1 Introduction

The economic literature traditionally emphasizes ‘hard factors’ as the primary drivers of corporate performance and competitive advantage, including patents, innovation, sustainable competitive advantages in supply, and consumer preferences in demand. However, there has been less focus on recognizing competition as a ‘team sport,’ where the quality of internal relationships among workers and between managers and workers, as well as external relationships with stakeholders and other companies along the product chain, plays a crucial role.

To bridge this gap, we aim to conduct an empirical analysis on the effects of corporate social responsibility (CSR) and relational skills on corporate performance, measured by value added per worker. Our research question revolves around how the quality of corporate relationships with workers and stakeholders can impact productivity. We propose three research hypotheses focusing on teamwork skills of hired workers, stakeholder participation, and attention to worker welfare. This paper contributes to theoretical research in fields such as gift exchange, procedural utility, social dilemmas, and the effects of soft skills on productivity, by highlighting the significance of strategic teamwork skills in hiring decisions, stakeholder participation, and worker welfare for enhancing corporate productivity. We examine the effects of these strategic directions through four specific actions: welfare provisions for workers, prioritizing teamwork as a key soft skill in hiring, projects benefiting local businesses, and stakeholder involvement in CSR initiatives. Our focus is restricted to a limited domain of CSR, particularly the social (S) aspect in standard ESG metrics, and specifically on actions visible to local workers and stakeholders at the firm’s headquarters. Thus, we do examine aspects like workers’ rights in supplier or contractor chains, which may not be visible to local employees or stakeholders.

Our focus is driven by the recognition that human relationships wield significant influence, a factor that has been only partially explored in the literature concerning social and economic performance. Indications of their potential positive effects stem from three distinct strands in the literature: firstly, the exploration of social dilemmas in game theory; secondly, the understanding of the impact of soft skills on productivity within the labor market; and thirdly, the insights from participatory utility theory as articulated by Frey and Stutzer (2005, 2006).

In the first strand, game theory has a longstanding tradition that underscores the significance of the quality of human relationships, particularly in thin markets. In scenarios characterized by asymmetric information, incomplete contracts, and non-overlap** competences, various game-theoretic models—such as the prisoner’s dilemma, trust investment game (Berg et al. 1995), traveler game (Basu 1994), and stag hunt game (Skyrms 2001)—highlight social dilemmas where coordination failures and suboptimal Nash equilibria illustrate how low relational skills can result in Pareto-lower outcomes. A common thread among these social dilemmas is that trust represents a form of social risk, as it entails entrusting oneself to others without legal protection.Footnote 1

Consequently, the absence of interpersonal social capital, including trust and trustworthiness, results in a lack of trust, leading to failures in coordination and cooperation. This situation makes it challenging to assemble non-overlap** competencies and experiences necessary for forming teams and generating superadditive effects. Conversely, adopting strategies of ‘relational rationality,’ ranging from minimal forms of communication to more engaging practices such as gift exchange (Akerlof 1984; Bewley 1999), can mitigate coordination failures. These strategies stimulate intrinsic motivations that positively contribute to productivity (Becchetti et al. 2013), thus leading to socially optimal equilibria. More specifically, in the example of gift exchange outlined by Akerlof (1984), a managerial ‘gift’—an action by a manager creating benefits for workers that are not required by managerial duties and are not motivated by previous actions by workers—can elicit gratitude and prompt reciprocity from workers. This reciprocity may manifest as increased productivity and lower rates of absenteeism and turnover. In a broader sense, a gift can be defined as any act of giving that surpasses what is expected based on legal obligations and corporate role tasks. Similar gift exchange mechanisms, when repeated among workers at the same hierarchical level, can foster feelings of gratitude and reciprocity.Footnote 2 As a result, these gift exchange dynamics create robust relational bonds that act as deterrents, raising the costs associated with breaching trust and making cooperation a more probable and resilient outcome in social dilemmas (Becchetti et al. 2012).

These findings suggest that the fundamental characteristics of social dilemmas in game theoretic literature extend to corporate environments. This is evident as potential social dilemmas, coordination failures, and, conversely, the high productivity potential of interpersonal social capital are identifiable in interactions among: (i) workers with diverse skills and competencies, (ii) between the firm and its suppliers/subcontractors, and (iii) between the firm and its stakeholders.

