Strategic corporate social responsibility by a multinational firm

• Author: Evangelos Mitrokostas,Constantine Manasakis,Emmanuel Petrakis
• Date: 01 August 2018
• DOI: http://doi.org/10.1111/roie.12320
• Published date: 01 August 2018

SPECIAL ISSUE PAPER

Strategic corporate social responsibility by a

multinational firm

Constantine Manasakis

1,2,3

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Evangelos Mitrokostas

4

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Emmanuel Petrakis

5

1

Department of Political Science,

University of Crete, Greece

2

Heinrich-Heine University of Dusseldorf,

Germany

3

Institute of Applied and Computational

Mathematics, Foundation of Researchand

Technology, Hellas

4

Portsmouth Business School,University

of Portsmouth, Portsmouth, United

Kingdom

5

Department of Economics, Universityof

Crete, Rethymnon, Crete,Greece

Correspondence

Constantine Manasakis, Department of

Political Science, School of Social,

Economic & Political Sciences,

University of Crete, Gallos Campus,

Rethymnon, Crete, GR-74100, Greece.

E-mail: manasakis@uoc.gr

Funding information

EU Framework Programme Horizon

2020: COST Action IS1104 “The EU in

the new economic complex geography:

models, tools and policy evaluation”, and

University of Crete, Special Account for

Research.

Abstract

This paper investigates the determinants of a responsible

multinational firm’s decision to enter in a foreign country

either through exports or through foreign direct investment

(FDI), as well as the relevant market and societal outcomes.

We find that coroporate social responsibility (CSR) invest-

ments are higher under FDI than under exports. The

multinational firm’s incentives to serve the foreign country

through FDI are increasing in the average consumer’svalua-

tion for CSR and in the intensity of the foreign country’s

market competition, but only if the average consumer’svalu-

ation for CSR in this country is sufficiently high. These

incentives are mitigated by the multinational firm’s liability

in this country under exports. We also find that there is mis-

alignment of preferences between the stakeholders of the

two countries over the multinational firm’smodeofentryin

the foreign country.

1

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INTRODUCTION

The core role of multinational firms, through international trade and investment, in home and host

countries has recently given rise to increased attention regarding their social and environmental foot-

prints by businesses, consumers, investors, policy makers, and academics (United Nations, 2014).

In this context, KPMG (2015) suggests that corporate social responsibility (CSR) is now undeni-

ably a mainstream business practice worldwide with more than 90 percent of the top 250 companies of

the Fortune Global 500 stating a well-defined CSR strategy and including relevant data in their annual

financial reports. Moreover, existing evidence suggests that consumers exhibit increasing trends on

their awareness for the social and environmental consequences of firms’production and their

Rev Int Econ. 2018;26:709–720. wileyonlinelibrary.com/journal/roie V

C2017 JohnWiley & Sons Ltd

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709

DOI: 10.1111/roie.12320