Corporate social responsibility sophistication: Company‐specific drivers among early and late adopters

Kunkel, Kyra; Wigge, Katharina; Lueg, Rainer Article — Published Version Corporate social responsibility sophistication: Company‐ specific drivers among early and late adopters Corporate Social Responsibility and Environmental Management Provided in Cooperation with: John Wiley & Sons Suggested Citation: Kunkel, Kyra; Wigge, Katharina; Lueg, Rainer (2024) : Corporate social responsibility sophistication: Company‐specific drivers among early and late adopters, Corporate Social Responsibility and Environmental Management, ISSN 1535-3966, John Wiley & Sons, Inc., Chichester, UK, Vol. 32, Iss. 1, pp. 894-910, https://doi.org/10.1002/csr.2998 This Version is available at: https://hdl.handle.net/10419/313695 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ RESEARCH ARTICLE Corporate social responsibility sophistication: Companyspecific drivers among early and late adopters Kyra Kunkel 1 | Katharina Wigge 1 | Rainer Lueg 1,2 1 Institute of Management, Accounting and Finance, Leuphana University Lüneburg, Lüneburg, Germany 2 Department of Business and Economics, University of Southern Denmark, Kolding, Denmark Correspondence Rainer Lueg, Institute of Management, Accounting and Finance, Leuphana University Lüneburg, Universitätsallee 1, 21335 Lüneburg, Germany. Email: [email protected] Abstract This study examines the internal company drivers of corporate social responsibility (CSR) sophistication from a diffusion theory perspective. Bertram et al.'s (2015) framework on implementation drivers of innovations is used as our basis to operationalize the internal company drivers influencing CSR sophistication. We conduct fixed-effects regressions on a sample of 1919 international for-profit companies listed on the STOXX 1800 index (17,848 company years over the period 2002– 2020) and explore several sub-portfolios. This study finds that management training, board skills, CEO compensation based on total shareholder return, and quality management systems drive CSR sophistication. Management training is the strongest and most consistent driver. Our analyses show that the effects of the identified drivers are strongest for portfolios of companies with previously low CSR sophistication. Moreover, early adopters appear to be motivated to utilize CSR for both economic reasons and legitimacy. While we find that board members with a finance background improve CSR sophistication, we also show that this increase mainly stems from improving governance practices. Last, we show that CSR sophistication notably increased over time, and parallel with the per capita wealth of the country that hosts its headquarters. Overall, this study is the first to investigate the internal company drivers of non-binary CSR sophistication using large-scale panel data, thereby exploring the effects of early/late adoption and the individual pillars of E, S, and G. KEYWORDS board skills, compensation, CSR sophistication, diffusion theory, early adoption, leadership skills, management training, quality management systems JEL CLASSIFICATION M10, M40, Q56 1|INTRODUCTION This article explores the organizational factors that influence corporate social responsibility (CSR) implementations. CSR is a voluntary practice whereby firms address social and environmental interests in corporate interactions with stakeholders (Commission of the European Community, 2001). Sophisticated CSR requires the integration of key processes across organizational hierarchies such as accounting, operations, and management (Ansari et al., 2010; Asif et al., 2013; Burkert & Lueg, 2013; Lueg & Radlach, 2016). The Received: 10 June 2024 Revised: 12 September 2024 Accepted: 24 September 2024 DOI: 10.1002/csr.2998 This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2024 The Author(s). Corporate Social Responsibility and Environmental Management published by ERP Environment and John Wiley & Sons Ltd. 894 Corp Soc Responsib Environ Manag. 2025;32:894–910. wileyonlinelibrary.com/journal/csr literature suggests that the implementation of CSR is a complex process that is influenced by both internal and external drivers. We recognize four groups of drivers: (i) institutional drivers that induce companies to gain approval from influential stakeholders (Campbell, 2007); (ii) economic drivers that motivate companies to implement CSR in order to improve long-term shareholder value (Colucci et al., 2020; Wobst et al., 2023); (iii) organizational drivers that adjust CSR to the chosen strategy and structure of a company, such as its complexity, or governance (Läger et al., 2022); and (iv) individual drivers that can also affect CSR implementations through, for instance, the skills and values of leaders (Agle et al., 2007). Institutional drivers are external, whereas the other three groups are company-specific. Despite the vast amount of literature on CSR and its drivers, research gaps still exist. First, many studies tend to focus on external drivers, thereby avoiding discussions of the fuzziness and endogeneity of internal company drivers (Campbell, 2007). Few exceptions exist (Kind et al., 2023; Laguir et al., 2019; Petrenko et al., 2016; Sajko et al., 