Who Needs CSR? The Impact of Corporate Social Responsibility On National Competitiveness

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Who Needs CSR? The Impact of Corporate Social Responsibility on National

Competitiveness
Article in Journal of Business Ethics · February 2013

DOI: 10.1007/s10551-013-1633-2
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J Bus Ethics (2014) 119:349–364
DOI 10.1007/s10551-013-1633-2
Who Needs CSR? The Impact of Corporate Social Responsibility

on National Competitiveness
Ioanna Boulouta • Christos N. Pitelis
Received: 2 December 2011 / Accepted: 21 January 2013 / Published online: 3 February 2013
Ó Springer Science+Business Media Dordrecht 2013
Abstract The link between corporate social responsibil- This pressure has both a moral and a strategic imperative.
ity (CSR) and competitiveness has been examined mainly The moral imperative has been widely discussed in the
at the business level. The purpose of this paper is to literature and is mainly based on the argument that busi-
improve conceptual understanding and provide empirical nesses have obligations not only to their shareholders but
evidence on the link between CSR and competitiveness at also to multiple stakeholders, including the society at large,
the national level. We draw on an eclectic-synthetic and hence they have a role to play in addressing some of
framework of international economics, strategic manage- the ‘ills of globalization’ (see Freeman 1984; Wood 1991;
ment and CSR literatures to explore conceptually whether Carroll 1999; Scherer and Smid 2000; Logsdon and Wood
and how CSR can impact on the competitiveness of 2002; Matten et al. 2003; Dunning 2003; Scherer et al.
nations, and test our hypotheses empirically with a sample 2006; Freeman and Velamuri 2006; Klein et al. 2012). The
of 19 developed countries over a 6-year period. Our evi- strategic imperative, based on the argument that CSR can
dence suggests that CSR can make a significant positive improve the competitiveness of firms (see Porter and Van
contribution to national competitiveness, as measured by der Linde 1995; Russo and Fouts 1997; McWilliams and
national living standards. We also find that countries with a Siegel 2001; McWilliams et al. 2006; Porter and Kramer
relatively low innovation record can benefit more, as 2006; Beurden and Gossling 2008), has been widely dis-
compared to highly innovative countries, by implementing cussed at the firm level. However, it has not been ade-
nationwide CSR-based positioning strategies. quately conceptualised at the macroeconomic level (EC
2008b). This is surprising given that CSR has become a
Keywords Competitiveness Corporate social priority issue on many governments’ strategic agendas
performance Corporate social responsibility (Albareda et al. 2007) and it even underpins the objectives
CSR strategies Innovation National living standards of the Europe 2020 strategy for smart, sustainable and
inclusive growth (EC 2011).
Introduction With a few notable exceptions (e.g. MacGillivray et al.
2003, 2007; Zadek 2006; Zadek et al. 2005), the arguments
The business world today faces increasing pressure to linking CSR and national competitiveness draw upon the
adopt or improve its corporate social responsibility (CSR). alleged positive link between CSR and competitiveness at
the firm level. This is also the approach taken by the
European Commission: ‘The principal focus is on how
I. Boulouta
CSR might contribute to competitiveness at the level of the
Lecturer in Management, Department of Management,
Birkbeck College, University of London, London, UK individual enterprise. The links between CSR and macro-
e-mail: [email protected] level competitiveness are also explored, although there has
been comparatively little research at this level of analysis’
C. N. Pitelis (&)
(EC 2008b, p. 106).
Judge Business School, University of Cambridge,
Cambridge, UK Such analyses are problematic, not only because of the
e-mail: [email protected] skepticism that remains around the ‘business case’ for CSR
123
350 I. Boulouta, C. N. Pitelis
(see Garcia-Castro et al. 2010; Barnett 2007), but also The structure of the paper is as follows. We first discuss
because the micro-level case may not be scalable to the the meaning of CSR and competitiveness at the national
national level (Swift and Zadek 2002; Frynas 2008; EC level. We then proceed with a literature review on the link
2008b). In addition, most literature emphasizes the impor- between CSR and competitiveness and present our con-
tance of macro-level, rather than firm-level factors to explain ceptual framework. The conceptual framework starts with a
national competitiveness (Aiginger 2006; Schwab 2009). discussion on the determinants of competitiveness at the
Accordingly, we lack an integrated, and agreed upon, national level, giving particular emphasis to strategy as a
conceptual framework within which to examine the impact determinant of competitiveness (see Porter 1990). In this
of CSR on national competitiveness. Unless we appreciate context, we then discuss CSR-based strategies, and present
better the strategic role of CSR and amass adequate our first hypothesis linking CSR with national competi-
empirical evidence of its impact at multiple levels, the tiveness. Following the above, we discuss what role a
potential of CSR to deliver real positive social change may country’s innovative strength can play on the above link.
fail to be realized. Besides the moral imperatives for pro- This discussion results in our second hypothesis which
moting CSR, the success and diffusion of the CSR concept suggests that a country’s innovative strength is a moderator
may well depend on its contribution to the wider compet- in the relationship between CSR and national competi-
itiveness of nations. tiveness. Following these, we proceed with an empirical
In the above context, we try to answer the following analysis and finally, in the last section, we discuss the
questions: Does CSR affect national competitiveness at all, results of this study, the limitations, our conclusions and
and if so, how? Which nations can benefit from adopting suggestions for future research.
CSR and how? We take a step in this direction by first
examining the link between CSR and national competi-
tiveness conceptually, drawing and building upon extant The Meanings of CSR and Competitiveness
literature in international economics, strategic management
and CSR. We also conceptualise the issue of the competitive What is CSR?
positioning of countries, and the interaction between CSR
and countries’ strength in innovation. We then proceed with Both the concepts of competitiveness and CSR, when
an empirical analysis, by focusing on a sample of firms, applied at the macro-level, are elusive and controversial
operating in 19 developed countries, between the years 2001 (see, for example, Krugman 1994; Porter 1990, for criti-
and 2006. We focus only on developed countries because the cisms of national competitiveness, and Carroll 1999; Fry-
literature on the determinants of competitiveness suggests nas 2008; Lantos 2001; Schwartz and Carroll 2003, for
different factors affecting competitiveness at different criticisms of CSR). Consensus on a CSR definition is dif-
