Corporate Social Responsibility and Innovation Input: An Empirical Study Based on Propensity Score-Matching and Quantile Models
Round 1
Reviewer 1 Report
In the paper, I recommend to argue against to the opposite possibility of dependence of the relationship between CSR and R&D, based on the simple assumption that investments in R&D are essential for value creation and represent a crucial condition for competitiveness. Businesses that support innovation investments are more likely to achieve profits and added value. Subsequently, they can allocate part of these profits to CSR activities and voluntary publication of CSR reports, with a higher probability than companies that do not achieve the appropriate level of innovation and profitability. The relationship between CSR performance and innovation investment is obvious, but the dependency can also be the opposite, that innovation investment (and the generated profit) supports a high level of CSR performance. It is obvious that the demands of stakeholders stimulate innovative ideas, but on the contrary, the innovative potential of the company, with its ability to generate profit, allows to increase the performance of CSR.
Although it is not among the goals and hypotheses of the research, one of the findings is the confirmation that financial leverage and enterprise age have a significant weakening effect on innovation investment. I recommend commenting on this insight and proposing an explanation in the Conclusion section.
Author Response
Response to Reviewer 1 Comments
Point 1: In the paper, I recommend to argue against to the opposite possibility of dependence of the relationship between CSR and R&D, based on the simple assumption that investments in R&D are essential for value creation and represent a crucial condition for competitiveness. Businesses that support innovation investments are more likely to achieve profits and added value. Subsequently, they can allocate part of these profits to CSR activities and voluntary publication of CSR reports, with a higher probability than companies that do not achieve the appropriate level of innovation and profitability. The relationship between CSR performance and innovation investment is obvious, but the dependency can also be the opposite, that innovation investment (and the generated profit) supports a high level of CSR performance. It is obvious that the demands of stakeholders stimulate innovative ideas, but on the contrary, the innovative potential of the company, with its ability to generate profit, allows to increase the performance of CSR.
Response 1: We would like to thank the reviewer for the constructive guidance and suggestions. Based on the suggestions, we have tried to regress the data in the article and indeed, as suggested by the expert guidance, different models (OLS model, quantile model) have revealed the impact of R&D investment on CSR to different degrees, and the expert's suggestions have provided useful insights for our future research. In the article, we suggest future research directions, as “In spite of the aforementioned theoretical significance and practical enlightenment, however, there are still some imperfections in this paper. In the future research, we can select multiple years to verify the above assumptions in this paper with panel data samples. Meanwhile, we could also further explore the impact and mechanism of corporate R&D investment on corporate social responsibility, and the boundary of contingency factors influencing the above two relationships.” (In lines 554 to 559 of the manuscript, pdf version; there may be differences in the number of lines between different Word versions.)
Point 2: Although it is not among the goals and hypotheses of the research, one of the findings is the confirmation that financial leverage and enterprise age have a significant weakening effect on innovation investment. I recommend commenting on this insight and proposing an explanation in the Conclusion section.
Response 2: At the same time, we have discussed and analysed the negative effects of financial leverage and firm age on R&D investment among the control variables, based on the recommendations of expert. As ”Meanwhile, in the Tobit model of Table 6, we find that corporate financial leverage has a significant negative effect on innovation investment, which is similar to previous research[4], in which the asset-liability ratio indicates a firm's external financing capacity; The lower asset-liability ratio, the more funds a firm can borrow and the more investment it will make in its innovation activities[4]; firms with low asset-liability ratio usually have a large amount of potential redundant resources, which can help enterprises in the process of selecting R&D projects, alleviate the urgency of pursuing immediate short-term results, and motivate enterprises to try high-risk strategies and innovation projects; in addition, the R&D innovation of enterprises is usually coherent and the projects are interrelated. The existence of redundant resources enables enterprises to invest in new projects when faced with environmental changes, thus ensuring continuity of R&D. Moreover, the age of the firm has a significant negative effect on innovation investment, which is consistent with the random effects model of Ju et al. (2013)[54]. With the growth of enterprise survival time, enterprise knowledge, experience and organizational system may become more and more solidified, and all kinds of organizations have the problem of organizational inertia, and this inertia will continue to increase over time, which is manifested in the organization's operation of conformity and the old-fashioned and over-reliance on the original resources, thus affecting the positive enthusiasm of R&D and innovation investment [55].”(In lines 513 to 531 of the manuscript, pdf version)
Reviewer 2 Report
The article takes up an important research issue. The authors correctly positioned the problem in the literature on the subject. The method was correctly selected and the research procedure was clearly described and correctly carried out. The results and their presentation do not raise any major doubts. The conclusions contain not only a reference to the theory but also implications for practice.
