Academic journal article Asian Social Science

Corporate International Diversification and Corporate Social Responsibility: Evidence from Korean Firms

Academic journal article Asian Social Science

Corporate International Diversification and Corporate Social Responsibility: Evidence from Korean Firms

Article excerpt

Abstract

In the process of their market globalization efforts in Korea, they have been positively utilizing corporate international diversification strategies to increase sales in overseas markets or reduce risks based on business diversification strategies. However there is mixed empirical results have been made on whether the corporate international diversification strategy made a positive or negative impact to the firm value. Extending Prior literatures, this study investigates the impacts of the level of corporate international diversification of Korean firms onto that of their corporate social responsibility activities.

Empirical result suggest that there is negative (-) association between the level of corporate international diversification and corporate social responsibility activities. In particular, this study is meaningful in demonstrating an empirical result that, even if the Korean firms pushed forward corporate international diversification strategies actively due to the stagnant domestic market in the 2000s, they actually reduced corporate social responsibility activities more greatly as they were recognized as the short-term expenses.

Keywords: corporate international diversification, corporate social responsibility

1. Introduction

In this study, an empirical analysis will be made to investigate the impacts of the level of corporate international diversification of Korean firms onto that of their corporate social responsibility activities. The corporate international diversification (Hereafter, CID) is a term referring to the strategies that individual firms intend to expand their business activities to the countries they belong to and the other geographical locations or markets (Cha et al., 2010). In case of some global companies such as Samsung Electronics and Hyundai Motors, they drove only a low ratio of CID strategies at domestic-oriented sales in the 1990s. On the other hand, more aggressive foreign-oriented export diversification strategies, rather than the previous domestic-oriented business strategies, were driven to report a dramatic increase in sales from the beginning of the 2000s. In this context, in order to overcome the stagnant state of growth in the domestic market, Korean firms started to be actively entering into the international markets. In the process of their market globalization efforts, they have been positively utilizing CID strategies to increase sales in overseas markets or reduce risks based on business diversification strategies. Thus, from the entry of the 2000s, the CID has been regarded as essential to Korean firms for a revenue diversification strategy, and a variety of studies have been reported to measure the economic effects of their CID endeavors.

A lot of mixed or inconsistent empirical results have been reported on whether the CID strategy made a positive or negative impact to the firm value of those individual companies, and there has been a lot of discussions in this regard (Denis et al., 2002; Gande et al., 2009; Jeong, 2003; Lee, 2003). The objectives of this study are to investigate the impacts of CID to be made onto the firm value and, furthermore, to make an empirical analysis on their impacts onto corporate social responsibility (Hereafter, CSR). According to the empirical analyses of the previous studies on the impacts of CID onto CSR activities, those companies having the high level of CID strategies participated more aggressively in CSR activities to satisfy the needs of various stakeholders, so as to demonstrate a positive (+) correlation between the levels of CID and CSR (Kang 2013; Ban 2013). (Note 1) However, with regard to CSR activities, some of the following differences were found between U.S. firms and Korean ones. Even if Korean firms entered into a number of foreign countries owing to their CID strategies, they did not actively participate in the CSR-related activities which would satisfy the various stakeholders of those foreign nations, unlike those firms of U. …

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