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International Corporate Responsibility Series

Volume 3, 2007

Controversies in International Corporate Responsibility

Nicholas Capaldi
Pages 223-229

Corporate Social Responsibility in Developing Countries in a Global Market Economy

Every firm or corporation faces both political and social transaction costs. The existence of political transaction costs is one reason firms, and even whole industries, employ lobbyists. CSR is an example of a social transaction costs. CSR means serving social and political interests without direct remuneration but in a way that is consistent with and indirectly serves long-term investor value; it is not philanthropy. Some will argue that the firm is not really being responsible or generous but only serving its own long-term interest. But that is precisely the point. The reasons this category of CSR must be introduced are that (1) it is obscured by the classical liberal perspective, sometimes to the detriment of the shareholders; (2) failure to recognize it, obfuscates the role of management, part of which is to look at a macro-context that includes more than markets; and (3) it misses the important extent to which business leaders can, may, and should have a vital role in formulating public policy.

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