2021). Second, the body of existing research on internal company drivers (economic, organizational, and individual) mostly covers corporate governance issues, especially board-related drivers (Beji et al., 2021), or political drivers. Third, many studies conduct static analyses of longitudinal data, or investigate rather short time horizons (Marano & Kostova, 2016; Miska et al., 2016). Marano and Kostova (2016) emphasize that CSR adoption is shaped by institutional complexity and argue that long-term horizons are critical to understanding CSR adoption dynamics across multiple institutional contexts. Likewise, Miska et al. (2016) suggest that short-term analyses may fail to capture how CSR responsiveness varies depending on both global CSR strategies and local responsiveness. In this vein, the shifting importance of CSR drivers across time, company types, or singlecountry settings could use further elaboration. The seminal implicit and explicit institutional framework of Matten and Moon (2008) provides a comparative perspective, showing how CSR adoption evolves across context and time. Lozano (2015) emphasizes the importance of adopting a more integrated, multi-level, longitudinal approach to CSR that considers dynamic interactions between factors that drive CSR. Most recently, Crifo et al. (2019) highlight the role of corporate governance in sustaining CSR initiatives over longer time horizons. Fourth, it is a novelty to the field to understand how CSR sophistication changes over time (Babiak & Trendafilova, 2011; Cetindamar, 2007; Colucci et al., 2020; Crilly et al., 2012). Most extant studies use binary classifications of adopters versus non-adopters that do not account for the fact that CSR initiatives—despite carrying the same name— might comprise practices that vary greatly across companies and even within the same company over time. Fifth, the bulk of the current academic literature on CSR implementation within companies is grounded in case study research and interviews (Pistoni et al., 2016; Sendlhofer, 2020; Vidal et al., 2010) while most of the quantitative research employs survey data (Cetindamar, 2007). Archival data can help avoid non-response biases that may be present in surveys, and provide novel insights (Lozano, 2015). Specifically, Laguir et al. (2019) suggest a quantitative evaluation of internal drivers of CSR sophistication. To address these relevant gaps, we pose the following research question: “How do internal company factors cause differences in CSR sophistication?” Our study builds on the concept of practice sophistication as proposed by Ansari et al. (2010), and applies Bertram et al.'s (2015) framework. This framework consists of competency, organizational, and leadership drivers that influence the sophistication of a practice. The aim is to explore the influence of internal company factors on CSR sophistication and compare the differences between adopters and non-adopters. We examine a sample of 1919 international companies listed in the STOXX Global 1800 Index using archival data from 2002 to 2020 in a fixed-effects regressions model. The results suggest that competency, leadership, and organizational factors have a positive and significant effect on the CSR sophistication of a business. Competency, assessed by training, exhibited the highest and most consistent impact of the drivers across all assessments. These results are especially pertinent for businesses that are just starting to embrace CSR, as well as those with low levels of CSR sophistication. They also imply that late adopters are driven more by external pressures, such as regulations, and the need for legitimacy. Furthermore, the study suggests that companies can increase the sophistication of their CSR practices if they work on the factors this study identifies. 2|THEORETICAL FOUNDATION 2.1 |CSR implementation and CSR sophistication in diffusion theory Whiletherearemultiplecontext-specific definitions of CSR (Dahlsrud, 2008), it is generally understood as a practice in which companies incorporate social and environmental factors into their operations and interactions with stakeholders on a non-binding basis, promoting the ability of future generations to meet their own needs. This study understands CSR as a management practice because it is a series of practices managers use to enact sustainability (Shapiro, 2016). To be successful, CSR must be integrated into all corporate levels and processes (Asif et al., 2013). The diffusion of CSR practices within an organization follows the principles of organizational learning and adaptation, where new ideas or practices are adopted incrementally across various departments and management levels. This dissemination is not linear; it often involves feedback loops where practices are refined as they move through the organization (Ansari et al., 2010). This study considers CSR implementation to encompass both adoption and sophistication. We explore the idea that companies may utilize different levels of sophistication when it comes to implementing CSR practices, rather than simply adopting or not adopting them in a binary fashion (Ansari et al., 2010; Etzion, 2014). This diffusiontheoretic perspective allows for a more comprehensive understanding of the