Extant research emphasizes the beneficial effects of digitalization on operational efficiency and competitiveness, while neglecting social and ethical repercussions alongside the digital transformation. Drawing on the stakeholder perspective and the resource-based view, we propose that digitalization might have some unintended and undesirable impact on the undertaking of corporate social responsibility, which is manifested as CSR decoupling. Specifically, digitalization enhances firms’ capability of CSR communication through digital channels, but it may simultaneously constrain their capacity to engage in substantive CSR actions due to resource reallocation pressures. Furthermore, we theorize that firms with greater resource constraints are more likely to decouple CSR walk from talk, as the costs of substantive CSR implementation outweigh the relative ease of communication through digital channels. Based on this logic, we hypothesize that state ownership, which provides enterprises with soft budge constraint, weakens the digitalization - CSR decoupling relationship, while special treatment status on the capital market, which signifies poor financial performance, amplifies it. Leveraging China’s Smart City policy as a natural experiment and using difference-in-differences (DD) analysis, our hypotheses were largely supported. Our study enriches digitalization literature by revealing its potential to foster opportunistic behavior and by shedding new light on the “dark side” of digital transformation. Our study also advances CSR decoupling literature by identifying corporate adoption of new technology, such as digitalization, as an important antecedent that drives firm’s CSR decoupling.
