Corporate Social Performance and Firm Location: Empirical Evidence

Introduction

The advancements of global integration of the economy have led to increased competition from the emergence of multinational corporations and rise of small and medium enterprises due to global trade that led to increased economic growth and job creation in the community. It has also contributed to increased environmental and social challenges such as resource depletion, pollution, and inequality. To ensure sustainable development, it is crucial to embrace these changes while considering their potential impact on the environment, society, and the economy. This entails promote responsible business conduct, such as support local communities, reducing carbon emissions, promoting social equity, and fostering innovation that promotes sustainable development (Waddock et al., 2002). The location of firms is a key factor in determining their ability to achieve sustainable development through effective CSP practices (Husted et al., 2016). In line with the growing body of research that explores the link between geography and corporate strategy, it has been demonstrated that proximity and geography can account for a significant portion of the differences observed in CSP across companies in developed countries (Ding et al., 2019). Thus, firm location is critical to developing effective CSP.

Geographers, over two decades, explored transformation of social and environmental concerns into drivers of effective CSP (Hamilton, 2011). Geography though believed to be critical, but a widely neglected in the CSP literature (Tang et al., 2018). O'Connor et al. (2021) favoured that geography in CSP can add strategic value to the social responsibility policy and is critical to firm. Jiraporn et al. (2014) argued that CSP is a visible and observable aspect of a firm's operations, it is likely that companies are influenced by their geographic counterparts when devising their own CSP strategies. Di Giuli and Kostovetsky (2014) observed that CSP of firms in each state tend vary with the ideology of the ruling political party in that state. The literature on firm location and CSP is on three lines of enquiry: impact of CSP on firm’s headquarters location (Ding et al., 2019), firms operating in the same location share similar CSP (Chintrakarn et al., 2017) and firm in higher CSR density areas tend to exhibit higher CSP (Husted et al., 2016). The literature documents the relationship between firm’s geographic location and CSP. Despite the significant impact of geography on corporate policies, the exact mechanism by which it exerts this influence is not yet fully comprehended. Thus, further research is required to address this gap and explore if location influences CSP of enterprises. Also, the extant of literature has advanced the line of enquiry in developed countries and developing countries have received limited scholarly interest. Thus, further research in developing country is needed to further generalise the phenomenon.

The concept of social responsibility has evolved from the responsibility of executives (Barnard, 1938; Bowen,1953), public stewards (Frederick, 1960), pursuing economic growth and profit (Friedman, 1970), the pyramid of social responsibility (Carroll, 1979), Public Responsibility (Preston and Post, 1981), Stakeholder Management (Freeman, 1984), “Corporate Citizenship” (Carroll, 1991) and to strategic CSP creating shared value for shareholders and stakeholders (Heslin and Ochoa, 2008; Porter and Kramer, 2011). The strategic nature of CSP can be understood based on the firm's understanding of social legitimacy (Du and Vieira, 2012), benefiting the firm and community in which it operates (Lantos, 2002). Like other strategies, CSP must be well-designed and implemented to achieve desired outcomes effectively (Dawar and Singh, 2022). A poorly conceived or implemented CSP will not help the community. For CSP to be efficient geographic proximity is crucial (von Weltzien Hivik and Shankar, 2011).