For example, companies engage in competitive races with projects and strategies devised by teams of workers with complementary, non-overlap** skills (e.g., lawyers, technology experts, economists). Consequently, the creation of high-quality projects occurs under conditions akin to those found in the trust investment game.

The initial commitment to employees within the gift exchange mechanism can be particularly crucial in incentivizing workers’ effort and enhancing productive performance, especially within small and medium-sized businesses. In these settings, where formal hierarchical relationships may be less prominent due to smaller employee numbers, the quality of relationships assumes an even greater significance (Muse et al. 2005). In a different strand of the literature, the increased focus of labor economics on relational skills is evident in recent studies that examine the returns to ‘non-cognitive’ skills, including social skills (Kuhn and Weinberger 2005; Heckman et al. 2006; Lindqvist and Vestman 2011; Borghans 2014). The significance of relational factors is further underscored by Deming (2017), who reports that employers within the National Association of Colleges and Employers (NACE) prioritize the ‘ability to work in a team’ when hiring new college graduates, ranking it above analytical/qualitative skills and problem-solving (NACE 2015). Additional evidence on the importance of teamwork and collaboration as essential worker skills is provided by Casner-Lotto and Barrington (2006) and Lins (2017).

A third strand of the literature related to our research hypotheses on the effect of relational skills on corporate performance concerns the value of participation. Along this line, Frey and Stutzer (2005, 2006) show that individual preferences are not only affected by outcomes, but also by circumstances of actions related to those outcomes. More specifically, they show that people tend to support a given choice when they are involved and participate in the decision process, while they are against the same choice if they are not.

Within this strand of research, empirical studies offer valuable insights. Edmans (2011) demonstrates a positive correlation between employee satisfaction and shareholder returns, suggesting that the stock market may not fully appreciate the value of intangible factors. Additionally, Lins et al. (2017) find that firms with higher levels of Corporate Social Responsibility (CSR) intensity experienced higher stock returns during the 2007–2008 financial crisis. They interpret CSR as a proxy for trust between companies and their stakeholders.

Within this literature, our contribution examines various research hypotheses regarding the connection between corporate relational skills and performance using the Multiscopo survey of Italian firms. This survey collects data on Italian companies with 250 employees or more, as well as a significant representative sample of companies with 2–249 employees. In our paper, we investigate whether theoretical findings from the above mentioned literature fields imply a significant nexus between relational skills and corporate performance, as measured by value added per worker. We compare small (2–49 employees), medium (50–249 employees), and large firms (250 employees and above). Our approach adds value by assessing the impact of specific relational skills on a comprehensive and representative sample of small firms, against medium and large firms. Specifically, we analyze the effects of four relational skills related to worker well-being, prioritizing team-working attitudes during recruitment, initiating actions to support the local productive network, and engaging stakeholders in CSR projects. Our main findings show that stakeholder involvement is positive and significant for all size classes, while the other three skills affect them differently. More specifically: (i) care for workers’ well-being seems to weaken its positive impact on added value when it comes to large firms, (ii) attention to team working attitudes has a positive effect on medium-sized working environments, and (iii) initiatives in favor of the local productive network have positive effects only for large firms. Our interpretation of these last findings is that (i) the gift exchange mechanism triggered by care for workers’ well-being weakens when the distance between employers and workers increases (Muse et al. 2005); (ii) the quality of relationships is more relevant in smaller working environments where formal hierarchical rules presumably matter less, but it requires a minimum scale where the mix of different competences can be large enough to generate the superadditivity effect of cooperation; (iii) initiatives in favor of local productive networks require scale. Therefore, they matter, and have impact and positive feedback when companies are large. A synthetic representation of the four variables in a principal component analysis allows us to use instrumental variables and test more specifically the causality link between relational skills and corporate performance. The instrumented variable is positive and significant. Empirical tests showing that the selected instrument is relevant and our arguments on its validity lead us not to reject the hypothesis that the observed significant association between corporate relational skills and performance could hide a direct causality nexus between the two variables.

In terms of economic significance, our estimates show that the effect of caring for workers’ well-being effect accounts for around 3900 (5600) extra euros of added value per worker for small (medium) firms, care for team building skills considered strategic when hiring workers for around 3000 extra euros for medium-sized firms, while involving stakeholders in the implementation of CSR projects for 10,000 (15,000) extra euros for small (medium and large) firms.

The paper is divided into six sections. The second section describes our research hypotheses. The third section describes our database. The fourth and fifth sections present descriptive and econometric findings. The sixth section concludes.