stages of development (Aiginger 2006; Schwab 2009), and ficult to achieve, as this is not merely a technical exercise
for data availability reasons. in describing what corporations are doing in society, but
Our analysis adds value on extant literature examining also a normative exercise on what corporations should be
the linkages between CSR and competitiveness (e.g. Porter responsible for (Marens 2004). Therefore, some research-
and Kramer 2006; McWilliams and Siegel 2001; Margolis ers have characterized CSR as an ‘essentially contested’
and Walsh 2003; Garcia-Castro et al. 2010), by measuring concept, including it in a group of concepts whose meaning
the impact of CSR at the national level. Towards this and application remain under debate (Moon et al. 2005).
purpose, we built a new and greatly improved dataset, Despite the absence of a universally agreed definition,
which included data on the corporate social performance of views on how to define CSR abound and range substantially
19 countries over a period of 6 years. Our dataset allowed in terms of their breadth. For example, the narrowest defi-
the use of panel data analysis which greatly improves nition of CSR may be Friedman’s (1970). His perspective
confidence in causal inference, as compared to cross-sec- equated CSR with the legitimate pursuit of profitability,
tional analysis that is often used in this line of research. namely one pursued within the ‘rules of the game’, without
Our findings support the idea that CSR has a positive deception or fraud. A much wider and widely accepted
impact on national competitiveness. Also, we examined the definition has been suggested by Carroll (1979), who argued
moderating role of a country’s innovation record and found that ‘the social responsibility of business encompasses the
that through appropriate competitive positioning strategies, economic, legal, ethical and discretionary expectations that
countries with a low innovation record may be able to society has of organizations at a given point in time’ (Carroll
capture more value from CSR-based strategies, as com- 1979, p. 500). Scherer and Palazzo (2008) added a political
pared to countries with a stronger innovation record. dimension to the term, suggesting that businesses should
Therefore, we conclude that such countries have more to ‘contribute to the development and proper working of global
gain by fostering and building a strong CSR profile. governance’ (Scherer and Palazzo 2008, p. 414).
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Who Needs CSR? 351
Beyond definitions which emphasize increasing determine the level of productivity of a country’ (Schwab
responsibilities for businesses, there are definitions which 2009, p. 4). Krugman (1994) argued that the growth rate of
emphasize what the aim of CSR at the macro-level should domestic productivity equals the growth rate of national
be. For example, the World Business Council for Sus- living standards. However, this link is not always
tainable Development (WBCSD) has defined CSR as ‘a straightforward (see Reinert 1994). This is why some
continuing commitment by business to behave ethically scholars have made explicit what the outcome of compet-
and contribute to economic development while improving itiveness should be. For example, Scott (1985) has argued
the quality of life of the workforce and their families as that ‘national competitiveness refers to a nation’s ability to
well as of the local community and society at large’ produce, distribute, and service goods in the international
(Holme and Watts 2000, p. 8). economy in competition with goods and services produced
Finally, there are definitions which emphasize the in other countries, and to do so in a way that earns a rising
instrumental/strategic view of CSR, i.e. the benefits for standard of living’ (Scott 1985, p. 14). Along similar lines,
both business and society. For example, Hopkins’ (2003) the European Commission has defined competitiveness at
definition explicitly stated that the aim of CSR at the the macro-economic level ‘as a sustained rise in the stan-
macro-level should be ‘to create higher and higher standards of living’ (EC 2008b, p. 15).
dards of living while preserving the profitability of the Aiginger (2006), after reviewing a number of diverse
corporation, for people both within and outside the cor- approaches to the concept, notices a convergence towards a
poration’ (Hopkins 2003, p. 1). Along similar lines, the definition as ‘the ability of a country or location to create
British Government has defined CSR as ‘the voluntary welfare’ (2006, p. 161). This broad definition of competi-
actions that business can take, over and above compliance tiveness contains an ‘outcome evaluation’ of competitive-
with minimum legal requirements, to address both its own ness (e.g. welfare) which can be measured by a number of
competitive interests and the interests of wider society’ indicators (e.g. per capita income, Human Development
(Business Innovation and Skills 2008, p. 5), while more Index, happiness etc.), and a ‘process evaluation’ of com-
recently the European Commission has defined CSR as petitiveness which relates to the analysis of the factors that
simply ‘the responsibility of enterprises for their impacts produce the outcome. It is arguable that a definition of
on society’, with the aim of ‘maximizing the creation of competitiveness as superior performance vis-à-vis a peer
shared value for all stakeholders and society at large’ (EC group that shares a common objective (Pitelis 2009) is not
2011). only restricted to welfare, but also incorporates a required
What all these definitions seem to suggest is that CSR is benchmark, against which to compare performance. In this
a complex and dynamic concept, continuously evolving, context, a country can be defined as being more competi-
following and sometimes shaping changes in societal tive, if it outperforms other countries, on the basis of its
norms and societal expectations. These definitions also capability to improve the shared indicator(s) over time.
suggest that CSR refers to business assuming and fulfilling In line with the above definitions of competitiveness, in
responsibilities that extend beyond their profit-making this study, we focus on national living standards, as mea-
functions, with the aim to enhance some social objectives, sured by per capita GDP at purchasing power parities.
such as sustainable economic development, quality of life, While this is not the only measure of competitiveness, it
and/or increasing the national standards of living, amongst seems to be closely correlated with many other indicators
many others. In this study, and in line with the above (see Porter and Schwab 2008; Ram 1992), while the data
broader definition of CSR, we test for the impact of CSR at on GDP per capita (GDPC) are more readily available and
the national level, through its impact on the national arguably more reliable. In addition, per capita GDP can be
standards of living. seen as a proxy for aggregate productivity—a measure
favored by scholars such as Krugman (1994) and Porter
What is Competitiveness? (1990) among others.
The concept of competitiveness is borrowed from the

