Abstract
The disconnect between the lofty aspirations of firms claiming Corporate Social Responsibility (CSR) and their shortcomings in practice have caused some observers to question its usefulness. The fallout from events like the Rana Plaza catastrophe has highlighted some of these shortcomings—namely, deficiencies in how multinational enterprises (MNEs) transact with suppliers in developing countries. Specifically, our paper aims to investigate whether or not MNEs behave hypocritically by examining the alignment of CSR to business practices in MNE affiliates in developing countries. To answer this question, we apply standard ordinary least squares (OLS) techniques to data for over 1000 MNEs that claim to have a CSR ethos. We find that CSR-active enterprises report significantly higher worker wages, ceteris paribus. Local African suppliers benefit from CSR through knowledge transfer, but only when MNEs make tangible investments in supplier development.
Highlights
In recent years, increasingly complex global supply chains have arisen, where multinational enterprises (MNEs) organize their production using suppliers around the globe
We find that MNEs that engage in Corporate Social Responsibility (CSR), pay higher wages on average than MNEs that are not engaged in CSR
This paper examines whether multinational enterprises that claim to be engaged in CSR activities provide better working conditions and have stronger interactions with suppliers than MNEs making no such claims
Summary
Increasingly complex global supply chains have arisen, where multinational enterprises (MNEs) organize their production using suppliers around the globe. We use information about the CSR orientation of MNEs to separate what we refer to as “verbal CSR” (CSRWORD) from “tangible CSR” (CSRDEED) Such a distinction has, to the best of our knowledge, not been made in the literature to date and it is one of the novelties of our paper. While, up to now, the spotlight in terms of CSR in global supply chains has tended to focus on Asia (e.g., garments procurement), other developing parts of the world, most notably the African continent, have remained under researched. We fill this gap, using firm level data for 19 Sub-Saharan African countries for our study.
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