CSR practices employed by companies than the simple KUNKEL ET AL.895 dichotomy of adoption and non-adoption (Ansari et al., 2010). According to Ansari et al. (2010), practices face greater variations if they are complex, divisible, and widely interpretable—and CSR is a relatively complex practice (Asif et al., 2013). As a result, variations in its drivers should disproportionally affect differences in CSR sophistication. Cetindamar (2007) notes that while companies may formally commit to seemingly clear and strictly defined CSR initiatives such as the UN Global Compact, their actual practices often vary significantly. These variations remain largely undetected by most research because such initiatives are grouped under the same overarching name. Crilly et al. (2012) present a nuanced perspective and challenge a binary view of adopters versus non-adopters by showing that companies may engage in CSR practices through varied strategies. Babiak and Trendafilova (2011) add that pressures to adopt CSR practices differ significantly across industries and geographies, reinforcing the argument that the distinction between adopters and non-adopters oversimplifies the complex dynamics of CSR. Further, Colucci et al. (2020) underscore that companies often exhibit a discrepancy between CSR talk and walk, reinforcing that a simple adoption/non-adoption framework fails to capture the varying degrees of CSR sophistication. This fits the empirical findings that companies implement CSR in unique ways (Campbell, 2007). Moreover, CSR is widely interpretable, as it needs to be adapted to the corporate contexts and strategic objectives (Dahlsrud, 2008). Last, different organizational factors are shown to lead to different levels of CSR implementation (Darnall et al., 2010). The implementation of CSR practices is often measured by environmental, social and governance (ESG) scores, which provide a composite evaluation of a company's environmental, social, and governance performance (Bauckloh et al., 2021; Refinitiv, 2021). In their text-mining review, Park et al. (2023) explain that while CSR focuses on a company's broader societal responsibilities, ESG provides clear measures to assess corporate behavior across environmental, social, and governance domains (Damtoft et al., 2024). The authors highlight that although CSR is more qualitative, ESG scores quantify company actions, making them a useful proxy for CSR sophistication in empirical studies. Empirically, companies with higher ratings have demonstrated more sophisticated CSR strategies. Bauckloh et al. (2021) provide empirical evidence showing that signatories of the UN PRI significantly improve their ESG integration post-signing. The authors conclude that higher ESG scores are indicative of a company's genuine commitment to CSR. Their study also highlights that early adopters (signatories) tend to implement more robust CSR strategies. Eccles et al. (2014) also support this connection, demonstrating that companies with higher ESG scores also tend to develop distinct governance structures and long-term orientations that improve their performance on CSR-related metrics over time. Kölbel et al. (2020) affirm that ESG scores are not only a reflection of a company's current CSR practices but also play a pivotal role in influencing investment decisions that can further encourage companies to enhance their social responsibility efforts. We would like to further clarify the relationship between our construct of CSR implementation (adoption and sophistication) that we measure with manifest data (ESG score) and further literature that employs ESG scores as a measure of sustainability/CSR performance, which we would consider the outcome of a successful CSR implementation. We view ESG scores as a measure of the CSR practices implemented by listed companies, rather than as a direct measure of their overall performance. The performance of these companies is the attainment of their corporate purpose/strategies. Performance is not explicitly measured in diffusion theoretical studies since the research objective is understanding the fit with the company (Ansari et al., 2010). 1 2.2 |Framework for drivers of CSR implementation Following the advice of Ansari et al. (2010), it is essential to determine company-specific drivers that may facilitate the implementation of a practice. The framework proposed by Bertram et al. (2015) serves as a basis to study the sophistication of practices, particularly in the public services sector, health-related academic settings (Damschroder & Hagedorn, 2011), and the implementation of innovations (Bertram et al., 2015). This framework can be applied to research on CSR as an innovative management practice that leads to change within companies. The framework has three main components: competency, leadership, and organizational drivers. The competency drivers refer to staff selection, training, coaching, and performance assessment meant to develop the knowledge, skills, and capacity necessary for successful implementation of new concepts (Bertram et al., 2015). The leadership drivers distinguish between technical and adaptive implementation challenges based on clarity and consensus concerning the problems and solutions (Bertram et al., 2015). Finally, the organizational drivers create an environment that offers resources for administration, funding, policy, and the processes required for competency-building (Bertram et al., 2015). The framework and its constructs are illustrated in Figure 1. 