In this paper, we investigate the role of social aspiration levels built upon competitors’ actions in the context of corporate social responsibility (CSR). We suggest that this behavior is motivated by a firm’s expectation to avoid potential penalties resulting from failing to meet social expectations, rather than being driven by expected premiums. Our empirical analysis is based on a sample of 6,369 publicly traded firms in 77 countries and supports our hypotheses. The findings provide a valuable extension to the behavioral theory of the firm (BTOF) by shifting the focus to a setting with high ambiguity and providing a new approach to problem recognition and resolution in problemistic search. We also contribute to the CSR literature by emphasizing the significance of competitors’s actions in firms’ corporate social engagement.
