Corporate Social Responsibility: Motivations and Effectiveness in Developing Countries

Worldwide there is an increasing trend of firms integrating social and environmentally responsible practices into their business strategy. This review aims to analyze the motivations for firms to engage in socially and environmentally responsible behavior and ways in which these motivations differ for firms in developed versus developing countries. In this context it discusses the differing role for governments and for markets in developed versus developing countries. In the developed countries, consumer, labor, and capital markets provide incentives for firms to voluntarily adopt these practices. Additionally, the threat of more stringent government regulations also motivates firms to engage in responsible behavior. Similar motivations may be weaker in developing countries where rewards for being responsible from either consumers or investors are uncertain, and environmental regulations are poorly enforced. Instead in developing countries there are other drivers of corporate social responsibility (CSR) such as pressures through the supply chain being exerted by downstream firms and consumers located in the developed countries, and MNCs in the developed countries. Firms in developing countries are also being directly required by government regulations to undertake CSR. We then assess how firms responded to these government policies, and the effectiveness of CSR initiatives in improving environmental and social goals. Finally, we discuss the limitations of relying on CSR to address pressing environmental and social problems in developing countries.