2.3 |A diffusion theory approach: How practices spread, and change as they do Our approach to understanding the drivers of CSR sophistication builds on diffusion theory. Diffusion is defined as “the process by which an innovation is communicated through certain channels over time among members of a social system”(Rogers, 1983, p. 5). Diffusion theory explains the patterns through which innovations or innovative practices spread among adopters within a field of practice (Abrahamson, 1991; Rogers, 1983). However, there is a lack of recognition of how practices vary among adopters throughout the diffusion 1 As examples of such ontologically different studies in related fields, Mishra (2017) highlights the impact of post-innovation CSR performance on firm value, focusing on the tangible outcomes of CSR initiatives. Wang et al. (2018) examine the readability of CSR reports as an indicator of CSR performance, showing how clear communication affects the perceived effectiveness of CSR activities. 896 KUNKEL ET AL. process (Strang & Macy, 2001). Rogers (1983) has proposed that the diffusion of a practice is influenced by both supply side (referring to the characteristics of the practice and its communication channels) and demand-side (encompassing organizational demands and prevailing conditions) factors. A substantial body of research in diffusion theory has aimed to understand the motivations underlying the initial adoption of practices among companies (Fiss & Zajac, 2004). Rational accounts emphasize potential economic benefits from the adoption of a practice, while social accounts prioritize the attainment of legitimacy (Abrahamson, 1991; Ansari et al., 2010; Strang & Macy, 2001; Tolbert & Zucker, 1983). Early studies suggested a connection between adoption time and the motives for adoption (Ansari et al., 2010;Rogers,1983; Tolbert & Zucker, 1983), with early adopters being motivated by rational accounts and late adopters by social accounts (Ansari et al., 2010; Tolbert & Zucker, 1983). More recent studies, however, have suggested that both rational and social motivations coexist during each stage of the diffusion process (Ansari et al., 2010; Kennedy & Fiss, 2009). A complementary stream of diffusion research examines how adopted practices diffuse within adopters, and how this translates into differences in sophistication. Ansari et al. (2010) clarify that diffusion theory explains how practices do not remain static as they diffuse but are instead subject to variations and adaptations within organizations based on the fit between the practice and the adopting organization's technical, cultural, and political dimensions. This dynamic fit is what drives different levels of CSR sophistication, as organizations adapt CSR practices in ways that best align with their specific internal and external contexts (Ansari et al., 2010; Lueg & Carvalho e Silva, 2022). Thereby, we apply the compatibility in our framework to explain CSR sophistication (Ansari et al., 2010). The demand-side factors, such as organizational needs, objectives, and prevailing structures, are volatile and adjustable among corporations adopting CSR. Building on this base of diffusion theory, Ansari et al. (2010) outline three drivers that affect the demand-side fit: (i) technical, (ii) cultural, and (iii) political influences. We began our exploration by considering the theoretical concepts of technical fit, cultural fit, and political fit. These concepts provided a foundational basis for examining the diffusion of practices, as demonstrated in the works of Etzion (2014) and Lueg and Carvalho e Silva (2022). To build on this foundation, we turned to Bertram et al. (2015) whose framework complements and operationalizes these concepts. By integrating Bertram et al.'s (2015) approach, we were able to investigate practice sophistication more effectively. This integration has been particularly useful in analyzing practice sophistication, as seen in the studies by Aarons et al. (2011), and Damschroder and Hagedorn (2011). First, the technical fit describes the compatibility of the practice with existing technologies in the company (Ansari et al., 2010). Tarí (2011) suggests that a stakeholder focus could be sharpened through the implementation of management practices, a view which aligns with the definition of organizational drivers in Bertram et al.'s (2015) framework. Second, cultural fit describes the compatibility of a practice with the cultural values, beliefs, and extant practices of potential adopters (Ansari et al., 2010). Sendlhofer (2020) demonstrates that when employees possess a shared knowledge of FIGURE 1 Implementation drivers according to Bertram et al. (2015). Adapted to corporate social responsibility (CSR) sophistication. KUNKEL ET AL.897 the moral obligation of CSR, they may promote CSR initiatives within the company. This is congruent with the competency driver proposed by Bertram et al. (2015), which seeks to induce behavioral transformation among employees through training and mentoring. Third, political fit refers to the alignment of a practice's implicit or explicit norms with the interests and agendas of potential adopters. Du et al. (2013) discovered that a higher proportion of transformational leadership among managers was associated with a positive effect on CSR. This is also consistent with Bertram et al.'s (2015) framework, which suggests that an open leadership style (adaptive leadership) is necessary to effectively respond to a practice that is influenced by uncertainty. 