analysis of firms and its meaning at the national level has Literature Review
been regarded by some as meaningless, or even dangerous,
since there is not a defined bottom line for countries, as CSR and Competitiveness
there is for business (Krugman 1994). Nevertheless, the
term is continuously used at the national level for economic The bulk of CSR literature has focused on the impact of
policy evaluation. CSR on firm-level competitiveness. Within this stream of
The World Economic Forum (WEF) defines competi- research it has been argued that firms engage in ‘strategic’
tiveness as: ‘the set of institutions, policies and factors that CSR (Baron 2001; McWilliams and Siegel 2000, 2001;
123
Siegel and Vitaliano 2007), which can lead to increased through its indirect impact on some factors of competi-
financial and social performance (Waddock and Graves tiveness such as social capital, innovation and human
1997; Husted and de Jesus Salazar 2006). More specifi- capital (EC 2008a, b).
cally, it has been suggested that CSR positively impacts on Despite the plausibility of these conceptual arguments,
the competitiveness of firms through a number of pathways there has been very little empirical research on whether the
such as by reducing costs (Hart and Ahuja1996; Jenkins aggregate CSR practices of individual companies do
2006), creating new value through entrance into new actually have a measurable effect on national competi-
markets (Porter and Kramer 2006; Pralahad 2004), tiveness (EC 2008b). An exception is work by the
enhancing human resource performance and helping retain AccountAbility organisation and its partners, focusing on
or attract new talent (Cochran 2007; Montgomery and the development of a ‘National Corporate Responsibility
Ramus 2011; Turban and Greening 1997; Backhaus et al. Index’ (NCRI), which captures ‘the extent to which there is
2002), building better relations with employees, customers, an enabling national environment for corporate responsi-
suppliers and communities (Hillman and Keim 2001; bility, and the resulting outcomes of corporate responsi-
Creyer and Ross 1997; Sen and Bhattacharya 2001) and bility practice’ (MacGillivray et al. 2003, p. 6). After
finally enhancing corporate image and reputation, which plotting this index against the WEF’s Growth Competi-
can be rewarded by stock market investors (Brown 1998) tiveness Index (GCI) and against per capita Gross National
and can help firms avoid costly stakeholder conflicts Income (GNI), the authors found a positive correlation.
(Schnietz and Epstein 2005; Fuller and Tian 2006). However, this index attempts to ‘measure the overall
Moreover, reviews of the empirical literature and meta- ecology of responsibility not merely what businesses do, or
analytic studies have confirmed a positive link between do not do’ (Zadek et al. 2005, p. 104). Hence, it does not
financial and social performance (Margolis and Walsh focus on actual CSR performance. Despite data weaknesses
2001; Orlitzky et al. 2003; Beurden and Gossling 2008). and other difficulties in the calculation of these indices,
Despite this evidence, some scholars question this link, which can prohibit causal inference, this line of research
mostly on the basis of arguments concerning methodo- has been a major step forward towards the empirical
logical and data quality issues (see Margolis and Walsh investigation in the area of CSR at the macro-level.
2003; Garcia-Castro et al. 2010). However, the fact that this index combines the actual
In addition to the fact that the literature on the ‘business socially responsible activities of corporations with the
case’ is not yet fully conclusive, grounding national com- enabling environment for such activities does not allow us
petitiveness on business competitiveness can be problem- to decipher whether it is the actual business social perfor-
atic. The benefits of CSR at the micro-level do not mance, or the enabling environment for such activities that
necessarily scale up to the macro-level. This has been contributes to national competitiveness.
emphasized by Swift and Zadek (2002), who investigated a The definitional and data measurement problems of CSR
number of factors that prevent micro-level CSR scaling up performance at the national level have led some researchers
to the national economy. Examples are: the possibility of to focus only on specific areas/dimensions of CSR e.g.
CSR benefitting one company but harming the economy, or environmental performance and its impact on national
the possibility of CSR being good for large companies but competitiveness (Esty et al. 2005; Porter and Van der
detrimental to small and medium-sized enterprises (SMEs) Linde 1995), or the impact of the gender gap on national
(Pitelis 2004). Another dimension is the possibility of CSR competitiveness (Hausman et al. 2008). Although these
harming the trading potential of some countries that are not studies have found a positive link; they do not address the
able to meet the market’s CSR standards, by creating ‘non- multidimensionality of CSR performance, as defined by
tariff’ barriers to trade (Swift and Zadek 2002). Wood (1991). Hence, they do not adequately answer the
These tensions can only be addressed by aligning CSR question of whether the overall CSR activities of individual
with national competitiveness goals, hence embedding it companies have an impact on national competitiveness.
into the wider economy (MacGillivray et al. 2003). This is To summarize, current literature so far has not yet
also what the concept of ‘responsible competitiveness’, explicitly examined the impact of national CSR perfor-
defined as ‘an economy’s productivity being enhanced by mance on national competitiveness. In addition, the ques-
businesses taking explicit account of their social, eco- tion of whether important institutional/macro-economic
nomic, and environmental performance’ (MacGillivray factors, such as innovative culture, can moderate the
et al. 2003, p. 13), aims to achieve. The view of embedding impact of CSR on national competitiveness has not yet
CSR into the wider economy has also been supported by been addressed. Finally, potential competitive positioning
the European Union (EU). The European Commission has strategies by nations through CSR are still underconcep-
examined theoretically the impact of CSR on national tualised in extant literature. These are important limitations
competitiveness and has suggested a positive link, mainly we aim to address in this paper.
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Who Needs CSR? 353
A Conceptual Framework and agglomeration effects (Porter 1990), as well as the

