How Corporate Social Responsibility Helps MNEs to Improve their Reputation. The Moderating Effects of Geographical Diversification and Operating in Developing Regions

Abstract

Multinational enterprises (MNEs) can enhance their reputations through advanced social initiatives and management practices. These firms often locate facilities in developing countries to benefit from lax environmental and social regulations, and to reduce their operating costs. MNEs can, however, also contribute positively to the development of those countries through corporate social responsibility (CSR) activities. This paper argues that MNEs operating in developing regions can enhance their level of corporate reputation through the implementation of CSR initiatives that meet specific stakeholders’ expectations of the firm’s activities in these areas. In addition, we argue that MNEs with units based in different regions strengthen the impact of corporate social performance on corporate reputation. Based on a sample of 113 US MNEs from the chemical, energy, and industrial machinery industries over the period 2005–2010, our findings show that CSR has a positive effect on corporate reputation. In addition, MNEs’ operations in developing regions intensify the positive relationship between corporate social performance and reputation, although geographical diversification does not necessarily enhance MNEs’ reputation through corporate social performance.