2.4 |Hypothesis development 2.4.1 | Competency drivers According to Bertram et al. (2015), four competency drivers foster the sophistication of a practice: staff selection, training, coaching, and performance assessment. Staff selection involves recruiting people with necessary skills that are difficult to teach, while training and coaching equip existing staff with appropriate softand hard-skills. The implementation of CSR relies on providing existing staff with the necessary skills and competencies (Bertram et al., 2015). The training and coaching components are the primary drivers of this (Sult et al., 2024). Larrán Jorge et al. (2016) outline that regular training programs are key to successful CSR implementation, as they ensure that managers have the requisite competencies to enact innovations. González-Ramos et al. (2023)showrelationships between knowledge management exploration and social and environmental CSR, as well as knowledge management exploitation and economic CSR. Performance assessment, meanwhile, ensures continuous monitoring for further improvement (Bertram et al., 2015). The literature suggests that training alone is not sufficient to develop staff confidence and competence related to practice (Fixsen et al., 2009). While training provides employees with basic knowledge and skills, confidence in their application comes through on-the-job coaching (Sult et al., 2024). Coaching and monitoring also ensures that skills are maintained and further developed (Bertram et al., 2015). Managers who are responsible for developing talentactascoaches(Sultetal.,2024). They must motivate their staff to achieve the company's strategic goals and create a positive work environment in which employees can obtain the required skills (Ghobadian et al., 2007). To this end, managers must have the coaching skills necessary to guide staff through a CSR implementation(Sultetal.,2024). Therefore, the following hypothesis is proposed: Hypothesis 1. The provision of leadership training positively and significantly influences CSR sophistication. 2.4.2 | Leadership drivers The strategic decisions of a company are largely determined by its leadership team, and this is especially relevant when considering the firm's engagement in CSR (Schuhmacher et al., 2022). Top management teams (TMTs) typically consist of the two highest levels of management within a company (Finkelstein & Hambrick, 1996). Leadership orientation has a direct effect on strategic decision-making (Hambrick & Mason, 1984), making it important to consider the characteristics of TMTs with respect to CSR sophistication. Research has demonstrated that demographic differences in TMTs have an effect on the adoption of management practices, strategic change, and decision-making in a company (Jensen & Zajac, 2004; Schuhmacher & Burkert, 2022). This is due to the fact that these differences shape the mental models of these managers, which, in turn, shape beliefs about corporate purpose and if implementations are feasible (Fiss & Zajac, 2004). Mental models are continually adjusted in response to learning (Burkert & Lueg, 2013) and studies suggest that the educational background of executives can influence CSR. Manner (2010) documented that a CEO with a bachelor's degree in economics has a negative association with CSR. Prabowo et al. (2017) found that the positive effect of a higher education on CSR disclosure lessened when directors held an MBA or had an educational background in accounting or economics. Godos-Díez et al. (2015) showed that students exposed to management theories were less likely to consider stakeholder interests. Sobczak et al. (2006) discovered that business school graduates viewed shareholders as the most important group of stakeholders. It is suggested that business schools promote self-serving interests that prioritize financial sustainability over broader CSR (Alajoutsijärvi et al., 2015). Research indicates that business students tend to be less cooperative than their counterparts from other academic fields (e.g., Boone et al., 1999), displaying a more individualistic attitude (Wei et al., 2018). Additionally, economic education is thought to be inadequate in terms of considering the implications of CSR (Arce, 2004). Given the entrenched emphasis on shareholder value in economics, it is likely that how a strong financial background shapes the beliefs of TMTs makes them less likely to embrace CSR initiatives (Fiss & Zajac, 2004). In addition to educational background, Hambrick and Mason (1984) and Manner (2010) suggest that the prior professional experiences of TMTs in the industry are significant factors in determining their willingness to adopt CSR. Manner (2010) suggests