institutional macroeconomic and policy environments, also
Determinants of National Competitiveness play an important role (Pitelis 2009). While we do not intend
to pursue all these factors here in detail, we submit that CSR
Extant literature on national competitiveness features four can function as a firm-region-nation-wide strategy which
main approaches: the economic theory-based ‘Washington can (indirectly) impact on national competitiveness through
Consensus’ approach, the more pragmatic ‘East-Asian its impact on all aforementioned factors. In particular, CSR-
approach’, the ‘national innovation systems’ approach- based strategies can improve the quality of human resources.
‘varieties of capitalism’ and the ‘Diamond’ approach of They foster improved and constructive relationships and
Michael Porter (1990). The first three approaches mainly diversity (Boulouta 2012) which ultimately foster innova-
emphasize macro-level factors of competitiveness. In par- tion (MacGillivray et al. 2007). Overall, CSR can help create
ticular, the ‘Washington Consensus’ approach focuses on better workplace environments which are more conducive to
the role of ‘free’ markets and ‘free’ trade in fostering com- innovation (Cochran 2007). In addition, CSR can enable
petitiveness and growth (see Stiglitz 2003; Rodrik 2004). businesses to become better at developing new products,
The ‘East-Asian approach’ emphasizes governmental processes and distribution channels (Sabapathy and Weiser
intervention and the developmental role of the state (see 2003; Rennings et al. 2006). The development of low-car-
Chang 2002; Shapiro and Taylor 1990), while the ‘national bon technologies, the expansion of the micro-credit market
systems of innovation’–‘varieties of capitalism’ approach (even in developed economies) or the ‘bottom of the pyra-
focuses on bundles of institutional and organisational char- mid’ approaches are obvious examples of how addressing
acteristics (such as relations between governments, busi- societal challenges can be a catalyst for innovation. Along
ness, banks and labour and the existence or otherwise of similar lines, Zadek (2006) has discussed how CSR can
supporting and complementary organisations, such as Uni- bring innovation in governance structures at the macro-level.
versities), in countries which foster, or hinder, their ability to Furthermore, a more innovative and flexible macro-economic
innovate and hence create value (see Freeman 1995; Jackson and institutional structure supports better stakeholder rela-
and Deeg 2006). The fourth approach, Porter’s ‘Diamond’ tionships, promotes societal learning, pluralism and diversity
approach, is distinct for its accounting for firm-level factors and ultimately impacts on unit cost economies.
of competitiveness, in particular business strategy and As our aim in this study is not to examine the indirect
structure (see Snowdon and Stonehouse 2006; Pitelis 2009). impacts of CSR on the major factors of competitiveness, but
Within this literature there is a long list of potential factors/ rather the direct impact of CSR-based positioning strategy
causes of national competitiveness, and little consensus on on national competitiveness, in our investigation we hold all
what factors matter most for each country at each time. the above-mentioned major factors of competitiveness
Nevertheless, a consensus seems to be emerging between (which are potentially affected by CSR) constant. Following
scholars and policy makers that competitiveness should aim on from this, moreover, we explore the potentially moder-
at increasing welfare (e.g. national standards of living) ating role of a country’s innovation standing.
(Aiginger 2006). However, the means to reach this goal
should be context/country specific (Rodrik 2004). CSR-Based Strategies and Their Impact on National
Amongst the various perspectives on nationwide com- Competitiveness
petitiveness mentioned above, four key determinants of
competitiveness seem to enjoy wide acceptability. These are All major determinants of competitiveness as discussed
innovation (Schumpeter 1942; Penrose 1959; Hall and above, except business strategy, can foster productivity (or
Soskice 2001), human resources, notably entrepreneurial value creation), but not necessarily value capture, hence
managers (Penrose 1959; Teece 2011), unit cost econo- realized competitiveness (see Teece 2006). Only when
mies,1 such as economies of scale and scope (Chandler appropriate strategies for value capture are used at the
1962), and firm-level strategy and structure (Porter 1990), national level to capture the value created from productivity
see Pitelis and Vasilaros (2010). In addition, demand factors improvements can these factors lead to increased living
standards, hence realized competitiveness. Therefore,
1 within this framework it is important to examine how CSR,
Unit cost economies refers to all the different types of economies
that lead to reductions in unit costs, such as economies of scale and as a process embedded into the value-capturing strategies of
scope (see Chandler 1962), transaction cost economies (see Coase firms and nations, can be used to capture value at the national
1937), economies of learning (see Arrow 1962), economies of growth level and hence contribute to national competitiveness.
(see Penrose 1959), economies of joint governance (see Williamson
To date, there has been very limited discussion in the
2005), external and agglomeration economies (see Henderson 2005)
and economies of pluralism and diversity (see Pitelis and Vasilaros national competitiveness and CSR literatures about value-
2010). capturing strategies at the national level that may lead to
123
competitiveness and consequently very little discussion on comparative or competitive advantage. By way of an
CSR as a value-capture strategy (McWilliams et al. 2006). example, in 2008 the Danish Ministry of Economic and
Porter (1980, 1985) has examined numerous strategies Business Affairs presented an ‘Action Plan for Corporate
employed by firms to capture value, such as ‘positioning’ Social Responsibility’ with 30 initiatives aiming at pro-
strategies. These include: cost leadership (producing moting CSR amongst Danish businesses and marketing
comparable products more cheaply than competitors), dif- Denmark for responsible growth (Knopf et al. 2011).
ferentiation (producing differentiated, usually higher Today, Denmark has built a strong CSR profile and is
quality products) and niche strategies (being a cost leader, among the forerunners in issuing a CSR strategy, empha-
or a differentiator within a particular market segment). sizing CSR as a means for improving national competi-
These also include ‘entry deterrence’ strategies, namely tiveness (Knopf et al. 2011). This view is reinforced by
barriers to new competition, such as branding). Such ideas scholars who have found that CSR-based product differ-
are relevant for nations too, but have not yet been lever- entiation can improve export performance (see Boehe and
aged towards this purpose in extant literature. Here, we do Cruz 2010). In addition, Dowell et al. (2000) have found
so, by focusing in particular on CSR-based positioning and that developing countries that use lax environmental reg-
entry deterrence strategies. ulations to attract investments may end up attracting poorer
quality and less competitive firms. Hence, national strate-
CSR-Based Positioning Strategies gies who support higher CSR standards and aim at devel-
oping a reputation as being ‘responsible’, at the country
Cost Leadership Strategies CSR embedded in a cost level, can positively affect trade and investment opportu-
leadership strategy can be employed at the national level in nities (Peng and Beamish 2008; Boehe and Cruz 2010).
ways that lead to cost reductions, and thus directly affect
national productivity. For example, many CSR practices Niche Strategies Like firms, nations can employ a niche
related to the environment contribute to a more efficient and strategy and focus on increasing their market share in
effective utilization of resources such as raw materials and specific market segments. For example, low-carbon tech-
energy, or even to more productive use of labour, and hence nologies alone will be worth US$ 500 billion by 2050,
contribute directly to cost reductions (see Esty et al. 2005; according to the Stern Report (Zenghelis and Stern 2007).
Porter and Van der Linde 1995). Moreover, CSR practices However, McWilliams and Siegel (2001) have argued that