After minor editorial corrections adjusting the article to the formal requirements of the Journal, the article may be published.
Author Response
Response to Reviewer 2 Comments
Point 1: The article takes up an important research issue. The authors correctly positioned the problem in the literature on the subject. The method was correctly selected and the research procedure was clearly described and correctly carried out. The results and their presentation do not raise any major doubts. The conclusions contain not only a reference to the theory but also implications for practice. After minor editorial corrections adjusting the article to the formal requirements of the Journal, the article may be published.
Response 1: We would like to thank the reviewer for the feedback. Based on the experts' suggestions, we have further revised and improved the manuscript, including adding a discussion and analysis of the negative effects of financial leverage and firm age on R&D investment among the control variables. As ”Meanwhile, in the Tobit model of Table 6, we find that corporate financial leverage has a significant negative effect on innovation investment, which is similar to previous research[4], in which the asset-liability ratio indicates a firm's external financing capacity; The lower asset-liability ratio, the more funds a firm can borrow and the more investment it will make in its innovation activities[4]; firms with low asset-liability ratio usually have a large amount of potential redundant resources, which can help enterprises in the process of selecting R&D projects, alleviate the urgency of pursuing immediate short-term results, and motivate enterprises to try high-risk strategies and innovation projects; in addition, the R&D innovation of enterprises is usually coherent and the projects are interrelated. The existence of redundant resources enables enterprises to invest in new projects when faced with environmental changes, thus ensuring continuity of R&D. Moreover, the age of the firm has a significant negative effect on innovation investment, which is consistent with the random effects model of Ju et al. (2013)[54]. With the growth of enterprise survival time, enterprise knowledge, experience and organizational system may become more and more solidified, and all kinds of organizations have the problem of organizational inertia, and this inertia will continue to increase over time, which is manifested in the organization's operation of conformity and the old-fashioned and over-reliance on the original resources, thus affecting the positive enthusiasm of R&D and innovation investment [55].”(In lines 513 to 531 of the manuscript, pdf version; There may be differences in the number of lines between different Word versions.)
In addition, future research directions have been added to the concluding section. As “In spite of the aforementioned theoretical significance and practical enlightenment, however, there are still some imperfections in this paper. In the future research, we can select multiple years to verify the above assumptions in this paper with panel data samples. Meanwhile, we could also further explore the impact and mechanism of corporate R&D investment on corporate social responsibility, and the boundary of contingency factors influencing the above two relationships.” (In lines 554 to 559 of the manuscript)
Reviewer 3 Report
Sample selection – there is no argumentation why companies in 2014 are considered
Description of variables – Since the set of variables is always questionable, I have following recommendations:
1) as an innovation input natural logarithm of innovation expenditure was taken, but also increase in intangible assets as the result of innovation investment could be considered (Ju, X.S.; Lu, D.; Yu, Y.H. Financing constraint, working capital management and sustainability of enterprise innovation. Econ. Res. 2013, 1, 4–16).
2) Because there is the time lag effect of variables on the innovation investment, some explanatory variables could have the lag period?
3) Q Tobin ratio as a measure of investment opportunities (It indicates how attractive a company or business would be to investors and potential buyers, it indicates whether a company or market is overvalued or undervalued) could be considered as potential variable
Conclusion – there is no discussion with results of other authors – this discussion could extend literature review. Explanation, on whether the Chinese context is very specific or whether the results can be extended internationally would be valuable.
