Does global integration stimulate corporate citizenship? The effect of international trade agreements and regulatory quality on state and private firm adoption of CSR standards

Abstract

We examine the effects of global trade integration on firm-level adoption of CSR standards as measured by the United Nations’ Global Compact Initiative. Building on policy transfer and economic institutionalism, we propose that country-level participation in trade agreements, and higher levels of regulatory quality, encourages firm-level adoption of CSR standards. We also suggest that participation in these trade agreements stimulates greater adoption of CSR standards from state-owned firms than privately owned firms because those agreements increase the accountability of state firms to supranational institutions, whereas private firms are already accountable to their respective state and domestic institutions. Moreover, we argue that the positive effect of trade agreements on the adoption of CSR standards is higher in countries with higher levels of regulatory quality. These insights are important for research on how economic integration affects firm-level strategies, especially those related to CSR, and for policymakers facing choices as to whether to enter into trade agreements and what types of agreements to enter. Analyses from 152,267 firm-year observations from 11,992 firms in 133 countries spanning 2000–2014 provide robust support for the arguments.