Corporate Social Responsibility and Entrepreneurship for Sustainability: Leading in the Era of Digital Transformation 9811634599, 9789811634598

Table of contents :
Preface
Contents
About the Authors
1 The Core Challenge of CSR in Entrepreneurial Ventures
1.1 Introduction
1.2 CSR Research Trend
1.3 The Legitimacy Problem
1.4 Solution to the Legitimacy Problem
1.4.1 Talent Principle
1.4.2 Thermometer Principle
1.4.3 Toolkit
References
2 Cross-Cultural CSR Strategy
2.1 Introduction
2.2 CSR Research in Cross-Cultural Contexts
2.2.1 CSR in Europe
2.2.2 CSR in Japan
2.3 Methodology
2.4 Case Study Results
2.4.1 Organic Cotton Avanti Japan (OCA)
2.4.2 Fuji Optical Co., Ltd (Fuji Optical)
2.4.3 SRM Technologies
2.5 Cross-Cultural Analysis of CSR
2.6 Conclusion
References
3 CSR and Marketing Integration: Network Perspective
3.1 Introduction
3.2 The Convergence Between CSR and Marketing
3.2.1 Marketing in the CSR Literature
3.2.2 CSR in the Marketing Literature
3.3 Conceptualizing the Intrafirm Integration of CSR and Marketing
3.3.1 Past Attempts to Uncover CSR and Marketing Linkage
3.3.2 Framework for CSR and Marketing Integration: From a Managerial Level
3.3.3 Participant Observation as a Means to Uncover Corporate Mechanisms
3.4 Methodology
3.4.1 Data Collection
3.4.2 Data Analysis
3.5 Results
3.5.1 Before the CSR Manager’s Arrival
3.5.2 After CSR Manager’s Arrival
3.5.3 After the Corporate Restructuring
3.6 Conclusion
3.6.1 Analytic Generalizations
3.6.2 Implications
3.6.3 Future Research
References
4 CSR Advocacy and Organizational Change: Perspectives from Within the Firm
4.1 Introduction
4.2 Literature Review
4.2.1 CSR in the SME Contexts
4.2.2 CSR Implementation of SMEs in Asia and Europe
4.3 Methods
4.3.1 Sample
4.3.2 Data Collection and Analysis
4.4 Findings
4.5 Model of CSR Advocacy for SMEs
4.6 Discussion
4.7 Conclusion
References
5 Corporate Strategy for Corporate and Ecosystem Sustainability
5.1 Introduction
5.2 Sustainability in the Japanese Corporate Context
5.2.1 Conceptualizing Sustainability
5.2.2 Key Characteristics of Japanese Firms’ Sustainability Practices
5.3 Research Model
5.4 Case Study Analysis
5.4.1 Methods of Firm Selection
5.4.2 Status Quo of Japanese Firms’ Sustainability Reporting
5.4.3 Individual Company Analysis
5.4.4 Common Features of Companies with High Sustainability Performance
5.5 Conclusion
References
6 Cluster-Level Legitimacy and Strategic Tie Formation of Ventures
6.1 Introduction
6.2 Literature Review
6.2.1 Cluster-Level Legitimacy
6.2.2 Strategic Choice Account of Legitimacy as Defense Mechanism in Ventures
6.3 Conceptual Framework: Life-Cycle View of Cluster-Level Legitimacy in Entrepreneurship
6.3.1 Stage 1: Birth
6.3.2 Stage 2: Commercialization
6.3.3 Stage 3: Growth
6.4 Conclusion
References
7 Role of CEO’s Moral Compass as the Organization’s Fourth Dimension (4-D) in the Era of Digital Transformation
7.1 Introduction
7.2 Theoretical Background
7.2.1 Rise in Alternative Organizational Structures: Self-managed Organization
7.2.2 Imprinting: External and Internal Sources
7.2.3 External Sources of Imprinting
7.2.4 Internal Sources of Imprinting
7.2.5 The Puzzle: When Does the Founder’s Imprint Prevail?
7.3 Methodology
7.4 Case Results
7.4.1 Background of nepes
7.4.2 Phases
7.4.3 Key Ingredients to Empower Employees
7.5 Comparison of Self-management Organizational Structures
7.5.1 Holacracy: Zappos
7.5.2 TEAL Organization: FAVI
7.5.3 4-D Organization: nepes
7.6 Conclusion
References
8 Looking Ahead: The Future of CSR Strategy
8.1 Talent and Thermometer Principle Meets the Digital Transformation (DX) Era
8.2 Cases of Entrepreneurs Leveraging on CSR for Sustainability
8.2.1 Dely with Kurashiru: Solving the Global “Digital Divide in Food” Using Videos
8.2.2 Stellapps: Tackling Poverty Through Digitizing the Agri-Dairy Supply Chain
8.3 CSR and “Analog” Emotion in the Era of Digital Transformation
8.4 CSR Strategy in the Post COVID-19 Era
References

Citation preview

Young Won Park Ye Jin Park

Corporate Social Responsibility and Entrepreneurship for Sustainability Leading in the Era of Digital Transformation

Corporate Social Responsibility and Entrepreneurship for Sustainability

Young Won Park · Ye Jin Park

Corporate Social Responsibility and Entrepreneurship for Sustainability Leading in the Era of Digital Transformation

Young Won Park Graduate School of Humanities and Social Science Saitama University Tokyo, Japan

Ye Jin Park Centre for Organisational Research INSEAD Singapore, Singapore

University of Tokyo Tokyo, Japan

ISBN 978-981-16-3459-8 ISBN 978-981-16-3460-4 (eBook) https://doi.org/10.1007/978-981-16-3460-4 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

Shifting market environments and the rise of disruptive technologies have created a need for top management to develop agile strategies and organizational structures. Such external pressures have driven business practitioners and academics to seek to innovate sustainably. While earlier works on sustainable innovation have emphasized innovation, recent societal disruptions due to climate change and the coronavirus pandemic have shown us the interdependence of societal sustainability and corporate innovation. Can organizations not only survive, but thrive, by converting societal instability as an opportunity? Our book aims to answer this question by focusing on the nexus of entrepreneurship and social responsibility. Our point of departure is that we believe that startups are best suited to tackle societal challenges. We provide a roadmap for entrepreneurs to build a solid innovation base for long-term growth and focus on tools needed for sustainable innovation. These include learning how to best embed technologies such as information communication technology (ICT) and Artificial Intelligence (AI), with Information of Things (IoT) infrastructure. Another equally critical tool is choosing the right business model. We propose that entrepreneurs are more likely to succeed financially if their business idea is rooted in a social problem, and the business model is based on socially responsible processes. We refer to corporate social responsibility (CSR) as organizational, philosophical, strategic, and systematic proactive actions intended to serve broad ecosystem constituents for which the business entity operates. This conceptualization of CSR differs from other theories with an ethical focus in that CSR attempts to bridge management theories where ethics are relegated to the margins, and the humanities where motivational drivers of morality and questions on the ultimate good is placed at the center. By suggesting that firms do have a responsibility to the environment they are embedded in, CSR is implicitly taking a moral stance. It is acknowledging that companies do have a social responsibility, and that firms are wellequipped to solve some of society’s most difficult challenges. Furthermore, the CSR approach tries to leverage on the best of management and the humanities research. It adopts the humanities’ focus on the individual as the key agent of prosocial behavior, but doesn’t end there. It then investigates how the aggregation of the multiple individuals in an organization could influence prosocial outcomes. It also leverages on v

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management researchers’ interest in environment and ecosystem-level factors and factor in contingencies that also influence organizational decision-making. Despite the multitude of factors that influence firms’ social responsibility, we propose that there is an ideal type of the future of business: the fourth-dimensional organization (4D organization). Notably, 4D organization has a moral compass that provides strategic direction and supersedes profit-oriented strategies. In this turbulent age, we contend that a moral compass anchors the organization to the survival of society, allowing for selective flexibility, clear identity, and safeguards against myopia and mediocrity. How is the 4D organization different from existing works? The 4D organization, by bridging the complementary nature of CSR and entrepreneurship, distinguishes itself from prior works that have often focused on corporate philanthropy or on entrepreneurship. Our conceptualization of the 4D organization is more proximate to social business and the idea that traditional financialoriented firms can re-position their management strategy to incorporate a social element. In particular, there are three reasons why the CSR strategy of an existing company can be transformed to become the core of the firm’s management strategy. The first reason is corporate globalization has increased the need for a firm’s business and CSR practices to be aligned. With the spread of the Internet and other information networks, corporate activities have become widely monitored. Whereas corporate scrutiny prior to the Internet era was limited to local communities, now the boundaries have expanded to include national and global audiences. Said differently, as the internet has increased the transparency of corporate conduct, firms need to be more careful with the type of activities they engage in. Secondly, we are at the crossroads of changes in the public’s awareness of societal issues. In the past, companies’ efforts to address societal issues focused on minimizing negative externalities caused by their business activities. Today, the public demands firms to take a step further. Firms’ responsibility toward the environment now includes a wider range of issues, such as environmental conservation, purification, ecosystem preservation, and measures against global warming. They also expect firms to engage in proactive strategies in conserving environmental resources rather than simply “fighting fires” that have no long-term impact. The third reason is the increasing diversification of corporate evaluation criteria. The criteria for evaluating companies are no longer limited to existing values such as sales and profits. Indicators of success now include the firm’s environmental footprint, employee rights, advocating for socio economic, gender, and racial equality, job creation, and even the firm’s corporate and private partners. It is increasingly common for consumers to choose products based not only on the product functionality, performance, and price but also on the philosophy and values the company stands for. In other words, more people judge a “good company” based on the entirety of the firm’s business activities. For these three factors, CSR has become one of the essential means to sustain corporate value. In this era, where the boundaries of a firm’s societal responsibility are changing, we illustrate the dilemma that companies face in engaging in CSR authentically while maintaining a financially sustainable business model. We also highlight several cases of firms that have attempted to integrate CSR within the business model. We focus primarily on entrepreneurial ventures given their nascent business model that would

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provide the best-case model to show how business leaders can embed the social mission in the firm at the beginning of the organizational founding. Our book is distinctive in its forward-looking nature. Our review of recent trends in CSR research and practice highlights that we are entering a new era: CSR is no longer a “bolt-on”, just another PR-related function. CSR is necessary to business legitimacy and sustainability. Aware of the public’s increasing scrutiny, companies are increasingly ramping up their focus on social responsibility, whether it be championing women’s rights, protecting the environment, or attempting to obliterate poverty, on local, national, or global levels. Simultaneously, we see more firms facing accusations of “greenwashing”—backlash due to consumer mistrust.While many works have highlighted this dilemma and how companies fall short either in their CSR activities or in their financial objectives (or both), there is a lack of understanding on what the ingredients are and crucial processes required for successful implementation of CSR in entrepreneurial enterprises. Our book serves to fill this gap. The target readership consists of academics, students, and practitioners in the areas of entrepreneurship, organizational theory, organizational behavior, and strategy. This book clarifies the critical practices and business strategy of sustainability oriented innovative ventures and SMEs. Here, we outline the contents of the book’s chapters. In Chap. 1, we address the core challenge of CSR implementation that entrepreneurial ventures face, which boils down to legitimacy. We deconstruct this legitimacy problem into two components: first, we depict the design problem that entrepreneurs face: What CSR initiative is best aligned with the company’s business model? Second, we show the communication problem that entrepreneurs face after establishing their CSR program: How can the firm communicate the CSR philosophy to gain legitimacy from internal and external stakeholders? We show that corporate leaders will be able to establish an authentic, sustainable firm by answering these two questions. While the problems are universal, the solutions are not. To help entrepreneurs find a solution that fits their context, we present a guiding framework to design a CSR that is consistent with the founder’s philosophy, and appropriate for the external norms. Our guiding framework is a two-pronged approach: first, the talent principle, helps entrepreneurs know the value of their idea that will become the DNA of the venture and also should serve as the inspiration of the CSR. Second, the thermometer approach, equips entrepreneurs with analytical tools that allow them to assess the current climate, predict future trends, and conduct experiments to test whether predictions match reality. In Chap. 2, we provide an overview on cross-cultural CSR strategy. A key challenge that global entrepreneurial ventures face is customizing their CSR practices to meet their customers’ demands across markets. We provide a strategy that explicitly takes into consideration the firm’s cultural fit with the local context and how culture may affect the global adaptation of CSR practices. In Chap. 3, we use the network lens to show how CSR and marketing departments can be integrated. To date, both academics and managers within companies have realized the convergence of CSR and marketing roles in some businesses. Despite the emerging number of conceptual studies on the integration processes of CSR and the

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marketing unit within the firm, there is little in-depth analysis testing these theories. This chapter seeks to fill this gap through an in-depth case study that observes the actual integration processes from the perspective of one manager. The research model defines the manager’s role as the firm’s liaison and differentiates the three stages on the integration process: first stage: marketing and CSR departments are two dichotomous units; second stage: the two units show areas of overlap through the marketing manager’s role, third, the two units converge into one unit. Through the participant observation method, we find that five conditions affect the extent to which CSR can integrate with other business units. Our findings reveal why certain firms are more successful in allowing their CSR mission to permeate throughout the entire company and even to its external stakeholders and the larger society. In Chap. 4, we provide a process model of CSR advocacy that starts from within the firm. While CSR departments are often portrayed as less powerful than the “rainmakers” within the firm, using an inductive case study method, we identify how firms that care about social responsibility can challenge the profit-centered corporate narrative to advocate for greater CSR business model integration. In Chap. 5, we explore the implications of socially responsible practices on organizational and ecosystem sustainability. In response to limited scholarship on how companies perceive and engage in sustainability, we conduct a textual analysis of Japanese transport equipment companies’ sustainability reports. We identify two trends: (1) from a top management’s strategy level, we find that business leaders have acknowledged that sustainability requirements are important and separate from legal compliance; (2) however, many firms have not yet explicitly formulated and implemented sustainability practices operationally. In Chap. 6, we provide a relational view of entrepreneurial decision-making and sustainability. We formulate a theory of legitimacy in regional clusters that is based on the idea that different audiences have distinct views on a venture’s legitimacy. We delineate propositions that show how cluster-level legitimacy has implications on venture’s tie formation with other ventures. In Chap. 7, we propose a novel construct called the fourth-dimensional (4D) organization in the era of digital transformation, referring to firms with a moral compass providing strategic direction. We show the value of the fourth dimension that links the firm’s performance to societal flourishing. We apply the theory using an indepth case study of a Korean enterprise nepes to show that effective implementation of the fourth-dimensional organization increases employees’ locus of control and helps them to utilize their creative and innovative capabilities. In Chap. 8, we briefly discuss recent CSR trends and cases (e.g., SDGs, social business, etc.) and suggest future CSR strategy. This work was supported by JSPS KAKENHI (Grant-in-Aid for Scientific Research (C)) Grant Numbers JP19K01856. Tokyo, Japan Singapore, Singapore

Young Won Park, Ph.D. Ye Jin Park, Researcher

Contents

1 The Core Challenge of CSR in Entrepreneurial Ventures . . . . . . . . . . . 1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 CSR Research Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 The Legitimacy Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Solution to the Legitimacy Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.1 Talent Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.2 Thermometer Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.3 Toolkit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 3 4 5 6 7 8

2 Cross-Cultural CSR Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 CSR Research in Cross-Cultural Contexts . . . . . . . . . . . . . . . . . . . . . . 2.2.1 CSR in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 CSR in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Case Study Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.1 Organic Cotton Avanti Japan (OCA) . . . . . . . . . . . . . . . . . . . . 2.4.2 Fuji Optical Co., Ltd (Fuji Optical) . . . . . . . . . . . . . . . . . . . . . 2.4.3 SRM Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Cross-Cultural Analysis of CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 11 12 14 15 17 18 18 20 21 22 24 24

3 CSR and Marketing Integration: Network Perspective . . . . . . . . . . . . . 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 The Convergence Between CSR and Marketing . . . . . . . . . . . . . . . . . 3.2.1 Marketing in the CSR Literature . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 CSR in the Marketing Literature . . . . . . . . . . . . . . . . . . . . . . . 3.3 Conceptualizing the Intrafirm Integration of CSR and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 Past Attempts to Uncover CSR and Marketing Linkage . . . .

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3.3.2 Framework for CSR and Marketing Integration: From a Managerial Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.3 Participant Observation as a Means to Uncover Corporate Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.1 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.2 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.1 Before the CSR Manager’s Arrival . . . . . . . . . . . . . . . . . . . . . 3.5.2 After CSR Manager’s Arrival . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.3 After the Corporate Restructuring . . . . . . . . . . . . . . . . . . . . . . 3.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.1 Analytic Generalizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.2 Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.3 Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35 36 36 37 38 39 40 43 44 44 44 46 46

4 CSR Advocacy and Organizational Change: Perspectives from Within the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.1 CSR in the SME Contexts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 CSR Implementation of SMEs in Asia and Europe . . . . . . . . 4.3 Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.2 Data Collection and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Model of CSR Advocacy for SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51 51 52 52 52 54 54 55 55 57 64 66 67

5 Corporate Strategy for Corporate and Ecosystem Sustainability . . . . 5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Sustainability in the Japanese Corporate Context . . . . . . . . . . . . . . . . 5.2.1 Conceptualizing Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.2 Key Characteristics of Japanese Firms’ Sustainability Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Research Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Case Study Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.1 Methods of Firm Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.2 Status Quo of Japanese Firms’ Sustainability Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.3 Individual Company Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.4 Common Features of Companies with High Sustainability Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Contents

5.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Cluster-Level Legitimacy and Strategic Tie Formation of Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1 Cluster-Level Legitimacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.2 Strategic Choice Account of Legitimacy as Defense Mechanism in Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Conceptual Framework: Life-Cycle View of Cluster-Level Legitimacy in Entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.1 Stage 1: Birth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.2 Stage 2: Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.3 Stage 3: Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Role of CEO’s Moral Compass as the Organization’s Fourth Dimension (4-D) in the Era of Digital Transformation . . . . . . . . . . . . . . 7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Theoretical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.1 Rise in Alternative Organizational Structures: Self-managed Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2 Imprinting: External and Internal Sources . . . . . . . . . . . . . . . 7.2.3 External Sources of Imprinting . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.4 Internal Sources of Imprinting . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.5 The Puzzle: When Does the Founder’s Imprint Prevail? . . . . 7.3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Case Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4.1 Background of nepes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4.2 Phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4.3 Key Ingredients to Empower Employees . . . . . . . . . . . . . . . . 7.5 Comparison of Self-management Organizational Structures . . . . . . . 7.5.1 Holacracy: Zappos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5.2 TEAL Organization: FAVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5.3 4-D Organization: nepes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Looking Ahead: The Future of CSR Strategy . . . . . . . . . . . . . . . . . . . . . 8.1 Talent and Thermometer Principle Meets the Digital Transformation (DX) Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Cases of Entrepreneurs Leveraging on CSR for Sustainability . . . . . 8.2.1 Dely with Kurashiru: Solving the Global “Digital Divide in Food” Using Videos . . . . . . . . . . . . . . . . . . . . . . . . .

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Contents

8.2.2 Stellapps: Tackling Poverty Through Digitizing the Agri-Dairy Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 CSR and “Analog” Emotion in the Era of Digital Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 CSR Strategy in the Post COVID-19 Era . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

121 123 124 125

About the Authors

Young Won Park is Professor of Faculty of Economics, Graduate School of Humanities and Social Sciences, at Saitama University and Associate Professor of project of Manufacturing Management Research Center at the University of Tokyo, Japan. He holds a Ph.D. degree in the Department of Advanced Social and International Studies from the University of Tokyo, Japan. His articles have been published in journals including Management Decision, International Journal of Production Economics, International Journal of Technology Management, International Journal of Information Management, Business Horizons, Journal of Business Research, Journal of Purchasing and Supply Management, Benchmarking: An International Journal, International Journal of Services and Operations Management, International Journal of Logistics Systems and Management, International Journal of Business Excellence, International Journal of Procurement Management, Akamon Management Review, Japan Academy of International Business Studies, Japanese Society for Science and Technology Studies, and the Japan Society of Information and Communication Research. He has received research awards including Certificate for Highly Cited Research in Business Horizons, Dissertation Chapter Awards from the Japan Association for Social Informatics (JASI), Best Chapter Awards from The Japan Society of Information and Communication Research (JSICR), Research Awards of the Social Science Field from The Telecommunications Advancement Foundation (TAF), and Research Students Awards of the Social Science Field from The Telecommunications Advancement Foundation (TAF). His research interests are in technology management, global strategy and IT strategy, and global supply chain management. Ye Jin Park is Researcher at INSEAD. Her interest in prosocial behavior emerged in her previous work as CSR Writer at Sustainable Japan, and since then, she is drawn to ways businesses can become a medium for social and political solutions. More specifically, her work examines corporate social responsibility’s strategic usage, comparative leadership, and uncovering factors that prevent and instigate entrepreneurship in Asia. She has published in journals including Benchmarking: An International Journal,Asia Pacific Journal of Innovation and Entrepreneurship, and Management Review: An International Journal. xiii

Chapter 1

The Core Challenge of CSR in Entrepreneurial Ventures

Overview • Every firm’s CSR problem boils down to legitimacy. • To address the legitimacy challenge, we provide two guiding questions: (i) What CSR initiative is most aligned with the company’s business model?; (ii) How can the firm communicate its CSR philosophy to gain legitimacy from internal and external stakeholders? • The legitimacy challenge of CSR implementation can be addressed using a twopronged approach. – Talent principle—the founding idea of the business should also be the idea that fuels the CSR program. – Thermometer principle—entrepreneurs need to be equipped with analytical tools that allow them to assess the current business climate, predict future trends, and conduct experiments to test whether predictions match reality.

1.1 Introduction One of the greatest challenges that entrepreneurs face is to identify a business idea and turn the idea into a sustainable venture. Entrepreneurs tend to tag CSR onto the core business as a “luxurious” marketing strategy reserved for after the venture becomes profitable. However, we claim in this book that CSR should be embedded in the business model from the firm’s inception. We make this claim for two reasons. Firstly, companies founded on a social vision are more likely to thrive in the longterm. Businesses, by definition, serve customers and need people to survive and thrive. Therefore, businesses are not only financial entities, but also fundamentally social. Nevertheless, a variety of drivers, from psychological biases that make people discount the future, to organizational, institutional, and cultural pressures incline business decision-makers to focus on the financial goals. CSR can serve as the © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_1

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countervailing force that prompts founders to simultaneously take into consideration financial and social dimensions of their business model. This will not only maintain the firm’s equilibrium on both fronts, but also increase its robustness. Secondly, embedding CSR within the architecture of the firm will increase the legitimacy of the firm’s communications. Nascent ventures are, by definition, lacking legitimacy, as they are unfamiliar and unknown to the general public. Given that legitimacy is essential for obtaining financial resources and gaining consumer traction, ventures need to quickly earn legitimacy. One important way to establish legitimacy is to create a socially responsible corporate culture and let social goals drive corporate practice. Studies have shown that firms that prioritize CSR practices from the onset are less likely to face charges of greenwashing when engaging in socially responsible activities later (Seo et al. 2020). Furthermore, psychological research shows that perceptions of authenticity are largely contingent on a “preemptive”, and not a “reactive” engagement in CSR practices. Such authenticity perceptions undergird the legitimacy of the firm’s CSR practices, and ultimately its brand. Therefore, we underscore how adopting a strategic approach towards CSR will be important for the firm’s survival.

1.2 CSR Research Trend What are the main social responsibilities of a firm? Defining the scope of CSR has been the subject of heated debates amongst CSR scholars (Freisleben 2011; Hah and Freeman 2014). This question is important because clarifying what constitutes a firm’s social responsibility will influence how senior executives allocate their resources in CSR initiatives. In this section, we begin by showing how CSR research has evolved to gain recognition that a broader of definition of “social” is warranted. In the early years of CSR research, the accumulation and distribution of profits amongst the shareholders were regarded as the primary concerns of senior managers, and CSR was an ideal, but not necessary means for reaching financial ends (Friedman 1970). Scholars espousing this view argued that corporate managers are only accountable to the company’s shareholders. For instance, Milton Friedman posited that corporate managers should be held accountable only to the company’s shareholders (Friedman 1970; Carroll 1991). Contrary to the traditional view of the firm, proponents of the stakeholder theory claimed that the CEO has fiduciary duties to all of its stakeholders (Garriga and Mele 2004). The stakeholder theory argues the need for managers to simultaneously satisfy the demands of all of the firm’s internal and external stakeholders, which include the “economic, legal, ethical, and discretionary expectations” that the public holds toward the firm (Carroll and Buchholtz 2003). Thus, they argue that it is crucial for the firm’s leadership to acknowledge its organizational responsibilities towards different stakeholders and respond to them when pursuing legitimacy within the region it conducts business (Yang and Rivers 2009; Jamali 2010). Said differently, proponents in this camp emphasize CSR should include responsibilities that go

1.2 CSR Research Trend

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beyond the legal and economical requirements. The societal norms have increasingly favored this view, as the public’s expectations for firms are rising, and companies in turn, are proactively responding to society’s expectations (Frederick 1986; Carroll 1991; Gorban, Johnson, and Preissler 2009). Many companies have integrated CSR not simply as an expense equivalent to unilateral aid but legitimate investment in the form of corporate social performance (CSP) and the long-term stratagem (Waddock and Graves 1997; Sakuma 2006). Despite disagreements among academics, there is a general consensus that there is a bidirectional relationship between business and society: business can affect society just as well as the society can affect a business. No matter what stance a company takes on CSR, social norms may constrain a business significantly (Frederick 1986; Gorban et al. 2009). Therefore, many companies have integrated CSR in their business model. CSR is viewed as managing resources that will bring benefit toward both the company and stakeholders, and should thus be treated as an investment. Thus, CSR’s potential to sustain and act as the cause of innovation has been recognized, and summarized as the long-term stratagem (Sakuma 2006). Riding on this wave, the most recent debate goes beyond what CSR is or the extent to which it is important. Rather, it revolves around how firms can implement CSR practices. This book addresses this challenge by proposing that entrepreneurs should embed CSR into the firm’s DNA by incorporating CSR into the founding purpose and business model of the firm. CSR and business performance should not be segregated – doing well in one arm would trickle down and lead to positive performance in the other. For instance, financial performance is critical when engaging in CSR given that more profits create the margin for the firm to engage in social causes that are peripheral to the business model. Waddock and Graves (1997) indicated that firms with financial resources have a higher likelihood to practice CSR, for they may choose to spend those resources on ‘doing good by doing well’, and that those resource allocations may result in improved corporate social performance (CSP) overall. They also found that corporate social performance is positively associated with future financial performance, supporting the theory that a thriving business and CSP are positively related. This has been corroborated by subsequent studies, such as Park and Ghauri (2015), who have shown that investors would prefer businesses that conduct ethical and sustainable practices. The spread of environmental, social and corporate governance (ESG) investing practices further attests to this trend (Halbritter and Dorfleitner 2015).

1.3 The Legitimacy Problem However, simply upholding socially-oriented values or engaging in CSR is not sufficient. Increasing number of studies suggest that the effect of CSR activities on company performance may be moderated by a number of factors, including the fit between the company’s business and CSR practice, the timing of CSR practice implementation, and the extent to which the company’s business is visibly harming

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society (Yoon et al. 2006). Experiments by Ellen et al. (2000) suggest that consumers react differently to marketing efforts based on social causes. Participants in their study evaluated a retailer more positively if the donated products reflect the retailer’s core business. Similarly, Sen and Bhattacharya (2001) found that consumers evaluate the company more favorably when a CSR activity reflects the brand image of the company’s products. Recent examples such as Exxon and Philip Morris suggest that CSR cannot be used merely as damage-control devices for a company’s failures; rather, CSR is a firm’s consistent commitment to promote genuine good for the society at large (Forehand and Grier 2003; Osterhus 1997; Strahilevitz 2003; Webb and Mohr 1998). We argue that all of these moderators are fundamentally about the legitimacy of the CSR program in the public’s eyes. To understand the legitimacy problem, we need to first define legitimacy. Legitimacy is “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman 1995, p. 574). Pursuing legitimacy via CSR can bind because it may result in “the CSR Promotional Dilemma”, or a clash between corporate promises and public expectations of whether these are simply empty words or realistic (Ashforth and Gibbs 1990; Coombs and Holladay 2012). Research on moral psychology further supports the underlying causes of the public’s skepticism towards CSR messages: they view CSR messages as “false signals” about the firm’s morality or that the firm is gaining “undeserved moral benefits” through surface-level and insincere CSR (Jordan et al 2017; O’Connor et al 2020). Therefore, firms need to navigate the balance between framing CSR activities as, on the one hand, a genuine, ethical urge to do “good” and, on the other hand, a rational strategy for the firm’s bottom line. This balancing act has thus proved to be a double-edged sword for many businesses (Carroll and Shabana 2010).

1.4 Solution to the Legitimacy Problem Here, we propose a framework for entrepreneurs to begin addressing the legitimacy challenge. While there is no one-size-fits-all solution, we present a guiding framework to design a CSR program that is consistent with the founder’s philosophy, while simultaneously attuned to societal norms. This is a two-pronged approach: first, the talent principle, helps entrepreneurs know the value of their idea that serves as the DNA of the venture and also should serve as the inspiration of the CSR. Second, the thermometer approach, equips entrepreneurs with analytical tools that allow them to assess the current business and societal climate, predict future trends, and conduct experiments to test whether predictions match reality.