2 Research Hypothesis and Theoretical Framework

Game-theoretic models assume that life is made of social dilemmas where individuals have non-overlap** competences and complementary roles and therefore can gain from cooperation. Unfortunately, cooperation requires interpersonal social capital, as it originates from a risky act of trust. In a framework of asymmetric information and incomplete contracts, the interplay of individual rationality among purely self-regarding individuals (when their preferences are common knowledge) ends up creating Nash equilibria that are suboptimal and dominated by cooperative equilibria. To achieve the latter, relational skills and ‘social rationality’ (capacity to combine gift, reciprocity, cooperation and interpersonal trust), different from ‘individual rationality’ (maximizing individual payoff under purely self-regarding preferences), are required.

On the other hand, the labor market literature finds that higher relational skills increase worker productivity and wages, thus positively contributing to corporate performance.

Therefore, the literature on social dilemmas predicts a positive causal relationship between relational skills and player payoffs that match corporate productivity when the game is played by workers within a company or by different companies trying to cooperate in some activities (that is, export, marketing, research consortia) (Becchetti et al. 2012). More specifically, the internal coordination game concerns the development of corporate strategies and projects that require information exchange and cooperation among workers with different (i.e., marketing, finance, environmental, technological, legal) nonoverlap** competencies. The external coordination game relates to relationships with other companies in order to create alliances for public goods (i.e., export services, marketing consortia, research and development).

Based on these considerations, we expect that companies with workers possessing higher relational skills are more likely to overcome internal social dilemmas in teamwork within the company and external social dilemmas in horizontal and vertical cross-corporate cooperation along the value chain. These effects have the power to increase corporate productivity and performance.

H01: relational teamwork skills among workers within a company and between companies indeed contribute to enhancing corporate productivity.

Another direction for cultivating relational skills involves the gift-exchange mechanism. In Akerlof’s (1984) model, the gift, such as an unexpected wage increase provided by the employer unrelated to positive employee actions, prompts reciprocity, subsequently boosting the effort and productivity of workers. Similarly, research in evolutionary game theory suggests that coordination failures in multiplayer prisoner dilemmas can be resolved through the “gift” actions of pivotal players who commit to a socially optimal strategy and risk not being reciprocated (Stewart and Plotkin 2013). Nonetheless, their commitment signals to other players their trustworthiness, fostering conditions for cooperative equilibrium to become a focal point where other players find it optimal to converge.

In general, in line with Akerlof’s reasoning, we argue that an employer’s gift, which constitutes a benevolent action toward workers not legally mandated, based on their commitment to the company and its employees, fosters gratitude and elicits reciprocity. This reciprocity gets visible in various forms such as increased worker productivity, decreased shirking, and reduced absenteeism or turnover.Footnote 3

Our underlying assumption is that the capacity of employers to offer gifts represents a relational skill that initiates dynamics culminating in increased worker productivity. In this regard, placing greater emphasis on worker welfare, such as work-life balance, and regarding it as a strategic priority (the variable used in our empirical analysis), signifies these relational skills in terms of a gift-oriented attitude. This attitude, characterized by actions that extend beyond explicit employer duties, elicits gratitude from workers, prompting reciprocation in the form of a heightened sense of belonging and more productive behavior.

In our empirical analysis, we identify companies exhibiting a distinct variable representing relational skills between companies. We focus in particular on those where enhancing worker well-being, ensuring equal opportunities, and promoting parental and work-life balance have been integral corporate policies over the past three years, aligning with the strategic mission. Subsequently, we examine whether this corporate relational skill activates a gift-exchange mechanism, wherein workers reciprocate the gift through increased productivity, consequently exerting a significant impact on corporate productivity.

H02: strategic attention to worker well-being is a gift exchange mechanism that contributes to improving corporate performance.

With the concept of participatory utility Frey and Stutzer (2005) argue that individuals have preferences not only for outcomes and the number of consumed goods but also for the pattern of actions and interactions leading to the outcome. They posit that individuals can switch from opposing to supporting exactly the same decision if they are involved and participate in the process leading to that decision. Based on the participatory utility concept, we argue that stakeholder involvement in corporate social responsibility strategies can significantly improve the attitude of stakeholders toward the company, thereby producing positive effects on its performance.

H03: stakeholder participation can contribute positively to corporate performance.