that promote open communications with stakeholders and the level of CSR depends on the demand for it. Therefore,
transparency can help society improve trust in business and companies and countries who manage to increase the level
increase social capital; hence facilitate the self-regulation of of demand and supply for such products faster than other
the industry. Self-regulation can significantly reduce the cost countries may benefit even more from such niche
of state-enforced regulation (EC 2008b; Zadek 2006). The strategies.
link between trust/social capital and competitiveness has Demand for ‘responsible’ products can be fostered
been discussed extensively in the competitiveness literature through a number of corporate and government initiatives;
(see Pollitt 2002). Finally, CSR policies can promote inno- for example, raising consumer awareness about CSR (e.g.
vation in regulatory practices and a more flexible macro- through information campaigns), ensuring credibility (e.g.
economic and institutional structure through social dialogue, through eco-labels), influencing prices (e.g. through taxes
partnerships with stakeholders, new forms of joint gover- or tax reductions), committing to sustainable public pro-
nance (e.g. the UN Global Compact) and/or by contributing curement, or even through financial incentives (e.g.
to wider societal education and learning by fostering econ- rewarding the exceptional CSR performance of a few
omies of learning and growth (Zadek 2006; Deakin and companies). As has been argued by Zadek (2006), the
Whittaker 2007). All these policies which contribute to a exceptional CSR performance, even of a few companies,
more flexible macro-economic and institutional structure can be very important in making demand more sophisti-
help increase efficiency and reduce costs at national level, cated and ‘responsible’, by creating consumers who learn
hence improving competitiveness. to require more ‘responsible’ products and services.
The potential of some multinational companies becom-
Differentiation Strategies CSR embedded in a national ing agents of change for local institutions or structures has
differentiation strategy can be used to enhance the repu- been widely discussed in the international business litera-
tation of the country, increase the perceived value of their ture (see Westney 1993; Dacin et al. 1999; Jones et al.
offerings (products and services), boost exports and attract 2007). Hence, along the same lines, some companies with
investment. In particular, countries that use CSR as a dif- exceptional CSR performance in one country may signifi-
ferentiation strategy can strengthen and promote a cantly affect the local institutional environment for CSR
responsible reputation and hence engender and promote a and increase the demand for more ‘responsible’ products
123
Who Needs CSR? 355
and processes at a national or at a more global level. the national level, the size of value captured may depend
Therefore, such exceptional CSR performance by a few on a number of factors such as a country’s stage of
companies in one country, incentivized by appropriate development, or its innovative strength.
government policies, can foster the level of sophisticated We argue that CSR-based strategies have a weaker posi-
demand and benefit the nations that focus on becoming tive effect on the competitiveness of highly innovative
leaders in ‘responsible’ industries through niche CSR- countries, as compared to less innovative countries, at the
based strategies. same stage of development. This is because the products/
services of highly innovative countries are already of high
quality and the image of these countries are of a high stan-
CSR-Based Entry Deterrence Strategies
dard, hence they may not need CSR-based differentiation in
order to enhance their competitiveness, and/or such CSR-
MacGillivray et al. (2003) argue that CSR might be used as a
based differentiation can contribute relatively little to their
strategic trade policy and create non-tariff barriers to trade.
competitiveness. CSR will still have a positive impact on their
For example, countries promoting a responsible reputation
competitiveness, mainly to the extent that it helps to avoid
might raise their CSR levels so high that they act as non-
negative criticisms from NGOs, and/or deter regulation.
tariff barriers to trade with other less responsible countries,
However, for less innovative countries that lack the ability
while boosting their exports within equally responsible
to differentiate through a strong innovative culture/capability,
countries. Moreover, McWilliams et al. (2002) have dem-
CSR-based differentiation will have a stronger positive
onstrated how political strategies based on CSR can raise
impact on their competitiveness. These countries will be able
regulatory barriers and impose additional costs on foreign
to gain competitive advantage by boosting their country’s
firms by preventing foreign competitors from using sub-
image through CSR differentiation. This is because CSR-
stitute (e.g. low cost) technology. However, it is important to
based differentiation does not necessarily require a strong
note that the effectiveness of strategic trade policies driving
innovation infrastructure with the associated costs. For
national competitiveness has been extensively debated in
example, CSR-based differentiation may increase the appeal
both academic and political circles. In this study, we do not
of products/services through compliance with CSR principles.
wish to enter this debate but to highlight the possibility of
Such an example could be compliance with ‘Fair-Trade’
countries using such CSR-based strategies within their
which does not necessarily require costly product or process
overall national competitiveness strategy.
innovation, but rather to increase the proportion of revenue
On the basis of our discussion so far, we propose that
that goes to poor farmers. Hence, ‘Fair Trade’ compliance
nationwide CSR-based strategies serving as national posi-
means paying farmers higher prices for the same crops.
tioning strategies can have a positive impact on national
Therefore, ‘Fair-Trade’ differentiation can boost exports in
competitiveness, controlling for other major factors of
countries that cannot differentiate by adding value to their
competitiveness, as identified in the previous section.
products/services through a strong national innovation sys-
Therefore, our first hypothesis is:
tem. Similarly, companies such as ‘One Water’ or ‘Toms
Hypothesis 1 CSR positioning strategies impact posi- shoes’ have demonstrated that differentiation is possible not
tively on national competitiveness. through the product, but by donating profits/products to
charity. In addition, CSR policies which foster employee
The Moderating Role of a Country’s Innovative empowerment or diversity and the promotion of women into
Strength leadership positions (see Boulouta 2012) can be virtually cost-
free. Finally, CSR policies which support various channels for
The means through which a country can achieve compet- dialogue with stakeholders can improve communication and
itiveness differ between countries at different stages of co-operation and increase CSR performance—again without
development (Aiginger 2006). For example, for the most any significant financial costs.
developed countries, the critical factor which defines their Along the same lines, some low innovation countries
competitive edge is the strength and depth of their inno- may also be in a good position to exploit cultural or his-
vation system (Schwab 2009). These countries, which torical factors to publicize compliance with CSR principles
operate at the ‘technology frontier’, can keep ahead of and add a premium to their products/services. For example,
‘rivals’ through innovations at all levels (Porter 1990). a country with a culture that is characterized by strong
Accordingly, positioning strategies such as differentiation gender inequalities, or has managed to overcome difficult
and niche strategies, based on a strong national innovation political conditions, such as apartheid in South Africa, may
system and/or CSR actions, are particularly important for extract a premium in foreign markets for products/services
developed/high income countries. Therefore, although that promote the empowerment of women or minorities in
CSR-based strategies may help countries capture value at local communities.
123
Finally, countries may use CSR-based differentiation and

