Decline in local newspapers reshapes corporate social responsibility, research finds

LAWRENCE — Corporate social responsibility (CSR) describes a business model, strategy or philosophy in which companies integrate social and environmental concerns into their operations and interactions with stakeholders.

But what happens if evidence of that behavior isn’t adequately passed on to the public due to shrinking media coverage?

“Local newspapers are uniquely embedded within communities. They operate under a distinct community-oriented logic that shapes both accountability and visibility,” said Jun Ho Lee, assistant professor of strategy and international business at the University of Kansas.

His new article, “When the Headlines Fade, the Story Goes On: Investigating How Local Newspaper Decline Affects Firm CSR Engagement,” finds that the decline of local newspapers reduces both external oversight and public visibility, weakening the pressures and incentives for companies to maintain corporate social responsibility engagement. The study further shows that changes in the local information environment shape how firms strategically adjust behaviors sensitive to scrutiny and public recognition. The article is published in Organization Science.

Co-written by Zhiyan Wu of Zhejiang University in China and Michael Bednar of the University of Illinois, the article notes that prior research on local newspaper decline typically focuses on the loss of monitoring and the resulting increase in agency problems or corporate misconduct. In contrast, this research argues that local newspapers historically played dual roles: They not only monitored firms but also enhanced firms’ prominence and legitimacy within communities.

“You can perceive CSR as more of a normative behavior, and if corporations want to be a good citizen in our society, they are supposed to behave responsibly. That is a baseline assumption. But in reality, CSR is very complex behavior. It’s often not a moral thing; it’s a strategic thing,” Lee said.

That includes managing stakeholder perceptions and maintaining legitimacy. Therefore, when local newspapers decline and firms experience changes in external scrutiny and visibility, CSR becomes a particularly useful outcome for examining how firms adapt to evolving informational environments, he said.

Lee emphasized how a lot of scholars have focused on the role of media in corporate activity. Yet they primarily focus on the watchdog aspect.

“We not only shed a light on this monitor role of a local newspaper but also pay attention to media as a visibility enhancer in corporate behavior,” he said. “Based upon that conventional wisdom in prior research, you might intuitively predict that corporations with a limited oversight by local media — due to the decline of the newspapers — feel less pressure and are more likely to increase in misconduct.”

But that intuition isn’t exactly correct, Lee said. The researchers clarified corporate response through two main contributions:

• The article reconciles competing predictions regarding how media affects CSR by confirming that the decline of local newspapers can increase or decrease CSR, depending on the broader informational environment.
• It extends the growing literature on local media and corporate behavior by moving beyond a pure monitoring perspective and theorizing the dual roles of oversight and visibility. 

“More broadly, the paper shows how governance operates not only through direct monitoring but through visibility and social evaluation within informational environments,” Lee said.

To establish these findings, Lee and his colleagues combined info from the United States Newspaper Panel and the Editor and Publisher Yearbook. This data set tracked changes in daily newspaper availability across U.S. counties from 1996 to 2014, identifying 204 counties that experienced various forms of decrease, including transitions to nondaily publications, mergers and permanent closures. 

“We are in the middle of the disruption of the media industry landscape, not only due to technological innovation but also social, political and environmental change,” he said. “So every single reader has a different perception as well as expectation toward the media industry compared to previous eras.”

If Lee were the CEO of a company with strong ties to a local community, he reveals how the information from his research could be applied:

“We need to shed a light on those dual functions of media, not only conventional wisdom being the watchdog role but additionally using media to promote the reputation, visibility or legitimacy of our behavior,” he said.

A KU faculty member since 2018, Lee researches how external governance mechanisms shape firm behavior and strategic decision-making. His work sits at the intersection of strategic management, corporate governance and international business.

“Ever since my Ph.D. education, I’ve been interested in the relationship between the media and corporate behavior,” Lee said.

The professor said he still firmly believes in the role of a local newspaper as watchdog. 

“But at the same time, we need to acknowledge the mutual beneficial relationship between the local media and local companies, even if it might seem adversarial on the surface,” he said. “Because both of them are local community members. In general, they both want to promote well-being in the community.”