Corporate social responsibility in emerging markets: the role of reciprocity in business-government relations

Purpose - Despite the rapid growth of corporate social responsibility (CSR) in emerging markets, there remains a need in the current literature for deeper insights into the factors influencing CSR practices in these contexts. This study aims to address this research gap and enhance the discourse on CSR in emerging markets by exploring the reciprocal relationship between business and government and its potential role in driving firms’ CSR efforts in these burgeoning economies. Design/methodology/approach - The study is grounded in the theory of reciprocity and integrates insights from existing literature to posit that, within a reciprocal relationship, firms respond positively to government regulatory support by actively participating in CSR initiatives. To test this hypothesis, data from prominent sources, including the CSRHub database, the World Bank’s Ease of Doing Business, and the International Country Risk Guide, are gathered, yielding a sample of nearly 1,500 firms operating in diverse emerging markets. A series of empirical tests are then conducted to validate the existence of the reciprocal relationship and its influence on firms’ CSR efforts. Findings - The findings reveal strong evidence of a reciprocal relationship between business and government in emerging markets. When the government provides favorable regulatory support, firms tend to reciprocate by shouldering greater responsibility in promoting societal well-being, specifically through active participation in CSR initiatives directed toward the well-being of the community in which they operate. These findings are robust across various estimation methods. Research limitations/implications - The study advances the understanding of CSR in emerging markets and provides valuable insights into the role of reciprocity in promoting CSR in real-world settings. This offers promising avenues for future theoretical and empirical research in the field of CSR. Practical implications - Policymakers are urged to recognize the significance of business-government relations in fostering CSR. Developing a supportive regulatory environment can motivate firms to invest in CSR, benefiting both businesses and the communities they serve. For businesses, aligning CSR initiatives with community needs can foster a mutually beneficial relationship with the government, leading to greater social benefits and competitive advantages. Originality/value - To the best of the authors’ knowledge, this study pioneers the application of the reciprocity theory to explain the interplay between business and government in shaping firms’ CSR endeavors in emerging markets.