<p>Previous studies implicitly assume that when firms’ innovation performance is lower than the average innovation performance of their peers (innovation performance deficit), their market competitiveness is reduced, and their survival is threatened. We challenge the implicit assumption in the prior literature that firms rely solely on market strategies to address innovation performance deficits and explore the impact of innovation performance deficits on corporate social responsibility (CSR), which is a typical nonmarket strategy. Combining the behavioral theory of the firm and the strategic CSR literature, we argue that an innovation performance deficit will motivate firms to enhance their CSR performance. CSR can serve as a strategic tool to help firms mitigate the leakage of valuable knowledge, gain better access to stakeholder insights, and thus address innovation performance deficits. Furthermore, we argue that the relationship between innovation performance deficit and CSR is likely nuanced and may vary according to the type of competitive strategy. A cost leadership (differentiation) strategy weakens (strengthens) the positive relationship between innovation performance deficit and firms’ CSR. We confirm our hypotheses by conducting empirical tests on China’s listed companies from 2010 to 2021.</p>