3 The Database

Our main data source is the first Permanent Census of Italian Companies conducted by the Italian National Statistical Institute (ISTAT) from May to September 2019. Unlike traditional censuses, this census is sample-based, occurring every three years instead of the usual ten, and incorporates data from statistical registers and ongoing economic surveys. Furthermore, it covers various aspects including entrepreneurship, control and governance, human capital, inter-enterprise relations, market dynamics, technological innovation, finance, internationalization, new development trajectories, and social and environmental sustainability. These characteristics render this database an exceptionally valuable data source, with approximately 24.0 percent of Italian companies represented, totaling around 280,000 companies with two or more employees. The sample accounts for 76.7 percent of the total workforce and 91.3 percent of all Italian employees. According to the Census, the three-year data for the 2016–2018 period showed a notable employment recovery, with 52.2 percent of micro and 77.3 percent of small businesses acquiring new human resources. During this period, 77.1 percent of the sampled companies undertook actions towards social sustainability, while 74 percent focused on improving workers’ well-being. These initiatives primarily encompassed equal opportunities, parental and family reconciliation, healthcare, and social assistance.

To assess corporate relational skills, we used variables related to the interaction between employers and workers, particularly focusing on corporate initiatives aimed at enhancing workers’ well-being. Specifically, we employed a unit dummy variable to identify companies where enhancing workers’ well-being, promoting equal opportunities, supporting parental and work-life balance were integral parts of the corporate strategy over the past three years. This variable serves as the most suitable proxy within our dataset for evaluating the level of care towards workers and potentially represents the initial input (giving) in gift exchange mechanisms. Additionally, we identified a second variable to measure worker relational skills. More precisely, we incorporate a dummy variable into the econometric specifications that follow, which takes the value of one if the firm has prioritized team working attitudes when recruiting its workers in the last three years. The third selected variable pertains to relational skills within the local business environment. This variable is a dummy that takes a value of one for companies actively supporting or initiating efforts to benefit the local businesses in their operational area, considering such activities as part of their strategic mission.

Lastly, a fourth variable takes a value of one if the company has funded Corporate Social Responsibility (CSR) projects and initiatives involving stakeholders in both planning and implementation. CSR initiatives encompassed in the Permanent Census include five options: reducing the environmental impact of corporate activities, enhancing workers’ well-being, engaging in initiatives of collective interest beyond the company, supporting the local business environment, and improving safety within the company or its operational area.

Summary descriptive findings on the variables used in the upcoming econometric analysis are presented in Table 2, with corresponding variable explanations provided in Table 1.

Table 1 Variable legend
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In 2018, the average added value per employee amounted to €47,729. Sample companies typically employ an average of 38 workers and have been established for an average of 21.6 years. Family-owned businesses constitute the majority, accounting for 66 percent of the sample, while less than 10 percent have competitors located outside the EU.

Over the past three years, 62 percent of companies invested in digitalization, while 61 percent utilized external financing sources in 2018. Remarkably, only 1 percent of companies relocated part of their production activities abroad during this period.

Among our four relational skill variables, 44 percent of sample companies prioritize workers’ well-being as a strategic priority, while 54 percent emphasize teamwork when hiring workers. Only 9 percent of sample companies support projects benefiting the local business, considering this action strategic, while approximately 22 percent involve stakeholders in defining their CSR projects.

In Table 2, a breakdown of descriptive statistics for small, medium, and large firms is provided. Larger firms exhibit a lower added value per employee (€75.2 thousand euros compared to €68.5 thousand and €44.8 thousand for medium and small firms, respectively). Worker well-being and teamwork values are notably higher in large firms, while relational activities involving the local business or stakeholders are more prevalent in medium firms.

Table 2 Descriptive statistics—size class breakdown
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Size and age are positively correlated, with small firms having an average age of 21 years, while medium and large firms have averages of 26 and 29 years, respectively. As anticipated, small firms are more likely to be family-owned (68 percent), less likely to have a non-EU competitor (8 percent), and more inclined to invest in digitalization technology (60 percent), utilize external sources of finance (60 percent), and delocalize part of their activity abroad (1 percent).

The geographical distribution of the four relational skill variables is illustrated in Figs. 1, 2, 3, 4. The North-East regions and Emilia Romagna exhibit the highest values for the worker well-being mission, the team working variable, and the stakeholder mission variable. The observed North–South gap in the regional distribution of these variables aligns with findings in the literature regarding lower social capital, which includes its interpersonal component of trust and trustworthiness, in the Italian Mezzogiorno (Nannicini and Leonardi 2008, and Guiso 2008).

