Open Economy, Global Value Chain and Corporate Social Responsibility in China

Abstract

Using a survey of 1,266 firms in 12 cities in China, this paper investigates the effects of open economy on the corporate social responsibility (CSR) of Chinese domestic firms embedded in the global value chain (GVC). We argue that, under a compliance-based paradigm, foreign domestic investment (FDI) and export not necessarily improve the CSR performance of Chinese firms. The cascade with foreign owned enterprises in the local value chain and CSR pressure from the GVC have important intervening impact on Chinese domestic firms’ CSR performance. The CSR performance improves in the domestic firms with foreign clients in the local value chain and under labor and environmental standards pressure from the GVC. There is no prominent improvement of CSR performance in domestic firms only with foreign suppliers in the local value chain. Regressions using the structural equation models show that the FDI has significant direct effect on working overtime and the social security coverage, while the export has no significant direct effect on CSR performance. However, export has significant indirect effect on improvement of the green investment and environment training through the cascade with foreign owned enterprises in the local value chain and pressure from the GVC.