Author Response
Response to Reviewer 3 Comments
Point 1: Sample selection – there is no argumentation why companies in 2014 are considered
Response 1: The manuscript took a long time to write and submit from the first draft to the current version after many rounds of suggestions from editors and reviewers in different journals and constant model corrections and additions. In retrospect, the status of some of the samples has changed, for example, those that were listed companies at the time may subsequently suffer ST or delisting; and some accounting rules have changed or relevant database indicators have been adjusted over time. As a result, updating the data following the original research framework can be extremely challenging, and this has become a limitation of this paper, and subsequent research has sought to make a breakthrough on this issue by adding future research directions in the concluding section, as “In spite of the aforementioned theoretical significance and practical enlightenment, however, there are still some imperfections in this paper. In the future research, we can select multiple years to verify the above assumptions in this paper with panel data samples. Meanwhile, we could also further explore the impact and mechanism of corporate R&D investment on corporate social responsibility, and the boundary of contingency factors influencing the above two relationships.” (In lines 554 to 559 of the manuscript, pdf version; There may be differences in the number of lines between different Word versions.)
Point 2: as an innovation input natural logarithm of innovation expenditure was taken, but also increase in intangible assets as the result of innovation investment could be considered (Ju, X.S.; Lu, D.; Yu, Y.H. Financing constraint, working capital management and sustainability of enterprise innovation. Econ. Res. 2013, 1, 4–16).
Response 2: As the expert noted, "increase in intangible assets as the result of innovation investment" is also often used to measure firms' innovation investment. On reflection, this variable has not been replaced in the manuscript, mainly for the following reasons: The number of intangible assets like trademarks and patent licenses is usually presented as discrete variables, while PSM models and quantile models usually require the dependent variable to be continuous, which may lead to bias in the applicability of the empirical model if the type of measurement of the dependent variable is changed. Many thanks to the expert for the advice, the recommended article (Ju, X.S.; Lu, D.; Yu, Y.H. Financing constraint, working capital management and sustainability of enterprise innovation. Econ. Res. 2013, 1, 4–16) has generated good insights and is cited in this article in the changes, as in reference 54. (in lines 678 to 679 of the manuscript, pdf version)
Point 3: Because there is the time lag effect of variables on the innovation investment, some explanatory variables could have the lag period?
Response 3: Thanks to the expert's guidance, as the expert suggests, there may indeed be a lagged effect of the independent variables on R&D investment, and we have retraced the sample data and found that the independent variables are all from 2013 (one year ahead of the dependent variable). To enhance the normative nature of the article, this issue has been clarified in the manuscript, as footnote 1 at the bottom of page 7.
Point 4: Q Tobin ratio as a measure of investment opportunities (It indicates how attractive a company or business would be to investors and potential buyers, it indicates whether a company or market is overvalued or undervalued) could be considered as potential variable
Response 4: Appreciating the expert's guidance, as the expert said, "Q Tobin ratio as a measure of investment opportunities", we used Tobin Q instead of ROA in the control variables in some of the models, and the results did not change substantially, as in the OLS model, the regression coefficient of CSR changed from 0.033 to 0.032 (p <0.05), but unfortunately the effect of Tobin Q on innovation inputs did not pass the significance test (r=0.094, P>0.1). In the quantile regression model, a similar situation was observed.
Point 5: Conclusion – there is no discussion with results of other authors – this discussion could extend literature review. Explanation, on whether the Chinese context is very specific or whether the results can be extended internationally would be valuable.
