Corporate Citizenship of Multinational Enterprises and Financial Performance: The Moderating Effect of Operating in Developing Countries

Abstract

Multinational enterprises (MNEs) often locate facilities in developing countries to benefit from lax environmental and social regulations and to reduce their operating costs. MNEs can also contribute positively to those countries by improving their economic environment, facilitating relationships with governments and other social agents, and enhancing social welfare. We argue that MNEs that operate in developing countries may enhance economic and sustainable development in those countries and simultaneously improve their financial performance. We analyzed a sample of 113 US MNEs from the chemical, energy, and industrial machinery industries. Our findings suggest that their presence in developing countries moderates the relationship between corporate social performance (CSP) and financial performance (CFP). We found that MNEs with a strong presence in developing countries can take advantage of the implementation of philanthropic initiatives to significantly improve their CFP.