Democracy and foreign firms’ internal corporate social responsibility: evidence from World Bank Enterprise Surveys

Democracy shapes the credibility, stability, accountability, and effectiveness of institutions in host countries where foreign firms operate. Although prior international business research has examined the role of democracy, its impact on corporate social responsibility (CSR) remains underexplored. CSR is an important strategy through which foreign firms mitigate the liability of foreignness and gain local legitimacy in the host countries. Using data from the World Bank Enterprise Surveys and Freedom House, this study provides the first global evidence on how host country democracy influences foreign firms’ internal CSR. We find that democracy positively influences foreign firms’ internal CSR. Moreover, this positive relationship is amplified when foreign firms have a strong local market focus or are affiliated with a business group. By identifying democracy as a key institutional driver, this study advances understanding of how host country political institutions shape foreign firms’ CSR strategies.