Response 5: At the same time, we have analyzed the findings of the paper in comparison with the established literature, as “This conclusion is in contradiction with the research results of Pan et al. (2021)[6], although their study was also based on a sample of Chinese firms in the context of economic transition, which showed a significant weakening effect of corporate CO2 emission reduction policies on the intensity of R&D investment, as the policy may lead to higher cost effects, thus affecting the intensity of innovation investment. In contrast, the apparently opposite findings are not contradictory, as CO2 reduction is only one aspect of corporate social responsibility, and there are many other dimensions of corporate social responsibility. After gaining positive responses from stakeholders through the implementation of comprehensive social responsibility, companies will have more motivation to sustain development in R&D and innovation. In addition, the study by Gallego-Álvarez et al.(2011)[13] also has the opposite conclusion to this paper, selecting 500 European companies and 500 non-European companies for the study, and the conclusion shows that CSR has a significant negative impact on R&D investment. On the one hand, this may be due to the global scope of the study sample and the large differences in the degree of marketization of firms across countries (regions). On the other hand, the study defines CSR as a dummy variable, compared to the CSR variables measured by the score rating method, which can provide a more accurate picture of CSR performance.” (in lines 472 to 490 of the manuscript, pdf version); and ”The findings of the study are more similar to Ho et al.(2016)[26], who chose the Kinder Lydenburg Domini(KLD) rating index as a proxy variable for CSR, which covers a more comprehensive and extensive content and has high credibility and reference value in Western capital markets[53], and found that the social responsibility performance of companies in European and American capital markets has a R&D investment intensity that has a significant positive predictive effect. In addition, the findings of this paper are consistent with the view of Husted and Allen(2007)[42] that "CSR provides opportunities for innovation". The above discussion indicates that after more than a decade of development, the development of CSR in China is becoming more and more mature, and favorable CSR performance is becoming a medium of interaction between enterprises and their stakeholders, and it is gradually becoming an important driving force for R&D innovation and competitiveness.” (in lines 491 to 502 of the manuscript, pdf version)
In the meantime, we have discussed and analysed the negative effects of financial leverage and firm age on R&D investment among the control variables, based on the recommendations of expert, as ”Meanwhile, in the Tobit model of Table 6, we find that corporate financial leverage has a significant negative effect on innovation investment, which is similar to previous research[4], in which asset-liability ratio indicates a firm's external financing capacity; The lower asset-liability ratio, the more funds a firm can borrow and the more investment it will make in its innovation activities[4]; firms with low asset-liability ratio usually have a large amount of potential redundant resources，which can help enterprises in the process of selecting R&D projects, alleviate the urgency of pursuing immediate short-term results, and motivate enterprises to try high-risk strategies and innovation projects; in addition, the R&D innovation of enterprises is usually coherent and the projects are interrelated. The existence of redundant resources enables enterprises to invest in new projects when faced with environmental changes, thus ensuring continuity of R&D. Moreover, the age of the firm has a significant negative effect on innovation investment, which is consistent with the random effects model of Ju et al. (2013)[54]. With the growth of enterprise survival time, enterprise knowledge, experience and organizational system may become more and more solidified, and all kinds of organizations have the problem of organizational inertia, and this inertia will continue to increase over time, which is manifested in the organization's operation of conformity and the old-fashioned and over-reliance on the original resources, thus affecting the positive enthusiasm of R&D and innovation investment [55].”(In lines 513 to 531 of the manuscript, pdf version)
Reviewer 4 Report
I have recommended to the editor the acceptance of the study. It has been a privilege to review the paper and contribute to the improvement of the document.
This study on "Corporate Social Responsibility and Innovation Input: An Empirical Study Based on Propensity Score Matching and Quantile Models" is very interesting and analyzes the issue in depth proposed in this investigation.
The literature review and the deployment of the theoretical analysis and hypothesys section is appropriate and well-developed.
The Research Desing section adequately explains the multivariate analysis method selected and the data analysed (the samples of the voluntary and control groups are unbalanced, the smallest one accounting for 9.7% of the total sample), and justifies the choice of statistical analysis methods applied.
The Empirical Results section is complete and contains the necessary information to interpret and justify the relationships between the variables analyzed.
Finally, the Conclusion section is correct.
Author Response
Response to Reviewer 4 Comments
Point 1: I have recommended to the editor the acceptance of the study. It has been a privilege to review the paper and contribute to the improvement of the document.
This study on "Corporate Social Responsibility and Innovation Input: An Empirical Study Based on Propensity Score Matching and Quantile Models" is very interesting and analyzes the issue in depth proposed in this investigation.
The literature review and the deployment of the theoretical analysis and hypothesys section is appropriate and well-developed.
The Research Desing section adequately explains the multivariate analysis method selected and the data analysed (the samples of the voluntary and control groups are unbalanced, the smallest one accounting for 9.7% of the total sample), and justifies the choice of statistical analysis methods applied.