1.4 Solution to the Legitimacy Problem

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1.4.1 Talent Principle The talent principle describes the fact that every individual is endowed with a unique gift that can positively contribute to society. The talent principle takes its name from the “Parable of the Talents” in the Bible’s Gospel of Matthew (chapter 25, verses 14–30). The Parable of the Talents was popularized by Robert Merton. He was most famous for coining the term Matthew effect, which captures the idea that “the rich get richer and the poor get poorer” (Merton 1968). However, another understated dimension of this parable is the notion of talents, or the unique endowed gifts of each person. In this parable, the Master provided each of his servant different amounts of gold that they were told to invest. While the Matthew effect focuses on the disparity of each person’s endowed wealth and often used to explain inequality, we argue that another important moral of this story is the idea of a talent itself. By focusing on the unique strengths each individual holds, we can begin to understand how to best invest in one’s unique gifts to reap the greatest amount of personal and social dividend. We argue that knowing what one’s bag of gold is serves as the point of departure for any entrepreneur. Based on this principle, entrepreneurs should first introspect and ask themselves the following questions: What is my core competence? What ideas intrigue me? Are there any consistent patterns in my work habits, hobbies, or interpersonal relationships? It is in this process of discovering one’s unique strength that entrepreneurs often gain clarity of their business idea as a component of the greater societal ecosystem. Maintaining a system perspective in conjunction with a clear identity should also fuel the business’ CSR program. When entrepreneurs are able to brainstorm their business idea in conjunction with the firm’s CSR component, this leads to the greatest degree of business-CSR alignment. It is this degree of alignment that can preempt the common critique of CSR as simply a “tag-on”. The talent principle’s advocation of specialization and focus may seem at odds with other theories that support the value of persistence in one’s weaknesses or diversifying one’s skillsets. We emphasize that persistence or diversifying one’s toolkit is not intrinsically bad. However, from a business strategy perspective, pouring the same amount of effort into one’s strengths would allow one to achieve exponentially more. This idea is illustrated in the story of a master cobbler who was known to make the best shoes in the world. But while he had the ability to make hundreds of them in a week, he ended up manufacturing only 30 because he spent a lot of time on marketing, sales, and operations, areas where he was less competent in. When he started collaborating with those who specialized in sales, he was able to make more than three times as many shoes. This anecdote illustrates ways in which specialization has benefitted society as a whole because it optimizes processes, cuts wastage, and increases opportunities for improvement. The talent principle also applies to the organizational-level. Take the example of the founding story of Honda. A key factor driving Honda’s success is the relationship between Honda Motor’s Soichiro Honda and Takeo Fujisawa that was founded

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on a mutually supportive partnership. Takeo Fujisawa was a Japanese businessman who co-founded Honda Motor Co., Ltd. alongside Soichiro Honda. Fujisawa oversaw the financial aspects of the company while Honda handled the engineering and product development. Together, they took the company from a small manufacturer of bicycle engines to a worldwide car manufacturer. Apart from such anecdotal evidence, statistical figures also buttress the point that a business venture rooted in one’s core talents is more profitable. According to one survey, people who work on their strengths every day are six times more motivated and productive than those who don’t, and more than three times as likely to report having a high quality of life. A boss who focuses on his strength makes the workplace better. This is because people’s strength is a function of talent (intrinsic quality) and investment (effort). If I find and nurture my innate qualities and dispositions, they can become my strength. In addition, exchanging feedback can help you focus on that strength. Drucker (1995) suggests a feedback process to identify and enhance the talent of individuals and companies, summarizing the five specific benefits. First, you can focus on discovering what your strengths are (i.e., core competences). Second, feedback can help you further develop your strengths through learning about complementary technology or know-how. Thirdly, receiving feedback has the effect of correcting ignorance. Feedback can correct ignorance because it reveals the cause of the failure—did i fail because I did not know what I should have known or because I over-stretched into an area outside of my area of expertise? If the answer is the former, one can correct ignorance by learning more knowledge within one’s domain expertise. If the answer is the latter, one can seek for partners who specialize in that area to leverage on their knowledge. Fourth, feedback allows you to change your bad habits. It provides an opportunity to change counterproductive behaviors that you have been engaging, or face salutary things that you have been procrastinating on. Fifth, feedback helps you to avoid wasting time in areas where you wouldn’t be able to achieve exceptional results. We should focus on our strengths. It takes far more energy to bump up incompetence to the average level than to raise our strengths to exceptional levels.

1.4.2 Thermometer Principle The second principle refers to the process of assessing the “temperature” of the society’s political and normative climate. A ubiquitous problem that business leaders face after establishing their CSR program is the communication problem: communicating the same CSR activities to diverse internal and external stakeholders about the firm’s contribution to social, environmental and economic development of society using the audience’s language. To frame the CSR program correctly, firms need to first care about and be attuned to the external climate demands. Let’s take the diffusion of CSR and Sustainable Development Goals (SDGs) in Japan as an example of how Japanese firms followed the thermometer principle. CSR was first popularized in Japan during the 1990s and

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by the 2000s, the concept of CSR became normalized. Since the beginning of 2010, an increasing number of companies have been engaging in CSR in order to earn the trust of consumers and improve the company’s reputation. Many of these companies adopted CSR as an a advertisement strategy with many firms copy-pasting the typical CSR brochure with little substantive social impact. Such trends changed when the United Nations General Assembly established the Sustainable Development Goals (SDGs) in 2015, and the public began to demand that firms engage in CSR activities designed to solve “social issues”. Since the announcement of the SDGs, Japan has seen a split between the majority of firms continuing their status quo CSR projects, and a subset of companies that changed their CSR activities, linking it to solving a greater social problem stated in the SDGs. Studies have shown that the companies who revamped their CSR activities to meet the social currents centered on SDGs performed better. In a recent survey by the Nihon Keizai Shimbun, they found that firms actively including SDGs in their management policy were positively associated with higher return on equity (ROE). This example highlights the importance of being sensitive to the external “temperature” and taking the perspective of external stakeholders when communicating the firm’s CSR policies to them. Most critically, for firms that are already engaging in substantive CSR, they fail to frame their CSR activities to cater to the public’s evaluation criteria. To guide this process, they should regularly ask themselves: How can we communicate the firm’s CSR philosophy to gain legitimacy from internal and external stakeholders? Corporate leaders can establish an authentic, sustainable firm by going through the talent- thermometer cycle iteratively. While the legitimacy problem is universal, the solutions are not. Finding the solution that works in the entrepreneur’s context is the essence of developing a successful CSR program.

1.4.3 Toolkit Finally, we borrow Puranam and Clement (2020)’s three levels of analytics-driven organization design to show how this framework can be applied in organizations (Fig. 1.1). The first level is “perception”, which refers to the ability to describe what’s happening now. Through using Big Data combined with traditional statistics, organizational leaders can assess the temperature of the current climate. The second level is “prediction”, or forecasting future social trends, which relies on machine learning or AI applied to Big Data. Through using predictive tools, entrepreneurs can anticipate the likelihood of certain events from occurring. For instance, factoring in political risk into one’s CSR is one of the most robust preemptive strategies that allow for CSR-entrepreneurship integration.

8 Fig. 1.1 Three levels of analytics-driven organization design

1 The Core Challenge of CSR in Entrepreneurial Ventures

Perception Prediction Prototyping

Lastly, at the final level of analysis is “prototyping”. This strategy is most relevant for entrepreneurs thinking of tweaking their CSR model, but seeking to understand the consequences of such changes before actually implementing the structural change. We highly encourage business leaders to engage in prototyping prior to implementation, as there are multiple low-cost methods to conduct experiments online including Prolific, Amazon Mechanical Turk (MTurk), and ROIROCKET. Although CSR might be the last thing on an entrepreneur’s mind when he or she sets out to start a successful business, we believe that by taking these three steps, entrepreneurs would be able to leverage CSR to be a part of the firm’s competitive advantage.

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Garriga, E. and Mele, D. (2004), “Corporate Social Responsibility Theories: Mapping the Territory”. Journal of Business Ethics, Vol. 52 No. 1–2, pp. 51–71. Gorban, M., Johnson, M. and Preissler, S. (2009), “EU Communication on Corporate Social Responsibility and the effects on national and corporate sustainability agendas”, Economic and Environmental Studies, Vol. 9 No. 1, pp. 75–93. Hah, K. and Freeman, S. (2014), “Multinational enterprise subsidiaries and their CSR: a conceptual framework of the management of CSR in smaller emerging economies”, Journal of Business Ethics, Vol. 122 No. 1, pp. 125–136. Halbritter, G., & Dorfleitner, G. (2015). The wages of social responsibility—where are they? A critical review of ESG investing. Review of Financial Economics, 26, 25–35. Jamali, D. (2010), “The CSR of MNC subsidiaries in developing countries: global, local, substantive or diluted?”, Journal of Business Ethics, Vol. 93 No. 2, pp. 181–200. Jordan, J. J., Sommers, R., Bloom, P., & Rand, D. G. (2017). Why do we hate hypocrites? Evidence for a theory of false signaling. Psychological science, 28(3), 356–368. Merton, R. K. (1968). The Matthew effect in science: The reward and communication systems of science are considered. Science, 159(3810), 56–63. O’Connor, K., Effron, D. A., & Lucas, B. J. (2020). Moral cleansing as hypocrisy: When private acts of charity make you feel better than you deserve. Journal of personality and social psychology. Osterhus, T. L. (1997), “Pro-social consumer influence strategies: when and how do they work?” Journal of Marketing, Vol. 61, pp. 16–29. Park, B. I. and Ghauri, P. N. (2015), “Determinants influencing CSR practices in small and medium sized MNE subsidiaries: A stakeholder perspective”, Journal of World Business, Vol. 50 No. 1, pp. 192–204. Puranam, P. and Clement, J. (2020). “The Organizational Analytics E-Book: A guide to Data Driven Organization Design”, Singapore. Sakuma, K. (2006), Toyota’s CSR Strategy, Seisansei Publishing, Tokyo. Sen, S. and Bhattacharya, C. B. (2001), “Does doing good always lead to doing better? Consumer reactions to corporate social responsibility”, Journal of Marketing Research, Vol. 38 No. 2, pp. 225–243. Seo, H., Luo, J., & Kaul, A. (2020). Giving a little to many or a lot to a few? The returns to variety in corporate philanthropy. Strategic Management Journal. Strahilevitz, M. (2003), “The effects of prior impressions of a firm’s ethics on the success of a cause-related marketing campaign: do the good look better while the bad look worse?”, Journal of Nonprofit and Public Sector Marketing, Vol. 11 No. 1, pp. 77–92. Suchman, M.C. (1995), “Managing legitimacy: strategic and institutional approaches”, Academy of Management Review, Vol. 20 No. 3, pp. 729–757. Waddock, S. A. and Graves, S. B. (1997), “The corporate social performance–financial performance link”, Strategic Management Journal, Vol. 18 No. 4, pp. 303–319. Webb, D. J. and Mohr, L. A. (1998), “A typology of consumer responses to cause-related marketing: from skeptics to socially concerned”, Journal of Public Policy & Marketing, Vol. 17, pp. 226–238. Yang, X. and Rivers, C. (2009), “Antecedents of CSR Practices in MNCs’ Subsidiaries: A Stakeholder and Institutional Perspective”, Journal of Business Ethics, Vol. 86 No. 2, pp. 155–169. Yoon, Y., Gürhan-Canli, Z. and Schwarz, N. (2006), “The effect of corporate social responsibility (CSR) activities on companies with bad reputations”, Journal of Consumer Psychology, Vol. 16 No. 4, pp. 377–390.

Chapter 2

Cross-Cultural CSR Strategy

Overview • A key challenge that global entrepreneurial ventures face is customizing their CSR practices to meet their customer’s demands across markets. • We provide a strategy that explicitly takes into consideration the firm and local context’s cultural fit and how culture may affect the global adoption of CSR practices.

2.1 Introduction In this increasingly interconnected world, more firms are targeting the global market. Even startups with limited resources are expected to engage in CSR and contribute to their local and global society (Thoumrungroje and Tansuhaj 2007). For ventures aiming to become a global firm, how can they customize their CSR practices to meet their customer’s (often conflicting) demands from each respective market? We aim to address this question from the perspective of Japanese firms who have been attempting to make inroads into global markets. They have been faced with the challenge of adapting their CSR practices to meet the local cultural needs while keeping the fundamental philosophy of the brand consistent. For firms with abundant resources such as Toyota Motor Corporation, the world’s largest auto-manufacturer, it is relatively feasible to increase investment in CSR activities. Toyota spent 13.7 billion yen on social contribution activities in 2014 and more than 20,000 employees donated their time to volunteer in social activities (Ando 2014). Toyota’s CSR activities target both local (e.g., forest restoration projects in the suburbs of Japan) and global customers (e.g., 100% recycling or reusing waste materials on-site in the state of Kentucky). Toyota has successfully adopted an approach of localizing its CSR practices and as a result, consistently rank high in various CSR ranking reports (Kishimoto 2013). © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_2

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Fast Retailing Co. is another example of a large firm that has the resources to invest in CSR. As the largest clothing retailer in Asia and the holding company of Uniqlo, it pledged on January 9, 2013 to eliminate the use and release of hazardous chemical substances across the life cycles of its products and all production processes by 2020. This makes Fast Retailing the first company in Japan and the 12th in the world to agree to the Detox campaign, promoted worldwide by Greenpeace, an international environmental NGO. Furthermore, Fast Retailing announced on February 2, 2021 that it would reduce carbon dioxide emissions from its factory and other activities to virtually zero by 2050. Yanai Tadashi, chairman and president of Fast Retailing, sensed that the Earth’s ecosystem may be destroyed by this generation if environmental destruction continues. He stated that to avoid this worst-case scenario, his firm will prioritize becoming a company that fights for sustainability. Those initiatives include installing solar panels on stores to increase the use of renewable energy, and reducing electricity consumption at factories where they outsource the production processes. It also plans to accelerate efforts to improve the efficiency of logistics such as clothing delivery. This is the first time Fast Retailing has announced a numerical target for carbon dioxide emissions with plans to formulate more specific targets in 2021. While the positive impact of CSR on firm performance is not a controversial point, fewer studies have investigated whether the same principles that helped large MNCs succeed apply to smaller firms. This question of generalizability is an important question, as SMEs account for 99.7% of all companies and 70% of all employees in Japan (METI 2013). We show in this chapter that SMEs have to be more strategic with their CSR implementation due to their resource constraints (Welford and Frost 2006; Visser and Tolhurst 2010) and fewer communication avenues to promote their CSR initiatives (Jenkins 2006). Our aim is to examine CEO’s influence on CSR implementation in the context of small and medium enterprises (SMEs) (Tang et al. 2015). The overarching research questions are, (1) How does culture influence CSR strategy? (2) How does the CEO’s philosophy affect the CSR practices? (3) Despite their resource constraints, do SMEs’ CSR involvement lead to positive firm performance? The subsequent sections discuss CSR research in cross-cultural contexts, followed by indepth case studies of three different SMEs that have approached CSR implementation in cross-cultural settings differently.

2.2 CSR Research in Cross-Cultural Contexts Studies on national culture can be traced back to Hofstede, who surveyed IBM employees based in subsidiaries across 64 countries. He initially found four dimensions of cross-cultural differences (Hofstede 1980); subsequently, his model was further supplemented with two other dimensions, resulting in the following six dimensions: Power Distance, Individualism versus Collectivism, Masculinity versus

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Femininity, Uncertainty Avoidance, Long Term versus Short Term Orientation, and Indulgence versus Restraint (Hofstede and Minkov 2010; Minkov 2007). Culture significantly influences interpersonal interactions, including how people communicate. For example, one significant dimension in which culture influences communication systems is high vs low-context cultures. Low-context culture includes the United States, Germany, Norway, Denmark, Switzerland, Sweden, Finland, Canada and other European nations. Communication within lower-context cultures is often direct, explicit, and precise. On the other hand, high context culture includes China, Korea, Japan, other Asian countries, Saudi Arabia, Pakistan, Afghanistan. The communication styles in high context cultures tend to be more indirect, implicit, and vague than those in low context cultures. These communication styles have downstream consequences on corporate culture as well as corporate strategy (e.g., how the firm strategizes and implements its CSR activities) (Table 2.1). While the bulk of research on corporate social responsibility (CSR) has focused on large firms in Western contexts, there has been a burgeoning field of research that has begun to apply culture to CSR research, albeit unevenly (Carroll 2008; Mueller et al 2012). We define CSR as all activities related to the firm’s responsibility towards its stakeholders and the society at large (Dahlsrud 2008; Jamali 2008; Steiner 1972: 18). With increasing engagements in global market, CSR practices outside the US context are becoming more important (Chapple and Moon 2005; Visser et al. 2006). Despite the rising awareness of CSR’s value in the East, scholars have noted how CSR practices in Asia have lagged behind the West (Carroll 2008; Matten and Moon 2008; Welford 2004). Both institutional and normative differences across countries affect the landscape for CSR practices (Kim et al. 2013; Maignan and Ralston 2002; Miles 2006). According to the 2013 global study by the PricewaterhouseCoopers (PwC) that surveyed 1330 CEOs from 68 countries, it found that CEOs from the US are most confident about their CSR reputation (64% feel strongly that the public perceives their company as a positive social performer). On the other hand, their counterparts in Asia have relatively low confidence (only 28% feel strongly that the public perceives their company as a positive social performer) (Bhaduri and Selarka 2016). Table 2.1 Comparison of national culture in West versus East National cultural dimensions

West (e.g., USA, Finland)

East (e.g., Japan, China)

Context

Low context

High context

Power distance

Low power distance

High/Middle power distance

Collectivism-individualism

Individualism

Collectivism(Japan)/Individualism(China)

Uncertainty avoidance

Low avoidance

High avoidance

Masculinity-emininity

Feminine (Finland)/Masculine (USA)

Masculine

Long-short term

Short term

Long term (Japan)

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Table 2.2 Comparison of organizational culture in West versus East Organizational dimensions

West

East

Values of employees

Liberalism; realization of personal value; freedom

Collectivism; benefit of community superior to individual benefit

Relationship between colleagues

Mutual-benefit; positive competition

Human-centered, tacit relationships

Evaluation system

Performance-based evaluation

Qualification-oriented; equalitarianism

Corporate values

Profit, efficiency

Harmonious

Corporate system

Clear-cut responsibility; ends trump means

Ambiguous responsibility; means are highly important

Adapted from Myers and Steckman (2014)

Such results show the disparities in executives’ attitudes towards CSR and their subsequent influence on CSR implementation. Lee (2008) emphasizes the importance of conducting CSR research that incorporates local culture as each geographic location has distinctive social, political, cultural traits. He maintains that despite the integration of global economy, businesses will retain ties with the society, and CSR practices, by extension, will also have cultural idiosyncrasies (Fassin et al 2015). Therefore, it is incumbent to situate CSR practices in the region’s specific cultural context. In this chapter, we provide several strategies small firms can use to adapt their CSR according to different national contexts. To this end, we have adopted the following steps: (1) we provide a literature review of different CSR practices in Europe versus Asia, (2) employ multiple case studies of CSR practices of Japanese firms that have succeeded in varying degrees to adapting globalized and localized CSR strategies. We highlight the importance of incorporating cultural differences when customizing CSR practices and communications (Table 2.2).

2.2.1 CSR in Europe We first provide an overview of CSR in European firms. European Commission defines CSR as “the responsibility of enterprises for their impact on society” (COM 2011: 681). European Commission is the EU’s executive body and represents the interests of the European Union as a whole. The Commission encourages enterprises “to have in place a process to integrate social, environmental, ethical human rights, and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders”. European firms are relatively progressive in their attitude towards CSR, partially explained by the region’s economic circumstances, such as high unemployment rates and widening wealth gap caused by the financial crisis. External crises pressured the government to be actively involved in

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the process of utilizing CSR to put the brakes on the numerous social crises. During the Lisbon European Council held on March 23 to 24, 2000, EU agreed on a new strategic goal for the Union in order to strengthen employment, economic reform and social cohesion as part of a knowledge-based economy (COM 2011). They concluded that they aimed to achieve this through CSR. In 2001, the European Commission published a Green Paper entitled “Promoting a European framework for Corporate Social Responsibility”. At the 2002 World Summit on Sustainable Development, there was a proposition for the new norm of management to encompass both internal factors within the firm as well as external factors that envelop the business. In 2006, the European Commission issued a Communication entitled “Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility”. The report viewed firms as central to the promotion of CSR, and encouraged them to engage in prosocial activities voluntarily. Official outcomes from such governmentled promotion have included establishment of the European Alliance for CSR and the CSR Laboratories. Through multi-stakeholder participation centered on business groups such as BUSINESSEUROPE and groups promoting CSR such as CSR Europe, firms and governments in Europe continue to discuss ways to address CSR priority issues and promote best practices. Other than government pressure, responsible investing trends are also emerging, which refer to more positive approaches that use specific standards to reward companies excelling in environmental, social and governance (ESG) domains. Even mainstream investors weigh ESG performance when conducting a financial assessment. Thus, responsible investment (RI) practices are increasing. Furthermore, following the onset of the financial crisis, business communities and groups promoting CSR in Europe have pursued a range of CSR promotion efforts, in cooperation with the European Alliance for CSR and the CSR Laboratories. As of 2009, more than twenty million small enterprises in the EU represent 99% of businesses, and are a key driver for economic growth, innovation, employment, and social integration. The European Commission aims to promote successful entrepreneurship and improve the business environment for small ventures, to allow them to realize their full potential in today’s global economy. Nevertheless, while more companies are investing on CSR, many companies still think CSR is luxury meant for large enterprises only. This perception that CSR is for MNCs is partially driven by the media that disproportionately choose to cover CSR activities of large firms.

2.2.2 CSR in Japan In Japan, firms are committed to the development of the local and regional communities (Fukukawa and Moon 2004). This commitment is visible in the Japanese word for business, keiei, a compound of the words kei, meaning ‘governing the world in harmony while bringing about the well-being of the people’, and ei, which means

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making ‘ceaseless efforts to achieve’ (Taka 1997). In other words, business encompasses the spirit of including individuals and companies as members of society; hence both have responsibility towards it (Tange 2001). The cultural foundation of ethical business is said to have originated during the Edo period (1603~1867). According to Toshiyuki Aoki at the Japan International Institute of Volunteering Research, the term Intoku, ‘performing an altruistic deed without expecting recognition’, emerged during the Edo Period when merchants, considered the lowest class, sought to justify their status by practicing their businesses ethically (McClimon 2013). Such communal orientations also have cultural roots tied to the philosophy of Sanpo-Yoshi (the three-way satisfaction) that were espoused by Omi merchants, who were regarded as some of the most successful merchants in Japan from the medieval period to the eighteenth century. The teachings of Sanpo-Yoshi state that every type of business conducted by Omi merchants (Omi shonin) needs to be beneficial to the seller, the buyer, and society in general. In short, business must result in three-way satisfaction. Such community-oriented business models contributed to Japan becoming the country with the greatest number of long-living firms, including Daimaru (1717–), Takashimaya (1831–), Shirokiya (1662–), Yamakataya (1751– ), ITOCHU Corporation (1858–), Marubeni (1858–), Sumitomo Group (1615–), Tomen (1920–), Kanematsu (1889–), Nisshinbo (1906–), and Toyobo (1882–) (Park and Hong 2019). However, in Japanese modern labor history, it became common for firms to practice unfair labor practices. Prior to and during World War II, several prominent Japanese firms exploited forced labor from China, Vietnam, Korea, and U.S. prisoners of wars (POWs) (Haberstroh 2003; Hein 2010). Since this nadir, Japanese firms have made reparations and attempted to improve their practices. The CSR Resolution held by the Japan Association of Corporate Executives in 1956 embodied such trends. It was created to address increasing labor movement pressures and societal demand. The rise of these organizations reflected the society’s demands on firms to comply with the law. Based on Japan’s historical context, many modern businesses still tend to regard employees as part of their extended communities. They believe that caring for local and regional needs is essential to enhance their corporate reputation (Dore 1993; Aoki 2004; Kamei and Taku 2015). As many Japanese firms obtain capital through industrial and financial business conglomerates (zaibatsu), compliance to policy requirements has become fairly common (Samuels 1987; Fukukawa and Moon 2004; Macintosh et al. 2000; Noronha 2014). Recently, more Japanese firms are becoming aware that CSR practices need to be adapted to meet global needs. A 2012 study of CSR by the Japan Ministry of Economy, Trade and Industry (METI) found that 86% of corporate managers think “companies should play a role in solving social issues” (The Tokyo Foundation 2014). Because globalization is inevitably exposing more Japanese corporations to the world, customers expect corporations to approach broader social issues. Thus, corporations’ stance towards CSR should also reflect this changing attitude and expand beyond domestic boundaries (The Tokyo Foundation 2014; McClimon

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2013). It is no wonder that large Japanese global firms such as Toyota, Fujifilm, NTT Docomo, Sony, Nissan, Fujitsu, Toshiba, Denso, NEC, Fuji Xerox have begun to approach global-scale issues through their business and CSR activities (Kishimoto 2013).

2.3 Methodology To examine how firms have customized their CSR practices to meet different cultural contexts, we adopted the case study method (Park et al. 2017). Figure 2.1 is a summary of the case study process. We first defined the selection criteria in terms of size, business model, CSR activities, competitive performance, domestic and international market scope, and their market reputation. Among the potential candidates of the initial selection (10 + firms), three SMEs were finally chosen. The first firm, Fuji Optical Co., Ltd. (hereafter referred to as Fuji Optical), is a Japanese retail optical company, selling glasses, sunglasses, hearing aids, low vision aid, and other optical goods. The second firm is Organic Cotton Avanti (hereafter referred to as OCA), a Japanese SME that imports organically grown cotton; however the

Consent from Firm Contacts

Define Selection Criteria Case Selection

Extract Themes from Corporate Documents

Coding by two authors

Field Interviews

Coding and Analysis

Feedback/ Assessment

Fig. 2.1 Case study process

Distribute Interview Questions

Follow up with Contacts

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company is involved in the entire process of product development, from the cultivation of agrochemical-free cotton, the production of yarn and fabric, to the sales of finished goods. Lastly, SRM Technologies is an IT services provider offering Cloud and Infrastructure, Digital Transformation, Application Lifecycle, Quality Assurance, eCommerce and Product Engineering services. Although SRM Technologies is based in Chennai, India, our case focuses on the firm’s Japanese subsidiary. These three companies are all SMEs that are highly socially oriented, yet show variance in the outcome variable: CSR strategy. After obtaining access to these companies, we examined each firm’s archival data. This included their website, mission statement, business model, books, magazines, and media publications covering these firms. Next, we employed semi-structured interview structure based on our research questions. In our interviews, we explored how the CEO’s philosophy influenced the CSR adaptation process. We focused on the CEO philosophy because past research suggests that the leader’s value system has a significant effect on the firm’s success. As Peters and Waterman (1982) indicated: Every excellent company we studied is clear on what it stands for, and takes the process of value shaping seriously. In fact, we wonder whether it is possible to be an excellent company without clarity on values and without having the right sorts of values…Clarifying the value system and breathing life into it are the greatest contributions a leader can make.

An official mission statement includes explicit and informal affirmation of core values that firm is committed (Ledford et al. 1996). We interviewed the Secretary and the Public Affairs Manager at OCA, the CEO and CSR manager at Fuji Optical, and the CSR manager at SRM Technologies. Each face-to-face interview lasted for two hours. We used open-ended questions to obtain qualitative answers. Furthermore, the semi-structured format facilitates in-depth exploration of the CEO and managers motivation in formulating and implementing CSR programs (Elo and Kyngäs 2008; Gill et al. 2008).

2.4 Case Study Results The data shed light on the role of senior executives on the formulation, communication, and implementation of corporate purpose and value-oriented goals in their corporate mission statement. We also provide suggestive evidence on how leader’s philosophy influences CSR adaptation across different cultural contexts (Park et al. 2017).

2.4.1 Organic Cotton Avanti Japan (OCA) OCA was founded on September 4, 1985 by the now president, Chieko Watanabe. Currently, OCA has 57 employees, with a capital of 20,000,000 yen. Though small in

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terms of size, OCA is influential in the Japanese society in several ways. First, OCA launched its own fashion brand and its products are sold in high-end department stores. Second, OCA received the “Daily Fashion Award” by the Mainichi Newspaper, one of Japan’s most prestigious newspaper. The firm has even been recognized by the national government when Japan’s Ministry of Economy, Trade, and Industry (METI) elected OCA as one of the top 55 companies in Japan that excel in social business. The CEO’s two business philosophies are highly intertwined with the firm’s CSR strategy. Firstly, the CEO does not do any CSR just for volunteering, emphasizing that “Everything is business.” Secondly, the CEO always aims to “future-proof” by maintaining a long-term orientation. OCA is presently involved in CSR domestically, focusing on the Tohoku region where a 6.8 magnitude earthquake struck on March 11, 2011. OCA is living up to its philosophy by creating new businesses to help farmers in the stricken area restore their jobs and support their self-management. One of the businesses that Watanabe CEO conjured up was helping the farmers grow cotton in Fukushima because many people were not willing to buy the food grown in Fukushima for fear of radiation. Another activity is called ‘Tohoku Grandma’. With cotton remaining from cloth processed in OCA’s factory, women in the Tohoku region craft Christmas tree ornaments and sell them. This initiative has created a mutually beneficial mechanism, where the people of Tohoku are employed and OCA can gain marketing opportunities, lessen waste, and gain in profits. In contrast to its thriving local CSR activities, OCA has discontinued its global CSR activities due to a lack of understanding in its customer’s taste and overestimation of market demand in foreign-produced cotton products. When we asked if OCA is presently involved in any CSR initiatives outside of Japan, Ms. Ito replied that OCA had initially collaborated with an organization called ACE, a NGO aiming to eradicate child labor. In its earlier partnership, they cultivated cotton in Cambodia which was sold in Japan for 735 yen, striving for a sustainable CSR model that linked CSR with business. However, the initiative was not sustainable because the business model didn’t align with customer tastes. In Japan, the yellow cloth made in Cambodia was lower in demand than the amount the CEO had initially anticipated. Through this failed attempt, OCA learnt that in order to erect a long-term business structure, the CSR strategy must also differ between countries because the needs will differ. President Watanabe learned from the mistake and changed to the current model of concentrating on domestic CSR. Despite the shift in the type of CSR activity, due to the CEO’s philosophy that “everything is business”, including CSR, OCA’s contribution to society in aggregate has not diminished. Thus, the leader’s long-term strategic and social value-oriented mindset directly correlates to the organization’s degree of CSR involvement. However, the CEO’s philosophy alone cannot guarantee the success of CSR. Philosophy must come along with a deep contextual understanding of the local culture, appropriate marketing strategies, and a long-term perspective. By extension, OCA’s case suggests that CSR requires strategic administration and should be implemented in collaboration with experts in marketing, national culture, and sustainability.

