Corporate social responsibility and Latin American firm performance

Abstract

PurposeThe purpose of this paper is to analyse the impact of corporate social responsibility (CSR) on firm performance in six Latin American economies. Firm performance includes five distinct dimensions, namely, firm turnover, labour productivity, innovativeness, product differentiation and technological transfer. The countries under scrutiny are Argentina, Bolivia, Chile, Colombia, Ecuador and Mexico.Design/methodology/approachPropensity score matching techniques are used to identify the causal effect of CSR on firm performance. To this end, World Bank Enterprise Survey (2006 wave) is used. This data set collects relevant firm-level data.FindingsCSR has a positive impact on the outcome variables analysed, suggesting that corporate goals are compatible with conscious business operations. The results also vary across countries.Research limitations/implicationsThe pattern that emerges from the analysis seems to suggest that the positive effects of CSR depend on countries’ stage of industrialisation. In particular, the least developed the economy, the wider the scope of CSR. Nonetheless, the relationship between conscious business operations, firm performance and countries’ level of development is not directly tested in the present work.Practical implicationsThe main practical implication of the study is that Latin American firms should adopt CSR. This is because corporate responsible practices either improve firm performance or they are not shown to have a detrimental effect.Social implicationsThe major policy implication is that emerging countries’ governments as well as international organisation should provide meaningful incentives towards CSR adoption.Originality/valueThe paper provides three major original contributions. First, it brings new descriptive evidence on CSR practices in Latin America. Second, it uses a broader and novel definition of firm performance, which is aimed at capturing developing countries’ business dynamics as well as at overcoming data limitations. Finally, it reassesses and extends the empirical evidence on the impact of CSR on firm performance.