The Empirical Results section is complete and contains the necessary information to interpret and justify the relationships between the variables analyzed.
Finally, the Conclusion section is correct.
Response 1: We would like to thank the reviewer for the feedback. Based on the experts' suggestions, we have further revised and improved the manuscript, including adding a discussion and analysis of the negative effects of financial leverage and firm age on R&D investment among the control variables. As ”Meanwhile, in the Tobit model of Table 6, we find that corporate financial leverage has a significant negative effect on innovation investment, which is similar to previous research[4], in which the asset-liability ratio indicates a firm's external financing capacity; The lower asset-liability ratio, the more funds a firm can borrow and the more investment it will make in its innovation activities[4]; firms with low asset-liability ratio usually have a large amount of potential redundant resources, which can help enterprises in the process of selecting R&D projects, alleviate the urgency of pursuing immediate short-term results, and motivate enterprises to try high-risk strategies and innovation projects; in addition, the R&D innovation of enterprises is usually coherent and the projects are interrelated. The existence of redundant resources enables enterprises to invest in new projects when faced with environmental changes, thus ensuring continuity of R&D. Moreover, the age of the firm has a significant negative effect on innovation investment, which is consistent with the random effects model of Ju et al. (2013)[54]. With the growth of enterprise survival time, enterprise knowledge, experience and organizational system may become more and more solidified, and all kinds of organizations have the problem of organizational inertia, and this inertia will continue to increase over time, which is manifested in the organization's operation of conformity and the old-fashioned and over-reliance on the original resources, thus affecting the positive enthusiasm of R&D and innovation investment [55].”(In lines 513 to 531 of the manuscript, pdf version; There may be differences in the number of lines between different Word versions.)
In addition, future research directions have been added to the concluding section. As“In spite of the aforementioned theoretical significance and practical enlightenment, however, there are still some imperfections in this paper. In the future research, we can select multiple years to verify the above assumptions in this paper with panel data samples. Meanwhile, we could also further explore the impact and mechanism of corporate R&D investment on corporate social responsibility, and the boundary of contingency factors influencing the above two relationships.” (In lines 554 to 559 of the manuscript, pdf version)
At the same time, we have analyzed the findings of the paper in comparison with the established literature, as “This conclusion is in contradiction with the research results of Pan et al. (2021)[6], although their study was also based on a sample of Chinese firms in the context of economic transition, which showed a significant weakening effect of corporate CO2 emission reduction policies on the intensity of R&D investment, as the policy may lead to higher cost effects, thus affecting the intensity of innovation investment. In contrast, the apparently opposite findings are not contradictory, as CO2 reduction is only one aspect of corporate social responsibility, and there are many other dimensions of corporate social responsibility. After gaining positive responses from stakeholders through the implementation of comprehensive social responsibility, companies will have more motivation to sustain development in R&D and innovation. In addition, the study by Gallego-Álvarez et al.(2011)[13] also has the opposite conclusion to this paper, selecting 500 European companies and 500 non-European companies for the study, and the conclusion shows that CSR has a significant negative impact on R&D investment. On the one hand, this may be due to the global scope of the study sample and the large differences in the degree of marketization of firms across countries (regions). On the other hand, the study defines CSR as a dummy variable, compared to the CSR variables measured by the score rating method, which can provide a more accurate picture of CSR performance.” (in lines 472 to 490 of the manuscript, pdf version); and ”The findings of the study are more similar to Ho et al.(2016)[26], who chose the Kinder Lydenburg Domini(KLD) rating index as a proxy variable for CSR, which covers a more comprehensive and extensive content and has high credibility and reference value in Western capital markets[53], and found that the social responsibility performance of companies in European and American capital markets has a R&D investment intensity that has a significant positive predictive effect. In addition, the findings of this paper are consistent with the view of Husted and Allen(2007)[42] that "CSR provides opportunities for innovation". The above discussion indicates that after more than a decade of development, the development of CSR in China is becoming more and more mature, and favorable CSR performance is becoming a medium of interaction between enterprises and their stakeholders, and it is gradually becoming an important driving force for R&D innovation and competitiveness.” (in lines 491 to 502 of the manuscript, pdf version)
