Keeping up with the CSR Joneses: The impact of industry peers on focal firms' CSR performance

Using US-listed firms from 2000 to 2015 as a sample, we report a strong enhancing effect of industry peers' corporate social responsibility (CSR) performance on focal firms' CSR performance. Firms improve their CSR performance by -10.15% standard deviation when other peer firms in the same industry increase their CSR by one standard deviation. Moreover, this peer effect is more substantial when the peer firms are closer to focal firms, are included in SP500 index, and have a relatively larger size than focal firms. Focal firms are less likely to follow industry peers if they are industry leaders, have stronger earnings capacity, occupy foreign business and receive fewer analyst followings. Finally, firms following industry peers' CSR policies achieve less product market shares and poorer performance, but a higher firm value. We suggest that executives should not blindly follow peer firms' suit and strategically invest in CSR to achieve higher competitiveness.