Fig. 1
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Geographical distribution of the four corporate relational skill variables. Team Working Priority

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Fig. 2
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Geographical distribution of the four corporate relational skill variables. Workers Well-being Mission

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Fig. 3
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Geographical distribution of the four corporate relational skill variables. Initiative for local business strategic

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Fig. 4
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Geographical distribution of the four corporate relational skill variables. CSR Involving Stakeholders

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Our descriptive findings indicate that the decreased level of trust and trustworthiness in the Southern regions, as documented in the literature, correlates with a reduced inclination of companies situated in this region to depend on relational skill variables.

4 Econometric Specification

In order to test our research hypothesis on the impact of relational variables on corporate productivity, we estimate the following specification:

$$\begin{aligned}{VA/employee}_{i}&={ \alpha }_{0} + {\alpha }_{1}{Worker Wellbeing Mission}_{i} \\ & \quad + {\alpha }_{2}{Team Working Priority}_{i}+{\alpha }_{3}{Initiative for Local Business Strategic}_{i}\\ & \quad +{\alpha }_{4}{Initiative for Local Business not Strategic}_{i}\\ & \quad +{\alpha }_{5}{CSR Involving Stakeholders}_{i}{+\alpha }_{6}{CSR not Involving Stakeholders}_{i}\\ & \quad +{\alpha }_{7}Number of Employee{s}_{i} {+{\alpha }_{8}Age}_{i} {+{\alpha }_{9}Non EU Competitor}_{i}\\ & \quad {+{\alpha }_{10}Digitalisation}_{i}\\ & \quad +{\alpha }_{11}{Family Owned}_{i}+{\alpha }_{12}{Delocalize+{\alpha }_{13} External Finance}_{i}\\ & \quad+\sum_{d}{\gamma }_{d}{DNACE(2)}_{i} +\sum_{f}{\delta }_{f}{DProvince}_{i}+{\varepsilon }_{i} \end{aligned}$$
(1)

where the dependent variable added value per employee (VA/employee) is computed as net sales minus production costs (including raw materials, intermediate products, and external services) and then scaled by the number of workers. The initial set of six regressors pertains to the corporate relational variables outlined in Sect. 3. Specifically, the variable Worker Well-being Mission is a binary (0/1) indicator. It takes the value of one if the company indicates that its strategic mission over the past three years involves enhancing worker well-being, promoting equal opportunities, supporting parenthood, and fostering work-life balance. We employ this regressor to evaluate research hypothesis H02.

Our underlying assumption states that the capacity for employers to provide gifts represents a relational skill that initiates dynamics fostering increased worker productivity. In this context, a heightened focus on worker welfare, particularly in terms of work-life balance, and its prioritization as a strategic goal (as indicated by the variable used in our empirical analysis) serves as an indicator of these relational skills, specifically in terms of a gift-giving attitude (where going beyond explicit employer obligations is implicit). This approach stimulates gratitude and reciprocity from workers in response. The variable Team-Working Priority takes the value of one (and zero otherwise) if the company reports that prioritizing team-work soft skills was a primary consideration when hiring workers from 2016 to 2018. The variable Initiative for Local Business Strategic takes the value of one (and zero otherwise) when the company states that it has undertaken or supported initiatives for local businesses during the same period, considering them part of its strategic mission. Conversely, the variable Initiative for Local Business Not Strategic takes the value of one (and zero otherwise) for companies involved in such initiatives but not considering them strategic. The omitted benchmark refers to companies not involved in supporting these initiatives.Footnote 4 Finally, our fourth key variable is CSR Involving Stakeholders which takes the value of one for companies that involve stakeholders in financing CSR projects. These initiatives encompass five potential options: reducing the environmental impact of corporate activities, enhancing workers’ well-being, supporting initiatives of collective interest beyond the company, contributing to the local business environment, and promoting safety improvements within the company or its operating area. Conversely, CSR not Involving Stakeholders is a variable that takes the value of one for companies financing CSR initiatives without stakeholder involvement. The omitted benchmark refers to companies not financing any CSR initiatives.

