Corporate social performance and geographical diversification

This paper investigates an under-researched relationship, that between corporate social performance (CSP) and geographical diversification. Drawing upon the institutional and stakeholder perspectives and utilising data on a sample of large UK firms, we develop a set of empirical models of CSP, and find evidence of a significant contemporaneous positive relationship between the two for some types of social performance and in some regions of the world. Specifically, the dispersion of activities is associated with improvements in community performance so long as operations do not extend to Eastern Europe, and with improvements in environmental performance in so far as operations extend to Western, but not Eastern, Europe. However, we find that geographical diversification has no impact on employee-related aspects of social performance, i.e. the relationship between geographical diversification and social performance varies significantly across different components of social performance. Overall, we provide evidence that firms shape their social performance strategies to their geographical profile. (c) 2006 Elsevier Inc. All rights reserved.