Reading IB Conference 2009 Stephen Pavelin – Does CSR affect development? 1 Let us say that: If firms invest in their social performance (CSP), they do so in response to demands made by stakeholders; If these demands are not met, the effect on the behaviour of stakeholders would harm the firms’ financial performance; Each firm invests in CSP in those instances where the benefits from meeting stakeholders’ demands outweigh the associated costs; So, CSR initiatives reflect the demands made by those stakeholders for whom behaviour is most critically contingent upon social performance, and that exert the greatest influence on financial performance.

Reading IB Conference 2009 Stephen Pavelin – Does CSR affect development? 2 Let us ask: Which stakeholders exert the greatest influence on financial performance? What do these stakeholders demand of firms regarding social performance? If met, would any of these demands promote the development of poorer countries? If so, is the behaviour of these stakeholders critically contingent upon such demands being met? How commonly is YES the answer to the last two questions?

Reading IB Conference 2009 Stephen Pavelin – Does CSR affect development? 3 These answers may depend upon: The size of the firm; The nationality of the firm; Whether the firm is multinational; In which industry (or industries) the firm operates. However, there are three points that together cast doubt on the likely contribution to development that results from the CSR initiatives of multinational companies from the most developed countries.

Reading IB Conference 2009 Stephen Pavelin – Does CSR affect development? 4 The three points are: Stakeholders in the developed world exert the greatest influence on these firms’ financial performance. Also, it seems that it is among stakeholders in the developed world that CSR is most salient. Firms may offset stakeholder concerns about their social impacts in the developing world through CSR initiatives in the developed world. –If offsetting is possible, firms may prefer to invest in CSP at home as such initiatives are more visible to home stakeholders and distract attention away from issues associated with operations in the developing world.