develop a ‘responsible country’ reputation simply by ban- Innovation
ning ‘irresponsible’ products. For example, a country which
bans genetically modified crops may create a ‘responsible’ high Sweden
USA
Japan
image for its own products. Its policy can be perceived as a Netherlands
Germany
Switzerland
Finland
signal of higher quality national food standards, or as one Denmark
Canada
which cares for the balance of the eco-system, and hence

may stimulate demand for its own ‘responsible’ products as
well as being able to charge a premium for ‘safer’ non- low Greece
Italy
genetically-modified food products. Portugal
Austria
Spain
Belgium
Therefore, less innovative countries can use CSR-based France
Australia
UK
differentiation as a substitute for a strong national inno- Norway
vation system and may gain a competitive edge which 0 20 40 60
would not be possible otherwise. Therefore, we can argue National Corporate Social Performance (NCSP)
that in the absence of a strong national innovation system,
Fig. 1 Mean National Corporate Social Performance (NCSP) vs
CSR-based differentiation strategies can have a more Innovation (per country) Notes The x-axis shows the mean NCSP
positive impact on the competitiveness of less innovative value for every country. The black dashed line indicates the overall
countries. mean NCSP value of all countries (NCSP = 48.7). The y-axis
Our arguments regarding differentiation/niche position- indicates national innovation records (as measured by patents) and
groups the countries into two groups (high and low innovation
ing, are summarized in Fig. 1 and Table 1. In Table 1, countries). Countries are placed into the ‘high innovation’ group if
countries found in quadrant 1, ‘competitors’ are those with their innovation record is above the overall mean innovation value.
strong national innovation systems but relatively low Countries found at/below the mean innovation value were placed at
national CSR performance (NCSP), such as the USA or the ‘low innovation’ group
Sweden (see Fig. 1). These countries may not need CSR as a
strategies, is likely to bring the greatest benefit to countries
differentiation strategy to extract a premium for their prod-
found in quadrants 2 and 4, which have relatively low inno-
ucts in current markets, but CSR can still have a (weak)
vation records. These countries are in need of differentiation
positive impact on their competitiveness through safe-
in order to compete in the international arena. Therefore, our
guarding their reputation from adverse criticisms. Higher
second hypothesis is:
levels of CSR can protect their longer term competitiveness
in future markets. Countries found in quadrant 3, ‘stars’, (see Hypothesis 2 CSR has a stronger positive impact on the
Table 1) are countries like Denmark, Finland and Canada, competitiveness of countries with a lower innovation
with not only a strong innovation culture but also strong standing, as compared to countries with a higher one.
NCSP (see Fig. 1). CSR in these countries is positively
impacting on their competitiveness, through safeguarding
their longer term competitiveness. Countries found in Empirical Analysis
quadrant 2, ‘laggards’ (see Table 1), are likely to be less
competitive, producing low differentiation products and Sample
exhibiting low levels of NCSP. Countries in this box include
many South European countries such as Greece, Italy and We obtained CSR performance data at the firm level from
Portugal (see Fig. 1). These countries, while developed, the Zurich-based fund management firm Sustainable Asset
need to differentiate more to sustain their high standards of Management (SAM), which is responsible for administer-
living. Hence, these countries need to decide how to dif- ing the Dow Jones Sustainability Index (DJSI) selection
ferentiate: through enhanced national innovation systems criteria. SAM does not issue an aggregate measure of CSR
and/or through compliance with CSR. Countries found in performance at the national level so we constructed this
quadrant 4, ‘question marks’ (see Table 1), are countries measure as explained in the ‘‘Measures’’ section below.
which fail to appropriate the benefits from their competitive The list of countries and the number of firms evaluated per
advantages and have relatively low innovative standing but country are shown in Table 2. Macroeconomic data were
high NCSP. These are countries like the UK, Norway and obtained from online macroeconomic databases as shown
Australia (see Fig. 1). In such cases, the requisite strategy is in Table 3. Our initial sample consisted of 19 developed2
more complex, as it may involve a plethora of possible countries over a 6-year period (2001–2006) comprising a
factors (thus the title of the group, ‘question marks’).
Based on the discussion so far, it follows that CSR as a 2
Countries classified as developed following the OECD classifica-
differentiation strategy, embedded in national competitiveness tion, widely known as the ‘developed countries club’.
123
Who Needs CSR? 357
Table 1 Positioning matrix: National Corporate Social Performance Table 2 Percentage of publicly traded firms per country
(NCSP) vs Innovation
Country Number of Total number of % of
Innovation publicly traded publicly traded publicly
firms analyzed firms per country traded
High Low in this study (source: OSIRIS) firms in
this study
NCSP
Low 1. Competitors 2. Laggards Australia 260 2,574 10.10
High 3. Stars 4. Question marks Austria 25 178 14.04
Belgium 42 287 14.63
Canada 167 4,725 3.53
panel of 114 observations. Since panel data were not Denmark 54 315 17.14
available for some countries, our sample was reduced to Finland 72 202 35.64
108 observations. Despite its relatively small size this is the France 232 1,598 14.52
first macro-panel in this line of research. Germany 238 1,382 17.22
Greece 28 373 7.51
Methodology Italy 198 472 41.95
Japan 502 4,501 11.15
For our data analysis we used panel data techniques. Panel The Netherlands 121 393 30.79
estimation has not been used before in this line of research. Norway 48 368 13.04
It makes it possible to control for omitted variable bias and Portugal 28 129 21.71
other sources of endogeneity (Halaby 2004), thereby pro-
Spain 137 340 40.29
ducing superior results compared with cross-sectional
Sweden 124 728 17.03
analysis (Baltagi 2008). There are a variety of techniques
Switzerland 154 413 37.29
that can be used to estimate a panel data model; however,
UK 549 4,884 11.24
the appropriate method for controlling for multiple sources
USA 755 13,929 5.42
of endogeneity such as omitted variables, simultaneity,
self-selection or measurement errors is the Instrumental Source Authors’ calculations based on SAM’s data
Variable (IV) estimation (Halaby 2004).
The problem of omitted variable/unobserved heteroge-
neity is quite common in the macroeconomic competitive-
ness literature, since the number of potential determinants of effect, even in the presence of all the above sources of
competitiveness can be very large or cannot be easily and potential bias (Halaby 2004).
accurately measured or observed (for example some quali- For estimation, we used the statistical software STA-
tative variables like norms and attitudes to work). Panel data TA10, following Roodman’s (2009) generalized method of
analysis can control for such unobservable effects which moments (GMM) estimation approach. The GMM
differ between countries but are fairly constant over time. approach is a common IV estimation method. It was ini-
Also, self-selection could bias our results. It can be argued tially introduced into the growth literature by Caselli et al.
that only the most socially responsible companies per (1996) but, since then, similar techniques have been
country would be willing to be evaluated by SAM and hence applied by many other scholars such as Benhabib and
be included in the sample. Moreover, reverse causality could Spiegel (2000), and Banerjee and Duflo (2003). The GMM
also bias our results since it can be argued that high living estimation usually produces more reasonable results in the
standards are also affecting the CSR performance of coun- growth literature compared to Ordinary Least Square
tries. Finally, a last source of bias can be due to the fact that (OLS) estimation and has the potential to obtain consistent
our sample is drawn from international datasets, suggesting parameter estimates, even in the presence of measurement
the inclusion of a number of variables whose measurement is error and endogenous right-hand-side variables.
prone to errors, due to differing national standards and There are two available GMM panel estimators, both
conventions. based on the use of lagged observations of the explanatory
Therefore, by employing IV estimation techniques that variables as instruments. The first is the ‘difference GMM’
use at least one instrument that correlates highly with the estimator developed by Arellano and Bond (1991) and the
variable but not with the error term, we can control for all second is the ‘system GMM’ estimator developed by
the above endogeneity biases. Overall, it is noteworthy that Arellano and Bover (1995). The second estimator ‘system
with panel data, if all sources of endogeneity are appro- GMM’ improves upon the difference estimator, insofar as
priately accounted for, it is possible to identify the causal the quality of the instruments is concerned, and hence has
123
Table 3 Variables: names, measures and sources of data

