Explaining the Growth of CSR within OECD Countries: The Role of Institutional Legitimacy in Resolving the Institutional Mirror Vs. Substitute Debate

Two strands of literature have emerged to explain the rise of Corporate Social Responsibility (CSR). One camp argues that CSR expansion is likely during periods of economic liberalization – because CSR tends to substitute for growing institutional voids and a lack of social regulation. The other camp argues that CSR is likely to diffuse within coordinated economies because it mirrors these institutional settings. While both camps find empirical support for their arguments, no one has yet managed to combine both perspectives. Based on a new dataset comprising the corporate membership in business-led CSR organizations in over thirty countries from 1981 to 2008, we show that economic liberalization has a strong effect on CSR expansion when the legitimacy of CSR is low. However, when the practice has achieved substantial cultural acceptance, economic liberalization no longer drives CSR expansion. In that setting, CSR expansion is most likely within socially regulated economic contexts.