This study investigates the relationship between employee-friendly workplaces and innovation. Using social identity theory, we further investigate whether organization identification strengthen the effect of employee-friendly workplaces on innovation. Collecting data from U.S. public firms from 1998 to 2018, this study make conclusions as follow. First, there is a significant positive relationship between employee-friendly workplaces and innovation. Second, external CSR strengths the relationship between employee-friendly workplaces and innovation. Firms that participate in employee-friendly workplaces and external CSR at the same time are likely to have better innovation performance than firms only participate in employee-friendly workplaces. Third, the positive association between employee-friendly workplaces and innovation is magnified for firms with higher financial distress risk.