Variable name Measure Source
Dependent variable National competitiveness GDPC is gross domestic product divided Business Monitor International database
(GDPC) by mid-year population. Measured in (2007)
current US dollars
Independent variable NCSP The country average on social SAM
performance calculated from
a sample of listed firms at each country
for each year
Control variables Innovation 1. The number of patents granted to each World Development Indicators database,
country by the USPTO World Bank (2008)
2. Company spending on R&D Global Competitiveness Reports, WEF
Unit cost economies RULC: total economy (Ratio of AMECO
compensation per employee to nominal
GDP per person employed. Base
year = 2000)
Human Capital 1. % of gross population enrolled in World Development Indicators database,
tertiary education World Bank (2008)
2. Expenditure by firms on staff training Global Competitiveness Reports, WEF
been shown to produce better results in the context of Independent Variable

empirical growth research (Bond et al. 2001). We, there-
fore, used this one in our analysis. National Corporate Social Performance (NCSP) One
We estimated the following dynamic panel data model means of operationalizing the concept of CSR at the
based on Hsiao (2003, p. 69): business level has been to measure the performance of
Yit ¼ X Yi;t1 þ bXit þ ai þ kt þ uit; firms across three dimensions: economic, social and envi-
i¼1;...;N; t¼1;...;T ;
ronmental. This is the path followed by various organisa-
ð1Þ
tions such as SAM, a Zurich-based fund management firm
where Yit is the dependent variable, measured in per capita which is responsible for issuing the DJSI. The criteria3
GDP, Yi, t-1 is the lagged dependent variable, Xit is a vector SAM selects to measure CSR performance of many com-
of all observable regressors, b is a vector of constants, ai, kt panies operating around the world which are similar to
are unobserved individual and time specific effects that are those proposed by the most frequently used guidelines such
assumed constant for given i over t and for given t over as the Global Reporting Initiative (GRI) and the screenings
i respectively, uit represents the effects of those variables used by fund managers in their Socially Responsible
that vary over i and t. Time dummies were also included in Investment (SRI) decisions. We used this metric due to its
the model in order to control for global shocks, which early availability (1999), its widespread adoption in the
might affect GDPC in all countries at any time but are not market and the credibility of the Dow Jones brand, as well
otherwise captured by the explanatory variables. Also, we as its global reach. Moreover, these ratings have been
corrected the estimated errors for heteroskedasticity as examined by academics and have been found to demon-
described in Roodman (2009). strate the desirable traits of consistency, verifiability, log-
icality and predictability (Fowler and Hope 2007).
Measures However, SAM does not issue an aggregate-level mea-
sure of CSR performance at the national level. Therefore,
Dependent Variable our independent variable is not directly observed but con-
structed as the aggregate social performance of a sample of
GDP Per Capita GDPC is a widely accepted measure, firms per country. This treatment is justified since the
used in national economic performance, welfare, produc- variance within a country is less than the variance across
tivity and growth analyses (Baumol 1986; Barro 1991, countries, for most countries in our sample. However, the
1997; Barro and Sala-i-Martin 2003; Jones 2006) and as sample of firms is not random; it includes only large firms
discussed at the beginning of this paper an appropriate that have been evaluated by SAM for potential inclusion in
measure of competitiveness in the context of CSR research the DJSI. All firms rated by SAM are included in our
at the macro-level. Since we are making comparisons
between nations, we used per capita GDP measured at 3
For more detail on these criteria, please see the SAM questionnaire
purchasing power parities. at: www.sustainability-indexes.com.
123
Who Needs CSR? 359
sample whether or not they qualified for inclusion. How- and Trademark Office (USPTO), following previous stud-
ever, SAM selects firms from the largest 3,000 companies ies such as Fageberg et al. (2005). Other common proxies
(by free float market capitalization) included in the Dow of innovation, such as Research and Development expen-
Jones Global Index (DJGI). This index covers 95 % of the ditures, were also used for robustness tests.
underlying free float market capitalization at the country
level and includes only companies with easily traded stocks Unit Cost Economies We used the Real Unit Labour
(based on liquidity and share class). Based on the above Costs (RULC) as a proxy for unit cost economies, fol-
selection criteria, our measure of aggregate social perfor- lowing previous studies such as Pitelis and Vasilaros
mance (NCSP) reflects the best possible CSR performance (2010). RULC represents price competitiveness and we
per country, accounting for the possibility that in each hypothesize that the presence of unit cost economies would
country the more socially responsible companies would be result in reduced unit costs. Data were taken from the
more willing to reply to SAM’s surveys. European Commission’s Annual Macroeconomic database
Our NCSP variable covers 19 countries and focuses on (AMECO).
developed countries only, where good quality economic
data have existed since 2001. NCSP averages were calcu- Human Capital The most common measure of human
lated from a sample of at least 25 firms per country (see capital has been the Barro and Lee (2001) database, which
Table 2). Multinational firms with operations in many covers school enrolment rates up to 2000. Since our panel
countries were evaluated in the country of operations. For covers a different period, it was not possible to use it in our
example, Coca-Cola in the United States is contributing to analysis. Therefore, we used two different variables as a
the American aggregate social performance while Coca- measure of human capital: tertiary education enrolment
Cola in Greece is contributing to the Greek aggregate rates and company expenditures on staff training.
social performance. No weights were applied as all firms A description of all variables and sources of information
are at comparable size by selection. Industry weights are is shown in Table 3.
already applied by SAM when calculating CSR perfor-
mance at business level. Hypotheses Testing and Results
Currently, there exist no other appropriate indices
available to measure CSR performance at the national Prior to testing, we visually analyzed the data to test for
level. Even the most promising one (NCRI) developed by anomalies and transformed all our variables into stan-
AccountAbility and covering a wide range of countries dardized form (z-scores). Table 4 reports the descriptive
around the world does not measure actual business CSR statistics and correlations for all variables.
performance, but a mixture of CSR performance as well as In order to test Hypothesis 1, we used the regression
the enabling environment for such performance. Besides, model shown in Table 5 (model 1). We found a positive
this index is not available for panel data analysis because it and significant correlation between national CSR perfor-
exists only for a few years, with varying content in each mance (NCSP) and GDPC (b = 0.16, p \ 0.10), so our
year. In this context, our constructed index is arguably the results confirmed Hypothesis 1 that national CSR perfor-
best possible for the purposes of this research. mance positively impacts on national competitiveness.
In order to test Hypothesis 2, i.e. the moderating role of
Control Variables a country’s innovative strength on the link between
national CSR performance and national competitiveness,
Innovation Innovation was proxied by the number of we added the interaction term of NCSP with innovation
patents granted to each country by the United States Patent (see Table 5, model 2), following Aiken and West (1991)
Table 4 Descriptive statistics and correlation matrix