Control variables include the following: the number of employees (Number of Employees), the age of the firm measured by the distance in years from its year of establishment (Age), and a series of binary (0/1) dummies indicating location of the firm’s main competitors outside the EU (non-EU competitor), investment in digitalization technology (Digitalization) over the past three years, family-ownership (Family Owned), location of some or all production activities abroad (Delocalize) in 2018, and use of external sources of finance (External Finance) in 2018. Additionally, the estimation includes 107 (minus one) Italian province dummies and 97 (minus one) NACE2 industry dummies. All specifications are estimated using heteroskedasticity-robust standard errors.

4.1 Econometric Findings

In the estimated specifications, we start with a basic setup that doesn’t include relational variables. Then, we gradually add our main corporate relational skill variables until reaching the fully expanded specification in column 5 of Table 3.

Table 3 Econometric findings—CSR effort and Added value per worker—OLS estimates
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We also provide estimates of our specification for the overall sample and the subgroups of large (more than 249 employees), medium (between 50 and 249 employees), and small firms (from 2 to 49 employees). The rationale for this choice is that size matters when dealing with relationships between employers and workers, more than when dealing with the environmental side of the ESG factors where industry type (e.g., fossil fuels versus renewable industry) is crucial. Bureaucracy, large numbers, and lack of arms-length relationships between managers and workers are more likely to reduce the potential for participation (one of our three research hypotheses) and sense of belonging in response to gift exchange mechanisms. One of the most relevant fields of research related to this point revolves around the interpretation of stylized facts of the empirical evidence on size-wage premia. Two main rationales argue that it is a compensating wage differential for a more alienating working environment that offers less autonomy (Pedace 2010), or it is alternatively related to higher efficiency wages (Shapiro and Stiglitz 1984) required in large working environments where it is more difficult to monitor worker shirking. Other contributions find that management-employee relationships are stronger in small companies and less satisfactory in large firms than in small firms (Antoncic and Antoncic 2011; Tansel and Gazîoğlu 2014). This literature supports the hypothesis that firm size significantly affects the environment in which the tested factors affecting productivity in our paper (gift exchange, participation) operate, thereby making their impact potentially different for small, medium, and large firms. Our implied assumption is that employer-worker relationships can be structurally different in small or large working environments and therefore the significance of our three research hypotheses can vary across firm size.

The results for small firms indicate that the two main relational factors with significant effects on the dependent variable are the care of well-being and the involvement of stakeholders, resulting in an additional €13,900 of added value per worker. If the effect of worker well-being is interpreted in terms of causality, our findings align with the gift exchange hypothesis (hypothesis 2): companies make costly decisions that improve well-being of their workers and this corresponds, coeteris paribus, to a productivity response in the workforce, increasing added value per worker. The finding regarding stakeholder participation, on the other hand, aligns with procedural utility theory and, more specifically, the idea that stakeholder participation can have a positive effect on corporate performance (hypothesis 3). Teamwork is weakly significant once all relational variables are introduced. For medium-sized firms, we find that the impact of all four relational variables is positive and significant. Medium-sized firms appear to be the most productive environment where the quality of relationships has the maximum power: with workers’ well-being contributing approximately €5,600, teamwork with €3,100, investment in the local productive environment with €10,400, and stakeholder involvement with €15,000. This finding does not reject hypothesis 1, which posits that workers with teamwork skills produce superior outcomes in social dilemmas and strategic interactions with colleagues within the firm.

We observe that worker well-being is slightly significant, and the effects of teamwork disappear when it comes to large firms, while investment in the local environment and stakeholder participation have the highest significant effects (€13,600 and €15,000, respectively).

Our interpretation of the different impact of relational variables across size classes is that scale can weaken gift-exchange mechanisms by increasing the distance between giver and receiver. The inverse U-shaped effect of scale on teamwork suggests that firms that are too small lack sufficient skill diversification to generate the positive superadditive effects of teamwork, while firms that are too large have more formal and bureaucratic rules that prevent them from benefiting from teamwork. Additionally, the initiative for local business is an activity typically requiring scale, and therefore it is not surprising that benefits from it are concentrated in medium and large firms.

An important caveat in interpreting our results is that socially responsible consumers may drive an increase in demand for goods and services from companies with the three relational skills we examined. This increase in demand is observationally equivalent to the gift exchange and/or participatory utility effect (on consumers’ willingness to pay for socially responsible products see among others De Pelsmacker et al. 2005; Loureiro et al. 2005; Verteramo Chiu et al. 2017; Van Loo et al. 2014). However, it’s important to note that this phenomenon is more likely to occur for social responsibility characteristics explicitly included in standard ESG metrics, such as the care of workers’ welfare. In contrast, “internal” factors, like considering teamwork capacity as a strategic soft skill when hiring new workers, are not explicitly included in standard ESG metrics and are therefore less visible and communicated to consumers.