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2.4.2 Fuji Optical Co., Ltd (Fuji Optical) The guiding value of Fuji Optical is, “We will render services to the cause of people’s healthy vision and the joy of sight as well as the creation and prosperity of culture.” As part of the CEO Akio Kanai’s philosophy, from 1983, it began providing medical and financial aid to improve Indo-Chinese refugees’ eyesight. To this day, the CEO has personally visited Thailand, Nepal, Armenia, and Azerbaijan to provide eye medical examinations for the refugees. Its partnership with UNHCR reached its 30th anniversary in 2013. In 2006, in honor of Fuji Optical’s long commitment, the CEO became the first Japanese to receive the Nansen Refugee Award. CEO Kanai said, vision screening each refugees one-by-one and gifting them glasses that fit them are every time a “surprising and heart-moving treasure trove”, as well as a “succession of extraordinary occurrences.” The CEO’s commitment towards CSR is embodied in the following statement: “To tell the truth, to continue this for 30 years, I am surprised, even consider it to be a miracle. We’ve only managed to persist thanks to the employees’ support and clients’ great collaboration.” “We will continue to endeavor to satisfy customers by a community-rooted management as well as eyesight aid initiatives and social contribution through utilizing the company’s specialized expertise and human resources.” The firm’s commitment to CSR can be attributed, in part, to the founder Takeo Kanai, and his business philosophy emphasizing “Quality of Service”. When the founder established the business, his goal was to erect a firm that is needed by society, useful, respected, and independent. He was motivated by his customers’ delighted expressions, and sometimes even at a loss, would offer services to help his customers. He held equally lofty expectations for his employees, seeking for them to be aim for highest-quality services and produce excellence. Kanai has tried to set an example of what it means to have a broad perspective, prescience, originality, and how to make discernment, and proactive attitude. When Konosuke Matsushita, the founder of Panasonic, visited the store, he saw Kanai personally responding to each customer and helping them choose the most suitable glasses for them, and was touched by his skill and unwavering conviction. Later in his book, Matsushita even praised Takeo Kanai by entitling Fuji Optical as “being the best glasses store in Japan, no, the best in the world (Iikaishya 2014).” The significance of the founder’s philosophy is evident, and the CEO’s intentional attempts to not earn profit through the company’s CSR activities have helped the firm garner legitimacy. Therefore, the CEO’s long-term mentality was crucial to create sustainable CSR activities that lead to domestic and global media attention and a positive image of the brand. The two interview results shed light on how CEO philosophy influences the successful implementation of local and global CSR practices. The integration of CSR and business model facilitated the CSR implementation.

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2.4.3 SRM Technologies SRM Technologies was established in 1998 and is based in Chennai, India with subsidiaries based in Japan and the US. In spite of being an Indian firm, the firm’s primary market is Japan. As an IT service provider, it has clients in the Education, Automotive, Manufacturing, Consumer, Transportation and Logistics, Supply Chain and Healthcare industries. The firm’s CSR activities are centered on leveraging their core competence—technology. The CEO believes that technology companies are particularly well-equipped to address pressing social issues through providing infrastructure and operations support to various philanthropic efforts. Specifically, SRM Technologies’ existing CSR activities can be largely divided into two pillars. Their first pillar is activities to increase access to education. In July 2018, SRM’s charitable foundation partnered with the Government of Tamil Nadu’s Department of School Education to set up smart classrooms in government schools in Erode and Salem districts. The firm equipped the classrooms with smart technology. Technology-based visual learning has enhanced the effectiveness of traditional teaching methods, helping teachers cater to varied learning styles, in turn inspiring their students to love learning. The schools have also reported significant reduction in distractions, increased student engagement and improved learning outcomes by making the entire learning process more enjoyable. The CSR program’s second pillar is providing online skills training for rural youth in India. The CEO noted that while people in rural areas and small towns are eager to set up small businesses and acquire relevant skills training, the challenge lies in identifying budding entrepreneurs early and empowering them with the right skills. To address this need, the firm set up its charitable foundation, Indian Small and Rural Business Exposition (ISRB Expo). ISRB Expo nurtures these entrepreneurs in small and rural enterprises across Tamil Nadu by providing critical skills training in a virtual setting. This second pillar is particularly on high demand during the spread of the covid-19 pandemic. When we asked why he chose to invest a significant portion of the firm’s resources to CSR practices, the manager responded that the firm’s CSR activities are motivated by an awareness of the public demands, as well as the CEO’s personal care for social causes. The CEO noted in an interview, “Modern consumers, especially millennials, expect more accountability from the businesses they support. Creating a sustainable business strategy that gives back to local communities therefore makes not only social but also economic sense. Technology companies, in particular, can help magnify social impact not only through their own CSR initiatives but also by providing infrastructure and operations support to various philanthropic efforts— especially in the post-COVID era.” He also later noted, “We have always believed in leading with purpose—it’s part of our DNA.” These responses suggest that financial and prosocial motives are not necessarily antithetical—they can both guide a firm to engage in successful CSR activities. Table 2.3 shows a summary of the interview findings from these three firms.

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Table 2.3 Summary of field interviews Firm

CEO’s CSR philosophy Domestic and foreign CSR implementation

Key CSR performance indicators

OCA

“Everything is business” “I want to keep our planet clean for the children”

(Overseas) Failed efforts to sell cloth made in Cambodia in Japan (Japan) Sustainable business model that solely relies on organic cotton, efforts to create employment for earthquake victims

Media Coverage; Nominated by the government as top 55 firms that excel in social business

Fuji Optical

“Creation of prosperous culture: Render services to the cause of people’s healthy vision and the joy of sight”

(Overseas) partnership with UNHCR; CEO visits refugee camps to provide fitting glasses for each children; donation to numerous organizations (Japan) Diversified efforts in offering free glasses to the elderly and orphans, sponsors for local music and football teams, etc

Media Coverage locally and internationally; First Japanese to receive the Nansen Refugee Award; invitations to various lecture tours

SRM Technologies “Modern consumers expect more accountability from businesses” “We have always believed in leading with purpose—it’s part of our DNA”

(Japan) None Media Coverage locally (Overseas) Establish and internationally; smart classrooms in Motivated workforce government schools in Erode and Salem districts Provide online entrepreneurship training for rural youth

2.5 Cross-Cultural Analysis of CSR In the aforementioned three cases, we have highlighted how the CEO’s sociallyoriented philosophy positively affects CSR implementation, conditional on the integration of CSR and business model which increases the public’s perception of the CSR’s legitimacy. Nevertheless, integration of CSR and business model does not necessarily have an immediate effect on customers’ perception of CSR legitimacy. Another critical moderator is culture. In this section, we examine how culture can explain the degree to which CSR initiatives implemented in different national contexts can succeed. First, the three cases illustrate the importance of taking into consideration the cultural fit between the headquarters and the target destination of the CSR initiatives. For instance, OCA’s failure to implement its overseas CSR practices illustrates

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how differences in Japanese and Cambodia’s culture may have influenced the overestimation of demand for Cambodia-produced cloth (Berkvens 2017). The CEO emphasized that the Cambodian cloth manufacturers produced cloth that was of lower quality than what would be attractive to Japanese consumers. She attributed this, in part, to Cambodian manufacturers, which had short-term orientations and prioritized quantity over quality. Such fundamental differences in temporal orientation and cultural values led the CEO to ultimately discontinue OCA’s overseas CSR practices. In the case of Fuji Optical, it engaged in successful domestic and foreign CSR activities. Notably, its domestic and foreign CSR activities differed in nature and scope. Fuji Optical’s domestic CSR activities incorporated a wide-range of activities, from offering free glasses to the elderly and orphans, to also sponsoring local music and football teams. Conversely, its foreign CSR activities were focused on helping children at refuge camps who needed fitting glasses. In our discussions with the CEO, it was evident that the local and foreign CSR differences were strategic, as he saw that the contextual needs also required different programs. In other words, his response suggests that he was sensitive to cultural differences and factored cultural differences when leading the firm’s CSR programs. For SRM Technologies, it strategically focused on domestic CSR activities. Given that SRM Technologies is an Indian firm, the CEO was more aware and empathetic towards the social needs of rural children in India. Furthermore, leveraging on its Japanese subsidiary, the firm had the resources to channel its highly qualified Japanese engineers to periodically volunteer teaching Indian children. Through investing heavily in education-based CSR activities, the CEO is signaling how highly he values human capital. These initiatives are also strategic given that the generation of children that SRM invests in now would cultivate higher quality workforce who could also flow into the firm’s future workforce. Second, while cultural misunderstandings can cause foreign CSR initiatives to fail, lessons learnt from those failures can help organizations strategically focus their domestic CSR initiatives and excel at CSR-business model integration. Although OCA stopped selling products made in Cambodia, the firm’s domestic CSR activities expanded into humanitarian aid efforts such as creating sources of employment for earthquake victims. Their integration of CSR and business model facilitated CSR implementation and reported positive impact on business performance. The CEO’s clear orientation towards CSR is evident in her consistent emphasis on strategic importance of CSR in the context of a broad business model. Such conscious efforts have resulted in media coverage and nominations to various awards by the government and local communities. As a result, OCA’s products are on high demand and hold booths in top-class department stores. These results suggest positive impact of CSR efforts on enhancing the company’s brand value and sales performance. Like OCA, Fuji Optical’s CSR activities seem to have a long-term impact on its business performances. With CSR practices that were rooted in the firm’s core business competence (glasses), Fuji Optical started social services that provide fitting glasses for each children, and are actively cooperating with numerous organizations.

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Ultimately, the integration of business and CSR has led to unexpected promotion of the brand locally and internationally, advertising the firm and the values it stands for, which ultimately has had a positive marketing effect.

2.6 Conclusion In this chapter, we suggested that leader’s philosophy influences CSR implementation across different cultural contexts. This exploratory study investigated the linkage between CEO’s clarity of CSR Orientation and CSR implementation, and downstream consequences on firm performance. Before deriving lessons and implications, we note three limitations of this study. First, this study was limited to a few case studies of firms based in Asia. Due to the limited sample size, further scrutiny and analysis will be useful. Second, this study lacks a comparison between large companies and SMEs so we do not know whether the findings are unique to SMEs or characteristic of most firms regardless of size. Finally, we did not compare firms from a diverse array of national contexts. In spite of these limitations, this research sheds light on the role of the CEO’s CSR orientation on the firm’s ability to implement CSR activities and benefit from them. The interview results also suggest how CSR implementation influences CSR reputation among customers. Furthermore, our research has illuminated the gap in the current literature that limits the function of CSR as a risk alleviation mechanism. By identifying the potential for CSR to also serve as a growth engine of the entire business, we have delineated the linkage beginning from a CEO’s awareness on the growth-enabling aspect of CSR, integrating CSR within the business model, followed by CSR implementation, and finally with downstream consequences on the firm’s CSR performance. The simple and practical aspects of this model have provided a useful benchmarking tool for researchers to analyze the different dimensions of a firm.

References Ando, M. (2014), “Why Toyota paid 13.7 billion yen to become a trusted company”, Yahoo Japan News, available at http://bylines.news.yahoo.co.jp/andomitsunobu/20140402-00034142/ (Accessed April 2 2014). Aoki, T. (2004). Nihon-gata kigyo no shakai koken: Shonindo no kokoro wo mitsumeru (Japanese Corporate Philanthropy: In Search of Its Root, Shonindo in the Edo Period). Tokyo, Toho Shobo. Berkvens, J. B. (2017). The Importance of Understanding Culture When Improving Education: Learning from Cambodia. International Education Studies, 10(9), 161–174. Bhaduri, S. N. & Selarka, E. 2016. Corporate Social Responsibility Around the World—An Overview of Theoretical Framework, and Evolution, Corporate Governance and Corporate Social Responsibility of Indian Companies: 11–32: Springer. Carroll, A. B. 2008. A history of corporate social responsibility: Concepts and practices. The Oxford handbook of corporate social responsibility: 19–46.

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Chapple, W. & Moon, J. 2005. Corporate social responsibility (CSR) in Asia: A seven-country study of CSR web site reporting. Business & society, 44(4): 415–441. COM (2011). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. A new skills agenda for europe. Brussels. Dahlsrud, A. 2008. How corporate social responsibility is defined: an analysis of 37 definitions. Corporate social responsibility and environmental management, 15(1): 1–13. Dore, R. (1993), “What Makes Japan Different?” in C. Crouch and D. Marquand (eds.), Ethics and Markets: Cooperation and Competition within Capitalist Economies, London: Political Quarterly. Elo, S. and Kyngäs, H. (2008), “The qualitative content analysis process”, Journal of advanced nursing, Vol. 62 No. 1, pp. 107–115. Fassin, Y., Werner, A., Van Rossem, A., Signori, S., Garriga, E., von Weltzien Hoivik, H., & Schlierer, H. J. (2015). CSR and related terms in SME owner – managers’ mental models in six European countries: National context matters. Journal of Business Ethics , 128 (2), 433–456. Fukukawa, K. and Moon, J. (2004), “A Japanese model of corporate social responsibility? A study of website reporting”, Journal of Corporate Citizenship, Vol. 16, pp. 45–59. Gill, P., Stewart, K., Treasure, E. and Chadwick, B. (2008), “Methods of data collection in qualitative research: interviews and focus groups”, British dental journal, Vol. 204 No. 6, pp. 291–295. Haberstroh, J. (2003), “In the World War II Era Japanese Forced Labor Litigation and Obstacles to International Human Rights Claims in U.S. Courts”, Asian American Law Journal, Vol. 10 No. 2, pp. 253–294. Hein, P. (2010), “Patterns of war reconciliation in Japan and Germany: A comparison”, East Asia, Vol. 27 No. 2, pp. 145–164. Hofstede, G. (1980). Motivation, leadership, and organization: do American theories apply abroad?. Organizational dynamics, 9(1), 42–63. Hofstede, G., & Minkov, M. (2010). Long-versus short-term orientation: new perspectives. Asia Pacific business review, 16(4), 493–504. IIkaishya. (2014), “We paid a call to Fuji Megane”, available at: http://e-kaisya.co.jp/ (accessed 10 June 2015). Jamali, D. 2008. A stakeholder approach to corporate social responsibility: A fresh perspective into theory and practice. Journal of business ethics, 82(1): 213–231. Jenkins, H. (2006). Small Business Champions for Corporate Social Responsibility, Journal of Business Ethics, Vol. 67 No. 3, pp. 241–256. Kamei, Z. and Taku, H. (2015), “Issues and Prospects for CSR in Japan Analysis of Japan’s CSR Corporate Survey”, Issues and Prospects for CSR in Japan: Analysis of Japan’s CSR Corporate Survey — The Tokyo Foundation, 30 Jan. Kim, C. H., Amaeshi, K., Harris, S., & Suh, C.-J. 2013. CSR and the national institutional context: The case of South Korea. Journal of business research, 66(12): 2581–2591. Kishimoto, Y. (2013), “CSR comprehensive ranking top 700”. Toyo Keizai Online. available at: http://toyokeizai.net/articles/-/13365/. Ledford, G. E., Wendenhof, J. R., & Strahley, J. T. (1996), “Realizing a corporate philosophy”, Organizational Dynamics, Vol. 23 No. 3, pp. 5–19. Lee, M. (2008). A review of the theories of Corporate Social Responsibility: Its evolutionary path and the road ahead. International Journal of Management Reviews, 10(1), 53–73. Macintosh, N.B., Shearer, T., Thornton, D.B. and Welker, M. (2000), “Accounting as simulacrum and hyper-reality: Perspectives on income and capital”, Accounting Organizations and Society, Vol. 25 No. 1, pp. 13–50. Maignan, I. & Ralston, D. A. 2002. Corporate social responsibility in Europe and the US: Insights from businesses’ self-presentations. Journal of International Business Studies, 33(3): 497–514. Matten, Dirk, and Jeremy Moon. 2008. ‘“Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility’, Academy of management Review, 33: 404–424.

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McClimon, T. (2013), “CSR in Japan”, American Express, Sep 3.available at http://about.americ anexpress.com/csr/csrnow/csrn097.aspx. METI. (2013), “Japan’s Policy on Small and Medium Enterprises (SMEs) and Micro Enterprises”. June. available at: http://www.chusho.meti.go.jp/sme_english/outline/04/20131007.pdf#search= ’SMEs+account+for+what+percent+of+Japanese+companies’. Miles, L. 2006. The Application of Anglo-American Corporate Practices in Societies Influenced by Confucian Values. Business and Society Review, 111(3): 305–321. Minkov, M. 2007. What makes us different and similar: a new interpretation of the world values and other cross-cultural data. Sofia, Bulgaria: Klasika i Stil. Mueller, K., Hattrup, K., Spiess, S. O., & Lin-Hi, N. (2012). The effects of corporate social responsibility on employees’ affective commitment: A cross-cultural investigation. Journal of applied psychology, 97(6), 1186. Myers, T., & Steckman, L. A. (2014). Financial transparency and disclosure: China progress on corporate governance. Journal of International Business Ethics, 7(1), 3–18. Noronha, C. (2014). Corporate Social Disclosure: Critical Perspectives in China and Japan. Palgrave Macmillan, New York, NY. Park, Y. W., & Hong, P. (2019). Creative Innovative Firms from Japan. Springer Books. Park, Y. J., Park, Y. W., Hong, P., and Yang, S-Y., (2017). Clarity of CSR Orientation and Firm Performance: Case of Japanese SMEs, Benchmarking: An International Journal. Vol. 24 Issue: 6, pp. 1 581–1596. Peters, T. J. and Waterman, R. H. Jr. (1982), In search of excellence. Lessons from America’s Best-Run Companies, New York: Harper and Row Publishers. Samuels, R. (1987), The Business of the Japanese State, Ithaca, NY: Cornell University Press. Steiner, G. A. 1972. Social policies for business. California Management Review, 15(2): 17–24. Taka, I. (1997), “Business Ethics in Japan”, Journal of Business Ethics, Vol. 16 No. 1, pp. 499–508. Tange, H. (2001), “A Study of the Social Nature of Corporate Management”, Chuo Keizai sha, Tokyo. Tang, Y., Qian, C., Chen, G. and Shen, R. (2015), “How CEO hubris affects corporate social (ir)responsibility”, Strategic Management Journal, Vol. 36 No. 9, pp. 1338–1357. The Tokyo Foundation (2014), “Overview of CSR in Japan: Ideals, Intentions and Realities at Advanced Companies”, available at: http://www.tokyofoundation.org/en/articles/2014/overviewof-csr-in-japan.. Thoumrungroje, A. and Tansuhaj, P. (2007), “Globalization effects and firm performance”, Journal of International Business Research, Vol. 6 No.2, pp. 43–58. Visser, W. and Tolhurst, N. (Eds.) (2010), “The world guide to CSR: A country-by-country analysis of corporate sustainability and responsibility”. Greenleaf Publishing, United Kingdom. Visser, W., McIntosh, M., & Middleton, C. 2006. Corporate citizenship in Africa. Greenleaf: Sheffield, UK. Welford, Richard. 2004. ‘Corporate social responsibility in Europe and Asia: Critical elements and best practice’, The Journal of Corporate Citizenship: 31. Welford, R. and Frost, S. (2006), “Corporate social responsibility in Asian supply chains”, Corporate Social Responsibility and Environmental Management, Vol. 13 No. 3, pp. 166–176.

Chapter 3

CSR and Marketing Integration: Network Perspective

Overview • Both academics and managers within companies have realized the convergence of corporate social responsibility (CSR) and marketing roles in some businesses. Despite the emerging number of conceptual studies on the integration processes of CSR and the marketing unit within the firm, there is little in-depth analysis testing these theories. • This chapter seeks to remedy this situation through an ethnography that traces the actual integration processes from the perspective of a manager. • The research model defines the manager’s role as the firm’s liaison, and differentiates the three stages of the integration process. First stage: marketing and CSR departments are two dichotomous units; second stage: the two units show areas of overlap through the marketing manager’s role, third, the two units converge into one unit. • The data illustrates that five conditions affect the extent to which CSR can integrate with other business units. Our findings reveal why certain firms are more successful at allowing their CSR mission to permeate throughout the entire company and even to its external stakeholders and the larger society.

3.1 Introduction For decades, there has been an ongoing debate on the “business case” for CSR (Carroll 1979; Frederick 1994; Wartick and Cochran 1985; Wood 1991). Kurucz et al. (2008) have framed this search in the following manner: “can companies perform better financially by addressing both their core business operations and their responsibilities to the broader society”? (Carroll and Shabana 2010; Kurucz et al. 2008) While the involvement in CSR itself has not guaranteed better business performance, there have been a multitude of studies that have shown that when certain conditions are © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_3

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satisfied, CSR can have a positive impact on firm performance (Carter et al. 2000; Chand 2006; Frooman 1997). To uncover when and how CSR positively affects business performance, various studies have emerged with a set of rich perspectives on the effect of CSR on business activities (Doh and Guay 2006; Freeman 1984; Wood 1991; Zahra et al. 2008). A first line of research adopts the stakeholder perspective, looking at how consumer, brand, and activist communities affect the CSR involvement (Carroll and Buchholtz 2003; Frazier and Summers 1986; Holt 2002; McGrath et al. 1993; Muniz and O’ Guinn 2001; Maignan and Ferrell 2004). The second stream presents the internal orientation view, where the company’s CEO or managers’ norms and value system shape the work climate (Babin, Boles, and Robin 2000; Grewal and Dharwadkar 2002; Singhapakdi, Vitell, Rallapalli, and Kraft 1996). A third research stream follows the performance impact lens that encompasses studies that identify key determinants of CSR success and measure CSR practices (Maignan, Ferrell, and Hult 1999; Van Beurden and Gössling 2008; Vogel 2005; Wartick and Cochran 1985). The fourth paradigm has centered on resource constraints outlook, where the organization’s monetary, human, or social capital has restrained or supported organizational citizenship (Fombrun et al. 2000; MacKenzie et al. 1993; Parasuraman and Grewal 2000). While all these research streams have provided valuable insights into analyzing the motivations behind corporations adopting CSR as well as the effect of CSR implementation on the company performance, less attention has been placed on tracing the manager’s attempt to integrate CSR into the core value system of the business, and how the organizational structure can aid or obstruct in the integration efforts (Maignan and Ferrell 2004; Robin and Reidenbach 1987). This study aims to tackle this limitation from a CSR managerial perspective, and how his or her role affects the integration of the CSR department within the core business. We focus on CSR managers as critical agents, where their liaison capability affects the potential to infuse CSR norms into the supply chain, sourcing, marketing, and management decisions. By answering this question, we believe that it will extend organizational change theory and illuminate a crucial step into how CSR is integrated with the core business of the company, and ultimately embedded within the company’s DNA. In order to start answering this question, we focus on developing a framework to analyze the integration of CSR and marketing departments. We focus on these two departments as they both place a heavy weight on public relations and external communications. Motivated by this research objective, we subsequently chose to adopt the participant observation methodology that enables one to trace the process of change. We conducted a participant observation of the firm’s Danish headquarters for two months. We follow an inductive methodology to decrease the possibility for cognitive biases (Yin 1994). Though the company of our study is progressive in terms of its CSR integration, it shares many traits common in other companies’ CSR and marketing programs. As such, our research is consistent with the conditions of the instrumental case study where insights extracted from the case study can be transferable to other

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companies undergoing processes of CSR and marketing synthesis (Stake 1995; Yin 2015). Our central theoretical contribution is a holistic framework of the longitudinal processes by which managers can integrate CSR with marketing. Through the analysis of the CSR manager and her constant evolving liaison roles between the CSR and marketing department, we find that several conditions mediate the extent to which the two departments overlap: (i) temporal level—the process of integration starts from the development of CSR manager’s human capital prior to filling this role at the firm (i.e. personal experiences), which provides the social capital that facilitates the CSR integration process; (ii) interpersonal level—CEO and manager’s fit in values, (iii) business unit level—proximity of the core business and CSR narrative strongly influence the ease in which the integration occurs, (iv) organizational level—the change in organizational structure from a private limited company (LTD) to limited company (LC) decreases the manager’s liaison bandwidth. Second, our methodological contribution hinges on providing “networks” as a systematic conceptual framework for content analysis of qualitative data. As we progressed through the two-month long participant observation, we discovered the value of starting from within the company but tracing the expansion of the employees’ networks as the CSR program expanded and converged with the core business. Lastly, we touch upon the practical implications of explicating the integration mechanism that was previously treated as tacit and organic and uncontrollable. By showing the evolving processes of CSR in relation to the other business practices, we provide a useful guideline for both academics and business managers to strategically plan CSR to make a tangible impact within and outside the firm. The chapter is organized as follows. First, we begin with a literature review on research that has showed the blurring the distinction between the CSR and marketing and studies that have constructed conceptual models of the CSR and marketing integration process. We also review three notable works that proposed a theoretical model of the integration mechanism. This is followed by presenting our methodology by describing our research site and process. The third section presents the findings obtained by the participant observation, where upon triangulating our findings, we construct the integration mechanism. Finally, we end with the discussion that addresses both the theoretical and practical implications of our research.

3.2 The Convergence Between CSR and Marketing Research on Corporate Social Responsibility (CSR) and marketing has traditionally been treated as two distinct fields. Marketing has been viewed as a core strategy of the firm (Jenkins 2009) while CSR scholarship has been more elusive and treated as a lower priority public relations scheme (Robins 2005; Lawrence and Weber 2008; Yuan et al. 2011). Yuan et al. (2011) argue that one cause of this divorce between CSR and other prevailing business operations is the lack of an attempt for firms to “routinize their recurring CSR undertakings.” (p. 75) The routinization of CSR activities includes an attempt to improve internal coherence amongst the range of

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CSR initiatives and external consistency with business operations. Routinization allows the firm to align CSR’s contribution with the end goal of the business, namely profitability and growth (Yuan et al. 2011: 75–76; Jamali et al. 2009). In order to illuminate where both fields overlap, we focus on both streams of literature to trace the influence each field has had on the other.

3.2.1 Marketing in the CSR Literature Due to the abundance of possible interpretations of corporate social responsibility (CSR), some have criticized the fact that scholars have conveniently adjusted this concept to support their research purposes (Frederick 1994; Griffin 2000). In response to such criticism, our definition of CSR is grounded on the essential role firms play in society, which is articulated by Steiner: “At any one time in any society there is a set of generally accepted relationships, obligations and duties between the major institutions and the people. Philosophers and political theorists have called this set of common understandings ‘the social contract.’” (1972: 18) In the business setting, this social contract refers to the company’s stakeholders. Thus, we define CSR as activities firms partake in order to fulfill their responsibility towards their stakeholders. Maignan and Ferrell (2004) trace the four ways in which the conceptualization of CSR has evolved: (i) as a social obligation, (ii) as a stakeholder obligation, (iii) as ethics driven initiative, and (iv) as a managerial process. There is a visible shift between the first three concepts and the last one. While the first three view CSR as a resource that is invested and evaluated based on its returns, the last perspective assumes that CSR is a viable management strategy. The strategic view posits that the most effective CSR approach should be selected and incorporated within the company’s other managerial decisions. Said differently, CSR can be viewed as proactive strategies that show the firm’s stance towards certain issues. The strategic CSR approach facilitates our understanding of CSR in relation to the other business departments and helps us predict how managers decide when to segregate (or integrate) CSR with the other business departments. Such strategic deployment of CSR shares striking similarities with marketing; yet paradoxically, to this date, there is little work documenting the convergence of these two fields. One exception is Scherer and Palazzo (2011), who have noted the family resemblance between CSR and marketing and pointed to the “instrumentalist view of CSR” (2011: 904). For example, they claim that more than one hundred studies have been conducted to test the underlying premise: in the managerial decision making process, stakeholders are considered only in as much as they are powerful and able to influence the profit of the corporation (Margolis and Walsh 2001, 2003; Vogel 2005; Walsh et al. 2003).

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Treating CSR as a branding tool has become less common and more subtle as consumers have become more skeptical and savvier (Jahdi and Acikdilli 2009). For example, after analyzing the Reputation Institute’s 2004 survey data, Morsing et al. (2008) found that while 96% of the Danish public believes that Danish companies should take on CSR, it simultaneously discourages companies from communicating about their social responsibility explicitly. This dilemma of engaging in, yet not blatantly communicating with corporate activities is a prominent issue facing many marketing managers, echoing the similarity between CSR and marketing (Podnar and Golob 2007).

3.2.2 CSR in the Marketing Literature Similarly, in the marketing literature, scholars have noted the qualitative change in marketing content from one that was driven purely for profit to an endeavor that is more socially-oriented (Vaaland et al. 2008); nevertheless, very few studies have explicated the actual process in which marketing has evolved. Marketing, which has been first defined by National Association of Marketing Teachers in 1935 was revised in 1985 to: “the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals.” (Vaaland et al. 2008: 929) In short, marketing was a means to facilitate the company’s goal, and because companies’ goal was to maximize profits, the original purpose of corporate marketing was communicating to the consumer (Podnar and Golob 2007). As Robin and Reidenbach argue, “the strategic marketing process and marketing management literature is primarily, if not exclusively, aimed at identifying strategies and tactics for consummating the marketing exchange. Books, journal articles, and consulting efforts focus on identifying, creating, and servicing an exchange.” (1987: 47). Amongst the theoretical studies, the treatment of “consumer” as a category has broadened (Vaaland et al. 2008). Following this expansion, around the 1960s and 70 s, marketing started to include social elements. The main impetus for this change was the increase in criticism within the marketing field who argued for the social duties attached to the marketing function (Kotler and Levy 1969; Lazer 1969). Still at this times, social marketing usually focused on limited aspects such as cause-related marketing (Barone et al. 2000), environmental marketing (Drumwright 1994; Menon and Menon 1997), and relationship marketing (Barone et al. 2000; Berry 1983). Few studies have empirically tested the actual linkages between CSR and marketing, and the nature of this convergence (Vaaland et al. 2008).