Obs. Mean SD Min Max 1 2 3 4 5
1. GDPC 114 3,0641 5,315 17,810 51,862 1.00

2. NCSP 114 48.69 12.46 5.433 68.10 0.52*** 1.00
3. Human capital 114 5.22 0.74 3.50 6.10 0.50*** 0.26*** 1.00
4. Innovation 114 8,715 22,113 12 102,169 0.32*** 0.01 0.27*** 1.00
5. Unit cost economies 108 99.11 2.78 91.30 107.50 -0.14 -0.20** -0.03 -0.25*** 1.00
Descriptive statistics based on their original values, correlation results based on their z-score transformations as used in the analysis
Significance levels: *** p \ 0.01, ** p \ 0.05, * p \ 0.10
123
Table 5 Dynamic panel model regressions model 2. This is not surprising since the inclusion of the
Model 1 Model 2
lagged dependent variable (lagged GDPC) can sometimes
Dependent Dependent dominate the rest of the regressors and suppress the
variable = GDPC variable = GDPC explanatory power of other independent variables (Achen
2001). To confirm this, we estimated a static panel model
GDPC (1 year lag) 1.08*** 1.09***
excluding the lagged dependent variable and including
(0.04) (0.03)
only the control variables. The results showed that inno-
NCSP 0.16* 0.15*
vation was significant, confirming our assumption about
(0.08) (0.08)
the dominance of the lagged dependent variable as well as
Human capital -0.03 -0.04
our earlier theoretical discussion about the fact that for
(0.04) (0.03)
developed/high-wage countries (i.e. the ‘innovation driven’
Innovation -0.02 -0.01
group of countries) the most critical factor to their com-
(0.08) (0.10)
petitiveness is innovation (Schwab 2009). All our models
Unit cost economies -0.05* -0.05
have a good F-statistic value (p = 0.000).
(0.02) (0.04)
NCSP*innovation -0.02*
(0.01) Discussion, Limitations and Conclusions
Num. of instruments 18 21
Time dummies Yes Yes Our results suggest that national CSR performance can be
Observations 90 90 an important contributor to improved national competi-
Number of groups 18 18 tiveness, approximated at first instance with GDPC.
Model F value 4,619*** 3,493*** Moreover, its impact seems to be stronger in countries with
Model 1 was used to test Hypothesis 1 and model 2 to test Hypothesis relatively low innovative standing. This may be because
2 these countries can compensate for the absence of a strong
Models are based on ‘system GMM’ estimation (two-step estimator national innovation record, through CSR-based differenti-
with robust errors), errors shown in parentheses ation strategies.
Significance levels: *** p \ 0.01, ** p \ 0.05, * p \ 0.10 Our results seem to confirm previous work in this area
(e.g. MacGillivray et al. 2003, 2007; Zadek 2006; Zadek
et al. 2005), that CSR at the national level is positively
suggestions on the appropriate use and interpretation of associated with competitiveness. Moreover, our results
interaction terms in order to avoid multicollinearity issues. seem to expand previous arguments on the link between
We found the interaction term to be significant and nega- CSR and competitiveness at the firm level, which have
tive (b = -0.02, p \ 0.10) indicating that the impact of suggested that emphasis on the CSR–competitiveness
NCSP on competitiveness is smaller for highly innovative relationship should be placed on the area of differentiation
countries, hence supporting our Hypothesis 2. The coeffi- where CSR will have most impact (Welford 2003). In this
cient of NCSP remained significant and positive (b = 0.15, context, Hull and Rothenberg (2008) have found that the
p \ 0.10). impact of CSR is stronger on less innovative firms.
For the regression models reported above, we checked Therefore, our results seem to confirm similar arguments in
the validity of the instruments used by using the Sargan the CSR-competitiveness link but at the national level.
(1958) and Hansen (1982) tests of over-identifying Our findings are important for public policy and mana-
restrictions, as well as the autocorrelation tests described in gerial practice, as they suggest that CSR-based positioning
Arellano and Bond (1991) and Roodman (2009). These are strategies can be important for national competitiveness and
standard tests after GMM estimation. All the test results hence should be promoted by national initiatives, especially
were satisfactory, accepting the validity of our instruments. in countries with weaker innovative records. However, our
For robustness reasons, we also tested our models with a study focused only on a sample of developed countries. Such
different number of instruments, and different measures for countries have already government policies in place to
control variables. While model 1 generated virtually the safeguard the economy from the potential negative impacts
same results confirming Hypothesis 1, model 2 could not of CSR, as discussed in extant literature (see, Swift and
always confirm Hypothesis 2 indicating that this result is Zadek 2002; Pitelis 2004; Frynas 2008). Hence, it is nec-
sensitive to the operationalization of variables. essary to note that the positive impacts of CSR at the national
As for the control variables, in model 1, only unit cost level are evident only after controlling for the existence of
economies (e.g. RULC) were found significant (b = policies to safeguard the competitiveness of SMEs, to pro-
-0.05, p \ 0.10) while none was found significant in tect market dynamism from bureaucracy and to thwart CSR
123
Who Needs CSR? 361
synergies turning to anticompetitive behaviour and harming also been supported in the international business literature
the wider economy. In this context, our findings can be taken (see Kwok and Tadesse 2006; Jones et al. 2007).
to imply that for as long as appropriate government policies On the basis of the above, additional research in future
are in place to minimize any potential negative impacts of should focus on the following. First, gathering a bigger
CSR-based strategy, CSR-based positioning strategies by sample of firms per country including SMEs as well as
firms and nations can be beneficial to a nation’s competi- firms from developing countries and second, testing more
tiveness goals. factors from the macroeconomic and institutional envi-
However, selecting appropriate CSR-based positioning ronment that can moderate the impact of CSR on com-
strategies (e.g. differentiation, cost leadership, entry deter- petitiveness. Work along these lines can provide managers
rence etc.) depends on each country’s desired place in the and policy makers with better advice on how to use CSR
international arena. As with any other value-capture strate- strategically at the firm, national and international levels.
gies, CSR-based ones should not be used to increase market Despite limitations, our work contributes towards the
share in the short term and at a level hurting the competi- critical question of both measuring and testing for the
tiveness of other nations. Ultimately, CSR-based strategies wider impact of CSR on the economy. It provides support
at the national level, as other value-capture strategies, should for the strategic view of CSR towards delivering shared
be further evaluated at the international level; for example, value for business and society; as envisioned by Porter and
according to wider criteria, such as the ‘global sustainable Kramer (2006, 2011). We hope the path of empirical
value creation’ criterion (Mahoney et al. 2009). enquiry initiated in this study will stimulate more research
Our work extends and improves upon previous work in a along the lines indicated in the previous section to under-
number of ways. First, we have used a new improved stand the important relationship between CSR and national
dataset and a more advanced statistical analysis through the competitiveness.
use of panel data and IV techniques which can control for
many sources of endogeneity bias. Also, our results, Acknowledgments For comments and discussion on earlier drafts,
we are grateful to participants at the Social Issues in Management
focusing on actual business performance on CSR, can Division-Academy of Management Annual Meeting 2011, as well as
better answer the question of whether CSR-based strategies to Prof. Roger Sugden and Dr. Stelios Zyglidopoulos. We are also
can have an impact on the competitiveness of a nation and grateful to the two anonymous reviewers and the Corporate
also examine policies or factors that affect this relationship. Responsibility section editor of this journal, Prof. J. Vanhamme, for
their most constructive comments. For access to the data, we are
In this context, we examined the impact of one such critical indebted to the company Sustainable Asset Management (SAM) in
factor, namely innovative standing, and suggested which Zurich. The usual disclaimer applies.
nations might need to build a stronger CSR profile more
than others.
Limitations of our study, that call for cautious inter- References
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Who Needs CSR? The Impact of Corporate Social Responsibility on National

Article in Journal of Business Ethics · February 2013

Ioanna Boulouta Christos Pitelis

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Theory of the firm View project

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Who Needs CSR? The Impact of Corporate Social Responsibility

The concept of competitiveness is borrowed from the

A Conceptual Framework and agglomeration effects (Porter 1990), as well as the

Finally, countries may use CSR-based differentiation and

which cares for the balance of the eco-system, and hence

vation system and may gain a competitive edge which 0 20 40 60

Table 3 Variables: names, measures and sources of data

been shown to produce better results in the context of Independent Variable

Table 4 Descriptive statistics and correlation matrix

1. GDPC 114 3,0641 5,315 17,810 51,862 1.00

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