Does product market competition foster corporate social responsibility? Evidence from trade liberalization

Authors

  • Caroline Flammer

    Corresponding author
    1. Ivey Business School, University of Western Ontario, London, Ontario, Canada
    • Correspondence to: Caroline Flammer, Ivey Business School, University of Western Ontario, 1255 Western Road, Office 3351, London, Ontario N6G 0N1, Canada. E-mail: cflammer@ivey.uwo.ca

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Abstract

This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi-natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference-in-differences methodology, I find that domestic companies respond to tariff reductions by increasing their engagement in CSR. This finding supports the view of “CSR as a competitive strategy” that allows companies to differentiate themselves from their foreign rivals. Overall, my results highlight that trade liberalization is an important factor that shapes CSR practices. Copyright © 2014 John Wiley & Sons, Ltd.

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