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3.3 Conceptualizing the Intrafirm Integration of CSR and Marketing 3.3.1 Past Attempts to Uncover CSR and Marketing Linkage As mentioned in the previous section, there have been limited range of research designs applied to study the integration processes between CSR and marketing departments within a firm. In the midst of this deficiency, we highlight three seminal studies that have endeavored to fill this gap by conceptualizing how CSR and marketing processes may overlap. Robin and Reidenbach (1987) pioneered in this area by constructing a theoretical model depicting the integration of CSR within the strategic marketing planning process. An overarching premise of their model is that CEOs have a clear social mission and then aim to integrate their values within the entire organization. By placing the leadership’s ethical core values as the guidelines for CSR integration, they spurred further studies investigating the individual philosophy of the CEO and manager. Subsequent publications have followed this suggestion by giving descriptive cases of executives who hold ethical values that motivate them to incorporate CSR into their entire business practice (Hemingway and Maclagan 2004; Loe et al. 2000; Park et al. 2017). Nevertheless, these cases have been either theoretical or anecdotal, and have not captured the actual processes in which integration between CSR and marketing occurs. While the determinants of the integration in Robin and Reidenbach’s model were limited to the top decision maker within the firm, Maignan and Ferrell (2004) identify both stakeholder and organizational characteristics as antecedents of the integration process. They claim that external community of the firm plays a decisive role in determining the CSR agenda as well as the positive reception of it. In their model, marketing is seen as a moderating factor that communicates the firm’s CSR initiatives to the stakeholders. Here, the authors imply that communication is separate from the domains of CSR and should be within the confines of marketing. Yuan et al. (2011) identify this gap in past research that primarily focused on evaluating CSR initiatives from the perspective of the stakeholders and less on business practices that have been undertaken to achieve a fit between CSR and the other core business practices. They utilized the core-periphery theory to differentiate the core elements of the company, which determine the firm’s identity and determine the distribution of resources, from the periphery, which is operational decisions to align the organization with its environment or protect the core from external fluctuations (2011: 78; Porter and Kramer 2006) Based on the core-periphery theory, they conceptualize seven CSR integration patterns that are based on three broader dimensions: (i) creation of new CSR initiatives, (ii) core and peripheral CSR practices that can be CSR initiatives evolving from the core business practice or a detached activity, (iii) new CSR routines that arise from cooperation with external partners (80). The three dimensions are contingent upon the company’s type prior to the CSR incorporation and the manager’s decision to select specific integration patterns (76).

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Table 3.1 Types and levels of intrafirm marketing-CSR integration Unit of analysis

Theory

Comments (Driver of integration)

References

CEO-level

Leadership philosophy

Integration begins from the CEO’s mission to integrate his/her values within the entire organization

Robin and Reidenbach (1987)

Stakeholder-level

Stakeholder theory

Integration begins from the external community who determines the CSR agenda. The marketing department then communicates the CSR content to the stakeholders

Maignan and Ferrell (2004)

Managerial level

Core-periphery theory

Integration is driven by how managers perceive the CSR activity in relation to the existing business practices and the type of integration process they choose to pursue

Mintzberg (1989) Yuan et al. (2011)

The three different types of CSR and marketing integration types have been illustrated in Table 3.1. They vary in terms of which unit of analysis drives the integration process. Taken these studies as a whole, it is evident that though theorizing on the integration process has started to emerge, these theories have not built upon one other, and no studies fully illuminate how various actors within the firm orchestrate the integration process. Furthermore, there is a lack of empirical testing of these theories. Hence, we identify a gap in the literature in terms of both the unit of analysis and research methodology.

3.3.2 Framework for CSR and Marketing Integration: From a Managerial Level In this section, we synthesize the review to create a framework that depicts when integration can occur at the managerial level. Our liaison model is inspired from Mintzberg (1989) who claimed that liaison as one of the ten roles of a manager in his book, “Mintzberg on Management: Inside our Strange World of Organizations”. Amongst the ten, the author emphasizes liaison as one of the most important managerial roles. Liaison is defined as “build[ing] up a network of outside contacts, which serve as his or her personal information system.” (Mintzberg 1989: 51) When the

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Fig. 3.1 The (dis)connect of CSR and the core business activities

CSR

Liasion

Core Business

manager holds this liaison capability, we argue that integration is possible. Figure 3.1 illustrates how interdepartmental integration can occur through the manager who plays the liaison role. To fully understand the conditions that allow managers to serve the liaison role, the incorporation of manager’s social networks is crucial. In Mintzberg’s analysis, instead of formal business contacts, he emphasizes manager’s informal contacts that are larger and more heterogeneous than a nonmanager’s comparable network (Mintzberg 1973). Carroll and Teo (1996) show that manager’s networks are also more intimate (p 428). The size and intensity of personal contacts in shaping the manager’s liaison capability are reinforced by other works that have found that the increasing levels of density of direct personal contacts within a manager’s network is associated with an increased ability by that manager to acquire and understand complex and ambiguous knowledge from the network contacts (Hansen, Podolny, and Pfeffer 2001). Hypothesis 1: The greater the manager’s personal contacts, the more social capital the firm has to aid in the interdepartmental integration process. Kramer and Porter posit the strategic perspective on CSR, claiming the need to pay more attention to internal fit (i.e., CSR’s alignment with the organizational practices) than focusing solely on adjusting CSR to be consistent with external stakeholder demands (Kramer and Porter 2006). Yuan et al. (2011) complement this idea of CSRbusiness fit by arguing that there are internal constraints to CSR implementation, hence suggesting the necessary procedures that need to be taken in order to adjust both the CSR and business routines to achieve a successful integration. Given the necessary variable of intentional adjustment, then, it highlights the importance of a manager’s role as a liaison. Hypothesis 2: The greater the manager’s desire to pursue internal fit of CSR and other business activities, the firm is able to synthesize CSR initiatives and prevailing business practices. Another condition that influences the CSR and business integration is the type of CSR activity. According to Yuan et al. (2011), CSR initiatives can evolve from the core business practice, or be an added activity to the firm after its establishment. Studies on mergers and acquisitions (M&A) suggest that the cultural fit between the two departments is a critical determinant for speed and depth of integration (Bauer and Matzler 2014). Similarly, we argue that in the case of intraorganizational mergers, greater cultural fit would decrease the need for modification after the integration. Furthermore, the high cultural similarity would allow both departmental heads to generate mutual support within the departments faster.

3.3 Conceptualizing the Intrafirm Integration of CSR and Marketing

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Hypothesis 3: The greater the cultural fit between the core business and CSR, the greater ease in which the integration occurs. Studies on the effects of structural change have been conducted in the dynamic capabilities, modularity, and strategy–structure disciplines (Eisenhardt and Brown 1999; Galunic and Eisenhardt 1996, 2001; Helfat and Eisenhardt 2004). Organizational restructuring is based on a fundamental premise to increase the efficiency and effectiveness of management teams through significant changes in organizational structure (Karim 2006; Bowman and Singh 1993). In Schilling (2000)’s general modular systems theory, she examines the drivers of a system’s modularity (vs. integration). She proposes that a system becomes more integrated as the components increase in synergy. Researchers have taken these concepts and applied them to the organization, highlighting the importance of flexible and adaptive organizations and portraying structure as malleable (Orton and Weick 1990). Hypothesis 4: The formalization of the firm’s structure negatively affects the manager’s liaison bandwidth.

3.3.3 Participant Observation as a Means to Uncover Corporate Mechanisms When conducting organizational research, the research methodology can be largely divided into two types: inquiry from the outside and inquiry from the inside (Yin 2015). In the former, the researcher is detached from the organizational setting, whereas in the latter, the investigator is personally involved in the research process (Evered and Louis 1981; Iacono, Brown, and Holtham 2009: 42). Though both are important means to obtain field data, Iacano, Brown, and Holtham argue that investigation of the internal functions is favorable because “given the human capacity to talk, the object of understanding a phenomenon from the point of view of the actors is largely lost when textual data are quantified.” (2009: 39). Participant observation is one of the most prominent method of internal investigation. Becker and Geer define it as “the method in which the observer participates in the daily life of the people under study, either openly in the role of researcher or covertly in some disguised role, observing things that happen, listening to what is said, and questioning people, over some length of time.” (Becker and Geer 1957) This method has been predominantly utilized by anthropologists (e.g., Kluckhohn 1940; Vidich 1955) and is less prevalent in business studies because it is a relatively labor intensive process and field sites are often inaccessible (Leonard-Barton 1990). Hence, only business researchers who are fortunate enough to have a connection have leveraged on this method for the purpose of answering a question that could not be attained from quantitative analysis or interviews. As Cook (1983:25) puts it, “It offers the best methodology… to ground theory in material content and to synthesize conjectural processes with deeper structures than those immediately accessible to empirical observation”.

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Despite its strengths, a key shortcoming of the participant observation method is that one cannot rule out the biased nature of the qualitative data (Leonard-Barton 1990). Iacono, Brown and Holtham note two main causes of bias. First, the researcher may inevitably influence participants’ behaviors, especially if the participants are aware that their actions and words are recorded for a study. Second, the researcher’s own beliefs and preconceptions may color the way he or she perceives and interprets the behavior of participants in the field. Despite these limitations, they can be accounted for through rigor in the data collection and structured analysis stages (Darke et al. 1998). For instance, iterating between detachment and immersion provides enough structure and flexibility to allow the researcher to take full advantage of the strengths of the participant observation method.

3.4 Methodology We used a single-case study employing the participant observation process (Eisenhardt 1989; Yagi and Kleinburg 2011). The focal firm is froosh, a Scandinavian fruit smoothie company. froosh is an independent Swedish drink manufacturer that was incorporated in 2004, and its headquarters is located in Copenhagen, Denmark. It also holds offices in Stockholm, Oslo, Helsinki and Tokyo. The firm markets itself as a premium product, so it sets the price on the higher end; nevertheless, it is the market leader in the fruit smoothie category in Scandinavia, and even ventured to Japan in February 2015. As of February 2016, the total number of employees is 53. Despite its relatively small size, we selected this firm for several reasons: (i) strong CSR orientation; (ii) distinct competitive advantage in marketing; (iii) complex value chain activities in multiple countries (e.g., effective outsourcing of the juice bottling process); (iv) transparent business practices; (v) willingness to share its business practices in the form of archival data, participant observation, and in-depth interviews. Given our aim of studying the processes in which inter-departmental integration occurs within a firm, our intentional case selection outweighed having a random sample (Siggelkow 2007).

3.4.1 Data Collection The data for this study came from three sources: (i) corporate documentation, (ii) interview, (iii) participant observation. Documentation included archival records, company files, website, business plans, published reports, magazine and newspaper articles, slide-shows, external pitches, emails etc. These provided the background information as well as the quantitative data that was critical during the triangulation process.

3.4 Methodology

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In order to understand the longitudinal CSR and marketing integration, we employed two semi-structured interviews with the CSR manager (February 2015, May 2016), and one interview with the CEO (May 2015). Realizing that corporate reports and interviews were insufficient in laying out the actual integration processes, we complemented the archival documents with the participant observation method. The primary investigator assisted the CSR manager (who is the current Group Communications and Public Affairs Director) for nine weeks in the summer of 2016. As an assistant, her presence was non-intrusive and she could easily observe the internal atmosphere of the company. Her role gave her many opportunities to interact with internal and external stakeholders, including company employees, senior executives of the firm’s partners, consumers, and public partners. Furthermore, her contract included living with the manager’s family, which allowed her to see the manager’s network that extended beyond the office space. At the time of her investigation, froosh was venturing into Japan, which was a significant feat for a Scandinavian SME. Given that the researcher was highly knowledgeable about Japanese culture and business, the company’s interest towards Japan placed her in a position as the “Japan expert”. In an office with only one other Asian, she was an apparent outsider by ethnicity, but an insider based on company title. This apposite balance allowed her to collect data discreetly and ethically during the normal course of business, so that, although informants were aware of the research project, this awareness did not affect the interaction (Iacono, Brown and Holtham 2009). The author also forced reflexivity throughout the reporting phase (Darke et al. 1998; Spradley 1979, 1980). For example, she regularly reported her field observations to the co-author who was not present at the site and thus could provide a detached perspective. In this way, we attempted to balance between the roles of outsider and insider; detachment and inclusion (Gill and Johnston 1991). Furthermore, she routinized the reflexivity process by raising questions and observations to the manager during their daily commute to and from work. The investigation environment proved to be very advantageous because she had access to archival data to contextualize the business routines, observations that provided insight into decisionmaking that were unavailable in archival sources, and interviews that revealed the intentions behind the behaviors and decisions. Finally, we constantly employed a reality check by comparing our internal observations with third-party portrayals including journalists’ accounts and newspaper clippings (Table 3.2).

3.4.2 Data Analysis Once the texts were consolidated, we used the qualitative data analysis software, ATLAS.ti, and underwent three rounds of coding. We found this method most suitable for our research because of its various strengths, which included its ability to (a) conduct multiple iterations of data analysis, (b) extend our analysis to summaries and memorandum (not only codes), (c) build conceptual maps grounded on our

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Table 3.2 Timeline of the company development Time

Company development

2004

Incorporated

Research process

2008

The current CEO joined forces with a London-based investment company to acquire the froosh trademark in December 2008

2013

CSR manager is hired

Nov 2014

Expand to Japan through the Xrossface Interview with CEO and CSR subcontractor manager

May—July 2016

Early stage of CSR-marketing integration

April 2017

Company structure changed from ApS (private limited liability company) to froosh AB (limited company)

Participant observation at Danish office

Source Interviews and corporate documents

analysis and not limited to hierarchical displays, and (d) facilitate our theoretical building process (García-Álvarez and López-Sintas 2001; Muhr 1997). Through the process of identifying patterns among CSR and marketing-related decisions, we found that the emerging categories could be connected by their linkage with the CSR manager. Based on this framework, we created a rough outline of her liaison capability. In order to refine our findings, we followed Eisenhardt’s model of iterative process of cycling among theory, data, and literature to refine our findings, relate them to existing theories, and clarify our contributions (Eisenhard 1989; Santos and Eisenhardt 2009).

3.5 Results Our data suggests that the CSR manager played a pivotal role in developing the CSR program and associating it with the business practices. Her success also partially owed to the CEO’s leadership style and the flexible corporate structure. By the end of 2016, the CSR activities had fully “invaded” the rest of business activities. However, as the company changed its structure from a private limited company (LTD) to a limited company that holds a more public presence, the distinction between CSR department and other business departments resurfaced. Below, we have outlined the three phases in which froosh’s CSR project stood in relation to the rest of the business activities. To understand the role the CSR manager played in situating the CSR practices with the rest of the business practices, we segment the process into the following stages: (i) prior to her arrival, (ii) after her arrival, and (iii) after the corporate restructuring.

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3.5.1 Before the CSR Manager’s Arrival Through the interviews, it became very clear that many conditions that would make the CSR-marketing integration conducive were being developed even before the CEO met the CSR manager. This supports the claim that firm’s antecedents matter in creating the organization’s potential absorptive capacity (Jansen et al. 2005). The potential capacities were being accumulated from both the business and manager’s sides. From the company’s end, it began with the CEO’s personal experience that formulated his strong orientation towards CSR. He recounts on how his six-year experience as the president of Coco-Cola Africa deeply influenced his value system: I became very aware in my time in Africa of the disastrous effect of international aid on these countries and I have always wanted to play a more active part in changing the way we in the developed world behave towards poorer countries. In that sense froosh’s ‘Trade not Aid’ campaign is much more than a ‘ticking the box’ exercise for me personally—I have a great deal of passion for this campaign. It runs very deep with me. Such experience then translated to his decision to serve as the CEO of froosh in 2008: I joined forces with a London-based investment company to acquire the froosh trademark in December 2008. We liked the brand name “froosh” because it can work in almost any language and we were able to acquire it at a reasonable price from its previous owners. We then set up a company in Sweden to create the froosh brand proposition. I became the CEO at that time and have been here ever since. These CEO’s experience and values were aligned with the froosh core business of creating fruit smoothies, importing them from developing countries, and upholding the premium juice quality. Due to the small company size, froosh supply chain is mainly based on outsourcing production processes, where caps, labels, bottles, trays and fruit blends, etc. are being catered by other companies based on the contract agreements. Nonetheless, all planning, scheduling and control are being accomplished by froosh supply chain department. By having a mixed supply chain model, froosh mitigates the risks of supply capacity as well as gains leverage to select the best suppliers in the market. When asked whether the investors affected the firm decision-making, the CEO clearly stated how little the board members affect the business or deals and he enjoyed a great degree of flexibility: We have around 25 shareholders in froosh and one of them, the largest, is an investment fund in London. That fund sources its funding from Unilever but that is coincidental—it doesn’t really matter where the fund sources its capital. The investment fund has two directors on our five-member Board, so they do not have

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a majority stake in the Board. All the operational decisions in the company– including the decision to use 100% NFC [Not From Concentrate] ingredients— have been made by the management team. Like the CEO, the CSR manager’s prior work experience and education helped her accumulated the necessary human capital. In an interview, the manager stated that majoring in International Politics provided her the intellectual foundation necessary for her current position. Furthermore, her work in UN-related NGOs helped her to be familiar with the subject of global poverty and attuned to the controversy towards trade and aid. Hence, her extensive experience provided her an immersion into the subject that granted her confidence to “totally welcome” the media’s interrogation on these sensitive issues. Based on this explanation, we build the first proposition corresponding to the first hypothesis. Proposition 1 Manager’s ability to liaison between the CSR department and the rest of the company hinges on the prior state of the CEO vision, business structure, and CSR manager’s personal experiences.

3.5.2 After CSR Manager’s Arrival This stage indicates the conversion of the potential capabilities into usable CSRbusiness liaison capability. After the CSR manager was hired in 2013 as the Group Communications and CSR manager, she constructed the Fruit Farm Program as the cornerstone of froosh’s CSR activities, who is currently the Group Communications and Public Affairs Director of froosh. The employees regularly visit their suppliers’ fruit farms in developing countries to learn about the fruit they use. Staff from Sweden, Denmark, Norway, and Finland spend a week immersing themselves in the lifestyles of the local villagers, whether it is digging holes, planting trees, and harvesting under the tropical sun in muddy boots, or learning how to wash and process fruit. Through this program, employees attain first-hand experience of the benefits of trading tropical fruit to the local villagers. Furthermore, communicating with farmers helps the employees to understand the circumstances that local suppliers face, and to see how their work is impacting the lives of people on the other side of the hemisphere. Froosh also invites celebrities, journalists, and social media influencers to join the Fruit Farm Program to increase brand awareness amongst consumers. Most of those who join the program are struck by the story froosh has to tell, so they use their own social media accounts to introduce froosh’s activities. Through these methods, froosh’s story has spread to a number of mainstream newspapers in Europe. Using these channels, they have successfully spread their message that trade has accomplished many things such as building schools and infrastructure that many NGOs and government aid were not able to accomplish. Of course, froosh did not spend

3.5 Results

41

any money on these advertisements. In other words, CSR is a part of froosh’s greater marketing and corporate strategy. The interview with both the CEO and the CSR manager showed that they held similar understandings of the CSR’s role in the company. During the interview with the manager, she described the CEO as a former president of Coca Cola in Africa, “so he has some strong opinions about how we should trade with the developing world.” She explained that after seeing the implications of the ineffectiveness of humanitarian aid in the regions, the CEO transferred those beliefs in his recruitment of the firm’s employees. Such values, in part, contributed to hiring herself, a CSR manager who could “make the fruit farm program come alive.” On a similar vein, the CEO stated the following: From the start of my time at froosh I wanted our company to be both commercially successful and also have a purpose beyond the simple business of making and selling smoothies. Our ‘trade not aid’ campaign is an obvious fit for us because we buy so much produce from the developing world. I felt that if we were going to be successful in our campaigning work, we would need to professionalize our activities and have a full time, dedicated manager responsible for it. I knew when I first met Anna that she was a perfect fit for the role. Proposition 2 The CEO and CSR manager’s fit in values creates a business environment conducive for the CSR initiatives and prevailing business practices to converge. Another crucial factor is the manager’s previous work experience that helped her play a brokerage role between the CSR and marketing departments. The manager explained how integral her first role as coordinator of the current marketing manager’s duties was. It provided her insight to see that the first step to integrate CSR within the core of the company’s business strategy was by working within the Marketing department. This helped her understand the important role of business branding, so she maintains her role as coordinator of the current marketing manager’s duties even after transitioning into the CSR managerial role. In other words, for brokers to integrate two different business areas, they need to be competent in both business areas so that employees respect and reach out to them during challenging circumstances. Such manager’s capability was supplemented by the lack of discrepancy between the business practices and the CSR content. In this company’s case, the mission statement derives from the company’s core business—importing fruits for their smoothies. Because their business revolved around mostly tropical fruits sold in developing countries, her trips to the farms showed her the tangible impact fruit farmers’ trade with froosh had on the entire community. It was impossible to dichotomize the business and the people the business touched. Seeing the potential in engaging in the community embedded within the business, she spearheaded the Fruit Farm Program as the heart of froosh’s CSR activities. Positioning themselves as proponents of trade necessarily placed the company as the nexus among development economics, social business, and politics, which brought forth their slogan: “Trade not aid.” All of the subsequent CSR activities have been minor adaptions of this core mission.

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Despite the high-level of integration that made CSR and other business activities indistinguishable at times, the firm engaged in certain CSR activities that were not financially motivated. One example is the CSR program that brought the firm’s employees to visit its suppliers’ fruit farms. This initiative was costly from a business standpoint because the firm loses labor during the week as well as flight and accommodation costs. Such characteristics highlight the socially-oriented nature of CSR activities. Given that the employees were normally detached from the actual fruit as they handled the logistics from computer monitors in their office on the other side of the globe, the trip allowed them to physically see the fruit, the environment in which it was grown, and build connections with farmers and communities that depend on these fruits. The CEO emphasizes why the CSR program is different from a marketing strategy: If CSR programs are developed as part of a marketing strategy, then ultimately they will fail. They will be irrelevant to the main business and only ‘skin-deep’— the employees of the company will not take the program to heart or incorporate it into their daily work. Our fruit farms program has nothing to do with marketing. It is integral to our whole business and cannot be separated from it. The fact that all our staff spend time working on a farm in the developing world to improve their own knowledge of the fruit lifecycle shows our commitment to the program. Through this program, employees attain first-hand experience of the benefits of trading tropical fruit. Furthermore, communicating with farmers helps the employees to understand the realities the local suppliers are facing. When the primary investigator asked the employees their opinions toward the trip, they did show sincere support for the program including remarks like “the infrastructure on the farm grew in pace with the employment of new staff—truly impressive and glad to see the impact of trade on ground” and “what struck me the most was the people we met, were so happy and thankful and had strong hope for the future.” Seeing the transformational effect the farm trips had on the employees, froosh began to invite customers, newscasters, photographers, journalists, and public figures from Sweden, Denmark, Norway, and Finland to spend a week in the local villagers. This included walking under the tropical sun in muddy boots, digging holes, planting trees, harvesting, or learning how to wash and process fruit. The experiences seemed to have genuinely touched many, and thus they used their own media sites as a platform to introduce froosh’s activities. Through these methods, froosh’s story has spread in the form of more than 150 articles in magazines, mainstream newspapers, blogs, TV and radio interviews of the CSR initiative. By seeing the influx of online coverage instigated by the Fruit Farm program, it has become the positive feedback loop to convince the CEO that money invested in CSR is not wasted, and gain confidence that leveraging on trade could accomplish greater things than NGOs and government aid. Because the company had not spent any money on advertisements, the CSR program replaced the conventional role of marketing within a firm. Said differently, by this stage, the distinction between CSR and marketing departments had blurred.

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Notably, in this phase, froosh’s activities diverged from conventional notions that CSR support from the firm’s onset is a critical determinant for CSR success (Robin and Reidenbach 1987). On the contrary, we found that it is not necessary to have a completely unified corporate culture supporting CSR initiatives in the beginning. In fact, the CSR manager may encounter skepticism and dissent internally in the beginning. However, the CSR manager can develop initiatives that help the employees have a personal encounter with the CSR program to draw them in emotionally. Furthermore, these initiatives can be supplemented by media coverage of the company, thereby increasing brand presence and increasing sales. As the manager noted, The fruit farm program is playing a crucial part in proving to the employees that it has a tangible benefit. It has become easier for me to push the fruit farm program because external parties are recognizing the company for its fruit farm program. In other words, key ingredients for successful CSR and marketing integration are leveraging on both pathos (the employee’s emotional attachment to the farm and encountering the tangible benefits which trade is giving to the local community) and logos (to convince CEO and the board to retain the budget on CSR, she appeals to the numeric growth in key performance indicators). The increasing convergence was also made evident in the expansion of her external network, switching from fruit farm workers to highly prominent stakeholders. This included the universities where she gave talks, conferences to spread word of froosh’s activities, government officials, journalists, media, NGOs and the public (consumers). A key finding through the participant observation was seeing her manage this complex web of ties that often held conflicting interests. Her ability to manage these ties required the fragile balance of clear vision and flexibility. Another example of the evolving nature of her work is her ability to establish ties with a member of the Danish government. After she met the Danish foreign minister at a conference, she noticed that afterwards, he tweeted his support for froosh. She took this as an indicator of their alignment of goals—knowing that he was liberal and supportive of businesses—and so she emailed him. As a result of her initiative, she was invited over for coffee and eventually becoming trusted enough to be chosen as one of the four advisors for a meeting to decide the country’s policies. Proposition 3 The proximity between core business and CSR narrative is positively associated with the ease in which the integration occurs.

3.5.3 After the Corporate Restructuring In 2017, the firm’s ownership structure changed from froosh ApS (private limited liability company) to froosh AB (limited company). This shift signifies the greater formalization of the company’s structure, which resulted in constraining the amount of information that it could release to non-corporate members. Another consequence

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of the restructuring was the decrease in flexibility, increasing barriers for the primary investigator to obtain information. Such organizational-level changes also influenced the department-level culture and routines. One evidence of the “formalization” of the CSR department was that the Public Affairs coordinator (who directly reported to the CSR manager) increasingly deepened her involvement in many of the firm’s CSR activities. In one of our interactions with the Public Affairs Coordinator, she described her job as “Almost like selling the CSR manager to every one.” This shows how deeply imbedded the CSR manager was to the company’s CSR image, suggesting that she served as the bridge that brought all the divergent stakeholders together. Another crucial component of the firm’s network was the board members. As external parties increased their investment in froosh, the firm became more pressured to report and justify all of its business practices, including CSR practices. Proposition 4 The change in organizational structure from a private limited company (LTD) to limited company (LC) decreases the manager’s liaison bandwidth.

3.6 Conclusion 3.6.1 Analytic Generalizations According to Yin (2014), qualitative studies can be generalized using a two-step process. It begins with a conceptual claim whereby investigators show their findings can inform a particular set of hypothesized sequence of events. The second step involves applying the same theoretical constructs to other contexts (Yin 2015: 105). Following this approach, we show a process model delineating the integration of CSR and marketing that begins with the two a priori factors: (Proposition 1) CEO and CSR manager’s accumulation of potential capabilities, and (Proposition 2) the manager and CEO’s fit in value. This is followed by (Proposition 3) creating a CSR program, where the degree of integration depends on the degree of overlap between CSR and the core business. Finally, (Proposition 4) posits that the CSR manager’s liaison bandwidth is moderated by how formalized the organizational structure is.

3.6.2 Implications Although a number of studies have investigated the similarities between brand marketing and CSR, few have moved beyond descriptive analysis. Existing works have detailed the various dimensions of CSR practices (e.g., Maignan et al. 1999), marketing managers’ social orientation (e.g., Singhapakdi et al. 1996), and norms in marketing channels (e.g., Grewal and Dharwadkar 2002). However, many of these

3.6 Conclusion

45

papers have often been based on faulty assumptions that CSR and marketing are categorically different responsibilities and that CSR may be segregated from real-world managerial processes taking place in the corporate world. Furthermore, it neglects the possibility that the two can be integrated. Through using an inductive method, we attempted to revisit unsubstantiated assumptions in the scholarship. Our ethnography highlights that processes of integration between CSR and other departments do exist in organizations. We provide a rare case that highlights the role of agency, where a single manager built interdepartmental ties. Furthermore, our study’s individual level of analysis delineated a highly organic process that departed from past theorizations of CSR and business integration mechanisms that focused on organizational and institutional levels of analysis. Our findings that the individual serves as the key driver of organizational change confirm Zontanos and Anderson’s conceptualization of relationship marketing: “isn’t relationship marketing more about entrepreneurial “networking”, tapping into to external sources to augment the limited resources of the firm?” (2004: 2). Moreover, the changes in the company structure also showed the interaction effects of the manager’s liaisoning capability with the firm’s level of formalization. Our findings have a number of theoretical and practical implications. In terms of theory, we have delineated the mechanism in which the CSR manager uses a key capability—liaison—to establish, elevate, and maintain CSR as a central agenda of the firm. Although this is a preliminary model based on one company, we think that the defining variables remain relevant even under different cultural and organizational circumstances. We encourage other researchers to apply this model to companies in other geographical locations, varying sizes and industries in order to identify other moderating variables influencing the degree to which CSR and marketing can be integrated. Secondly, we believe that our research approach adds new vigor to the current research methodology in the field. As our survey of the past literature showed, many CSR and business integration studies are based on abstract theories that are based on case studies that are outdated or lacking in depth. By employing a participant observation approach, we have utilized an inductive approach that shows the closest resemblance to actual business practices in SMEs today. Furthermore, we have illustrated how the manager’s networks can be a valid unit of analysis to systematically analyze qualitative data. Finally, the most fundamental contribution may be the practical insights it can provide to the current dichotomized treatment of “CSR” as a peripheral activity visà-vis other “core” departments. The paper’s findings may be particularly noteworthy to managers in either CSR or marketing departments who are unclear how they should divide these departments, as well as tailor their communication depending on their stakeholders. Our findings suggest that such dilemmas may be misplaced because the distinctions have been overplayed in academia. Our case highlights that in the case of smaller enterprises, one manager can play a pivotal role in integrating these departments. Relatedly, these findings may also empower managers who were already involved in the integration process yet unaware of the significance or lacking the vocabulary to label and describe their actions.

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3.6.3 Future Research An important theme in management studies is how a company integrates the leader’s mission into the firm, while creating a structure flexible enough to adapt to changes as the organization grows. In this chapter, we have provided an account of how a CSR Manager in a Scandinavian company spearheaded the CSR practice and within the span of three years, integrated the firm’s CSR and marketing units. The integration process is not linear or static but a dynamic one, where the restructuring of the firm affected the liaison capabilities of the manager. An in-depth study on one firm limits the generalizability of the results to a certain extent. Nevertheless, the role of the CSR manager as an intertwining agent can be generalized through studies using different methodologies and contexts. Moving forward, future studies should investigate other successful and less successful cases of integration processes and uncover the common variables. This will provide a stronger case to validate our findings.

