Corporate social responsibility, real options, and value: the role of internal resources

While the debate on corporate social responsibility (CSR) has gained prominence among investors and corporate managers, the academic discussion on the impact of CSR investments on firm value has remained unresolved due to a lack of a solid theoretical foundation and consistency, as well as a sufficiently developed theory. This chapter builds on the Real Options Theory (ROT) and on the Resource-Based View (RBV) to conceptualize the key optional value drivers of CSR investments and to understand the relationship between these drivers and firm’s internal resource endowment, thereby providing a sound theoretical foundation for future empirical research. The chapter concludes that to fully understand the value process of CSR, it is necessary to consider two additional variables that have been neglected in previous literature, such as the intrinsic flexibility of CSR investments and the contextual flexibility of CSR investments. The chapter contributes to sustainable finance literature by integrating CSR issues into the financial decision-making process, through a pioneering approach based on the analysis of internal resources for evaluating CSR investments from a real options perspective.