Another caveat to consider in our findings relates to the fact that our key variables are measured as intentions and not observed consequences of actions. As is well known, the popularity and maturity of ESG factors have contributed to the phenomenon of green and social washing, which refers to a discrepancy between declarations and deeds. However, a recent survey of the literature has emphasized that ESG washing is less common than it seems to be, given the increasing number and quality of monitoring activities on companies (Pope and Wæraas 2016). Additionally, it’s worth noting that social washing should matter less concerning our hypotheses involving relationships between workers and employers (hypotheses 1 and 2), since informational asymmetries on CSR characteristics are likely much larger for consumers than for workers who spend much of their time inside the company.

Among controls, our findings indicate a positive and significant effect of the number of workers for small and medium-sized classes, with a higher magnitude in small firms, suggesting diminishing marginal returns of employment growth as corporate size increases. Conversely, the positive and significant impact of age is quite similar in magnitude between small, medium, and large firms. Having non-EU competitors is a distinctive feature for small and medium-sized firms, positively impacting added value per worker, while investment in digitalization technology is positive for all size classes. Family ownership is a constraint (negative and significant) for small and medium-sized firms, while delocalization and the need for external finance have respectively positive and negative impacts, as expected, across all size classes. The latter effect is presumably due to the adverse effects of debt service on corporate economic performance and a selection effect, as less productive companies have a higher need for external finance.

4.2 Instrumental Variable Estimates

As is well known, the significant association between corporate relational skills and performance can be influenced by endogeneity, which can imply an inverse causality link beyond our anticipated direct causality connection (companies with higher added value tend to have more resources to finance relational activities, particularly when considering three of our relational variables excluding the teamwork skill variable) or a spurious correlation, where a third omitted factor drives both relational skills and added value per worker. To address this issue, we run instrumental variable estimates. In order to minimize the number of required exclusion restrictions, we employ principal component analysis involving an extended set of CSR variables. The first two principal components, collectively explaining 40 percent of the observed variance (Tables 4, 5, 6, 7), are used to replace the relational skills variables in Eq. (1). The second principal component, which explains approximately 16 percent of the observed variance for small firms and up to 18 percent for large firms, is particularly noteworthy as it exhibits a positive correlation with all four of our relational skill variables (56 percent with the worker well-being variable, 13.5 percent with the teamwork variable, 60 percent with the support for the local business environment variable, and 14 percent for the stakeholder participation variable in the overall sample).

Table 4 Principal component analysis and extraction of the relational component – Small Firms
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Table 5 Principal component analysis and extraction of the relational component—medium firms
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Table 6 Principal component analysis and extraction of the relational component—large firms
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Table 7 Principal component analysis and extraction of the relational component—all firms
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The estimation results reveal that the second principal component significantly and positively contributes to added value per worker, whereas the first principal component does not show significance (Table 8, column 1). This variable serves as the basis for constructing a shift-share instrument, following the approach outlined by Goldsmith-Pinkham et al. (2020). For the i-th firm operating in sector j and province k, the shift variable represents the average relational ability (RA) at the macrosector level (NACE 0), proxied by the second principal component, as a deviation from the country’s average relational ability. The share variable is the weighted average of corporate relational skills in the province where the firm is located, with weights determined by the macrosector shares in that province relative to the total economy.

Table 8 Econometric findings—CSR effort and added value per worker—IV estimates
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Therefore, the instrument is:

$${RA}_{i,j,k }={\sum }_{j}{(RA}_{j,k}-\widehat{RA})*\frac{{n}_{j,k}}{{N}_{k}}$$

where the Bartik instrument possesses the two necessary characteristics of a shift variable at a different aggregation level from the sample unit (the macrosector instead of the firm) and a share variable that can be regarded as exogenous. In our scenario, it is the local macrosector mix that, inherently, does not influence the relational skills of a particular firm.