that CEOs with broader career experiences are more likely to engage in proactive CSR, while those with narrower expertise, such as a degree in economics, tend to exhibit lower levels of proactive CSR. Carpenter et al. (2004) suggest that TMTs with diverse industry experiences are more open to strategic change, while those with single-industry expertise may be less adaptable to new initiatives. Boone and Hendriks (2009) propose that TMTs with diverse functional backgrounds are more likely to engage in high-quality decision-making and improve firm performance due to the variety of their expertise. Furthermore, Musteen et al. (2006) find that directors with external work experience are more open to change and possess greater adaptive leadership skills. These findings are further supported by Mazutis (2014), who reveal that a broader range of functional experiences is associated with a higher adoption of CSR initiatives over time. Thus, directors with an industry-specific background, who typically have more undiversified 898 KUNKEL ET AL. work experiences, may be less likely to implement CSR. We hypothesize: Hypothesis 2a. A financial or industry-specific background of the board negatively influences CSR sophistication. Although executives often develop mental and behavioral models that do not prioritize CSR, companies can leverage reward systems to incentivize desired behavior (Profitlich et al., 2021). Prior research shows that variable and long-term oriented compensation components (Profitlich et al., 2021; Schuhmacher et al., 2022) can play a role in steering executives toward CSR, although the financial benefits for the firm associated with CSR actions, such as reduced risks of legal and social sanctions, improved access to resources, and increased capability to acquire employees, customers, and suppliers can take time to develop (Schuhmacher et al., 2022). If executives view CSR as a tool for long-term financial performance improvement, variable compensation linked to long-term financial objectives should encourage more sophisticated CSR. We hypothesize: Hypothesis 2b. A variable long-term incentivized CEO compensation structure positively influences CSR sophistication. 2.4.3 | Organizational drivers Quality management systems (QMS) can be seen as a significant facilitator for the refinement of CSR. Bertram et al. (2015) explored organizational drivers which may support the sophistication of a new practice. Their work finds that it requires the implementation of a management practice that aligns with CSR. Research conducted by Fisscher and Nijhof (2005), Ghobadian et al. (2007), Larrán Jorge et al. (2016), McAdam and Leonard (2003), and Waddock and Bodwell (2004) shows that QMS are similar to CSR in multiple ways. In particular, they share foci on stakeholders and corporate conduct/business ethics. This is for two reasons. First, facilitative administration plays a key role in ensuring that existing policies, processes and working conditions are compatible with new practices (Bertram et al., 2015). CSR requires operations to be tailored to meet the needs of stakeholders (Tarí, 2011). The implementation of a QMS necessitates an assessment of socially responsible behavior, which is an important element of both environmental and social performance (Tarí, 2011). Moreover, a QMS should include process evaluation to ensure production accuracy and efficiencies (Tarí, 2011). This may support companies in creating environmental management practices (Lueg & Radlach, 2016), big data analytics (Choi & Park, 2022), and a waste management system (Hassan, 2013). Second, the availability of data is essential to increase the impact of CSR. Data-driven decision-making is fundamental for effective management practices, as highlighted by Bertram et al. (2015). Within this context, companies that have adopted a QMS such as Six Sigma are more easily able to generate the data necessary for identifying leverage points for the implementation of CSR (Ghobadian et al., 2007). We hypothesize: Hypothesis 3. The prior implementation of a QMS positively and significantly influences CSR sophistication. 2.4.4 | Timing influences Bertram et al. (2015) suggest that timing affects the implementation of practices. This is in line with diffusion theory (Ansari et al., 2010). According to Strang and Macy (2001) and Tolbert and Zucker (1983), later adopters are motivated by sociology and earlier adopters by economics when adopting a practice. Bauckloh et al. (2021) indicate that early adoption is often linked to higher practice sophistication, while later adopters may be more interested in gaining a better reputation without actually changing behaviors. Also, Wang and Sarkis (2017) propose that early adoption, driven by economic motives, links to higher sophistication. We hypothesize: Hypothesis 4a. The effects of organizational drivers on CSR sophistication will be stronger for early adopters. Late adoption of CSR strategies may be a more viable option for companies than early implementation, as it can result in financial savings (Fiss & Zajac, 2004; Lueg & Carvalho e Silva, 2022;Tolbert& Zucker, 1983). Additionally, it may still be received favorably by the stock market (Fiss & Zajac, 2006). These companies are aiming for legitimacy in the field, achieved via their branding and image, stakeholder relations, or improved organizational culture and are less likely to repeat the mistakes of early implementers. Furthermore, the low level of regulation surrounding CSR implementations allows companies to espouse CSR at a symbolic level (Kolk & Tsang, 2017). Tolbert and Zucker (1983) suggest that this could be an effective way for companies to reap the benefits of a practice without the associated costs. We hypothesize: Hypothesis 4b. The effects of the investigated implementation drivers on CSR sophistication will be stronger for companies with a low CSR sophistication. 