Can Country Trade Flows Benefit from Improved Corporate Social Responsibility Ratings?

Abstract

We set out in this study to examine the effects of country ‘corporate social responsibility’ (CSR) ratings on the international trade flows of 28 countries. Drawing on categorization theory, we examine whether country CSR engagement is a categorizing factor capable of influencing the overall process of categorization. Based upon a two-stage approach, comprising of gravity and panel Tobit models, we find that a country`s CSR rating has significantly positive effects on the country`s international trade flows. When the CSR rating of a country is higher than that of another rival trading country, this will have significantly positive effects on the bilateral trade flows between the two countries.