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Does Geographical Proximity Affect Corporate Social Responsibility? Evidence from U.S. Market

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Abstract

Corporate Social Responsibility is considered as a key corporate agenda in recent years. This study examines the relation between geographical proximity to metropolitan areas and corporate social responsibility. Methodologically, sample firms are classified by their distance to top-metropolitan area of Census 2010. Corporate social responsibility follows scoring system, which has been developed by the notable KLD Research & Analytics. Based on the samples from U.S. listed firms, the results support the main hypothesis that firm locating further from metropolitan areas tends to commit greater degree of social responsibility than those locating nearby top-metropolitan areas. Social responsible activities are exploited as a mean to alleviate information asymmetry and agency conflict rose from a distance. Besides, further investigation shows that the results above are potentially explained by some attributes of corporate social responsibility. These results are important to academic field because they show that the extent of any non-financial corporate activity, i.e. corporate social responsibility, can be explained by its geographical background.

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... To align our findings with previous literature, and also to examine whether measurement errors between firmand industry-level data seriously impede empirical findings, we estimate a unionization proxy by using industry-level data. Using data from the Union Membership and Coverage Database (UMCD), we estimate UNION_IND by multiplying the percentage of employees covered by collective bargaining in a firm's primary Census Industry Classification (CIC) industry with the number of company employees over lagged total assets (Chen et al., 2011, 2012, Chyz et al., 2013Hilary, 2006). Since UMCD data are available in CIC codes, we use a crosswalk list (retrieved from the US Census Bureau) and convert CIC to Standard Industrial Classification (SIC) codes (www. ...
... Further, prior literature indicates that firm location is influential to corporate CSR engagement (Boeprasert, 2012;Ding et al., 2019;Husted et al., 2016;Jiraporn et al., 2014). More specifically, there is evidence that a) firm location (Boeprasert, 2012;Ding et al., 2019), b) influence by geographic peers (Jiraporn et al., 2014), and c) high levels of local CSR density (Husted et al., 2016) are influential on a firm's CSR policy and engagement. ...
... Further, prior literature indicates that firm location is influential to corporate CSR engagement (Boeprasert, 2012;Ding et al., 2019;Husted et al., 2016;Jiraporn et al., 2014). More specifically, there is evidence that a) firm location (Boeprasert, 2012;Ding et al., 2019), b) influence by geographic peers (Jiraporn et al., 2014), and c) high levels of local CSR density (Husted et al., 2016) are influential on a firm's CSR policy and engagement. We capture such effects by the following: first, we create an indicator (URB) that equals 1 for firms headquartered in MSAs with at least 1 million residents (as defined by the U.S. Census), and 0 otherwise (Francis et al., 2016); second, we use a dichotomous variable (UAGG) for firm headquarters located in an urban agglomerate area, namely one of the following MSAs: New York City, Los Angeles, Chicago, WA, Baltimore, San Francisco, Philadelphia, Boston, Detroit, Dallas, and Houston (Francis et al., 2016); third, we operationalize local CSR density (CSRDENS) as the spatial distribution of CSR engagement by firms surrounding the focal firm, as determined by the location of its headquarters (Husted et al., 2016) [14]. ...
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... This study simply divides the geographical characteristics of enterprises into local institutional ownership and non-local institutional ownership, ignoring the geographical distance between enterprises and ownership institutions. Boeprasert (2012) showed that firms whose headquarters are farther away from big cities have higher social responsibility scores (Boeprasert, 2012), but this finding does not take into account the geographic dispersion of firms. A firm that has its' headquarters far from a big city is not necessarily geographically centralized. ...
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When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system”, I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are — or would be if they or anyone else took them seriously -preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.
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Many developing countries have relied on technology transfer through foreign direct investment (FDI) from developed countries as a primary means of technology acquisition. However, recent increased global eco-consciousness and linking of trade and investment with environmental issues has the potential of disrupting these investment flows. This paper investigates the validity of the `pollution-haven' hypothesis (which claims that an open market regime will encourage the flow of generally low-technology polluting industries to developing countries) from a neo-technology trade perspective. In the process, an emerging trajectory of international technology transfer favoring high-technology industries is established. This paper concludes that positive measures enhancing FDI is not only crucial for technology upgrading, but at the same time brings about enhanced environmental welfare through transfer of eco-friendly products and production processes.