3|RESEARCH DESIGN 3.1 |Sample selection To answer the research question, a sample of CSR adopters differing in CSR sophistication is required. Since an international sample is likely to fulfill these criteria (Matten & Moon, 2008) the sample selection is based on companies listed in the STOXX 1800 Index. CSR sophistication substantially varies among the selected companies on a scale from 0 to 100 from minimum 0.47 to a maximum of 95.21 with a mean of 53.11 and a standard deviation of 20.20 (Table 1). KUNKEL ET AL.899 TABLE 1 Descriptive and correlation statistics. Source Mean SD Min Max (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) ESG_Score TR.TRESGScore 53.11 20.20 0.47 95.21 1.000 (2) Mgmt_Training TR.MgtTraining 0.61 0.49 0 1 0.522 *** 1.000 (3) Board_Spec_Skills TR. AnalyticBoardSpecificSkills 54.34 23.87 0 100 0.199 *** 0.161 *** 1.000 (4) QMS TR.SixSigmaQMS 0.21 0.41 0 1 0.226 *** 0.181 *** 0.057 *** 1.000 (5) CEO_Comp_TSR TR.CEOCompTSR 0.46 0.50 0 1 0.204 *** 0.041 *** 0.037 *** 0.001 1.000 (6) FTE TR.Employees 9.55 1.46 4.71 12.78 0.332 *** 0.231 *** 0.113 *** 0.199 *** 0.021 *** 1.000 (7) Board_Size TR.CGBoardSize 2.35 0.28 1.61 3.04 0.162 *** 0.099 *** 0.095 *** 0.055 *** 0.099 *** 0.342 *** 1.000 (8) Tobin_Q TR.CompanyMarketCap TR.TotalEquity 1.24 1.09 0.11 8.01 0.073 *** 0.106 *** 0.005 0.012 0.055 *** 0.136 *** 0.221 *** 1.000 (9) Leverage TR.TtlDebtToTtlEquityPct 72.59 58.57 0.11 280.19 0.067 *** 0.029 *** 0.040 *** 0.041 *** 0.095 *** 0.064 *** 0.133 *** 0.254 *** 1.000 (10) Blockholder NOSHIC 5.45 6.97 0 32 0.133 *** 0.140 *** 0.055 *** 0.043 *** 0.174 *** 0.163 *** 0.172 *** 0.154 *** 0.018 ** 1.000 (11) GDP World Bank 10.76 0.24 9.08 11.42 0.083 *** 0.004 0.029 *** 0.026 *** 0.284 *** 0.028 *** 0.163 *** 0.145 *** 0.015 ** 0.149 *** 1.000 Note: This table displays the summary statistics (mean, standard deviation, minimum, maximum) for the investigated variables. Financial institutions are excluded from the sample resulting in 17,848 firm-year observations for all variables. In the following columns, Spearman's rank correlation coefficients of the variables in the descriptive statistics are shown. FTE, Board Size, and GDP are winsorized at the 1% and 99% level and logarithmized. The variable Blockholder is only winsorized at the 1% and 99% level. Due to severe outliers Leverage is winsorized at the 5% and 95% level. The variables are defined as follows: ESG_Score =Combined company score based on the self-reported information in the environmental, social and governance pillars; Mgmt_Training =Binary variable which is marked as one when the company claims to provide regular staff and business management training for their managers; Board_Spec_Skills =Percentage of board members who have either an industry-specific background or a strong financial background; QMS =Binary variable which is marked as one if the company applies quality principles; CEO_Comp_TSR =Binary variable which is marked as one when the CEO's compensation is linked to total shareholder return; FTE =Ln of the number of full-time equivalent employees; Board_Size =Ln of the total number of board members; Tobin_Q =Market capitalization of a firm divided by its assets replacement costs which are simplified as the equity book value (ratio); Leverage =Ratio of total debt to total equity; Blockholder =The percentage of shareholdings of 5% or more held as long-term strategic holdings by investment banks or institutions; GDP =Ln of the economic output of a nation per person. A time lag of 1 year is applied to all variables except for the ESG score. 900 KUNKEL ET AL. Companies that have entered or left the Index are included as well to mitigate survivor bias. By including only listed companies, the sample is homogeneously comprised of large corporations. The timeframe of the study was chosen as 2002 to 2020, as complete ESG scores were available for this period at the time of data retrieval. The initial sample consisted of 52,726 company-year observations. Thereafter, observations with missing values and financial institutions (including insurances and banks) were deleted. To reduce the influences of outliers, the variables were winsorized. The final sample consisted of 1919 individual companies with 17,848 company-year observations. The sample distribution was balanced among the continents of the Americas, Asia and Oceania, and Europe. 3.2 |Dependent variable and independent variables In accordance with prior research measuring implementation behavior (Bauckloh et al., 2021), the dependent variable CSR sophistication was proxied by the Refinitiv ESG score, available in the Thomson Reuters ASSET4 database. This relative score scales from 0 to 100, comparing a company's performance to its industry peer group (Refinitiv, 2021). 