Marketing

Ecology

Biology

Transaction cost

Business administration

International business

Economic system

Public relations

Business management

Accounting

Economics

Enterprise value

New business development

Computer science

Business model

Business

Management

Business ethics

Political science

Monetary economics

Value (mathematics)

Econometrics

Organizational culture

Corporate social responsibility

Unobservable

Finance

Equity (law)

Machine learning

Journal of International Business Studies

Drawing on transaction cost theories and the resource-based view of a firm, we posit that the value of corporate social responsibility (CSR) initiatives is greater in countries where an absence of market-supporting institutions increases transaction costs and limits access to resources. Using a large sample of 11,672 firm-year observations representing 2445 unique firms from 53 countries during 2003–2010 and controlling for firm-level unobservable heterogeneity, we find supportive evidence that CSR is more positively related to firm value in countries with weaker market institutions. We also provide evidence on the channels through which CSR initiatives reduce transaction costs. We find that CSR is associated with improved access to financing in countries with weaker equity and credit markets, greater investment and lower default risk in countries with more limited business freedom, and longer trade credit period and higher future sales growth in countries with weaker legal institutions. Our findings provide new insights on non-market mechanisms such as CSR through which firms can compensate for institutional voids.

Country-level institutions, firm value, and the role of corporate social responsibility initiatives