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Chapter 4

CSR Advocacy and Organizational Change: Perspectives from Within the Firm

Overview • CSR managers are often perceived as relatively powerless actors within the firm. • Using in an inductive case study method, we identify how firms who care about social responsibility can challenge the profit-centered corporate narrative to advocate for greater CSR-business model integration.

4.1 Introduction A myriad number of factors including societal demands, competitive pressure, and legal mandates are pushing firms to adopt corporate social responsibility (CSR) in today’s business environments (Reis and Clohesy 1999; Zahra et al. 2008). Most research interest in CSR has focused on large firms in Western contexts (Carroll 1979; Wartick and Cochran 1985; Wood 1991; Carter et al. 2000; Chand and Fraser 2006; Doh and Guay 2006; Freeman 1984; Zahra et al. 2008). While scholars have contributed to our current understanding of CSR implementation practices and downstream consequences on firm performance, we note the need to uncover how CSR is implemented in other organizational settings, including small and medium sized firms (SMEs) from non Anglo-Saxon regions (Maignan and Ferrell 2004; Robin and Reidenbach 1987; Chapple and Moon 2005; Inyang 2013; Welford 2004). Paradoxically, the very firms that CSR researchers have been overlooking are those located in regions where corporate sustainability is salient. According to the 2008 Bank of Korea report, there are 5586 companies in the world that have over a 200 year-old history. Out of those companies, 3146 are based in Japan and over 1300 are based in Europe (Park and Hong 2019). In these regions, firms are deeply invested in maintaining the overall wellbeing of the societal ecosystem (Ward 2016). Thus, it is worth examining how SMEs that value long-term orientation perceive and implement CSR differently. © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_4

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In this chapter, we explore CSR implementation practices of SMEs from Japan and Denmark, two countries that value firms’ long-term contribution to society. We structure the chapter as follows. First, we begin with a literature review that guided our research design. Next, we define the case selection criteria in two different national contexts. Our approach follows past qualitative scholars who have used field observations and interviews (Eisenhardt 1989; Yagi and Kleinberg 2011). Based on the case study findings, we identify key variables for successful CSR implementation in SMEs. Finally, we present propositions for future empirical research in different national contexts.

4.2 Literature Review 4.2.1 CSR in the SME Contexts Large firms are more likely to implement CSR in order to maintain their reputation and license to operate (Andreasen 1996; Inyang 2013; Santos 2011). Due to the overemphasis of CSR practices in MNCs, we know less about CSR practices in smaller firms (Jamali et al. 2009; Spence 2007). Effective CSR implementation have been found to depend on institutional, organizational and personnel factors (Labelle and St-Pierre 2010; Lepoutre and Heene 2006). In view of resource constraints of SMEs (Baumann-Pauly et al. 2013), personal motivation of the senior executive heavily influences CSR implementation (Spence 2007; Hemingway and Maclagan 2004). An emerging stream of research suggests that smaller firms are not necessarily more disadvantaged in terms of CSR implementation potential vis-a-vis MNCs (Baumann-Pauly et al. 2013). Community-oriented business model and the pervading influence of CEO’s business philosophy allow SMEs to proactively pursue CSR within their organizational processes (Tang et al. 2012; Levinthal 1991; Mitchell 1994; Dobrev 2001). Size disadvantage does not necessarily prevent SMEs from collaborating with other socially conscious agents including various non-profit service organizations and regional governmental entities (Tang et al. 2012).

4.2.2 CSR Implementation of SMEs in Asia and Europe Research on CSR has examined internal cross-functional collaboration (Robins 2005; Lawrence and Weber 2008; Yuan et al. 2011). For SMEs with limited resources, refashioning the firm’s existing resources for CSR purposes may be a cost-effective and viable strategy (Maignan and Ferrell 2004). Past scholars have noted how CSR initiatives have leveraged on the firm’s resources including using marketing channels to communicate the firm’s CSR initiatives to stakeholders (Maignan and Ferrell

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2004; Yuan et al. 2011). These works have highlighted the important role senior executives play in merging social and financial-oriented departments such as corporate philanthropic arm with the marketing department to implement CSR. Table 4.1 provides an overview of articles that have addressed SME’s CSR implementation. It shows that CSR research of SMEs is still largely at the firm level. Many of these papers have argued for the need to better understand firmspecific requirements as well as methodological limitations in the field’s study of CSR implementation—performance relationship. To complement the scholarship at the organizational-level, we examine CSR implementation mechanisms at the Table 4.1 Sample of studies on small firms’ CSR implementation practices Authors

Focus and findings

Future research

Classification: Comparative study of CSR implementation Matten and Moon (2008)

Cross-cultural differences in CSR implementation: While CSR in the US are explicit, CSR in Europe are implicit. Such differences are caused by institutional contexts that obliges European corporations to assume wider responsibilities

How does applying the explicit-implicit CSR framework inform our understanding of cross-cultural CSR?

Chapple and Moon (2005), Visser et al. (2006)

Geographical spread of CSR literature in non-US regions: CSR literature is found most prevalently in Europe, followed by Africa, Australasia, South America, and South, East, and Southeast Asia

Why have CSR studies overlooked non-US regions? How can we address these inequity in research coverage?

Fukukawa and Teramoto (2009), Fukukawa and Moon (2004)

CSR of Japanese firms: Japanese MNCs excel in environmental aspects but less so with community-involvement. Drivers of CSR in Japan include the development of Japanese model of business and society, government policy, and effects of globalization of business

How do differences in organizational culture moderate CSR practices in Japan vis-à-vis the US?

Wang and Chaudhri (2009)

CSR practices in Chinese firms: Chinese firms engaged in CSR prioritize corporate image and culture. CSR communication relies on in-house and online media

How does Chinese firms’ perception towards CSR depend on firm size and sector?

(continued)

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Table 4.1 (continued) Authors

Focus and findings

Future research

Classification: CSR implementation in SMEs Williamson et al. (2006)

Environmentally-conscious conduct of SMEs in the manufacturing industry: Found that SMEs in the manufacturing industry are unlikely to participate in CSR activities because it is viewed as optional

What are the industry-level differences in CSR practices and norms?

Spence (2007)

Research Agenda for CSR and Small business in European context: European policy makers emphasize SMEs’ role in driving economic growth but deemphasize their potential to contribute to social, economic, and political realms

How can we maintain and increase the credibility of CSR research? How do the CSR practices of large and small firms differ meaningfully? When are firms over-stepping their boundaries when engaging in social and political activism?

Lepoutre and Heene (2006)

Key factors that influence CSR What are the internal and commitment in SMEs are external factors that influence institutional, organizational SME’s change processes? and personnel aspects

Baumann-Pauly et al. (2013), Investigating stakeholder Labelle and St-Pierre (2010), theory and social capital Lepoutre and Heene (2006), Russo and Perrini (2010)

How do SMEs utilize their social capital to achieve their CSR goals?

departmental-level in three different firms across different cultures and inductively build a conceptual framework.

4.3 Methods 4.3.1 Sample To elucidate the CSR implementation process in European and Asian SMEs, our case selection fulfilled the following criteria: (i) employee size ranging from 40 to 500 + , (ii) firms engaging in CSR, (iii) market and supply chain were international in scope, (iv) transparent in their communication of business practices and financial results. Given our aim to study the processes of intra-departmental integration, an intentional case selection outweighed the random sample selection criteria (Siggelkow 2007).

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After examining over 100 Asian and European firms that met the above criteria, we narrowed down our choices by looking through each firm’s homepage, mission statement, and business model. For our Asian case, we chose two firms of different sizes: Firm A is a company in the textile business that specializes in delivering products that are organic. As of 2019, the firm has 50 employees. Firm B, a company that sells hearing and vision aids. Firm B was founded in 1939 with around 500 employees. For the European case, we selected Firm C, a beverage manufacturer. The firm’s target is providing premium value in the fruit juice market in Scandinavia. As of 2020, the total number of employees is 59. Figure 4.1 shows the details of research methodology. We anonymized the company names due to privacy concerns. Although the three firms differ in terms of their size, Firm B’s employee count include the franchise shop keepers and retailers; Firm C and Firm A outsource most of the production and supply chain functions, so their employee count is smaller. Hence, we concluded that the comparison scope was justifiable.

4.3.2 Data Collection and Analysis To understand the CSR implementation process in the firms, along with in-depth interviews and corporate documentation, we adopted the participant observation method. Documentation included archival records, company files, website, business plans, published reports, magazine and newspaper articles, slide-shows, external pitches, and emails. These provided the background information and data that was critical during the triangulation process. In order to understand the longitudinal CSRmarketing integration progress, we employed semi-structured interviews with the CSR manager and CEO in each respective firm. Subsequently, we followed Eisenhardt’s model of iterative process of cycling among theory, data, and literature to refine our findings, relate them to existing theories, and clarify our contributions (1989; Santos and Eisenhardt 2009).

4.4 Findings We propose a model of CSR advocacy and organizational change that traces the crucial steps needed for SMEs to gain buy-in from internal and external stakeholders. A key difference between the Japanese and Scandinavian cases concerns who is the central actor. For the Scandinavian firm, the CSR manager served as the main engine bringing CSR to the forefront of the company, whereas in the case of the two Japanese SMEs, the CEO conceived and executed the CSR projects. As power distance, on average, is higher in Japan compared to Scandinavia (Hofstede et al. 1990; Hofstede 1980), these differences may have influenced the patterns of CSR implementation in the two countries.

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Fig. 4.1 Research process

Regardless of the cultural context or industry scope, we found in all three firms the importance of CSR increasing over time through the advocacy of a central employee within the firm. We propose the CSR advocacy model for SMEs, where we found that CSR advocacy hinges on the following four factors: (i) the actor’s ability to identify the locus of the company’s complex web of stakeholders and intertwine them based

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on the CSR initiative; (ii) the overlap between the core business and CSR narrative, (iii) the actor’s networking behavior that linked external and internal stakeholders using the CSR narrative, and (iv) leveraging public platforms to communicate the CSR narrative. Below, we delineate the five-step integration model.

4.5 Model of CSR Advocacy for SMEs Phase 1: CSR Advocate Selection The CSR implementation begins with the CEO selecting a responsible figure within the firm. In Firm C’s case, it hired a new employee to take complete charge of the firm’s nascent CSR program. The CEO hired her in February 2013 as the CSR Manager. In this phase that is largely one of selection, the CEO’s value system determines the selection criteria and discernment determines the ability to assess the most competent and appropriate personnel. The CEO of Firm C worked in a beverage industry prior to founding the firm, so he held strong beliefs about how the firm should engage with the developing world through both business and philanthropy. By seeing the implications of the ineffectiveness of humanitarian aid in the regions, the CEO transferred those beliefs in his recruitment processes and this was the impetus to hire a CSR manager to “make the fruit farm program alive.” In the case of the two Japanese firms, the CSR activities are largely spearheaded by the CEO. Given its nascent stage, Firm A did not even have an official CSR division at the time of study. Nevertheless, since age 20, the CEO held on to a vision that “she will pave a new path for the Japanese society.” Her determination and effort put into this vision paid off in 2009, when the Japanese government Ministry of Economy, Trade and Industry (METI) selected Firm A as one of the top 55 social businesses in Japan. On the other hand, Firm B, a relatively more established firm, did have a CSR division. Yet, the establishment of the CSR practices was grounded in the founder’s care for society, which reached beyond his consumers. The current CEO, the grandson of the founder, attributed his current CSR activities to the legacy of his father and grandfather. Thus, we propose the following: Proposition 1 Corporate executives’ selection of a CSR advocate is instrumental in forming a CSR Program with well-articulated policies and procedures. Phase 2: CSR Advocate’s Human Capital Accumulation Across all three firms, the CSR advocates’ human capital influenced their CSR advocacy capabilities, yet to differing degrees. In Firm C, the CSR manager’s past experiences in both marketing and international relations helped her serve as the boundary-spanner between CSR and the marketing department. For instance, her prior work experience in NGOs that was associated with the United Nations helped her to be familiar with the subject matter of global poverty and the debate on trade versus humanitarian aid. Hence, her extensive knowledge and work experience on

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the subject matter immersed her into the subject and granted her confidence to engage with social media on hot button topics. Her education also differentiated her within the firm. For example, during the company’s workshops for the departmental heads, all the managers had little to no background on the firm’s core CSR philosophy. She states, “They find it a little scary to broach this topic on social media. Through these workshops, I help the managers see what they can say on social media (which empowers them to post campaign slogans on social media too). However, one thing that I do not delegate to other employees is communications with journalists. Never. ”The CSR manager’s ability to educate employees and discern when to delegate activities also illuminates the importance of expertise on the social issue that the CSR program is founded on. Another crucial factor is the manager’s previous work experience. Prior to moving into her current position as the CSR manager, she first served as the coordinator of the firm’s marketing practice. She emphasized how integral that experience was, for it provided her insight to see that the first step to elevate CSR to the center of the company’s business strategy is by working within the Marketing department. Her marketing experience taught her the core techniques of business branding—valuing that experience, she still maintains her role as coordinator of the firm’s marketing managers. In other words, moving CSR from a peripheral to central position in the firm’s agenda requires the advocate to be competent in both business areas so that the actor’s integration work gains legitimacy. Lastly, the actor’s personal attributes cannot be neglected. Personality such as intrinsic motivation added to her capability as a bridge between CSR and the rest of the firm. In interviews with the CSR manager’s parents, we identified that the manager was a driven person from a young age. For example, her mother recounted the earliest moments of the manager’s life. The first word [she] uttered, strangely, is not mom or dad, but ‘read‘. She wanted us to read to her! I never had to tell her to do her homework, not even once. She and another girl were the best students in their grade. But the good thing about her was she was also very caring and looked after those who didn’t do as well.

Both Firm A and Firm B are markedly different from Firm C. Both Firm A and B’s CEOs took CSR implementation as a personal responsibility. Thus, they seem somewhat reluctant to delegate the CSR responsibilities to managers. Both CEOs of these firms, though not holding official marketing or public affairs positions, were exposed to international issues and regions which paved their way to be engaged in social issues that influenced their CSR projects. In the case of Firm A, the CEO’s first encounter with organic cotton was in 1990 when a British ecologist requested for organic cotton import from Texas. Eyeing the vast fields of cotton fields growing without pesticides, she vowed that she would be the vehicle to popularize organic produce world-wide. Because the nature of her business was centered on environmental sustainability, both the CSR and marketing goals were naturally aligned.

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Similarly, Firm B’s CEO received his medical degree in the US. During his time, it was relatively rare for a Japanese to study overseas. Thus, this international experience played a pivotal role in broadening the geographical scope of the firm’s CSR activities to include projects to assist refugees. Nevertheless, neither the CEO nor employees in Firm B emphasized the need to proactively intertwine CSR and the marketing function. Instead, the CEO upheld a broader business philosophy, “We will render services to the cause of people’s healthy vision and the joy of sight as well as the creation and prosperity of culture.” He believed that a prosocial business philosophy would trickle down into CSR and business practices. Proposition 2 CSR advocate’s human capital in social and corporate domains determines their ability to advocate for CSR and integrates CSR with the corporate’s business practices. Phase 3: CSR Narrative Creation Firm C’s CSR program began in 2013 after the current CSR manager was hired. In this company’s case, the CSR philosophy was a natural outflow of the company’s core business—importing fruits for the beverages they sold. Because a large portion of the firm’s business focused on importing natural resources sold in developing countries, she often made trips to the local farms. These visits exposed the tangible impact fruit farmers’ trade with Firm C had on the entire village. She learned then that it was impossible to dichotomize the business and the people the business touched. Seeing the business and social value in collaborating with the local community, she spearheaded the Firm C’s flagship CSR program. Positioning themselves as proponents of trade necessarily placed the company at the intersection of developmental economics, social business, and politics. All of the subsequent CSR activities have been minor adaptions of this core mission to engage in trade, rather than aid with developing countries. After building this CSR mission centered on encouraging trade with developing countries, the firm piloted its CSR program by bringing employees to visit their suppliers’ fruit farms. Through this program, employees attain first-hand experience of the benefits of trade. Furthermore, communicating with farmers helps the employees to understand the realities the local suppliers are facing, and to see how their work is making an influence in the people’s lives. When the primary investigator asked the employees about the trip, they did show sincere support for the program, making remarks such as “the infrastructure on the farm grew in pace with the employment of new staff—truly impressive to see the impact of trade on ground” and “what struck me the most was the people we met, were so happy and thankful and had strong hope for the future.” After taking the employees to the farms, they started bringing public figures with online media presence from Sweden, Denmark, Norway, and Finland to spend a week in the same lifestyles that the local villagers lived in. This included walking under the tropical sun in muddy boots, digging holes, planting trees, harvesting, or learning how to wash and process fruit. The experiences touched many, and the invited guests used their personal social media platforms to share about Firm C’s activities. Through these

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methods, the firm’s story has become viral, reaching the European public through more than 150 articles in magazines, mainstream newspapers, blogs, TV and radio interviews on the CSR initiative. By seeing the influx of online coverage instigated by the Fruit Farm program, it has become a positive feedback loop to convince the CEO that money invested in CSR was not wasted and increase public confidence that leveraging on trade may be more effective than NGOs and government aid. Because the company had not spent any money on advertisements, CSR replaced the conventional role of marketing within a firm. These findings are particularly noteworthy because Firm C’s CSR manager encountered skepticism and dissent within the organization at the start of the initiative. However, bringing the employees to the fields becomes a personal encounter that first drew them in emotionally. Furthermore, personal encounters were substantiated by statistics (i.e., media coverage), thereby increasing the firm’s brand presence and increasing sales. Despite their cultural differences, both Firm A and B from Japan showed similar signs of building CSR practices that were closely related to their business. Firm A’s CEO reiterated several times that “everything that we are involved in is business.” During the nascent years of the firm, Firm A partnered with ACE, an NGO fighting against child labor. The CEO strove for a sustainable CSR model by linking CSR with business by selling cotton that was cultivated in Cambodia in the Japanese market. However, it was unsustainable because Japanese consumers did not appreciate the yellow-colored cloth produced in Cambodia. Through this initial failure, she switched her focus to domestic CSR efforts. When the 2011 T¯ohoku earthquake and tsunami struck Japan, she decided to create sources of employment for earthquake victims. After seeing how the Japanese public were averse to buying natural produce grown in Fukushima in fear of absorbing radiation, she helped farmers switch from growing food to cotton in Fukushima. Another CSR project called “Tohoku Grandma” involved recycling remaining cloth processed in Firm A’s factory. The women who were victim of the earthquake could use these cloth pieces to create Christmas tree ornaments and supplement their income source. This initiative has created a win–win model, where the people of Tohoku are employed and Firm A could expand their sales repertoire. As evident in this case, Firm A’s current domesticoriented CSR activities are results of the CEO’s trial-and-error to find CSR projects that can best tap into the current business resource: cotton. In the case of Firm B, the CEO’s mission is aligned with the company’s philanthropic endeavors and marketing goals. Such CEO’s philosophy has aided the integration of CSR and business area and expanding CSR practices internationally. To integrate CSR and their business area (glasses), Firm B started social services that provide fitting glasses for every child and are actively cooperating with numerous organizations to scale these services. Unlike Firm A, Firm B is also involved in CSR activities in foreign countries that differ from their domestic CSR activities. Whereas Firm B’s domestic CSR activities emphasize community such as offering free glasses to the elderly and orphans and sponsoring local music and football teams, its international CSR projects are focused on programs where the CEO, a licensed optometrist, visits refugee camps to prescribe and donate eyeglasses. This program

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began in 1983, when the CEO began aiding Indo-Chinese refugees. To this day, the CEO has visited Thailand, Nepal, Armenia, and Azerbaijan. From this, we posit the following: Proposition 3 A successful CSR program hinges on constructing a narrative that is grounded on the company’s core business processes including sourcing, operations and servicing functions. Phase 4: Network Capability The fourth step consists of consolidating the CSR as a core brand within the firm that relies on the CSR advocate’s network. Firm C’s manager mentioned that after establishing the CSR program, for three years, she concentrated on integrating all the firm’s business activities to fit the narrative that is consistent with the CSR program. During this process of integration, she leveraged on both her internal and external networks. Intrafirm networking consisted largely of organizing employee training. For example, she made changes in the company’s routines. One notable change was adding social communications workshops for all the company’s marketing managers to gather at the headquarters once a month. In those workshops, she adopted marketing managers’ language and tone as they strategized about future CSR initiatives. Her code-switching behavior included talking about how CSR can “open up doors that we weren’t allowed in before”. Her high self-monitoring abilities facilitated the discussion and decreased the gap between the marketing and CSR department’s interests. In those workshops, she gave them hypothetical cases and asked them to respond to those in a limited amount of time. For instance, in one training she asked the marketing managers to design a social media campaign revolving around the firm’s CSR program in a creative but sensitive fashion. After the workshop, she revealed to the researcher that the main purpose of the workshop was to “educate them to see that our CSR mission does not mean we are “shooting the humanitarian aid industry down. We just want to spread the message that we need to do it differently.” Another important internal network was the CSR and Public Affairs coordinator, who directly reported to the CSR manager. The Coordinator was deeply involved in all the manager’s CSR activities and she played a pivotal role in supporting the CSR manager throughout this integration process. In one of our interactions with the Coordinator, she described her job as “Almost like selling the CSR manager to every place.” This shows how integral the CSR manager was to the company’s CSR image by then. She was the broker that connected all the different stakeholders together. Yet her internal network was dense and primarily focused on the top management team, and the CSR and marketing departments. The CSR manager’s external network was expansive and filled with structural holes, including the farms where they sourced the raw ingredients for their products, universities where she gave talks, conferences to spread word of the firm activities, government officials, journalists, media, NGOs, and the general public. The participant observation illustrated how challenging it was to manage this complex web of ties that often were at odds with one another. Her ability to manage

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these ties required her to balance holding a clear vision with flexibility. To manage these various demands, the manager’s ability to hold a clear vision was critical and many of her contacts identified her as very competent in this area. For example, her husband mentioned that she was an “extremely focused woman”. Similarly, her mother supported her clarity of vision and recounted of its early origins: …[r]eminds me of her first part-time job, which was handing out newspapers at age 13. She had to wake up at 6am. She wanted to work because she wanted to get rollerblades. I still remember this because after working for months, she and Paul (her father) went together to the shop to buy her coveted blades.

Focused and having a go-getter personality, she made sure to not let go of any networking opportunities. For example, after she met a high-level government official at a conference, she noticed that he had posted a supportive message of the firm on his social media. She took this as a signal of their aligned interests and emailed him. As a result, they formed a personal tie. She engaged in deepening networking behaviors for strategic ties. For instance, she regularly communicated with the government official, eventually gaining enough trust to become one of his personal advisors, serving to increase the CSR manager’s influence in the political domain. Despite the breadth of her external network, she had a clear policy on only establishing purposeful partnerships. In a conversation where she was talking about the hundreds of emails from NGOs that piled into her inbox every week, she revealed: I am a little hesitant to initiate too many partnerships. Because many of the NGOs and our firm hold different values and interests, and in terms of resource and scope, I think we shouldn’t stretch ourselves too thin.

Hence, she showed high network acuity, the ability to purvey the field and identify who shows good fit and adds complementary value to her existing network. Another critical component to her successful networking behavior was her flexibility. Because she was not fixated to a particular structure or procedure, she created enough space for the employees to innovate and learn. Flexibility was also her way of emphasizing efficiency and expecting others to constantly adapt their work processes for greater productivity. Her casual persona in the office also manifested this quality, where she didn’t hesitate to wear casual clothes, encourage friendly relationships spanning hierarchies, buy snacks for her colleagues, and make playful jokes, playing the “mother” role in the office. Even her work schedule reflects her willingness to adapt to the circumstances. Most of her work did not take place in the conventional office-setting. Neither did her schedule follow the 9–5 office hours; in fact, she spends more hours outside the office than in the office. As the CSR program continues to evolve and expand, she matches her lifestyle to it as well. Her flexibility also allows her to handle serious situations pragmatically. She was able to deal with problems caused by miscommunication when importing new drinks to Japan. In both the Japanese Firms A and B, we also observed strong evidence for clarity in vision. However, we failed to see the CEOs engaging in flexible network management. This may in part be driven by cultural differences. In Japan, given the lack of a culture of empowerment, there were no CSR managers who were in charge of

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the CSR-related corporate ties, and as a result, the firms did not see strong CSRinitiatives. In the case of Firm A, although a socially conscious manager attended the Waseda University MBA program during her period of employment and mentioned that “only after learning socially responsible behaviors and the amount of impact they can have to our stakeholders and consumers [in class], I finally realized why our CEO was obsessed with CSR.” However, ultimately, such reflections were not further spread and advocated within the firm because the manager left the firm. She confessed that one reason for her departure was that the “CEO was inflexible and had a clear end-goal of what she wanted in mind… This is normal here in Japan.” In the end, the inflexibility of the CEO hampered the diffusion of CSR-oriented culture throughout the middle and lower-level managers. In the case of Firm B, we identified a similar top-down culture where the CEO determined the CSR direction and the entire employees followed to deliver the projects. Hence, all CSR practices depended on the CEO’s decision-making priorities. Given the more passive nature of the CSR strategy and implementation in the firm, it often took several years for the CEO’s ideas on CSR to materialize into an actual program. One employee even claimed that CSR was viewed by some in the earlier years as “the CEO’s pet-project in the headquarters”. However, as time passed and the impact of such activities became more tangible, the CEO shared CSR-related information with an assistant, and delegated the logistics to the firm’s operations. These examples illustrate that CSR programs spearheaded by the CEO were often contingent on the CEO’s vision and motivation for effective implementation. That could lead to swift and decisive execution in some circumstances, but often private reasons hampered the execution of CSR initiatives. Such contrasting findings between Firm A, Firm B, versus Firm C illustrate the importance of outsourcing crucial CSR processes to internal and external ties. Based on these findings, we claim: Proposition 4 CSR advocates’ network capabilities allow them to integrate CSR into the core business model. Phase 5: Channeling CSR Using Public Sounding Boards The final step is based on external-oriented communications to publicize CSR activities. For Firm C, they utilized many public platforms which were largely educational in nature. This includes offering to speak at conferences, universities, global events such as Women Deliver and Tedx talks. They have also invested in creating an animation that describes the firm’s story in an easy-to-understand and simple manner. They have also partnered to become a learning partner with a media and communications school in Sweden. These activities feed off one another to spread the company’s narrative without using costly advertisements and increase the brand value of their core product. In the case of Firm A, the CEO has proactively engaged with TV, newspapers, and radio to spread its CSR message to the Japanese public. Such conscious efforts have resulted in media coverage and nominations to various awards by the government and local communities. As a result, the firm’s products have increased in demand and

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hold booths in top-class department stores and received the “Daily Fashion Award” by the Mainichi Newspaper. These results suggest that CSR activities have a positive effect on enhancing the company’s brand value and sales performance. Despite Firm B’s less targeted CSR advocacy, the broad overarching business philosophy created a consistent message for the public. For example, the firm’s ongoing refugee camp visits resulted in becoming a UNHCR partner. The partnership reached the 30th anniversary in 2013, receiving a lot of international recognition. In 2006, in honor of its long commitment, the CEO received the Nansen Refugee Award. In the award-commemoration speech, the CEO states, To tell the truth, to continue this for 30 years, I am surprised, even consider it to be a miracle. It is due to the employees’ support and clients’ great collaboration that we managed to persist, thank you […]. We will continue to endeavor to satisfy customers by a community-rooted management as well as eyesight aid initiatives and social contribution through utilizing the company’s specialty and human resources.

As evident in his remarks, Firm B’s CSR program ultimately integrated both international and external stakeholders, for the ultimate goal of meeting and superseding the firm’s responsibility towards the community. Hence, while less strategic, Firm B’s CSR activities did have a long-term impact on its business performances. After receiving greater recognition by news outlets through the awards, more employees understood the importance of CSR in supporting the core mission of the business and its positive effect on the firm’s performance. The linkage between the firm’s business and CSR has led to unexpected promotion of the brand internationally and locally, serving as free and highly legitimate advertisements. Therefore, we propose that: Proposition 5 To increase external legitimacy, CSR practices are communicated leveraging on broad mediums. Figure 4.2 shows the transition of five different steps of CSR implementation.

4.6 Discussion Using an inductive method, we delineated how CSR advocacy unfolds within an organization. We first summarize the five steps of CSR advocacy. The process begins with the organizational leader identifying the CSR advocate (P1) and the CSR advocate accumulating competencies in both CSR and corporate functions (P2). These two phases highlight two antecedents that have been understated in the existing CSR research. The implementation of CSR is highly dependent on identifying one individual who serves as the broker to connect the CSR department with departments that are more directly tied to business profits. After these two factors are established, we identified the process of creating a viable CSR program. Already from this stage, the CSR advocate needs to construct a CSR narrative that is relevant to both the CSR and

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Fig. 4.2 A CSR and marketing integration model for SMEs

core business practice. Such overlap will increase support and buy-in from other business functions (P3). Stage 4 highlights the role of CSR leader’s networking behavior to broker and bridge both internal and external stakeholders relevant to the CSR program. This process of weaving and intertwining networks is critical in elevating CSR to become a high priority agenda in the company (P4). Finally, CSR programs with internal coherency and legitimacy should be communicated to the public using educational and news channels as a way to broadcast the CSR project. Such activities increase the firm’s brand value, and in turn, gain more internal support for the firm’s CSR program. By the time the firm reaches the mass communication phase, CSR advocacy has successfully reached a key milestone and the CSR department will no longer be viewed as a peripheral, illegitimate function, but rather as legitimate and necessary from both internal and external stakeholders (P5). We submit our findings’ theoretical and practical contributions. In terms of theory, we have delineated the mechanism in which CSR advocacy occurs; although this is a preliminary model based on three firms, we believe that the key driving principles remain relevant even under different cultural and organizational circumstances. We encourage other researchers to apply this model to companies in other geographical

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locations and varying size and industries in order to identify other moderating variables influencing the ease and effectiveness in which CSR and marketing converge into one. In addition to presenting a theory of CSR advocacy, our study highlighted the influence of national culture on CSR practices. In the case of the European Firm C, although the CEO could spearhead the CSR program on his own, he chose to delegate the role to another manager who constructed the entire program using her own contacts. He did not interfere in any of the processes and largely depended on her personal experience and contacts. On the other hand, both Japanese firms A and B’s CSR programs were initiated and sustained by the directives of the CEO. Employees in these Japanese firms were aware that CSR was an initiative spearheaded by the top management, and therefore showed little signs of awareness or ownership. These differences suggest that power distance, one of Hofstede’s cultural dimensions, may also moderate the approach and effectiveness of CSR implementation patterns. We encourage future studies to empirically test whether power distance does influence CSR practices using data with a larger sample size that allow for generalizability. Secondly, our research approach provides new vigor to the current research methodology in the field. As our survey of the past literature shows, many CSR and business integration studies are based on anecdotal cases where the implementation process was treated as a “black box”. By employing a participant observation approach, we have utilized an inductive approach that sheds light into the black box and provides a clearer picture of CSR implementation in SMEs today. Furthermore, by limiting our focus to CSR advocacy, we have focused on the critical role of the CSR managers and how they use their network to broker and bridge various stakeholders through constructing a CSR narrative. Lastly, the research findings have implications for practice. As the process model highlighted how CSR departments in SMEs are malleable and constantly evolve, we highlight that such flexibility is critical to strategically place CSR as a central part on the firm’s agenda, especially in firms where resources are constrained.

