer resources. In other words, tactical CSR is easier and faster to implement and more easily reversed. In
contrast, strategic CSR requires long time horizons, large resource commitments and signicant structural reform. Strategic
CSR is thus more difcult to implement and reverse and is expected to contribute to the rm's reputation and nancial
success. Accordingly, we suggested and found empirical support that tactical CSR was withdrawn more than strategic CSR in
the Recession.
Discriminating between tactical and strategic CSR can help resolve the conicting ndings of past studies. For example, the
effect of CSR on CFP has been a key topic in the CSR literature, receiving enormous scholarly attention, but often producing
contested results. To illustrate, Wang et al. (2008) investigated the effect of corporate philanthropy on CFP and found an
inverted U-shaped relationship. In contrast, Barnett and Salomon (2012) reported a U-shaped relationship between CSR and
nancial performance. We believe these differences could be at least partly explained by the denition and measure of CSR
used in those studies. Wang et al. (2008) used a panel data set of 817 rms from 1987 to 1999 from the Taft Corporate Giving
Directory. They assessed corporate philanthropy by the dollar amount of charitable giving by a rm in a given year, scaled by
the rm's sales in the same period, which is akin to our notion of tactical CSR. Barnett and Salomon (2012) used a panel data of
1,214 rms from 1998 to 2006, from the STATS data. They measured CSR by the aggregated score of 13 individual social
performance criteria, which are based on binary information (e.g., a strength or not, and a weakness or not). Barnett and
Salomon (2012) captured both strategic and tactical CSR in what Barnett (2007) refers to as Stakeholder Inuence Capacity.
It is important to note, this study aims to explain the impact of CFP on CSR, not the reverse relationship that Wang et al.
(2008) and Barnett and Salomon (2012) explored. However, the differences between tactical and strategic CSR may help to
explain the different ndings in those studies. Wang et al. (2008) may have found an inverted U-shaped relationship because
the benets that accrue from tactical CSR, such as securing critical resources from various stakeholders and gaining
insurance-like protections, are higher at low levels of CSR and lower at higher levels of CSR. In other words, there are
diminishing returns to tactical CSR. On the other hand, Barnett and Salomon (2012) found that the benets that accrue from a
general conceptualization of CSR are low initially, quite possibly because the benets from strategic CSR take time to
materialize (Barnett and Salomon [2012] applied a one-year lag). However, the benets of (particularly) strategic CSR, accrue
strongly at higher levels of CSR. At low levels, strategic CSR requires rms to develop close relationships with often skeptical
stakeholders. In contrast, philanthropic donations are more likely to be accepted without much stakeholder scrutiny of the
donor rm's intention.
We anticipate that both the antecedents and consequences of tactical and strategic CSR differ considerably. Tactical CSR is
not only quick and easy to implement, it can also adapt quickly to the context and corporation's needs. Strategic CSR, on the
other hand, takes time and resources, but is likely to provide the corporation with more enduring benets. Prior research has
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P. Bansal et al. / Long Range Planning xxx (2014) 1e11

not yet tackled these differences in CSR activities, and yet we believe they may be applied to numerous contexts, including
informing the heavily researched topic on whether CSR pays (Margolis and Walsh, 2003). It also encourages researchers to
look more closely at the temporal aspects of CSR, both in terms of the time it takes to demonstrate responsibility, but also the
time it takes to realize its benets (Slawinski and Bansal, 2012).
The nal contribution of this study pertains to the relative impact of CFP on tactical and strategic CSR during a widespread
recession. Although we found that rms withdraw CSR during a recession, those rms that had higher nancial performance
are more likely to continue their strategic CSR. We believe this is not only because CSR takes time and money, which also
applies to tactical CSR, but because these rms are more likely to have a long-term focus. These rms are willing to play the
long game and wait for the benets to materialize. It is interesting to note, we found that CFP did not signicantly affect the
relationship with tactical CSR, supporting our suspicion that tactical CSR is likely more pragmatic and short-term oriented.
