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Foreign Firms and Local Communities

Bruce Blonigen and Cheyney O'Fallon

No 17282, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The literature on the effects of foreign direct investment (FDI) and activities of multinational enterprises (MNEs) on host-countries has been almost exclusively focused on issues of productivity, growth and wages. We argue that this leaves quite a bit of important unexplored areas of inquiry, particularly those connected with the interactions of local communities and governments with MNEs. As an example, we provide a novel analysis of local corporate philanthropy, which shows significant differences between local- and foreign-owned corporations. We find that foreign-owned enterprises are less likely to give, but that when they do give, it is substantially more in magnitude than domestic firms, everything else equal. This evidence is consistent with the hypothesis that foreign-owned firms would prefer to use corporate social responsibility (CSR) activities on a more international scale, but will strategically use CSR activities for public relation motives when the MNE faces greater local scrutiny and/or bias.

JEL-codes: F23 M14 (search for similar items in EconPapers)
Date: 2011-08
Note: ITI
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