4.7 Conclusion This chapter provided an account of how SMEs from two different cultural contexts— Europe and Asia—engaged in CSR advocacy and elevated CSR’s prioritization on the firm’s agenda. An overarching theme across the three firms is the critical role of CSR advocates, individuals who use their network to integrate CSR into the core business. Nevertheless, we found important variance amongst the three firms, namely the national culture of the firm’s leaders. Power dimension moderated CSR advocacy, where the employees in the Japanese firms experienced lower degrees of empowerment. Our in-depth study on three firms limits the generalizability of the results. Nevertheless, we believe that organizations from different cultures and industries may have CSR advocates who play a critical role in influencing the firm’s attitude

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towards CSR. Moving forward, future studies may investigate other successful and less successful cases of integration processes and uncover conditions that hamper CSR advocate’s influence.

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Chapter 5

Corporate Strategy for Corporate and Ecosystem Sustainability

Overview • In response to a lack of understanding on how companies perceive and engage in sustainability, we conduct a textual analysis of Japanese transport equipment companies’ sustainability reports. • We identify two trends: (1) at a strategic level amongst the top management, firms have acknowledged that sustainability requirements are important and separate from legal compliance; (2) however, many firms have not yet explicitly formulated and implemented sustainability practices at an operational-level.

5.1 Introduction According to the 1987 World Commission on Environment and Development Report, sustainability is “the development of the present needs without compromising the ability of future generations to fulfill their own needs.” Most of the discussions on sustainability either focus on macro-level sustainability (i.e., how do we maintain the current global environment for the future?) or firm-level sustainability (i.e., how can a firm stay relevant and retain performance?), without looking at both levels together. We argue here that we do not necessarily need to hold a zero-sum view, namely that saving the environment is directly balanced by corporations’ losses. The sustainability of firms and ecosystem should be viewed as complementary and the debate should shift towards focusing on how both can be achieved. In this chapter, we ask: “Are the sustainability activities of firms (e.g., providing essential products and services for people by using minimum organizational resources) compatible with maintaining a profitable business model? What do longliving companies have to teach us on ways firms can contribute to the sustainability of the ecosystem while supporting the needs of people?”.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_5

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To answer these questions, we focus on Japanese firms with long operating histories. Japan is known to have a significant number of some of the world’s oldest companies. Of the fifty companies worldwide founded before the year 1300 and still operating, 24 are Japanese (Park and Hong 2019). Many of these firms are ryokans (traditional Japanese inn) or onsens (Japanese hot spring), but others include: Genda Shigyo, a manufacturer of paper bags (founded in 771); three different confectionary companies: Ichimonjiya Wasuke (founded 1000 CE), Gorobee Ame (1177), and Fujito (1184). The oldest firm, Nisiyama Onsen Keiunkan, was established 705. The second-oldest is another Japanese hot-springs hotel, Hoshi Ryokan, founded in 718. But Japanese firms’ longevity is not limited to the hospitality industry. Japan is home to many of the world’s oldest things. Sudo Honke, the world’s oldest sake brewer, has been around since 1141. Before being absorbed into a subsidiary in 2006, the oldest operating family business in the world was Kongo Gumi, which built temples, and had been doing so for 14 centuries. The list goes on. Yamanashi Prefecture Company, which has been making goods for home Buddhist altars and clothing for monks since 1024; Ichimojiya Wasuke, Japan’s oldest confectionary company, founded in 1000; Nakamura Shaji, a Buddhist temple and Shinto shrine construction company that dates to 970; and Kyoto-based Tanaka Iga, which has been making Buddhist goods since 885. The prevalence of long-living firms is not limited to firms established centuries ago. In a more recent survey on companies that are more than 100 years old, they found that there are more than 21,000 companies in Japan (Park and Hong 2019). Based on this data, it is evident that Japanese companies predominate the ranks of sustainable corporate management. In their study, they claimed that the secret of the longevity of these firms is the corporate leader’s adaptability. Based on interviews, the authors found that Japanese corporate leaders in the long-living firms tried to position their firm in harmony with the surrounding world. By staying open-minded and attentive, they were able to swiftly respond to macroeconomic and social changes with unique products and services. While Park and Hong (2019)’s study introduced many cases of long-living Japanese firms, it is unclear what factors drive their corporate sustainability policies. To fill this gap, the purpose of this chapter is to examine how Japanese firms approach sustainability in conjunction with their strategic goals. Specifically, this chapter aims to clarify the impact of sustainability-conscious management practices on financial performance. Healthy financial performance is crucial for any firm’s long-term survival (i.e., business sustainability). To further examine the vital relationships between firm-level environmental sustainability goals and financial sustainability, we analyze the sustainability management practices in Japan, report the findings, and discuss lessons and implications.

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5.2 Sustainability in the Japanese Corporate Context 5.2.1 Conceptualizing Sustainability Businesses globally have increasingly begun to place a greater emphasis on sustainability. Yet a critical difference amongst firms engaging in sustainability initiatives is the motivation behind making these investments. While some firms do engage in sustainability out of genuine care for the environment, others hold a strategic view. The strategic perspective on sustainability posits that sustainable management is being accountable for the impact that the organization exerts on its surroundings, which include the business community, the environment, and the greater society. Yet taking responsibility is perceived as advantageous in the long-run for conscious management of the impact and can be translated into lower costs, improved external relations and better managed risks. The strategic perspective is increasing in its popularity, as a study showed that thirty-three percent of companies prioritize sustainability in order to reduce costs and improve operational efficiency. Still others invest in corporate citizenship best practices for a short-lived media boost (Bahu 2020). The disagreements on the definition of corporate sustainability lie on the extent to which corporate sustainable practices need to incorporate societal externalities. In other words, sustainability is about striking the balance between business development and protecting the environment so that future generations also have resources to be productive. In this chapter where we attempt to illuminate how Japanese longevity firms have been sustainable, we take a broader approach to this concept. We define sustainability as promoting development and growth while supporting the global ecosystem (Sugie et al. 2016). Sustainability is a comprehensive approach to management of organizations which is focused on creating and maximizing longterm economic, social and environmental value. It is a response to the challenges of the modern world facing both the public and private sectors. Mitsuhashi (2006) also extends this definition of sustainability for corporations and raises three conditions that corporations need to meet in order to qualify as sustainable: (1) recognize that resources on this Earth are finite (2) protect the overall ecosystem, (3) retain opportunities for future generations. Companies’ primary goal should be to pursue profit through their business activities without destroying the natural environment that supports their very existence. Sustainable strategic management is a form of co-evolution that refers to the ongoing interactions between an institution and the society it is located in. Firms therefore need to formulate a strategy that achieves economic competitiveness and social credibility, and ultimately in harmony with natural cycle (Jean and Edward 2014).

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5.2.2 Key Characteristics of Japanese Firms’ Sustainability Practices A key distinguishing factor of Japanese corporate sustainability is that in addition to environmental conservation, it also incorporates the development of human capital. Take the example of Japanese Monozukuri, which literally means ‘manufacturing’ in Japanese. Monozukuri encompasses a synthesis of technological prowess, knowhow and spirit of Japan’s manufacturing practices. The development of Monozukuri capabilities is, in part, driven by the fact that a larger percentage of the Japanese workforce have multi-disciplinary skills compared to those of US and European firms (Fujimoto 2004). Japanese firms and government invested in long-term technology development training and creating a multi-disciplined employee population. Therefore, one driver of long-term employment and corporate sustainability may be the company’s emphasis on technology training and development. However, research on monozukuri, to date, has not been connected to corporate sustainability management. Therefore, there is an insufficient understanding of how senior executives’ company policies influence long-term corporate management (i.e., business sustainability), with downstream consequences on environmental sustainability. To fill this gap, we probe whether sustainability initiatives incorporate key strategic and operational practices of Japanese firms, such as “quality”, “value chain-supply chain”, “economic contribution” and “innovation". We hypothesize that longevity firms are more likely to integrate environmental sustainability (i.e., protection of environmental ecosystem) with business sustainability (i.e., long-term survival through healthy financial performance) by sticking to their traditional quality, lean and supply chain practices. Figure 5.1 shows the theoretical framework of this study based on four elements of sustainability.

Fig. 5.1 Theoretical framework

5.3 Research Model

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Fig. 5.2 Research model

5.3 Research Model The research process followed four steps: (1) industry selection based on economic impact and history; (2) Firm selection based on representativeness and influence; (3) Analysis based on reputation and quality; and (4) Findings. By using these predefined steps, we aim to examine the sustainability practices of major firms in the selected industry using reputable reports and summarize findings that would provide meaningful lessons and future research and managerial implications. Figure 5.2 outlines the case analysis procedures.

5.4 Case Study Analysis 5.4.1 Methods of Firm Selection We focused on corporations in the Transportation Equipment industry that were listed in the First Section of the Tokyo Stock Exchange Group (excluding ETF · ETN) as of June 2016. We further narrowed down the target base to domestic shares, which resulted in 83 Transportation Equipment corporations. We limited our selection criteria to firms in the Transportation Equipment industry for three reasons. First, transportation equipment and electrical equipment have consistently accounted for around 20% of the Japanese market. These two industries have served as one of the cornerstones of Japan’s economy, influencing and being influenced by the rise and fall in history, and therefore represent the characteristics of the Japanese market. Second, transportation equipment firms are known for their “integrated manufacturing systems”, which refer to product components that depend on complicated

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interplay of parts and thus need long-term skill accumulation. As we mentioned before, scholars have pointed to such integrated manufacturing system as one source of Japanese firms’ longevity (Fujimoto 2004). Third, we identify how the past literature is dominated by studies that have defined sustainability as “global environment” and conducted case studies of companies in the travel or tourism industry such as Hoshino Resort, Irodori Inc. (Adachi and Tokoro 2009; Sugie et al. 2016). Given the concentration of studies on global environmental sustainability, there is little knowledge on the sustainable growth for corporations in different industries. In this chapter, by identifying Transportation Equipment companies that have also engaged in overseas deployment, our research will also incorporate a transnational perspective while shedding light on an understudied industry.

5.4.2 Status Quo of Japanese Firms’ Sustainability Reporting From the 83 Transportation Equipment companies’ websites, we identified firms that published sustainability reports. Amongst these companies, 33 companies issued a CSR report, 23 companies issued an environmental statement, and only six companies had issued a sustainability report. Those six firms were, Nissan Motor Co., Ltd., Toyota Motor Corp., Musashi Seimitsu Industry Co., Ltd., Calsonic Kansei, Mazda Motor Corp., and Honda Motor Co., Ltd. Comparing the number of report publications across these three report types, it is evident that sustainability is less common than CSR or the environment amongst Japanese transportation equipment manufacturers. Yet based on this quantitative analysis, we do not know the causal mechanism: is the discrepancy due to lack of concern for sustainability issues, or simply driven by more pressure to publish CSR reports? To unpack potential causes and better understand these six firms that are outliers, we conducted an in-depth analysis of each firm’s sustainability practices. Nissan Motor Co., who first published a report in 2005, is the first company amongst these six to issue a sustainability report. The remaining five companies’ reports evolved from a CSR or environmental statement into a sustainability report, as shown below (Fig. 5.3).

5.4.3 Individual Company Analysis Based on the reasons mentioned above, our case analysis will focus on the following corporations: Nissan Motor Co., Ltd., Toyota Motor Corp., Musashi Seimitsu Industry Co., Ltd., Calsonic Kansei, Mazda Motor Corp., and Honda Motor Co., Ltd. We adopted a text-analysis method, where we extracted phrases related to “sustainability” and “innovation”. These phrases were subsequently classified under 10 categories, which were “environment”, “safety”, “social contribution”, “quality”, “value chain (supply chain)”, “employee”, “economic contribution”, “corporate governance

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Fig. 5.3 Historical analysis of 6 firms

and internal controls”, “innovation” and “Others” resulting in Fig. 5.4. Furthermore, because the term “innovation” was used by companies with different connotations, we classified innovation into subcategories “innovation (in Japanese)”, “innovation (in English)”, “open innovation”, “Global Innovation”, “green product Innovation”, “Eco Innovation”, “innovative human resources development”, and “EQ innovation”. We find that in the Sustainability Report, the terms “environment” and “social contribution” are most frequently used, consistent with past studies. The term “sustainability” was often used when referring to the global environment. Moreover, we found that Nissan’s report used the term “innovation” the most, suggesting that the corporate strategy positioned sustainability and innovation as symbiotic, whereby sustainability initiatives contributed to the firm’s innovation, and vice versa. Key indicators Environment Safety Social contribution Quality Value chain (Supply chain) Employee Economic contribution Corporate governance and internal controls Innovation Others Total

Nissan

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Musashi Seimitsu Freq. % 5 33 0 0 5 33

Calsonic Kansei Freq. % 2 8 0 0 7 28

Freq. 10 4 8

% 16 6 13

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% 22 6 26

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3 6

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% 21 13 5

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% 30 18 14

4 4

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8 0

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20

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3 0 25

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7 4 100

0 3 78

0 4 100

Fig. 5.4 A breakdown of the sustainability report of 6 firms

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5.4.4 Common Features of Companies with High Sustainability Performance We next scored the firms based on the four essential elements for sustainable management: “quality”, “value chain–supply chain,” “economic contribution”, and “innovation”. Amongst our selected firms, Nissan Motor Co. scored the highest. Nissan is notable for its strategic partnership with Renault where they cooperated on projects in a wide range of fields. Since joining hands with Renault in 1999, Nissan has been expanding its reach globally, and the firm has grown significantly. Nissan positions its alliance in order to reach its goal in these areas: (1) technological innovation, (2) revenue and operating profit, and (3) product quality and customer satisfaction benefits. One reason why Nissan was able to break free from the conventional usage of sustainability in Japan is that it was exposed to the “global environment” through its partnership with a French company. As French companies are more likely to treat sustainability as a key performance criteria for the firm, they have a higher propensity to understand the interconnected relationship between the company’s sustainable practices and its effect on the firm’s revenue and product quality. Hence, Nissan’s unconventional take on sustainability may be largely attributed to its alliance with Renault. However, the Franco-Japanese alliance has been hit particularly hard due to COVID-19, just when it was trying to chart a new course with an overhauled corporate strategy and a swerve away from the tainted image associated with the former leader Carlos Ghosn (Sugiura 2020).

5.5 Conclusion Transportation industry requires heavy usage of energy resources, negatively impacting the environment. Therefore, examining their sustainability practices— both environmental ecosystem and long-term business survival—is an important indicator of sustainability approach of industries that consume large amounts of resources. The aim of this chapter has been to discuss current issues encountering the Japan’s transportation equipment industry. Most Japanese transportation equipment companies understand sustainability as an important but elusive responsibility towards local communities and the global environment. Theoretically, there has been a lack of work on how corporate strategy has implications for firm-level and ecosystem-level sustainability, as well as how these corporations can sustainably manage themselves. To fill this gap, we used text analysis and found the following: (1) from a strategic leadership level, firms accept sustainability requirements philosophically (e.g., corporate social responsibility) to be a distinct issue from legal compliance and important to consider on its own right; (2) however, many firms have not yet explicitly formulated and implemented sustainability practices operationally. Building upon this study, future studies can explore the role of sustainability communications on firm performance. Focusing on a specific industry, our results

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suggest that well-formulated, communicated and accepted corporate sustainability statement is positively related to innovation policy and corporate sustainability. To generalize these findings, we encourage future scholars to test whether this relationship holds true in different industries and firms from different cultural backgrounds.

References Adachi, T. and Tokoro, N. (2009). Sustainability and Business Administration-Environmental management to achieve a symbiotic society, Minerva Shobo. (In Japanese). Bahu, S. 2020. Corporate Sustainability vs. CSR: What’s the Difference?, Jun 22 (https://unboxe dtechnology.com/the-difference-between-sustainability-and-corporate-social-responsibility/). Fujimoto, T. (2004). Manufacturing Philosophy in Japan, Nihon Keizai Shimbun. (In Japanese). Jean, G. and Edward, S. (2014) Sustainability Business Strategy Futuristic management which connects the profit environmental and social, Nihon Keizai Shimbun. (In Japanese). Mitsuhashi, T. (2006). Sustainability Management, Kodansha. (In Japanese). Park, Y. W., & Hong, P. (2019). Creative Innovative Firms from Japan: A Benchmark Inquiry into Firms from Three Rival Nations. Springer Books. Sugie, R., Park, Y. J., Hong, P. (2016) Sustainable Innovation and Ecosystem: A Case of Japanese Transport Equipment Industry, 7th International Conference of Entrepreneurship (Nov 3-4), Kyungpook National University, Daegu, Korea. Sugiura, E. (2020). Twin storms batter struggling Nissan-Renault-Mitsubishi alliance, Nikkei Asia (July 30).

Chapter 6

Cluster-Level Legitimacy and Strategic Tie Formation of Ventures

Overview • We present a theory of legitimacy in regional clusters that is based on the idea that different audiences have distinct views on a venture’s legitimacy. • Cluster-level legitimacy has implications on venture’s tie formation with other ventures.

6.1 Introduction A perennial question that has stimulated debate amongst economic geography and entrepreneurship scholars is, “Do regional clusters help or hinder entrepreneurship?” Resource-dependence theorists have highlighted the benefits of clusters, such as how proximity to raw materials, customers, or suppliers promotes efficiency; and how clustering promotes the sharing of non-financial resources such as knowledge and locational legitimacy (Aldrich and Fiol 1994; Angel 1990; Audretsch and Feldman 2004; Enright 2003; Greenhut 1956; Isard 1949; Tallman and Jenkins 2002). Yet the flip side of the coin is that the location of production centers limits entrepreneurial opportunities (Shane and Stuart 2002; Sorenson and Stuart 2001; Stuart and Sorenson 2003, 2005). Sorenson and Audia (2000) identify the geographic concentration of the shoe industry as an example of the “pollination effect” of production centers as they provide proximate firms with more opportunities to acquire knowledge of the business, form critical networks, and build confidence in their ability to open a new venture. An implication of these studies is that ventures will crowd around established production centers (Delgado et al. 2010). If resource dependence theory explains why certain geographic clusters attract entrepreneurs, social network theory indicates who these ventures choose to form ties with. Network theorists have studied the role of tie quantity and quality for firms to obtain resources, including legitimacy. Ties provide information about partnership © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_6

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opportunities, and the reliability of a potential partner (Gulati and Gargiulo 1999). Thus, before choosing to establish the partnership, ventures try to gauge the value of the resource the alter will provide, and whether they have the necessary defense mechanisms to safeguard their resources (Katila et al. 2008). In contrast, research has been less concerned with how ties evolve and how ventures, at later stages of the venture life cycle, break free from ties that had been beneficial in their nascent stages but fall in value. For instance, while de novo firms would prioritize forming ties with the core firm in a cluster to obtain legitimacy, as the venture commercializes and grows, its ties with the core firm may not signal legitimacy to the respective audiences (Fisher et al. 2016, 2017). Gargiulo and Benassi (1999) noted that cohesive ties can be a liability to firms that are striving to adapt to changing task environments. This warning is particularly relevant to ventures in clusters, for as a function of time, they grow in capabilities as well as in size, and need to diversify their contacts to sustain their evolving needs. Building upon the idea that different audiences may have distinct views on a venture’s legitimacy, and how this may in turn create conflicting legitimacy needs within the same cluster, we develop a theory of legitimacy in regional clusters. This theory of cluster-level legitimacy builds upon Fisher et al. (2016)’s work that notes two aspects that have often been neglected in the legitimacy literature. First, new ventures face multiple legitimacy thresholds through the course of their life cycle. In other words, even if a firm gains legitimacy in an early stage, it can be lost in later stages (Elsbach 1994; Fisher et al. 2016; Jonsson et al. 2009). Second, they illustrate this mechanism by pointing to the fact that ventures constantly need to meet the expectations of multiple resource providers who may have conflicting demands. Our theory makes two additional propositions. First, in a regional cluster, the hub (core firm) serves as a critical source of legitimacy in the initial stages of the venture’s founding. Thus, the venture firm invests its resources to conform to the hub’s norms in order to establish strong ties. However, as the venture gains more experience, the legitimacy diffuses throughout the cluster. Under conditions where the ties with the hub no longer serve to legitimate the venture, uncertain market conditions drive the venture to cut ties with the hub.

6.2 Literature Review 6.2.1 Cluster-Level Legitimacy Scholars have analyzed the role of legitimacy on multiple levels of analysis, including the individual, organizational, community, population, industry, and network levels of analysis (Aldrich 1999; Aldrich and Fiol 1994; Amburgey and Rao 1996; Baum and Oliver 1992). In this chapter, we propose that legitimacy can also be applied to a regional cluster, defined as “a geographically proximate group of interconnected companies and associated institutions” (Porter 2000, p. 254). In Markusen (1996)’s

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seminal study, she identified four types of regional clusters: (1) Marshallian industry districts, (2) hub-and-spoke clusters where regional structures revolve around an anchor firm, (3) satellite industrial platform with branch plants of absent multinational corporations, and (4) government-led clusters. Of these four types, the power asymmetry is most salient in hub-and-spoke clusters (Emerson 1962; Hansen et al. 2001; Pfeffer and Salancik 1978). While much work on clusters has focused on depicting the passive nature of the outsourcing firms, resource-dependency scholarship on low-power maneuvering tactics helps us question this assumption. These scholars have noted that weaker firms can adopt several power balancing operations to retain leverage, including alliances, inter-firm ties, and ties with third-parties (Bae and Gargiulo 2004; Casciaro and Piskorski 2005; Davis and Greve 1997; Gulati 1995; Hillman et al. 2009). For the purposes of theory building, we focus on hub-and-spoke clusters, as it provides a setting that brings to light two scenarios that ventures typically face. First, there is a striking power imbalance between the hub and spokes firms, for the hub (i.e. global brands like Microsoft or Boeing) can supply from local and global suppliers, while the young ventures in the cluster are often geographically constrained due to limited resources and depend on the core firm to do business. Second, as evident in Fig. 6.1, the distinction between the central node (hub) and venture (spokes) is clear, which facilitates longitudinal studies and other methods that require tracing the changes in the ties between hubs and spokes across long spans of time (Lincoln and Gerlach 2004; Walker and Poppo 1991; Wang et al. 2014). In Bell et al. (2009)’s model of regional clusters, they note that a regional cluster can be distilled into two building blocks: transaction sets and the cluster’s macroculture. Transaction set refers to a particular transaction within a cluster, such as an exchange between a manufacturer and a supplier for the purchase of a subassembly

Fig. 6.1 Hub-and-spoke cluster networks. Adapted from (Markusen 1996, p. 297)

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component (Bell et al. 2009, p. 625; Venkataraman 1998). In the case of a hub-andspoke cluster, two configurations of the transaction set are commonly observed: the hub—spoke, and the spoke—spoke sets. The hub-spoke set is characterized by high power asymmetry as the spokes depend on the hub firm for legitimacy as well as other financial and knowledge-based resources. The spoke-spoke sets refer to equal power relations between similar sized ventures in the cluster. These transaction sets are constrained by the macroculture, which is “higher-order beliefs and assumptions” (p 624). One of the key components of macroculture is the legitimacy embedded in the cluster. Cluster-level legitimacy refers to the status and credibility of the cluster and cluster activities as perceived both by member firms and outside constituents like funders and customers (Human and Provan 2000, p. 328). A cluster’s legitimacy is primarily imprinted by the prominent hub firm, such as Detroit known as the “Motor City”, and Seattle known for being the “Boeing cluster” (Markusen 1996). By being a member of the cluster, and having direct ties with reputable hubs, clusters aid the survival of the new venture by providing credibility for the new venture (Deeds et al. 1997; Ostgaard and Birley 1996; Westhead 1995). In other words, by affiliating with a prominent firm, the core firm’s legitimacy “leaks” onto the venture, mitigating the “liability of newness” that ventures are infamous for (Stinchcombe 1965). In the following section, we provide a strategic choice account of entrepreneurship in regional clusters from the perspective of the ventures. One of the venture’s defense mechanisms has been to strategically deploy various means of legitimation depending on the cluster-level legitimacy’s degree of diffusion.

6.2.2 Strategic Choice Account of Legitimacy as Defense Mechanism in Ventures Institutionalists have traditionally viewed legitimacy as bestowed when organizations conform to system-wide norms, beliefs, and rules (DiMaggio and Powell 1983; Meyer and Rowan 1977; Scott 2001). Yet the managerial perspective of legitimacy has begun to question this assumption and explicated various strategies that firms can adopt to acquire legitimacy (Aldrich and Fiol 1994; Deeds et al. 1997; Suchman 1995; Zimmerman and Zeitz 2002). The strategic legitimation approach treats legitimation as an “operational resource” that organizations extract from their cultural environments and that they employ in pursuit of their goals and have some level of managerial control over the legitimation process (Ashforth and Gibbs 1990; Dowling and Pfeffer 1975; Suchman 1995). Even ventures with little resources can network strategically to acquire legitimacy. Low-power firms can adopt social defense mechanisms, which are in essence, strategic tie formation decisions in order to garner legitimacy (Hallen et al. 2014). Spokes in early stages of their life-cycle will prioritize establishing strong ties with the hub as the cluster’s legitimacy is centralized around the hub. By affiliating itself

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with the main source of legitimacy, the venture will signal to grant providers and investors of its sociopolitical legitimacy and market position. Yet in later stages of the venture’s life-cycle, the cluster’s source of legitimacy will also diffuse to the other firms in the cluster. Therefore, the spoke will have a weaker incentive to retain strong ties with the hub. Furthermore, the venture’s stakeholders will grow and the venture will need to balance its diverse audience’s often conflicting criteria of legitimacy (Bitektine 2011; Denis 2004; Hanlon and Saunders 2007; Webb et al. 2009). Conversely, spoke-spoke sets will have weaker ties in the conception stages because the spokes have little legitimacy to confer to other spokes. Nevertheless, as time passes and legitimacy diffuses to the spokes within the cluster, affiliating ties with other spokes will serve as a source of legitimacy as well as a balancing operation to attain negotiating power with the hub. The arguments are summarized in Fig. 6.2. The model shows that tie formation in clusters is embedded in the larger temporal and spatial dynamics of the cluster. Thus, while not deterministic, we have shown that cluster-level legitimacy does serve as an incentive structure that motivates ventures to initiate ties (i.e. Quadrants 2 and 3), or cut ties (i.e. Quadrant 1 and 4).

Fig. 6.2 Tie strength as a function of transaction set—legitimacy diffusion match

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6.3 Conceptual Framework: Life-Cycle View of Cluster-Level Legitimacy in Entrepreneurship Here, we illustrate how a venture’s networking behavior is mediated by the clusterlevel legitimacy based on the venture’s life cycle stage.

6.3.1 Stage 1: Birth The first stage is characterized by the venture’s high degree of uncertainty and low resource endowment. Nascent firms are highly dependent on their environments for resources and constantly face situations where they rely on resource providers who may potentially exploit the young firm’s technologies (Diestre and Rajagopalan 2012; Katila et al. 2008; Zimmerman and Zeitz 2002). Thus, it is incumbent for ventures to acquire legitimacy as legitimacy is needed to obtain other resources and ultimately to survive (Pollock and Rindova 2003; Singh et al. 1986). As ventures balance the tension between novelty and legitimacy, there is a “legitimacy threshold” for ventures to survive (Zimmerman and Zeitz 2002). Despite such vulnerability, the venture can make several strategic tie formation decisions. First, its decision to locate in the cluster signals to grant providers that the firm is cognitively and sociopolitically legitimate (Sorenson and Audia 2000). Second, the venture can prioritize forming ties with the hub by attending networking events or setting up shop in the vicinity of the hub. It can also take preemptive steps by aligning the venture’s culture and routines to conform to that of the hub, as studies have found that new ventures’ conformity to resource providers endorses legitimacy spillovers into the venture (Rao 1994; Zimmerman and Zeitz 2002). The venture’s strategic prioritization of the hub will also mean that its ties with the other ventures in the cluster are either nonexistent or weak. Thus: Proposition 1 During the venture’s nascent stage, the venture will form strong ties with the hub.

