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Applying CSR to Foreign Investments, Incentives of MNCs and Effects on Host Society: The Case of China

Oscarius, Louise and Glimeus, Linn (2009)
Department of Economics
Abstract
Corporate Social Responsibility (CSR) is a fairly new concept that acknowledges the social and environmental responsibility of Multinational Corporations (MNCs). This thesis sets out to investigate the incentives for Multinational Corporations to engage in CSR and, if they choose to do so, what effects such an engagement has on development in the host country of investments. The study focuses on development effects in China, since it is one of the largest receivers of Foreign Direct Investments (FDI) in the world today. In order to address the research question, the theoretical framework behind FDI and CSR is thoroughly examined to sort out the different angles from which one can approach this subject. The theories are used to analyze... (More)
Corporate Social Responsibility (CSR) is a fairly new concept that acknowledges the social and environmental responsibility of Multinational Corporations (MNCs). This thesis sets out to investigate the incentives for Multinational Corporations to engage in CSR and, if they choose to do so, what effects such an engagement has on development in the host country of investments. The study focuses on development effects in China, since it is one of the largest receivers of Foreign Direct Investments (FDI) in the world today. In order to address the research question, the theoretical framework behind FDI and CSR is thoroughly examined to sort out the different angles from which one can approach this subject. The theories are used to analyze empirical findings of development effects coming of FDI and CSR, which are further supported with three specific case studies of MNCs operating in China. We reach the conclusion that CSR and the development effects linked to it depends on the actions and choices of the corporation. The analysis shows that a partnership relation between the corporation and the host country is more favorable than a vertical relationship where the corporation invests with the pure incentive to benefit from the host country’s abundant factor of production (such as labor) and does not intend to create a long lasting business relationship. In order for vertical relationships to become more CSR friendly, it is suggested that CSR policies become subject to more structured regulations, imposed and follow up by some kind of international organization. Moreover, we suggest that the collection and presentation of statistical data of development effects that CSR could bring with it becomes more organized and follows an international standard. If so, the effects of FDI and CSR work made by all MNCs could be easily contrasted and compared. This should work as a mean for stakeholders to compare MNCs and their actions, thereby influencing them to take a greater responsibility and somewhat forcing them into a beneficial relationship with the host country their investing in. (Less)
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@misc{1436788,
  abstract     = {Corporate Social Responsibility (CSR) is a fairly new concept that acknowledges the social and environmental responsibility of Multinational Corporations (MNCs). This thesis sets out to investigate the incentives for Multinational Corporations to engage in CSR and, if they choose to do so, what effects such an engagement has on development in the host country of investments. The study focuses on development effects in China, since it is one of the largest receivers of Foreign Direct Investments (FDI) in the world today. In order to address the research question, the theoretical framework behind FDI and CSR is thoroughly examined to sort out the different angles from which one can approach this subject. The theories are used to analyze empirical findings of development effects coming of FDI and CSR, which are further supported with three specific case studies of MNCs operating in China. We reach the conclusion that CSR and the development effects linked to it depends on the actions and choices of the corporation. The analysis shows that a partnership relation between the corporation and the host country is more favorable than a vertical relationship where the corporation invests with the pure incentive to benefit from the host country’s abundant factor of production (such as labor) and does not intend to create a long lasting business relationship. In order for vertical relationships to become more CSR friendly, it is suggested that CSR policies become subject to more structured regulations, imposed and follow up by some kind of international organization. Moreover, we suggest that the collection and presentation of statistical data of development effects that CSR could bring with it becomes more organized and follows an international standard. If so, the effects of FDI and CSR work made by all MNCs could be easily contrasted and compared. This should work as a mean for stakeholders to compare MNCs and their actions, thereby influencing them to take a greater responsibility and somewhat forcing them into a beneficial relationship with the host country their investing in.},
  author       = {Oscarius, Louise and Glimeus, Linn},
  keyword      = {China,Corporate Social Responsibility (CSR),Multinational Corporations (MNCs),Foreign Direct Investments (FDI),Development effects,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Applying CSR to Foreign Investments, Incentives of MNCs and Effects on Host Society: The Case of China},
  year         = {2009},
}