Limitations and future research directions
The Recession was a natural experiment well-suited to test the efcacy of CSR during tough economic times. Yet, this study
focused on only one recession event, and each recession has unique attributes. Future studies could consider applying similar
analyses to different recessions in different cultural contexts, as well as to different types of economic shocks, which is
important for assessing the generalizability of our ndings.
As well, we used a fairly coarse measure of tactical CSR, specically the Community domain of the STATS database. We
recognize that some investments in the Community domain may require long-term commitments and some investments in
the other domains may be quickly withdrawn. However, in general, the domains overlay with the tactical and strategic activities we describe, but future researchers are encouraged to nd more precise measures of tactical and strategic CSR.
We further expect that the distinction between tactical and strategic CSR will advance the CSR literature by, for example,
stimulating research into the antecedents and consequences of different types of CSR. For instance, most prior work has
focused on large corporations. But, if strategic CSR takes more time and resources to build, then it is unlikely new ventures
will engage in strategic CSR in the same way as large rms (Wang and Bansal, 2012). Second, it would be interesting to identify
what other factors at the rm, industry and macro levels inuence rms' choice between tactical and strategic CSR. In this
study, we found that those rms operating in controversial industries (alcohol, gambling, rearms, tobacco, military and
nuclear power) tend to prefer tactical CSR over strategic CSR.
Last, future research could analyze the temporal orientations and resource commitments of specic socially responsible
activities more parsimoniously. The temporal aspects of CSR have received scant attention. In this study, we highlight the fact
that some CSR activities take time to implement and their value is slow to accrue. We suggest that these activities are indeed
the most strategic, and likely also contribute to shared value (Porter and Kramer, 2006, 2011). Although this study theorized
that the scale of resource commitment over time is correlated with a corporation's long-term orientation, there is much work
to be done in this area which could help advance a deeper understanding of the relationship between CSR and CFP.
Conclusion
The Recession presented an uneasy test to many rms and managers. As stakeholders confronted some of the most
challenging of possible circumstances (unemployment, poverty, foreclosures), managers were likely more aware of the
importance of CSR than at any other time in the recent past and yet were often unable to respond. The Recession made a dent
in CSR activities as corporations maneuvered through one of the toughest economic environments many had seen. As we
show in this paper, managers were more likely to withdraw tactical commitments, which do not require CSR activities to be
integrated into the routines and operational procedures of the rm. However, we found that some rms took this opportunity
to increase their strategic commitments to responsibility. We believe there is much research to be done to help understand
when and why rms make strategic, as opposed to only tactical, commitments to CSR. In addition, we believe that there is also
much work to be done by managers and NGOs to encourage rms to engage in strategic CSR, so that CSR investment can
withstand tough economic times.
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Biographies
Pratima Bansal (Ph.D., Oxford) is a Professor, Canada Research Chair and Taylor/Mingay Chair in Business Sustainability at the Ivey Business School, Western
University. She also founded and directs the Network for Business Sustainability (nbs.net), and Ivey's Centre for Building Sustainable Value. Both the Network
and Centre aim to strengthen the ties between research and practice. Her research is centered in business sustainability and strategy. E-mail: tbansal@ivey.
uwo.ca
Guoliang F. Jiang (Ph.D., Western) is an Assistant Professor of Strategy and International Business at the Rowe School of Business at Dalhousie University. His
research interests include rm internationalization strategy, international management and corporate social responsibilities. Prior to his academic career, he
worked at General Electric, and Kao in China. E-mail: frank.jiang@dal.ca
Jae C. Jung (Ph.D., Western) is an Associate Professor at the Bloch School of Management, University of Missouri-Kansas City. His research has focused on the
formation and performance of international joint ventures, relation-specic assets in non-equity alliances, and determinants of corporate social
responsibility. E-mail: jungjc@umkc.edu

Please cite this article in press as: Bansal, P., et al., Managing Responsibly in Tough Economic Times: Strategic and Tactical CSR
During the 2008e2009 Global Recession, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2014.07.002