6.3.2 Stage 2: Commercialization In the second stage, the venture needs to signal to a different set of audiences such as customers, regulators who care about legal compliance, and angel investors concerned with technological progress and business model viability (Fisher et al. 2016). In the midst of these demands, venture firms strive to lower their market risk, or the “uncertainties attributable to competitors and consumer responses and by all the other factors that together determine venture outcomes” (Branscomb et al. 2000, p. 14). Consequently, there are two opposing forces that make the legitimacy-related

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benefits of maintaining ties with the hub less clear. On the one hand, strong ties are important in settings where people need to take actions in an uncertain context or in emerging industries where industry-level legitimacy has yet to be established (Granovetter 1983; Pontikes 2012; Wuebker et al. 2015). On the other hand, retaining strong ties with the hub reaps fewer rewards, as the sociopolitical legitimacy acquired by forming strong ties with the hub (e.g. a partnership with the hub is a de facto “quality” certification) diminishes marginal returns (Aldrich and Fiol 1994). Furthermore, Semadeni and Cannella (2011) note that while oversight and ownership can positively affect spinoffs’ stock market performance, having too many links with its parent firm is negatively related to performance. The positive benefits of strong ties with the hub are also moderated by the hub’s institutional logics, for if the hub prioritizes exploitation while the venture firm emphasizes innovation, the lower-power venture will expend more resources due to the misalignment. These arguments lead to the following proposition: Proposition 2 There is an inverted-U shape relationship between tie strength with the hub and legitimacy benefits. However, in times of cluster stability, ventures struggle to change ties due to inertia and legitimacy factors. The paralyzing effects of structural inertia have been well-established, where change becomes riskier (Hannan and Freeman 1984; Nelson and Winter 1982). These core rigidities not only lock the venture into past courses of action but also keep psychological commitments among contacts (Leonard-Barton 1992; Rousseau 1995). Furthermore, in times of stability, taking proactive steps such as withdrawing from partnerships can delegitimize ventures because a strategic action could become an aberration to the norm and be judged as deviant (Ashforth and Gibbs 1990; Zhelyazkov and Gulati 2016; Zimmerman and Zeitz 2002). Thus, diminishing returns of maintaining ties with hub is not a sufficient driver for the venture to cut ties with the hub. This suggests that: Proposition 3 During the venture’s commercialization stage, in times of cluster stability, ventures will retain ties with the hub.

6.3.3 Stage 3: Growth If changing ties is difficult in times of stability, it becomes easier in times of firmand market-level uncertainty. The third stage marks a higher degree of firm-level uncertainty as the venture prepares itself from a shift from private to public ownership. This transformational event necessitates changes in the firm’s organizational structure, goals, and routines. It also broadens the venture’s audience to organizations such as institutional investors, banks, auditors, and formal listing regulations (Fischer and Pollock 2004; Fisher et al. 2016, 2017). Therefore, the growth stage serves to interrupt the lock-in that prevented the venture from cutting its tie with the

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Fig. 6.3 Temporal view of cluster-level legitimacy evolution

hub in the previous stage. From the perspective of legitimacy, the venture has already proved its capabilities and built ties with other members in the cluster, and thus its source of legitimacy is no longer rooted in its ties with the hub. Furthermore, in times of market uncertainty, proactive strategies can confer legitimacy as it serves as an act of inserting a definition in times of ambiguity (Aldrich and Fiol 1994; Zimmerman and Zeitz 2002). Therefore, we expect the following: Proposition 4 In times of firm or market-level uncertainty, the venture is more likely to cut ties with the hub. Figure 6.3 illustrates the arguments made in this section. As the venture progresses in its life-cycle, the cluster’s legitimacy, once centralized in the hub, gradually diffuses to the other constituents in the cluster. Although the hub’s value as a source of legitimacy declines by stage 2, the venture needs a stronger exogenous shock to act upon the opportunity cost by cutting ties.

6.4 Conclusion In this chapter, we have proposed a temporal model of how ties with large, established brands may serve as a source of legitimacy in a venture’s early stage and a liability in later stages because the hub’s legitimacy-conferring power diminishes and it encumbers the venture. The central assertion is that ventures in clusters are

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embedded in both the spatial and temporal context, which play a role in influencing how the venture can form ties to acquire greatest degree of legitimacy. This chapter makes the following contributions. First, through proposing a novel concept, cluster legitimacy, we have explored how legitimacy drives firms to agglomerate in physically-bounded regions. While entrepreneurship and economic geography scholars have already discussed how resources drive entrepreneurs to agglomerate, we posit that legitimacy is one resource that influences ventures’ mobility decisions. This work also builds upon the burgeoning stream of multiple legitimacy thresholds (Elsbach 1994; Fisher et al. 2016; Jonsson et al. 2009). We echo Fisher et al (2016)’s insight that legitimacy thresholds continue to evolve because legitimacy ultimately depends on the eyes of the beholder, and relevant audiences evolve as the venture grows. Second, it responds to Clough et al. (2019)’s review that revealed the dearth of scholarship investigating life cycle contingencies of resource mobilization. They encouraged scholars to study resource mobilization across multiple stages of firm emergence because the longitudinal approach would untangle the interplay of different resources. Following their call, we have attempted to provide a more nuanced view on how ventures are embedded in both spatial and temporal dynamics (Haveman et al. 2012; Vaara and Lamberg 2016). Lastly, we highlight the practical implications of this model. Power imbalances are inherent in any venture’s B-to-B interactions; this theory shows that legitimacy can be a defense mechanism founders can wield. We have modelled entrepreneurs as boundedly rational agents who make strategic tie formation choices and constantly reevaluate the opportunity cost (Hallen 2008; Vissa 2012). In the initial stages of the venture’s founding, entrepreneurs can invest their resources to conform to the hub’s norms for it serves as a critical source of legitimacy. However, as the ventures gain more experience, the hub’s legitimacy will be diffused throughout the hub. Especially when there is high market or firm-level uncertainty, ventures can choose more active forms of legitimacy deployment such as forging ties with other ventures in the firm or decreasing dependency on the hub. One limitation of this study is its focus on hub-and-spoke clusters. We are conscious that there are many other cluster configurations, and the legitimacy diffusion process may differ. Nevertheless, the building blocks of this chapter (transaction sets and cluster-level legitimacy) can be applied to different contexts, where different audiences and power dynamics between the transaction sets would influence the outcomes. We encourage future scholars to apply this conceptual model to different types of ventures and measure when and to what degree legitimacy is the driving force of location legitimacy and tie formation decisions.

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Chapter 7

Role of CEO’s Moral Compass as the Organization’s Fourth Dimension (4-D) in the Era of Digital Transformation

Overview • We propose a novel construct called the fourth dimensional (4-D) organization, referring to firms with a 4th dimension that serves as the moral compass providing strategic direction. • We show the value of the fourth dimension that links the firm’s performance to societal flourishing. • We apply the theory using an in-depth case study of a nepes, a Korean enterprise, to show that effective implementation of the 4-D organization increases employees’ locus of control and helps them to utilize their creative and innovative capabilities.

7.1 Introduction The shifting market environments and the rise of disruptive technologies have created a need for top management to develop flexible strategies and organizational structures. Such external pressures have driven business practitioners and academics to develop an enduring ecosystem to secure a growth engine of new products (Anthony et al. 2006; Nill and Kemp 2009; Charmondusit et al. 2016; Iñigo and Albareda 2016). The need to build a solid innovation base for long-term growth is particularly crucial for startups in resource-poor nations. To achieve this end, entrepreneurs in these nations need to incorporate internet-based Information Communication Technology (ICT) infrastructure and new digital technologies such as IoT, Industry 4.0, and AI (Narula and Santangelo 2009; Cecere et al. 2014; Venturini 2015; Davis and Marchs 2015; Ivanov et al. 2016; Vogel-Heuser and Hess 2016; Hoffman 2016). In particular, artificial intelligence (AI) technology is rapidly evolving, and more jobs are usurped by AI. Some even project that AI can replace human abilities in jobs such as software development and medical services. In order to remain competitive

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_7

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in this technology-driven age, unique human competencies such as problem-solving ability, critical thinking ability, and creativity will be important to respond to the constantly evolving environment. In response to the increasing pressure for managers to develop agile organizational structures in the disruptive digital era, we have seen a rise in scholarship advocating for alternative structural forms such as Holacracy and TEAL organizations. Against this backdrop, how do entrepreneurs take advantage of the advances in technology, to excel in business and in giving back to society? In this chapter, we take an organizational structural perspective to identify a critical dimension that can explain whether successful organizations use their resources to give back to society. We categorize traditional organizations where the configuration of tasks and activities are firm-centric as third dimensional organizations (3-D organizations). In contrast to 3-D organizations, we present a novel construct called the fourth dimensional organizations (4-D organizations). 4-D organizations refer to firms with an additional dimension that serves as the moral compass providing strategic direction. We show that in this turbulent age, firms need to extend the firm’s mission beyond their own organizational survival. In our theory section, we provide a typology of organizational structures and show that 4-D organization builds upon certain features of existing structures but distinctive as it focuses on the moral dimension of the organization. The theory is followed by an in-depth case study of a Korean enterprise, where we find that effective implementation of the 4-D organization increases employees’ locus of control and helps them to utilize their creative and innovative capabilities. We further argue that 4-D organization serves as a resilient basis to build a sustainable IoT ecosystem.

7.2 Theoretical Background 7.2.1 Rise in Alternative Organizational Structures: Self-managed Organization We first begin by briefly introducing traditional organizational structures. Traditionally, organizational structure was categorized into two types of structure: mechanistic organization (control type) and organic organization (autonomy type) (Burns and Stalker 1961). The characteristics of mechanistic organization include (1) high level of standardization and centralization; (2) less emphasis on education and training and work experiences; (3) a wide range of managerial control, (4) top-down vertical and document-rich communication. In contrast, organic organizational structure is notable for its (1) low level of standardization and centralization; (2) strong emphasis on education and training and work experiences; (3) a limited scope of managerial control; (4) horizontal communication and cross-functional meetings.

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Following this typology, alternative organizational structures have emerged as a response to shifts in technology and societal demands. We focus on two specific forms, holacracy and TEAL organizations, to highlight the recent movement. Holacracy is a decentralized management method that aims to distribute authority and decision-making through self-organizing teams rather than top-down hierarchical organizational decision making patterns. Holacracy’s origin can be traced back to Brian Robertson, who developed the system at Ternary Software (Robertson 2015). By dispersing power across the organization, Holacracy creates transparent authority at every level in the organization and empowers every employee to contribute to the organizational decision-making process. This structure aims to reduce inefficiencies and prominent firms such as Zappos and The David Allen Company have adopted this structure. TEAL organization is another self-management structure that was developed to enable workers to be guided by a purpose without the need for a micromanagement by the president or boss. In this system, there is no formal system of instructions from the president and managers, and the entire organization operates based on trust and devises its own rules and mechanisms to achieve its goals. It is the thoughts and actions of the members who work together that trigger internally-driven innovation, leading to constant evolving organizational practices. The TEAL paradigm was introduced by Frederic Laloux. It is built upon previous models by evolutionary and social psychologists including Jean Gebser, Clare W. Graves, Don Edward Beck, Chris Cowan and Ken Wilber who explored the stages of development and impact of human consciousness (Laloux 2014). The metaphor that TEAL organizations are a “form of life” encapsulates the philosophy that those are organizations as an independent force with its own purpose and characterized by self-organization and self-management. TEAL organizational philosophy claims that the organization is not just for the president and shareholders, but for everyone involved in the organization, and is an organization that acts while resonating to realize the “purpose of the organization.” TEAL organizations are different from past organizational structures in several ways. The Orange model, representing hierarchical “predict and control” pyramid organizations, is replaced with a decentralized structure consisting of small teams that take responsibility for their own governance and for how they interact with other parts of the organization. Assigned positions and job descriptions are replaced with a multiplicity of roles, often self-selected and fluid. People’s actions are guided not by orders from someone up the chain of command but by ‘listening’ to the organization’s purpose. Furthermore, unlike the highly static nature of Amber, Orange and Green organizations, the TEAL organizational structure is best suited for rapid change and adaptation, as adjustments are continuously made to better serve the organization’s purpose. We note the five stages of organizational structural evolution based on Ken Wilber’s “The Spectrum of Consciousness” in Fig. 7.1. TEAL organizations have three defining characteristics: self-management, wholeness, and evolutionary purpose. Self-management means that all members have the authority and responsibility for decision-making, and each person uses the power generated by the goals and motives set by the organization for the operation of the

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Fig. 7.1 The stages leading up to the TEAL paradigm

organization without seeking the support of a third party. In the conventional 3-D organization, each employee in a certain role is responsible for executing a specific demarcated scope of tasks, such as Human Resources, accounting, sales, and operations. However, in TEAL organizations, all members have equal authority. Instead of fixed departments and roles, a TEAL organization has many teams and respective rules that are created in a timely manner to fulfill needs as they arise. Members create rules when demand arises and use them appropriately as tools to facilitate the activities of the organization. The second characteristic, wholeness, emphasizes the identity of the firm in its aggregate form, including all the employees. Relatedly, the third point, having an evolutionary purpose, refers to the need to listen to the purpose of the organization itself. An implication of evolutionary purpose is viewing the organization as a living entity with its own energy and sense of direction. Therefore, it invites us to stop trying to predict and control the future, but instead continuously listen and respond to the organization’s purpose. This third characteristic is particularly pertinent in this era of digital transformation as the development of advanced technological capabilities has led to mounting demands toward organizations. Figure 7.2 suggests that these varied forms of self-management are classified based on two parameters—empowerment scope and involvement scale (Bernstein et al. 2016). Empowerment scope refers to the extent to which an individual employee can make consequential decisions and involvement scale refers to the size of collaboration. Clou structure scores the lowest both in terms of involvement and decision making impact, while TEAL organization is highest in terms of involvement scale and empowerment scope. This figure suggests that organizations may successfully implement TEAL organizations by taking steps to build the necessary individual

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Fig. 7.2 Various forms of self-management

and team culture of involvement and empowerment. Recent successful corporate cases also indicate that organizations that seek sustainable innovation through IoT ecosystem are more likely to adopt organic organizational structure and implement self-management. The key difference between hierarchical organization and self-management organization is whether power is shared or concentrated by a small group of individuals. Power is highly concentrated in hierarchical organizations and aligned with the command-and-control mechanism. In rigid hierarchical organizations, the leader holds a concentrated power-base and exclusive decision-making authority. Such structures also dictate communication flows. In traditional hierarchies, communication typically flows up the chain of command. In such structures, employees at the bottom of the hierarchy have limited opportunities to communicate laterally with other peers. In contrast, self-management organizations are characterized by a much simpler structure. Each segment is independent, responsible for its own set of work units, and the groups are connected to the central core segments that coordinate all other segments. Even core units are managed by multiple groups of individuals and are highly interactive. The constant lateral flow of communication allows them to be more equipped to deal with diverse set of issues simultaneously. Next, in order to describe how 4-D organizations differ from such traditional organizational structures, we use the imprinting framework. Importantly, we show how 4-D organizations’ moral compass provides the guidance organizations need to deviate from external circumstantial demands. The ability to hold a clear sense

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of the firm’s core identity is critical during the era of digital transformation and is consistent with the talent principle presented in Chap. 1.

7.2.2 Imprinting: External and Internal Sources In this section, we apply the rational and identity aspiration model in the context of imprinting. Imprinting refers to how the context leaves a mark on objects. In Marquis and Tilcsik’s review (2013) of five decades worth of scholarship on imprinting, they break down the imprinting mechanism into sources of imprint (IS), and imprint destination (ID), or entities bearing the imprint. Imprint sources can come from entities external to the organization (e.g. economy, technology, institutions, and organizations) as well as internal factors (e.g. individuals such as the CEO or founder). A range of studies have shown that imprints tend to persist due to causes such as “traditionalizing forces, the vesting of interests, and the working out of ideologies” (Stinchcombe 1965: 169). Lastly, a premise of the imprinting research stream has been that the environment etches its mark on the organization. Therefore, the destination organization has little agency to influence the process (Marquis 2003). However, in cases where there are conflicting sources of influence, studies have found that the organization has agency to consciously and purposely engage in choosing one over other influence sources (Casciaro et al. 2014; Brennecke 2020). When traditional firms (i.e., 3-D organizations) are confronted with a change in the external source of influence that conflicts with its identity aspiration, it will adjust its internal aspirations to match the external imprint source. Therefore, we should expect 3-D organizations to imprint according to external market conditions and show signs of external imitation. On the other hand, we argue that deviant organizations weigh founder’s vision over rational aspirations. We argue that 4-D organizations are more likely to deviate given that they counterweigh external imprinting influences with organizational identity aspirations; thus, the 4-D organization will retain a consistent moral compass and less prone to conformity. Figure 7.3 illustrates the relationship and the various factors that influence imprint source’s infectiousness and imprint destination’s susceptibility.

Imprint Desnaon (ID)'s Aspiraons

•Raonal vs Identy Aspiraons

Fig. 7.3 Conceptual framework

Imprint Source (IS)

•External vs Internal Imprint Source

Imprint Outcomes

•3-D organizaons: External IS imitaon •4-D organizaons: Non-conformity

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7.2.3 External Sources of Imprinting In this section, we apply the theoretical framework to the current societal context. First, we focus on the arguments that have emphasized the strength of external environmental factors that influence the firm’s organizational structure. Scholars who take on this view emphasize the importance of the organization adapting flexibly to the environmental conditions. For instance, Miles et al (1978: 547) said: “Effective organizations carve out and maintain a viable market for their goods or services. Ineffective organizations fail this market-alignment task. Organizations also constantly modify and refine the mechanism by which they achieve their purposes-rearranging their structure of roles and relationships and their managerial process.” Given that successful organizations are those that successfully adjust to external imprinting sources, it follows that analyzing the key external drivers of change is important. A key external driver of change is the rise of Industry 4.0 and digital transformation (DX). Characteristic of this era is the rise of new digital technologies such as 5G, IoT, AI, 3D Printer, Cloud, driverless cars, making timely responses to all these changes increasingly important and challenging. We have already seen the disruption of many industries due to the technological revolution and consequently the rise in many job losses. It is crucial for top management to build organization strategy and effective structure to meet these rapid external technological changes and corresponding demands (Porter and Heppelmann 2015; Hong and Park 2014). According to Porter and Heppelmann (2015), IT strategists in the IoT Age should pay careful attention to emerging patterns of connected and complex products. For example, without communication technologies, information from distant locations could become inaccessible. Therefore, in response to such turbulent environmental changes, scholars have proposed various alternative structures such as Self-Managed Organization, TEAL and holocracy. Thus, external sources of imprinting in the era of digital transformation (DX) are consistent with the thermometer principle presented in Chap. 1.

7.2.4 Internal Sources of Imprinting Other scholars have identified factors within the organization such as Top Management Team (TMT) leadership, founder philosophy, and values to influence the organization’s structure and focus. The characteristic of scholars who take this position is their view that leaders should not change their philosophy lightly based on volatile external circumstances. For instance, Chin et al. (2012) encourage scholars to look at factors such as emotional intelligence and spiritual intelligence in nurturing creative and innovative enterprises with a clear guiding principle. Some scholars have explicitly looked at the founder’s spirituality as playing a definitive role in influencing the firm’s decision-making process (Dean et al 2003; Pascarella 1996; Richman 1992; Tischler et al 2007; Vilnai-Yavetz and Rafaeli 2003).

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For instance, King and Williamson (2005) measured employees’ desire to express their religiosity, and their job satisfaction against the organization’s acceptance of religious expression at work. Sanders et al (2005) studied employees’ assessments of leaders’ behaviors, the organization’s behaviors, and organizational commitment. Other scholars, while not using religion explicitly, have noted that all organizations should engage in “soul work” and understand the role of spirituality in community building (Mirvis 1997).

7.2.5 The Puzzle: When Does the Founder’s Imprint Prevail? As explicated in the above review, both the organizational structure and imprinting research streams talk about the external and internal factors that influence the firm’s structure. However, there is insufficient understanding on how these two factors interact to mold the firm’s architecture. Understanding this process is crucial especially in instances where the two sources are contradictory or competing. However, the distinction between the external environment and actors blurs when we realize that organizations are also part of the environment and shaping the environment as well (Weick 1995). From the latter’s perspective, the social constructivist lens is useful, as it shows that the entity serve as filters, making sense of the environment (Berger and Luckmann 1966; Gioia et al. 1994; Weick 1995). To illuminate this process, we ask the following questions: How does the founder of 4-D organizations imprint one’s moral compass unto the firm? When are these values informed and influenced by the environment, and when do they guide the firm to choose a path that is less sought after?

7.3 Methodology To address our research questions, we conducted an inductive qualitative study of a Korean entrepreneurial venture, nepes. nepes integrated the 4-D philosophy within the organizational architecture while managing the environmental turbulence spanning three decades (1990 to 2019). nepes’ example suggests that effective implementation of the 4-D organization is feasible. To answer our research questions and triangulate our findings, we collected archival data as well as interviews. Interviews were conducted through two separate meetings (total 8 hours) with the CEO and senior managers. Archival data included website, financial data, newspaper, published books and company’s magazines. Based on the analysis, we identified the three phases of change the firm underwent to become its current organizational structure.

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7.4 Case Results 7.4.1 Background of nepes Since 2001, nepes is a provider of bumping and wafer-level package Outsourced Semiconductor Assembly and Test (OSAT) manufacturing services in partnership with fabless and integrated design manufacturer (IDM) customers worldwide. The firm currently offers Total Flip Chip Package Solutions (Bump, Test and Wafer Level Package), Neuromorphic A.I Chip, Process Chemical/Functional Chemical, and Plasma, LED, Display, Functional Glass, Nano Products. nepes means “Eternal life” and “dynamic” in Hebrew. The founder envisioned to build a company with a long life-span that conducts business sustainably. To reach that end, the firm has established three pillars as the cornerstone of its business model: (1) creating employment; (2) pursuing firm growth and maturity through developing masterpieces; and (3) enhancing a culture of gratitude. These dimensions were established by the Chairman Lee from the onset of the firm’s establishment and have also served to guide the firm as it grew in size. In the following case, we will illustrate the process that the firm navigated and characteristics of the 4-D organization (Fig. 7.4).

Fig. 7.4 Direction of the 4-D organization at nepes

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7.4.2 Phases Phase 1: The Establishment of nepes nepes’ founder Byung-Koo Lee was previously the manager of LG Semiconductors’ Production Technical Center, but resigned in 1990 in order to establish nepes. nepes started off as a semiconductor package factory. The firm grew rapidly and within 3–4 years, it reaped 10 billion WON in sales and hired over 100 employees. However, in the same year, the HR manager pointed to the inconsistencies in nepes’ status as a SME and its corporate policies that were closer to what one would see in MNCs. This was because the CEO had adapted many of the routines he experienced during his time at LG Corporation, one of South Korea’s largest multinational conglomerate. Pondering over this feedback, the CEO purchased dozens of management-related books but none of them were a good fit for his firm’s needs. Instead of hiring a consultant, he remembered the church that he attended and how efficiently the church organized the tens of thousands of church members. Inspired by his religious identity, he decided to take the church system and incorporate it into his company. Thus, nepes’ 4-D organization was rooted in the CEO’s observations of a church’s organizational design. Phase 2: Exogenous Shock as an Impetus for Organizational Change The Financial crisis in 1997 and 2008 served as an important wake-up call that probed the founder to question whether his moral compass and the firm’s management system was sound. nepes, like many other companies during the 1997 financial crisis, lost large sums of money through failed investment in several business areas and was forced to reduce its workforce. The CEO recounted how painful it was to fire even a single employee. During the 2008 global financial crisis, nepes once again was in the red due to the global recession. Business orders for their component parts plummeted from 30 million units a month to less than 10 million, removing 200 out of the 380 job positions in the manufacturing department. The CEO had to consider laying off 200 employees and heard news of firms in their industry also having to fire 70 out of their 100 employees. However, the CEO did not feel that it was the right decision to fire the employees on the production line when it wasn’t their fault that the order volume fell. He decided that “We can’t fire those who are not to blame.” So instead of firing them, he re-educated the employees. Due to the lower production volume, the staff had more time to learn. While the CEO took the risk of bearing the cost of the education, the subsequent results bore great fruit. Before the training, the employees were specialized in one or two tasks, but after the re-education, they became multi-tasking players who could manage a diversified range of work in adjacent fields. The re-training investment decision illustrates an outgrowth of the 4-D organization’s value in treating each employee as a life given from God. nepes prioritizes each employee and believes that it is the firm’s mission to educate the employee to maximize individuals’ ability to contribute to society. The CEO pointed out, “People

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are designed to work, and as beings designed to attain happiness through work, the absence of work also denies the potential value of the individual. Hence, I believe the firm plays a role in completing an individual’s education that began as an infant in the home by parents. Job creation also enables the development of the nation.” Phase 3: Overcoming Exogenous Shocks and Growing Resilient Through Them Supported by its 4-D organizational architecture, nepes’ CEO views industry 4.0 in the era of digital transformation (DX) as an opportunity rather than a threat. The essence of nepes’ philosophy is that the heart is a muscle, and therefore should be trained. He claimed that in the modern business environment, there is extreme stress in the workplace because the employees are required to adapt endlessly to change. Other stress factors such as an uncertain future and fierce competition add to sources of frustration, fear, and anxiety. In such a climate, there is greater likelihood that the individual’s wellbeing will deteriorate and have downstream consequences on immersion in tasks at work as well as passion towards the company. In response to the physical and mental consequences that Industrial 4.0 can have on employees, nepes implemented meditation and WellBeing Program as coping mechanisms for employees. The CEO believed that the core differentiating factor of individuals who thrive despite uncertain external circumstances is whether they have psychological recovery “elasticity” or “resilience”. Such resilience allows one to view a slump period in life as an opportunity for growth (Lazarus 1993; Tugade and Fredrickson 2004). The CEO likened resilience to having strong muscles for runners, helping them to run for a long time. Applying the same logic to a person’s heart, he believed that firms with resilient employees are more likely to be resilient in an economic crisis. Incorporating this philosophy into their 4-D organization model, nepes created a “3–3–7” organizational culture for employees to train their heart muscle on a daily basis (Fig. 7.5): In order to inculcate a 3–3–7 culture, nepes incorporates the four aspects in its business routines. Below, we focus on two aspects to show how the values are embedded into the firm’s routines and leak into the culture. First, each morning, music is played at the office for 30 minutes. If you add this up, 30 minutes per day is 150 minutes a

3-3-7 model

Share 3 or more good things with colleagues daily. Sing more than 3 songs daily. Read a book for more than 30 minutes daily. Write 7 or more thank you leƩers daily.

Fig. 7.5 3–3–7 model

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week, multiplied by 40 weeks a year, and totals up to 6000 minutes invested in music. nepes believes that music helps employees forget all the distractions that happened before or during commute and allows them to be immersed in work. In order to make music also a source of excitement, the firm organizes various music-related events. Some examples include the New Year’s Song Festival where they invite professional musicians so that employees can appreciate high quality music performances. They also organize Thank You Relays where individuals can send songs to people who they want to thank. They even created an in-house choir where employees practice and sing songs for company-wide events such as the New Year’s celebration. The CEO stated that because a song is words with a rhythm, when employees sing the lyrics together it helps to improve communication and cohesion amongst the employees. In our interview with many employees, they also shared how the music bonding events have had a tangible influence on their motivation and performance at work. Another important guiding principle at nepes is gratitude. During the new recruits’ onboarding process, they are asked to write a list of 100 reasons they are thankful. The company continues to train and remind employees on gratitude using the nepes company newsletter (called Superstar) as an avenue. Superstar is issued bimonthly and always includes a thank-you letter sent to family members and a thank-you letter relay amongst colleagues. Furthermore, through their “Magic Notebook Application” system, employees can easily send thank-you letters to their colleagues, seniors and juniors. As evident from the above two examples, through a series of programs outside of their work, employees have been trained in soft skills that have indirectly contributed to the firm’s productivity and sales. nepes’ growth curve has been upward sloping for 28 years. This is an amazing feat as a typical firm’s growth curve will spike for a few years before plateauing or falling within a 15-year span.

7.4.3 Key Ingredients to Empower Employees Below, we detail specific organizational routines at nepes that are an overflow of their moral compass centered. As a result, these routines have created an empowering organizational culture.

7.4.3.1

From Leadership to Un-leadership

nepes emphasizes un-leadership over leadership. Un-leadership philosophy refers to their emphasis on operating the business to minimize central interference and control. nepes introduced a plan to increase autonomy, whereby officers and group heads do not hand work orders or receive reports. Instead, the practitioners are given the responsibility to take charge of their work, and the section manager and the deputy serve as a Mentor to make sure that the business plan is aligned with the values of the

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firm. As a result, nepes employee’s satisfaction-level has been continuously rising and is currently higher than that of South Korea’s large MNCs.

7.4.3.2

An Organization that Recognizes Human Values

The management of nepes assumes that every employee is “a person who can make wise decisions.” The nepes’ management’s expectations for every employee are founded on these four mission statements: (1) a creator designed and born to work; (2) a happiness propagator living a life full of vitality, joy, and happiness; (3) a person with a mission to do good work in the world, manifesting infinite potential; (4) someone who appreciates the existence of people and the surrounding environment. Such beliefs have trickled throughout the organization and employees have commented in surveys that their sense of pride has grown because they feel that the company respects and recognizes them. Building on this self-confidence, employees have become more positive, honest, flexible and responsible. In addition, greater sense of stability resulted in increased creativity and sensitivity towards others.

7.4.3.3

You Are My Superstar

In nepes, they even change how they call their employees. Instead of using standard prefixes such as Mr. or Mrs., they greet each other as a Superstar. Even employees of the lowest rank are called superstars to emphasize their precious presence. Four implications from this unconventional policy are the following: (1) the employees deserve trust and respect, (2) should serve and be served, (3) should cooperate, and (4) increase a sense of belonging in the community.

7.4.3.4

Only One is Better Than Number One

nepes’ entrepreneurial vision comes from the words of Korean writer Lee O Young, who famously said, “Become Only One, not Number One.” They believe that individuals have different abilities as part of the larger ecosystem. When all the parts come together as one, they constitute the whole body. The founder believes that individuals have their own core competence. When each unique individual is empowered, they can form a mutually complementary and healthy dependency with their colleagues. The tasks assigned to them are the jobs that are most appropriate for them, and when their responsibilities are fulfilled, the community and the company can prosper. nepes uses these criteria to evaluate staff in terms of fulfillment of responsibility, cooperation and community spirit. Notably, nepes’ philosophy towards each employee captures the essence of our talent principle that we proposed in Chap. 1. Upholding this vision to “Become Only One”, nepes has prioritized cultivating a unique identity rather than competing to become the best in the field. To create

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a niche, they have chosen to venture into challenging roads that have been avoided by other firms. Owing to this “go-getter” spirit, the company has been contributing to the development of the IT component materials industry in South Korea. In a market relied on imports, nepes changed the market by domestically producing core electronic materials for semiconductors and displays. Their entrepreneurial spirit has become the source of the firm’s constant innovation. For instance, nepes became the only firm in Korea to commercialize the FOWLP (Fan-Out Wafer Level Package) and also the first in the world to commercialize a state-of-the-art semiconductor package PLP. In addition, the company became the first in the industry to mass-produce the “Neuromorphic Chip” that imitates the human brain.

