Purpose – The objective of the present study is to investigate opportunities for integrating innovation and CSR in the context of firms’ activities. This is explored by investigating the extent to which innovation may complement CSR activities of MNE subsidiaries in developing-countries.

Method/approach – This paper employs literature study to describe how innovation complements CSR in the search for competitiveness at the level of the firm. In doing so, the competitiveness of firms, which is often driven by the demands for responsible behaviour and innovativeness, is derived from studying the extant literature. By drawing from multiple theoretical lenses (i.e., legitimacy theory, stakeholder theory, CSR literature, firms’ reputation, and innovativeness), we aim at evaluating their collective impact on firms’ competitiveness.

Findings - The model suggests that firm’s contextual capabilities (e.g. legitimacy, innovation, and stakeholders) can define its CSR activities (e.g. CSR ethical, CSR social, and CSR environmental). The cumulative effects of these, define firm’s reputation, which eventually, produces firm’s own competitiveness. The study has argued that there is more to firms’ stakeholders than ordinary resources required in furtherance of firms’ economic objectives. It therefore follows that stakeholders’ potential to constitute a pool of resources and capabilities that the firm can blend with to realize its strategic objectives ought to be stressed. Consequently, markets and for that matter firms, are subject to CSR and innovation demands through, for example, more socially responsible productive behaviour. This requires that MNE subsidiaries in developing-countries connect different strategies towards improving their own competitiveness. This may be accomplished through, re-packaging CSR into bundles of interrelated activities, collaborating with stakeholders to jointly create and deliver social and economic values, and integrating CSR into productive activities that may lead to bundles of products to suit local market conditions.

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