The relationship between corporate social responsibility, external orientation, and environmental performance

Firms in an open economy with stronger external orientation have been under pressure from customers and other stakeholders to implement global corporate social responsibility (CSR) activities since the 2000s. However, does it pay to be green for an open economy? Attempts to address this question have yielded a key and contentious debate, with mixed evidence from studies on two different relations between the external orientation level and environmental performance, and the status of CSR disclosures and ecological performance. Accordingly, this study extends the debate, reconciling the divergent views by modeling and proposing the relationships between CSR, the level of external orientation, and environmental performance, such as pollution reduction. It employs an empirical methodology using available data from a small open economy. The results testify to the negative (positive) relationship between CSR (external orientation) and pollution. Moreover, CSR exerts a moderating effect on pollution. Indeed, the two viewpoints may be complementary, and open-economy firms and industries with more substantial external CSR exposure likely yield good environmental performance.