Our first-stage results indicate that the instrument is both relevant (as it is negatively and significantly correlated with the instrumented regressor) and not weak (Table 8, column 2). The relevance is further supported by the Cragg-Donald Wald F statistic, which rejects the null hypothesis of weak instruments. We reasonably assume instrument validity, given that we argue the local/industry gap of the relational principal component (particularly the local macrosector mix or the share component of the instrument) does not directly impact the added value per worker of the observed company, especially when controlling for province and industry effects. Second-stage findings do not reject the hypothesis that the instrumented variable positively and significantly contributes to added value per worker (Table 8, column 3), holding true for firms of all sizes.

4.3 Robustness Checks

We perform our estimates again substituting the 107 NACE2 dummies with the 272 NACE3 and 615 NACE4 dummies in two separate runs, aiming to capture more disaggregated industry-specific fixed-effect components that influence added value per worker. Our findings regarding relational variables remain consistently significant and stable in magnitude across all size classes (Tables A.1 and A1.2 in the Appendix). In an additional robustness check, we incorporate survey weights as supplementary controls, considering NACE2, NACE3, and NACE4 industry controls alternately. As commonly acknowledged, employing survey weights to adjust individual observations in the estimates may introduce biases in standard errors, whereas integrating them as additional controls allows us to incorporate them into our findings without introducing further biases (Tables A.3–A.5). Once again, our primary findings are robust to this change in specification. Furthermore, we run an additional robustness check by clustering the data at the NACE0/province and NACE2/province levels, and the significance of our main results remains unchanged (Tables A.6 and A.7).

5 Conclusion

The role of relational skills in the corporate performance of small firms, compared to medium and large firms, has hardly been explored in the literature. Within theories addressing the economic value of relationships applicable to corporate contexts, we explore gift exchange, procedural utility, and trust investment game-like models. These models demonstrate that team working skills can play a pivotal role in addressing Pareto-dominated and inefficient coordination failures, as well as social dilemmas inherent in such games.

Based on these theories, we develop three research hypotheses concerning the significant impact of different forms of relational skills on corporate performance. We empirically test these hypotheses using a large sample of small-sized Italian companies, comparing them with larger firms, encompassing the entire universe of large firms in the country.

Our findings do not reject our research hypothesis showing that added value per worker is significantly higher in the small and medium-sized samples for firms that have, in previous years: (i) considered the strategic well-being of workers in terms of equal opportunities, parenthood, and work-life balance, and (ii) involved stakeholders in their CSR policies. Additionally, while teamwork as a crucial skill during the hiring process has a positive impact only for medium-sized firms, initiatives supporting the productive network operating in the same local area are significant for both medium and large firms. To investigate whether a causality nexus exists beyond the observed significant correlations, we extract a principal component correlated with the four significant variables that we define as corporate relational skills, and instrument it with a Shift-Share Bartik-style instrument. We demonstrate the relevance of the instrument, argue its validity, and find that the instrumented variable significantly affects added value per worker.

Therefore, the empirical findings of the paper do not reject our research hypotheses on the relevance of relational factors, but highlight that corporate scale has an important effect on them. Specifically, gift exchange mechanisms activated by corporate concern for worker welfare and well-being are beneficial when the distance between the employer and workers is not too vast, as it occurs in small and medium-sized firms. Teamwork skills exhibit positive effects on added value when implemented at a moderate scale, suggesting that the benefits of collaboration necessitate a minimum level of diversification in complementary non-overlap** skills. Investments in support of the local productive environment are effective at a minimum scale, either medium or large, likely due to the provision of additional financial resources and influential positions within product chains.

Under the assumption that our empirical findings reveal a causality nexus, they hold significant policy implications. Corporate culture should not solely prioritize know-how and technologies but also recognize the varied impact of different relational skills based on scale, particularly on ‘know-how-with’, defined as the corporate ability to cultivate positive internal and external relationships and invest in teamwork and relational skills. This is because corporate tasks, activities, and interactions within and outside firms are not carried out by isolated individuals but depend crucially on the complex interplay among various actors. In these interactions, what matters is not only hard skills and competence but also, importantly, mechanisms of giving, trust, reciprocity, and the quality of participatory processes, as emphasized by the theoretical foundations of our research hypotheses.

The policy implications of our paper underscore the significance of incorporating soft relational skills into school and university curricula, prioritizing team-building activities within companies, and fostering positive relationships with stakeholders and the local productive environment.

However, the limitations of our cross-sectional database suggest avenues for future research. It would be valuable to explore the dynamic impact of relational skills and ascertain whether similar effects are evident in various countries and time periods.