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Contracting With the Government on CSR: Evidence From the Supply Chain

Rui Hu,Karen Jingrong Lin,Albert Tsang

Published 2026 in Corporate Governance: An International Review

ABSTRACT

This study examines the role of government as a major customer in influencing corporate social responsibility (CSR) initiatives among supplier firms. Specifically, it investigates whether firms that rely on government customers are more likely to engage in substantive CSR practices to meet government expectations and maintain strong business relationships. Our findings indicate that supplier firms with greater reliance on government customers exhibit a higher propensity to adopt CSR‐related executive compensation plans, establish CSR committees within their boards of directors, and voluntarily disclose climate change risks in their SEC filings. These effects are more pronounced for firms operating in states governed by Democrats and for smaller firms. To address endogeneity concerns, we employ instrumental variable analysis, difference‐in‐differences estimation, and entropy balancing, all of which reinforce the robustness of our results. This study contributes to the literature on CSR and stakeholder theory by highlighting the government's role as an influential stakeholder in shaping firms' CSR engagement through supply chain relationships. It also extends research on political economy by demonstrating how political leadership at the state level moderates firms' CSR responsiveness to government customers. Our findings suggest that policymakers can leverage government procurement policies to incentivize broader CSR adoption among supplier firms, thereby fostering positive social externalities. Firms seeking to establish or maintain government contracts should consider aligning their CSR strategies with government expectations to enhance their business relationships and long‐term sustainability.

PUBLICATION RECORD

  • Publication year

    2026

  • Venue

    Corporate Governance: An International Review

  • Publication date

    2026-01-09

  • Fields of study

    Not labeled

  • Identifiers
    DOI 10.1111/corg.70023
  • External record

    Open on Semantic Scholar

  • Source metadata

    Semantic Scholar

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