7.4.3.5

A New Paradigm for Competition

nepes also highly values natural resource. They believe that a firm’s competitive is its ability to provide products and services that conserve resources and more energy efficient than other firms. By focusing on minimizing resource usage, more natural materials can be used by other firms and the subsequent generations. In order to use less resources, the founder believes that the employees should burn in passion for life and strive to explore for better solutions. Such mindset allows employees to retain a humane spirit while being creatively competitive. In the era of digital transformation (DX), boundaries in each field often disappear and fuse to create new value. Therefore, cooperation becomes a more important skill than competition. Chairman Lee seeks to create synergy by continually planting the perception that the firm is one, without fostering unhealthy competition between teams and staff within the organization.

7.4.3.6

Collaboration is an Essential Survival Strategy: N-Family’s 10 Codes of Conduct

In order to create an atmosphere of collaboration and helpfulness, the President Lee created the Code of Conduct 10 Commandments. Here, there are a variety of codes of conduct, such as how to report within the company, how to write work, and how to speak. Notably, in the firm’s personnel system, employees’ collaborative abilities constitute 70% of the evaluation ratings (Fig. 7.6).

7.4.3.7

N-Sharing Seed Fund for Community Development

nepes launched a fund called “Sharing Seed” since 2009 and has been using it to express gratitude to the community. Sharing Seed serves as a matching fund, where employees voluntarily raise money and the company matches that amount in order to donate for a local cause. Critically, the employees self-organize these fundraising

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1. Let's share honestly. N family code of 2. Work in a humble, humble, and humble a tude. conduct 10 commandments 3. Let's process other departments' requests before my work. 4. I will choose to be the one that suffers at the moment of choice. 5. Let's work together instead of working alone. 6. Let's balance work breaks. 7. Input good things to customers and colleagues. 8. Let's talk with gra tude. 9. Sing and always work with joy. 10. Meet great minds by reading. Fig. 7.6 N family code of conduct

activities. Therefore, CSR activities at nepes are driven by actual needs, and are highly in touch with local needs. Therefore, employees are excited to engage in these prosocial activities and the public are unlikely to view CSR as insincere or hypocritical. The fund has been extremely popular, to the point where 80% of employees participate in it. Every year, employees are designing a wide variety of activities, such as visits to the nursing homes, mentoring students from low socioeconomic status households and children with disabilities, donating books, delivering briquettes and kimchi.

7.4.3.8

A Warm Word to Move Staffs

nepes bans the use of bad language and encourages employees to use positive and warm words. They even encourage them to practice it not only in the company, but also in their personal lives. For example, they discourage employees from using the word “problem” and instead ask them to use the phrase “OFI (Opportunity for improvement)”. The firm also hosts regular workshops on positive language and coaches employees to teach how to engage in emotion-based dialogue. Officials are also asked to positively frame their message, which has served as a catalysis for greater emotion management and communication skills. In order to provide specific templates, the company has also selected the ten most frequently used words in the company and provided more positive alternative ways to communicate the same message.

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Importance of Middle-Up-Down Decision Making: New Business Plan Writing Method

nepes has also changed its decision-making protocols to one they call “Middle-UpDown” decisions. While in the past, they adopted the common traditional hierarchical Top-Down method where executives set strategic goals on sales and profits and issues to achieve them. However, nepes changed their decision-making flow so that it begins with employees in each business unit who define their own annual targets, which will then be used as a basis to generate sales and profits. For example, in the case of the Semiconductor Business Department, each department sets goals and targets for next year in terms of occupancy rate, productivity, cost reduction, etc., and derives strategic issues on how to improve. In the case of other technical departments, the new technology and new product development goals to be set next year are also set, and they discuss when and how new technologies and products can be realized as sales and profits. The main goal of Middle-Up-Down decision-making model is to incorporate staff members’ spontaneous ideas and feedback into the business plan. Once the primary business plan with all employees has been created, a secondary business plan workshop will be conducted to add goals and awareness to this plan, and the final business plan will be finalized. Managers do not make an authoritative decision; instead the whole team is united and plays a major role in the process of determining the future direction of the company.

7.4.3.10

The Secret of True Sustainable Growth

In addition to nepes’ strong application of the talent principle to guide its philosophy, it has also applied the thermometer principle in idea-generation meetings. In the beginning of each month, nepes holds a meeting called “Management Change Production Room”. At the company training institute, all staff members meet to announce and discuss current market and competitor trends. Employees from all ranks are encouraged to ask questions during the meeting. To prepare for the meeting, employees actively interact with overseas companies and research institutes and contribute ideas that further advance existing processes or discover and launch new business ideas. The production room meeting proved to be a fertile ground for innovation. It was during the first Management Change Production Room meeting that they generated the idea which led to successfully mass-producing the world’s first artificial intelligence semiconductor chip.

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7.5 Comparison of Self-management Organizational Structures Finally, in this section we compare three firms with different organizational structures. We also show that 4-D organizations are superior in terms of their ability to embed CSR into the core business model.

7.5.1 Holacracy: Zappos Zappos is a Las Vegas-based (Nevada, USA) online retailer of shoes, medical products, and accessories in USA and Canada. Its online sales volume of shoes is the largest in USA. In 1999, Tony Hsieh and others founded the company with initial investments and as of November 2009, it was valued at 1.2 billion and acquired by Amazon. Zappos describes itself as a “customer service firm specializing in shoes sale” and takes customer service as the highest priority. In 2007, US Retail Customers Association listed Zappos as the 2nd highest firm in terms of customer service exceeding two legendary firms—Nordstrom and Amazon.com. Starting from 2009, it is also included as one of “100 Most Desirable Firms to Work For” by Fortune. Zappos’ ecosystem is unique for its sustainable IoT ecosystem that utilizes ICT. Instead of the hierarchical command-and-control organization, Zappos is selfmanagement driven and decision-making authority is not based on positions but by role functions. Its circular hierarchy is delineated by the mission and purpose and is also further divided into additional details for carrying out complex work requirements. Each smaller circle depends on one another to fulfill its goals and mission. The interdependencies between the small circles have positive spillover effects on the larger circles (Bernstein et al. 2016). In a traditional company where workers are pigeonholed into a single type of task, it is easier to let the market dynamics sort decisions that need to be made (Bernstein and Bunch 2016). However, in the modern IoT era, self-managed organizations are becoming more prevalent, which require members to work more proactively and make decisions about what their own roles stand for. Zappos’ holacracy proved effective in adapting to external shifts. Zappos is a company which is famous for being irreverent, deviant, and customer-centered. When the firm was acquired by Amazon, many feared that Zappos would lose its culture. Yet Zappos has retained its core culture and its resilience is attributed to the firm’s organizational structure (Bernstein and Bunch 2016).

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7.5.2 TEAL Organization: FAVI FAVI is a French metal parts manufacturer with 500 employees. Jean François Zobrist, who was appointed CEO in 1983, has implemented the TEAL model to transform the “extremely hierarchical factory premised on domination” that has continued since the 1950s. Despite the increasing lure of offshoring given the lower labor costs in China, FAVI has chosen to retain their production base in northwestern France. Their decision has paid off, as they are growing rapidly and achieving the combined benefits of high quality performance and customer satisfaction. First, in terms of FAVI’s self-management structure, it places a high degree of trust in its employees. They organize at a team-level that they call “a mini factory” consisting of 15 to 35 members, who work autonomously according to psychological rhythms. This is a deviant move given that the prevalent management system at the time used time cards to sanction those who don’t follow the regulations. Employees are also given a great degree of autonomy. For instance, the sales team doesn’t have a minimum quota they need to meet. Employees are given permission to make costly bulk purchases at their sole discretion, and they negotiate with banks and suppliers without asking their supervisors. The firm also resists laying-off employees even during crisis such as when they experienced a sharp decline in orders during the Gulf War. Under financial strain, FAVI has explicitly stated that employee lay-offs is the last resort. Instead, the employees generated creative ideas and made concessions, ultimately managing to overcome challenging external circumstances. Second, in terms of holistic employee wellbeing, FAVI’s CEO believes that without a sense of happiness, employees cannot be motivated to achieve superior performance and create value on site. To cultivate the sense of joy, in the beginning of every meeting, FAVI has routinized expressing gratitude and blessing every member for their recent work. Third, FAVI’s evolutionary purpose is locally oriented. The firm’s main mission is to create employment in the Arancourt region. FAVI is also customer-driven and seeks to deliver love to customers. During the probationary period before newcomers’ employment is determined, the firm checks whether the employee fits the organization’s purpose. Based on the FAVI case, we see that the TEAL organizing method has been effective and helped cultivate an organizational culture that is employee and customer centered.

7.5.3 4-D Organization: nepes nepes’ 4-D organizational system created a community centered on life-giving, and its effectiveness has been proven in the employee ratings and financial performance. The satisfaction of nepes staff exceeded the satisfaction of those in South Korea’s top10 largest firms. In 2017, while the average engagement level in job tasks of Korean

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enterprises was 67.17%, nepes was 71.32%, according to the survey conducted by Korea Association for the Promotion of Cooperation. nepes exhibits 4-D management by pursuing employees’ higher quality of life and happiness above the firm’s short-term profits. The CEO is convinced that this management style allows the organization to be firmly rooted in an unwavering philosophy in the age of Industry 4.0 and digital transformation (DX) where external circumstances are shifting. In the future where Industry 4.0 accelerates, simple labor will be replaced by machines, and humans should instead pursue joy and happiness through engaging in meaningful work. nepes’ Chairman Lee pointed out that “practicing the fourth dimensional management strategy can create a life community that completes the very existence of a human being who pursues joy and happiness.” At nepes, the ultimate goal of a variety of non-work related activities, such as “first thoughts in the morning,” “music classroom,” and “writing a thank-you letter,” is to help employees work while retaining their sense of humor and positive mood. The CEO believes that for a company to grow, the culture must be full of positive talk and ideas. In order to create such an environment, they encourage employees to ask oneself uplifting questions as one wakes up in the morning, listen to songs, sing, and be in a pleasant state of mind (Luthans et al 2007). The management philosophy of nepes is to live a life of service, to take on challenges, and to be grateful. Passion is the cornerstone of overcoming challenging work. Despite the burden and fear of failure is great in challenging work, challenge coupled with passion excites employees and engenders intrinsic motivation. The 4-D management system does not only affect human resource management, but also nepes’ business strategy as well. When nepes chooses new business areas to invest in, it focuses on products that are genuinely needed by customers, even if they take longer to develop. Such customer-centric designs often lead nepes to select items that has not been developed before. As a result, nepes has become an innovator and numerous times as the first firm in Korea and the world to offer their products. For instance, nepes developed FOWLP, a state-of-the-art semiconductor packaging technology in 2010 and entered mass production eight years later in 2018. The CEO notes that the gratitude-oriented culture has reduced the turnover rate. In the past, the display department at nepes was in the process of restructuring its business products, and was in the red for years, and had a significantly higher turnover rate compared to the other more stable departments (about one employee retired a month). When the CEO noted that one of the key causes was the tenuous cooperative relationship between the development and the manufacturing units in the Display department. Requests for samples from the development unit were often ignored by the manufacturing units and even meeting requests were ignored. On the other hand, the manufacturing unit complained that it would be difficult to match the production volume demands that the development units demanded. The division managers then realized that they were not grateful for each other. Therefore, they sent the members of the development unit to the factory floor so that they could directly see and understand how busy the workers in the manufacturing unit were. This first-hand exposure allowed them to appreciate the efforts of the manufacturing unit, and the manufacturing unit members were moved to see their colleagues in

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the development unit come directly to the factory floor to try to understand their work. Attempts to understand each other have changed the situation, resulting in a turnover rate close to 0%. In nepes, they regularly conduct two types of workshops to solicit future goals and intentions. When a one-year business plan and sales targets are released, a first workshop is held to explain and propose the goals of the plan. Then, once the staff members are familiar with the company’s goals, the next step is to raise awareness in the second workshop. Here the employees will learn what each company’s goals mean, why they should be achieved, and what these goals mean during the company’s growth phase. These various interventions have substantiated that 4-D organizational structure does have performance implications and help a firm to adapt to a turbulent environment.

7.6 Conclusion The implications of the cases on nepes, Zappos, and FAVI suggest that traditional hierarchical structures may be the default but they may not necessarily be the optimal way to create a workforce that is entrepreneurial and socially responsible. Rather, proper development of highly collaborative and accountable work culture is crucial for successful implementation of 4 dimensional organizations (Nidumolu et al. 2014; Elsbach et al. 2015; Bernstein et al. 2016). Such work culture requires responsible management at both individual and team levels (Drucker 2005; Kaplan 2008). Furthermore, these more flexible and empowering organizational structures motivate aspiring young leaders to use their talents and creative energy to develop themselves and the organization (Peters and Benson 1978; Ciampa 2005; Ibarra and Lineback 2005; Schwartz 2007). We set out to explore how a firm manages competing sources of imprinting. Importantly, while holacracy and Teal organizations do show agility and humane philosophies, only 4-D organizations provided the moral compass that helped guide the firm to make challenging decisions during crises. We showed that in the case of nepes, the founder’s strong moral compass was modelled after a religious worldview and served as the CEO’s consistent guide. Eventually the internal and invisible structure of this moral compass permeated and flowed into the firm’s visible structures such as routines, policies, and employees’ wellbeing. Notwithstanding the contributions, our study has limitations which offer possibilities for future research. First, we explored a firm’s internal dynamics from the standpoint of the CEO. We did not explore how external stakeholders reacted to such policies. We encourage scholars to explore how external stakeholders such as competitors can seek to influence them, and how focal firms can react. Finally, our study focused on one firm’s process of overcoming competing forms of imprinting. This served to open the blackbox but we acknowledge that other firms of different sizes in different industries might undergo different processes. We would encourage additional research which explored this question further.

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Chapter 8

Looking Ahead: The Future of CSR Strategy

Overview • The majority of this book has focused on small firms that are often hidden from the public. • We end with highlighting entrepreneurs who are socially-oriented and in the midst of developing their business and dreams in their respective spaces. • We highlight the future of CSR in this covid-19 era. It should no longer be just about typical “corporate social responsibility” where the “responsibility” connotes a small under-funded team—now it should be about every single person in a business taking responsibility to make a difference in everything they do, at work and in their personal lives (Richard Branson).

8.1 Talent and Thermometer Principle Meets the Digital Transformation (DX) Era The chief goal of this book has been to provide a playbook for small entrepreneurial ventures who are also socially conscious. As eloquently phrased by Richard Branson, CSR is a personal responsibility for every employee within the organization. We have attempted to construct a framework to navigate such a new world through the talent principle. Namely, this is the idea that each individual has a unique talent that needs to remain the core of the firm’s business and CSR activities. However, the Talent and Thermometer principle are not limited to social entrepreneurs. They can serve as a blueprint for any firm interested in connecting and integrating their social and innovative needs to achieve a sustainable business model. Particularly in this era of constantly shifting environmental demands, all firms need to develop strategies to gain reputation using the Thermometer Principle. The Talent and Thermometer, in conjunction with digital tools, provide exciting opportunities for firms to develop a socially beneficial business. © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 Y. W. Park and Y. J. Park, Corporate Social Responsibility and Entrepreneurship for Sustainability, https://doi.org/10.1007/978-981-16-3460-4_8

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We end this book by introducing cases of firms that have successfully bridged CSR and entrepreneurship in the era of DX. We believe that the development of advanced technologies offers new opportunities for the rise in entrepreneurship because it provides tools for socially conscious individuals who were previously constrained as they did not have the means to tackle the issues. DX technologies such as AI and IoT are expected to contribute significantly to perceiving, predicting, and prototyping current business trends and build a more resilient venture.

8.2 Cases of Entrepreneurs Leveraging on CSR for Sustainability 8.2.1 Dely with Kurashiru: Solving the Global “Digital Divide in Food” Using Videos Dely was founded in 2014 while Yusuke Horie was still a student at Keio University in Japan. Dely is most widely known for Kurashiru, the video-centric culinary media that it launched in 2016. Kurashiru has since been downloaded 18 million times and is one of Japan’s top-three recipe and cooking apps in terms of daily downloads. As of 2019, they post, on average, 50 videos a day. All of these videos are original recipes by chefs and dieticians. The firm’s value proposition can be summarized by the following slogan: “Make your life delicious and warm” and Dely aims to introduce recipes that anyone can use to cook easily. Its main users are women in their 20s to 40s. Compared to other recipe apps, Kurashiru is geared towards beginners in cooking. Indeed, a large percentage of users are those who visit the website after scrolling through Instagram, drawn to the slick videos. As of 2021 in the midst of the covid-19 pandemic, the app has gained traction as more people are stuck at home and created an environment motivating even novices to try cooking. Dely is attractive because of the sheer range of recipes (they have a diverse range of over 40,000 videos), brevity (each video is only a few minutes long), and clear process (unlike traditional cookbooks that fail to capture the actual process of cooking, Dely’s videos succintly capture the motion and process of cooking). Such an enormous assortment of videos are original recipes that professional cooks hired by kurashiru developed and the nutrition of each menu is checked by the company’s dietitians. After the recipe is corroborated by expert chefs and dieticians, the firm shoot approximately 60 recipe videos every day in kurashiru’s kitchen studio. Despite the firm’s current notable performance, it underwent considerable challenges searching for the right business model. Ultimately, Horie honed the firm’s business model through balancing the talent and thermometer principle. Dely initially began as a food delivery business in Tokyo. They received funding from Anri. However, after Horie assessed the future for delivery services to be difficult, Dely withdrew from this service in January 2015. After exploring, in February of 2016

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the firm pivoted to video curation media, which became the model for their current business. While the firm searched and experimented in search of the best business model, the unifying thread amongst the iterations of the firm’s business model was its sociallyoriented motivations. The founder’s passion for entrepreneurship rose out of his experience volunteering during the aftermath of the Great East Japan Earthquake on March 11, 2011. When he saw the horror of the disaster, he said that he had never felt such a deep sense of his own powerlessness. He wanted to create a business to revive this country and empower many who were hurt from the catastrophe. In addition to his desire to make a positive difference, he was inspired when he read news that SoftBank’s Masayoshi Son donated 10 billion yen to social causes. He realized then that “Manager can do such a thing!” and grew in passion to become an entrepreneur to have the power to make a significant impact. Such a broad childhood dream materialized in 2014 when he began searching for a business area where he could deliver the most frequent bursts of happiness to customers. That was how his business ended up focusing on the food industry where people eat three meals a day to survive. Through his business, Horie hopes to decrease the large divide with regards to people’s understanding of cuisines from different cultures. Furthermore, they hope to increase cultural understanding through using a video platform that surpasses language barriers and share information about food and cultures globally.

8.2.2 Stellapps: Tackling Poverty Through Digitizing the Agri-Dairy Supply Chain In this section, we also highlight startups that are growing steadily as the logic surrounding venture capital and entrepreneurship is changing. These startups have latched on ending poverty issues that have been overlooked in society, inventing new business models to create a sustainable firm. The First Sustainable Development Goal (SDG) is to end poverty in all its forms everywhere. Its objectives include ensuring that the entire population and especially the poorest and most vulnerable have equal rights to economic resources, access to basic services, property and land control, natural resources and new technologies. Stellapps is a firm that has contributed to the eradication of poverty through digitizing the Agri-Dairy supply chain in emerging markets. The dairy sector is important when discussing solutions to poverty because milk in developing economies serve as an important means to provide nutrition support, reduce rural poverty, inequity, ensure food security for millions of rural households, and enhance economic growth. Despite the large amount of production and economic importance, there has been a lack of technology interventions in this industry, especially in emerging markets where the yield per animal is low, traceability is inadequate, and quality is suboptimal. In India, dairy farmers have been struggling with

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poverty because of low productivity. There are 76 million dairy farmers in India. Nearly 70% of them are small businesses that own only 2 to 3 cows. In such communities, it is hard to expect development unless the income increases. However, the average age of the farmers is now around 60, and the younger generation are leaving these rural towns to avoid hard labor. In response to these systemic drivers of poverty, Stellapps created a business that utilized the Internet of Things (IoT) to improve the quality of its milk and raise prices. This firm developed a unique device to attach to dairy cows. By recording the biometric data of each animal, the team was able to detect the optimal timing of reproduction and signs of disease based on body temperature and physical activity. Productivity has improved so dramatically that 1.7 million dairy farmers in 24,000 villages are using the company’s devices. Stellaps is an innovative startup in India working towards the digitization of the dairy supply chain. Founded in the year 2011 by Ranjith Mukundan, the startup is based in Bangalore, an IoT business with a primary focus on data acquisition and machine learning. The firm is an IIT-Madras incubated company founded by a group of IITians and technologists with a strong industry background with over 18 years of Industry experience across well-established firms such as Wipro, Nortel, Ericsson, Alcatel-Lucent, AT&T, Vodafone, Telstra, Bharti-Airtel, Aircel, Avaya, and Cisco. Stellaps digitizes and optimizes milk production, milk procurement and coldchain management through SmartMoo™ platform (Full Stack IoT solution). Its services help dairy farmers and cooperatives maximize profits while minimizing effort. Currently, the SmartMoo™ platform & suite of apps manage over two billion liters of milk annually. SmartMoo™ IoT Platform is the first initiative taken towards providing measurable data for cattle insurance, quantifying value for all stakeholders including farmers. Stellapps’ SmartMoo™ IoT platform stores data via sensors that are embedded in milking systems, animal wearables, milk chilling equipment, and milk procurement peripherals. In addition to the platform service, the SmartMoo™ Cloud supports the management of data arising out of tens of millions of liters of milk through the milk production, procurement and cold chain flow across millions of farmers. The acquired data is transmitted to the Stellapps SmartMoo™ Big Data Cloud Service Delivery Platform (SDP) where the Stellapps SmartMoo™ suite of applications analyze and crunch the received data before forwarding the analytics and data science outcome to various stakeholders over low-end and smart mobile devices. The patent-pending hardware and software is designed to scale horizontally across other industry verticals. As a result of the firm’s business, the firm has increased the efficiency of the collection center of raw milk. The system also measures the fat and sugar content of raw milk and automatically sets appropriate prices. As a result, dairy farmers are incentivized to increase their income by producing high quality raw milk. In addition to the collection centers, Stellapps’ accumulated data provided information of each dairy farmer’s management ability and the asset value of the dairy cattle. As a result, various peripheral services, such as the provision of loans and insurance services from financial institutions, have been deployed through their reliable data-driven methods.

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We highlight the role of the founder Ravishankar G. Sirol’s passion for poverty alleviation in creating a business that revolutionized India’s diary sector. This case illustrates the potential one socially-motivated and innovative startup can have on revamping an entire process in an malfunctioning industry, from dairy farming to dairy processing, with IoT connectivity for everything. As a result of the Stellaps’ service, small dairy farmers, who previously made only about $10 a month, can now make about $150 a month. “Some dairymen make 1000 dollars a month.” says co-founder Ravishankar G. Sirol. Stellaps sheds light on how creative attempts to tackle dysfunctional social systems can result in significant breakthroughs that result in creating a profitable and sustainable business model.

8.3 CSR and “Analog” Emotion in the Era of Digital Transformation In March 2016, history was made when a 18-time world champion 9th dan Go player was defeated by an artificial intelligence AlphaGo, a computer Go program developed by Google DeepMind. AlphaGo versus Lee Sedol, also known as the Google DeepMind Challenge Match, was a five-game Go match played in Seoul, South Korea. Strikingly, AlphaGo won all but the fourth game. This match has sparked a surge in interest in artificial intelligence (AI), a wide-ranging branch of computer science concerned with building smart machines capable of performing tasks that typically require human intelligence, including comprehension of languages, reasoning, and problem solving. AI has the potential to affect a wide range of human life. Transportation is one domain that has undergone drastic changes because of AI. In February 2016, US regulators said they would consider the AI in Google’s selfdriving cars to be a federal driver. AI is no longer an issue limited to technology, but also a legal and institutional issue. Self-driving cars will most likely fundamentally change our lives. For example, in the past, people were always responsible for driving their cars, but through the emergence of self-driving cars, the presence of a driver is not essential and people can do other jobs while in the car. As a result, the value of cars will also likely shift, and services such as car sharing, which have not made much progress due to restrictions on manned drivers, can be expected to become more active in the near future. In addition, self-driving cars will eliminate the need for driver licenses and significantly reduce the number of deaths from drunk driving and other unfortunate accidents. But can computers replace humans? You might imagine a machine acting like a human, but it is unlikely that it can resemble people completely. As is evident from the AlphaGo versus Lee Sedol match, computers may already be approaching or surpassing human intelligence. Yet high intelligence alone without encompassing the rich world of human emotions will not be able to recreate people. The irreducibility of human emotions may be best illustrated in the movie Equilibrium (2002). The movie is set in the future, where a regime has eliminated war by suppressing emotions:

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books, art and music are strictly forbidden and feeling is a crime punishable by death. Clerick John Preston is a top-ranking government agent responsible for destroying those who resist these rules. When Preston, who has been trained to enforce strict laws of the new regime, misses a dose of a mind-altering drug that hinders emotion, he suddenly becomes someone able to overthrow the regime. The movie depicts in depth the difficulty of eliminating human emotions. Furthermore, medicine and technology may be able to temporarily suppress such emotions but cannot replace them. Advances in computer technology such as artificial intelligence (i.e. digital world) will continue, but it is unlikely to reach the rich sensitivity (i.e. analog world) that is the essential value of human beings. As we mentioned before, the Talent and Thermometer Principles, in conjunction with digital tools such as AI, provide exciting opportunities for mankind to live a full and meaningful life.

8.4 CSR Strategy in the Post COVID-19 Era 2020 has presented novel challenges for CSR and corporate executives, and the nature of these challenges continue to evolve. During a time of widespread suffering and grief due to a global pandemic, economic recession, and systemic racism, corporate leaders are facing the daunting challenge of figuring out whether and how their corporate social impact strategy should evolve. In the midst of the disruptions and uncertainty, one thing that has become clear is that we are seeing the emergence of a new normal of what constitutes business. This new normal encompasses the following three factors that elevate the importance of CSR: First, the relationship between society and business is evolving. The public is increasingly demanding firms to care about societal needs and carry the weight of disadvantaged individuals in society. For example, we saw that companies that responded inadequately to the adverse consequences of covid-19 (such as Yelp and GoFundMe) were quickly identified by the public and pressured to change. The seeds of this shift in CSR expectations preceded the covid-19 pandemic, however. Carroll (2015) noted the intensification of the public’s scrutiny towards businesses is his manuscript published prior to the pandemic. He foresaw the future of CSR research as the following: an increase in stakeholder engagement, prevalence and power of ethically sensitive consumers, the increase in power of social and nongovernmental organizations (NGOs), employees as a driving force of CSR, and increase in CSR activity up, down, and across the global supply chain. While he was anticipating gradual changes, the pandemic has accelerated and intensified the rate of these changes. Second, CSR departments have proven their value to communities, employees, and the company. A silver-lining amidst the pandemic was that we saw many firm’s innovative CSR activities in response to economic recession. Through many firms’ responses to the pandemic, they highlighted the importance of the Talent and Thermometer Principle working in unison. Through the thermometer principle, they

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quickly assessed the public’s needs. After identifying specific societal issues, they utilized their core business (i.e. talent) in ways that helped society as a whole through this crisis. For example, Amazon created a $3Billion fund for small businesses near their office buildings to support them. But they went further by reorganizing warehouses to prioritize deliveries of essential goods and sourcing face masks for essential employees and Personal Protective Equipment (PPE) for healthcare workers. Microsoft’s CSR programs included collaborating with telehealth software and data projects to better track covid-19. Refusing to lay off workers, Cargill paid workers and suppliers wages and set up its own crisis support. In doing so, it enabled the company to sustain its participation as a critical player in the global food system, while building loyalty with communities and partners around the world. While these firms’ CSR initiatives may have increased their costs in the short-term, their CSR strategies are in fact strategic, for they are aware that investing in societal sustainability will eventually lead to corporate sustainability. Third, CSR serves as the resource buffer that all firms need in this time filled with volatility, uncertainty, complexity, and ambiguity. One thing the turbulence during the covid-19 pandemic illustrates is the value of maintaining a margin for error that allows the firm to improvise according to the situation. CSR department can serve as the firm’s risk alleviation and management function. Specifically, firms can adopt certain CSR activities that will increase the firm’s adaptability to exogenous shocks, such as smart technologies. At the same time, these firms should embrace a flexible and compatible workplace through introducing special programs such as working from home. At the end of the day, we cannot predict what the next form of CSR will look like, as particular CSR trends are highly contingent on the societal needs in the moment. But we are confident that the Talent and Thermometer Principle will serve as useful tools to anchor one’s focus on the firm’s core competence—and assessing the societal temperature, and tuning the CSR activity at the intersection of both. Lastly, we end with a quote by Lars Rebien Sørensen, the CEO of Novo Nordisk and recently named the “Best-Performing CEO of the World” by Harvard Business Review: “corporate social responsibility is nothing but maximizing the value of your company over a long period of time, because in the long term, social and environmental issues become financial issues” (Ignatius and McGinn 2015; Flammer et al. 2019).

References Carroll, A. B. (2015). Corporate social responsibility: The centerpiece of competing and complementary frameworks. Organizational dynamics. Dely Home Page (dely.jp). Flammer, C., Hong, B., & Minor, D. (2019). Corporate governance and the rise of integrating corporate social responsibility criteria in executive compensation: Effectiveness and implications for firm outcomes. Strategic Management Journal, 40(7), 1097–1122.

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Ignatius, A., & McGinn, D. (2015). Lars Sorensen in what propelled him to the top’. Harvard Business Review, 60–63. Stellapps Home Page (www.stellapps.com).