Strategic responses of stigmatized Chinese manufacturing firms to formal and informal environmental regulative pressures through enhanced corporate social responsibility effort

Linking two forms of regulative pressures to different motivations for firms' strategic choices, we propose that stigmatized firms' effort to enhance their corporate social responsibility (CSR) reflects legitimacy considerations when faced with formal regulative pressures, but efficiency considerations when faced with informal regulative pressures. We provide empirical support for our theory by investigating publicly listed Chinese manufacturing firms' environmental CSR performance after they are stigmatized for environmental pollution. Our data strongly support our predictions. Stigmatized firms show a lower CSR effort when formal regulative pressure is low and they can easily shun responsibility for polluting the environment, whereas they show a higher CSR effort when informal regulative pressure is high and they cannot easily shun responsibility for the pollution. These findings highlight the unique insight that can be gained by studying stigmatized firms' reactions to different types of regulative pressures as a function of responsibility dilution in an emerging economy.