For Whom Is There a Motive To Do Good for the Poor? An Extended Base-of-the- Pyramid Perspective

In this study we explore and empirically test how the quality and familiarity of institutions set boundaries to the performance of firms operating at the Base-of-the-Pyramid (BoP). We propose that poverty sets unique conditions, which make the level of institutional quality a critical factor that influences the relationship between the firm’s social and environmental impact and financial performance. We also propose that firms from low-income countries can be conceived as more familiar with the institutions at the BoP than multinationals from high-income countries. Thus, we propose a revised BoP perspective that addresses the involvement of actors from developing countries at the BoP, including emerging country multinationals and local small-scale producers and the critical role of local government institutions. To test our theoretical framework we collected -in cooperation with NGOs, development organizations, and micro-finance institutions-, a unique dataset of 143 firms operating in BoP markets across 105 countries. Through our analysis we find support for our revised BoP perspective with respect to social impact, however, we do not find support with respect to environmental impact. The results also show that foreign firms outperform local actors, although multinationals from low-income countries do better than those from high-income countries. We discuss the important implications of this finding for the further development of the BoP management perspective.status: publishe