2 This study draws on four independent variables retrieved from the Eikon Database. To account for the competency driver, training and coaching, the variable management training was examined. It is a binary variable, taking the value one if the company provides regular training to their managers, and zero otherwise. A company is considered to provide management training if it offers training to managers on how to lead teams and handle processes, and if it offers mentoring programs for, as yet, non-managerial staff. In line with Larrán Jorge et al. (2016), such training is designed to managers with the leadership skills and coaching competencies necessary to implement CSR. We examined two variables to measure leadership drivers. First, we used the variable board skills which measures the percentage of board members who have either an industry-specific or a distinctive financial background. It is a proxy for the board's openness to change and thus its inclination toward CSR. Second, to account for a long-term incentive in the compensation structure of the TMT, a link of the CEO's compensation to total shareholder return (TSR) was included. This is a binary variable, which is assigned the value one if the CEO's compensation is linked to TSR, and zero otherwise. We chose TSR as prior studies find that CSR is positively associated with the market value of a company (Ademi & Klungseth, 2022) and TSR (Lueg & Pesheva, 2021). Last, we included the binary variable QMS which takes the value one when the company applies a quality principle such as Six Sigma or Total Quality Management, and zero otherwise. 3.3 |Control variables We chose control variables that have been associated with CSR sophistication in diffusion studies. Our study controls for company-specific, board-specific, investor-related, and institutional-related influences. As larger companies are more visible and hence face more external pressure to engage in CSR, we included company size, proxied by the natural logarithm of the number of full-time employees (Läger et al., 2022). To control for the influence of the company's past performance, the market-based performance measure Tobin's Q was incorporated. It is calculated by dividing a company's market capitalization by its equity book value. Moreover, the leverage ratio of the companies was employed, calculated as the ratio of total debt to total equity. Companies with a high-leverage ratio face lower free cash flows, indicating fewer funds to finance CSR activities (Sun et al., 2020). To account for board-related effects, we included the natural logarithm of the number of board members.Itisexpectedthata higher number of board members will be associated with a greater diversity of opinions, leading to an increased likelihood that the board considers CSR to be important (Beji et al., 2021). To account for investor influences, the investor concentration was controlled by including the percentage of blockholders (holding 5% or more in shares). Thereby, the cumulative power and long-term orientation of those shareholder groups areaccountedfor(Burkert&Lueg,2013; Fiss & Zajac, 2004). Since benefits of CSR only materialize in the long run, long-term institutional investors are expected to motivate companies to engage in CSR (Kim et al., 2019). The institutional pressure for CSR varies largely across different countries, therefore the gross domestic product (GDP)percapitawas included: it is anticipated that wealthier countries will be found to exert more pressure on corporations to engage in CSR (Lim & Tsutsui, 2012). All control variables were retrieved from the Eikon database except for GDP, which is available on the World Bank website (Worldbank, 2022). 3.4 |Regression model We test the hypotheses with a fixed effects regression on the panel data, using the following model: ESG_Score i,t =β 0 +β 1 Mgmt_Training i,t1 +β 2 Board_Skills i,t1 +β 3 QMS i,t1 +β 4 CEO_Comp_TSR i,t1 +β 5 FTE i,t1 +β 6 Board_Size i,t1 +β 7 Leverage i,t1 +β 8 Tobin_Q i,t1 +β 9 Blockholder i,t1 +β 10 GDP i,t1 +Pγ year +ϵ i,t . In the regression equation Pyear,irepresents the time-fixed effects, while εis the error term. To account for the time delay in information incorporation and to rule out endogeneity concerns, a 1 year time lag was included for all independent and control variables. The Breusch-Pagan-Lagrange-Multiplier-test suggests that heteroscedasticity is present. Furthermore, the Hausman test suggests a fixed 2 Unlike the ESG database of its rival Bloomberg, Refinitiv does not measure CSR reporting but rather externally observable indicators of CSR practices. Companies with Refinitiv ESG scores are thus thought to espouse more sophisticated CSR (Clément et al., 2023). In the systematic literature review by Clément et al. (2023), the authors elaborate on the differences between Refinitiv and Bloomberg ESG scores. Refinitiv scores rely on comprehensive datasets that capture externally verifiable CSR outcomes, making it a more robust tool for assessing CSR. 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