When and how corporate social responsibility promotes innovation: A multi‐level moderated mediation model

Abstract This study advances and tests a micro‐foundations model that reveals when and how corporate social responsibility (CSR) will enhance organizational innovation. Challenging the prevalent assumption that CSR uniformly leads to positive outcomes, we posit that the impact of CSR on innovation is contingent upon the interplay between employee‐level psychological processes and organizational‐level factors. Specifically, we argue that under conditions of good internal organizational communication, CSR facilitates employees' intrinsic motivation. Then, this motivation can increase organizational‐level innovation, but only if employees are also allowed to thrive, when they are psychologically empowered. We examine the multi‐level model by utilizing a 4‐wave, time‐lagged data from one of the largest Korean commercial banks, featuring 2545 employees across 379 branches. The data consist of both survey data and centrally audited CSR data. The results of the analyses bolster our hypotheses, but also highlight unexpected backlash effects where CSR negatively affects organizational innovation. Our findings contribute to the CSR literature by unveiling the complex micro‐level mechanisms and boundary conditions that shape the CSR‐innovation relationship, thereby addressing the inconsistencies in previous research. Practically, our study suggests that managers should carefully align their CSR initiatives with internal communication strategies and employee empowerment practices to foster innovation. Failing to do so may inadvertently undermine the very outcomes CSR is intended to promote. These insights also speak to the ongoing debate on the role of CSR in driving organizational competitiveness and social impact, underlining the need for a more nuanced and contextualized understanding of CSR's effects. In sum, our results facilitate the integration of previously disparate literatures, while simultaneously also underlining that CSR efforts need to be orchestrated with other improvements if any innovation benefits are to be reaped.