We explore the non-linear relationship between Corporate Social Responsibility (CSR) and firm performance in India. In addition, we also investigate the mediating effect of firms’ innovation and pro-environmental strategies in explaining the relationship between CSR and firm performance. This research is conducted both at aggregate and disaggregated levels. Our sample consists of 21,138 firm-year observations from 2009 to 2021 for the manufacturing sector in India. The empirical findings reveal a significant negative relationship between CSR and the financial performance of firms with a positive effect on the lag of CSR. Using the Panel Threshold Model (PTR), we also arrive at a non-linear relationship between CSR and corporate financial performance. Our results also indicate that a firm’s pro-environmental strategy partially mediates the relationship between CSR and firm performance, whereas corporate innovation is not a significant mediating factor. The outcomes of this study have significant policy implications and managerial insights. Consequently, these findings enhance executives’ understanding of the significance of CSR as a strategy to strengthen internal resources to achieve sustainable competitive advantage.


Keywords: Corporate Social Responsibility, Corporate Sustainability, Firm Performance, Indian Rummy Game, Environmental Expenditure, Indian Firms

JEL Codes: C55; G3; L25, M14; Q56; Q57