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The use of corporate social responsibility (CSR) initiatives to influence consumers and differentiate product offerings has become quite common. This research builds on the growing body of marketing literature through two investigations that manipulate consumers' perceptions of fit, motivation, and timing of corporate social initiatives embedded within promotions. We find that low-fit initiatives negatively impact consumer beliefs, attitudes, and intentions no matter what the firm's motivation, and that high-fit initiatives that are profit-motivated have the same impact. Furthermore, consumers consider the timing (proactive versus reactive) of the social initiative as an informational cue, and only the high-fit, proactive initiatives led to an improvement in consumer beliefs, attitudes, and intentions.
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Our paper examines the impact of geographic location on liquidity for U.S. rural- and urban-based companies. Even after adjusting for size and other factors, rural firms trade much less, are covered by fewer analysts, and are owned by fewer institutions than urban firms. Trading costs are higher for rural Nasdaq firms, and volume that can be attributed to marketwide factors is lower for rural stocks. The findings add to our understanding of the way that access to information and familiarity affect liquidity.
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This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears these costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.The directors of such [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.Adam Smith, The Wealth of Nations, 1776, Cannan Edition(Modern Library, New York, 1937) p. 700.
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Economic geography during an era of global competition involves a paradox. It is widely recognized that changes in technology and competition have diminished many of the traditional roles of location. Yet clusters, or geographic concentrations of interconnected companies, are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more advanced nations. The prevalence of clusters reveals important insights about the microeconomics of competition and the role of location in competitive advantage. Even as old reasons for clustering have diminished in importance with globalization, new influences of clusters on competition have taken on growing importance in an increasingly complex, knowledge-based, and dynamic economy. Clusters represent a new way of thinking about national, state, and local economies, and they necessitate new roles for companies, government, and other institutions in enhancing competitiveness.
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In the end business has only two responsibilies - to obey the elementary canons of everyday face-to-face civility (honesty, good faith, and so on) and to seek material again. The fact that it is the butt of demagogical critics is no reason for management to lose its nerve -to buckle under to reformers- lest more severe restrictions emerge to throttle business completely. Even today, most American critics want only to curb capitalism, not to destroy it. The comtemporay school of business morality seems intent on adding its own caveat to that unhappy consequence. The gospel of tranquility is a soporific. Instead of fighting for its survival by means of a series of strategic retreats masquerading as industrial statesmanship, business must fight as if it were at war
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The paper compares the extent and content of businesses' communications about corporate social responsibility (CSR) in France, the Netherlands, the U.K., and the U.S. In particular, the study investigates the nature of CSR principles, processes, and stakeholder issues discussed in web pages. The results show that businesses in the four countries do not display the same eagerness to appear as socially responsible and employ diverse means to convey social responsibility images.© 2002 JIBS. Journal of International Business Studies (2002) 33, 497–514
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The strong bias in favor of domestic securities is a well-documented characteristic of international investment portfolios, yet we show that the preference for investing close to home also applies to portfolios of domestic stocks. Specifically, U.S. investment managers exhibit a strong preference for locally headquartered firms, particularly small, highly levered firms that produce nontraded goods. These results suggest that asymmetric information between local and nonlocal investors may drive the preference for geographically proximate investments, and the relation between investment proximity and firm size and leverage may shed light on several well-documented asset pricing anomalies. Copyright The American Finance Association 1999.
Corporate social performance revisited
  • D J Wood
Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16(4), 691-718. http://dx.doi.org/10.5465/AMR.1991.4279616
Corporate governance and international location decisions of multinational enterprises. Corporate Governance: An International Review
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Dam, L., Scholtens, L. J. R., & Sterken, E. (2007). Corporate governance and international location decisions of multinational enterprises. Corporate Governance: An International Review, 15, 1329-1346. http://dx.doi.org/10.1111/j.1467-8683.2007.00649.x
Do shareholders care about geography?
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John, K., Knyazeva, A., & Knyazeva, D. (2010). Do shareholders care about geography?. Journal of Financial Economics.
Corporate Social Responsibility. World Business Council for Sustainable Development
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WBCSD. (1999). Corporate Social Responsibility. World Business Council for Sustainable Development.