Development of CSR in Emerging Markets: Constructive Role of Reciprocal Business-Government Relations

Abstract

This study sheds light on the development of CSR in emerging markets through the lens of reciprocal relationship between business and government. Drawing on the theory of reciprocity, the study proposes and tests the hypothesis that, in a reciprocal relationship, emerging market firms that receive business-friendly regulations from the government – the regulatory environment that is more conducive to business operations – are more likely to engage in active CSR initiatives in return for this supportive regulatory environment. Using a sample of 1,465 corporations from 20 emerging market countries, the findings provide supporting evidence for the proposed hypothesis. Specifically, the vast majority of firms in emerging markets appear to reciprocate a more business-friendly regulatory environment received from the government by engaging more in CSR activities, especially in the domain of community development. The results are robust across various methods of estimation. The current study adds directly to the existing body of knowledge on CSR in emerging markets by embracing the perspective of reciprocal business-government relationships to understand the nature and practice of CSR among emerging market firms. The findings offer meaningful implications for businesses and policy makers as well as potentially fruitful avenues for further research.