Socially Responsible International Business: Critical Issues and the Way Forward 1788114116, 9781788114110

Table of contents :
Contents
Contributors
Preface
Introduction
PART I Overview of research on socially responsible international business
1. Socially responsible international business: review, synthesis, and directions
1.1 INTRODUCTION
1.2 REVIEW APPROACH
1.3 MAJOR CONTRIBUTING JOURNALS, PROLIFIC AUTHORS, AND KEY ARTICLES
1.4 PROFILES OF STUDIES
1.5 KEY THEMATIC AREAS
1.6 CONCLUSIONS, IMPLICATIONS, AND FUTURE DIRECTIONS
REFERENCES
2. An overview of social responsibility dimensions in international business
2.1 INTRODUCTION
2.2 METHODOLOGY
2.3 FINDINGS
2.4 CONCLUDING REMARKS
NOTES
REFERENCES
APPENDIX: SEARCH TERMS
PART II Institutional environment and socially responsible international business
PART III Customer reactions to socially responsible international business
PART IV Social responsibility issues in foreign market targeting
PART V Designing and implementing socially responsible international business strategies
PART VI Special issues in socially responsible international business
3. Trade-offs and institutional contradictions in formulating responsible international business strategies
3.1 INTRODUCTION
3.2 APPROACHES TO CORPORATE SOCIAL RESPONSIBILITY (CSR)
3.3 TRADE-OFFS IN FORMULATING RESPONSIBLE STRATEGIES
3.4 INSTITUTIONAL PERSPECTIVES OF MNEs AND INSTITUTIONAL CONTRADICTIONS
3.5 CONCLUDING THOUGHTS FOR CONCEPTUALIZATION AND PRACTICE
ACKNOWLEDGMENT
REFERENCES
4. Institutional drivers of stakeholder engagement and legitmacy of Chinese MNEs
4.1 INTRODUCTION
4.2 LITERATURE REVIEW
4.3 METHOD
4.4 CASE STUDIES AND RESULTS
4.5 SUMMARY AND CONCLUSIONS
4.6 IMPLICATIONS AND FUTURE RESEARCH
REFERENCES
5. Cross-country comparison of corporate social performance: how do institutions matter?
5.1 INTRODUCTION
5.2 LITERATURE AND THEORIES
5.3 EMPIRICAL EVIDENCE
5.4 CONCLUSIONS
5.5 FUTURE RESEARCH
ACKNOWLEDGMENT
NOTES
REFERENCES
6. Re-assessing risk in international markets: a strategic, operational, and sustainability taxonomy
6.1 INTRODUCTION
6.2 TAXONOMY DEVELOPMENT
6.3 FURTHER WEIGHTING AND SAMPLING
6.4 FIRST RESULTS
6.5 CONCLUSION AND WAYS FORWARD
NOTES
REFERENCES
7. Consumer responses to MNE socially responsible behavior
7.1 INTRODUCTION
7.2 CSR AND CONSUMER RESPONSE
7.3 CSR AND INTERNATIONAL ASPECTS IN CONSUMER RESPONSE
7.4 RESEARCH PROPOSITIONS
7.5 AVENUES FOR FUTURE RESEARCH
7.6 CONCLUSION AND MANAGERIAL IMPLICATIONS
NOTES
REFERENCES
8. CSR, causal attributions, and a country’s legal origin
8.1 INTRODUCTION
8.2 LEGAL ORIGIN AND ATTRIBUTION INFERENCES
8.3 LEGAL ORIGINS AND CSR ATTRIBUTIONS
8.4 LEGAL ORIGINS AND TYPES OF CSR ATTRIBUTIONS
8.5 IMPLICATIONS AND DISCUSSION
NOTES
REFERENCES
9. Cross-cultural consumer responses to cause-related marketing: theoretical insights and future research
9.1 INTRODUCTION
9.2 COMPARATIVE CONSUMER RESPONSES TO CAUSE-RELATED MARKETING ACROSS CULTURES
9.3 THEORETICAL UNDERPINNINGS FOR THE DIFFERENCES IN CONSUMER RESPONSES TO CRM
9.4 CONCLUSIONS
9.5 FUTURE RESEARCH RECOMMENDATIONS
REFERENCES
10. Social responsibility and foreign market targeting
10.1 INTRODUCTION
10.2 INTERNATIONAL MARKET SELECTION AND SOCIAL RESPONSIBILITY CONSIDERATIONS
10.3 FOREIGN MARKET ENTRY MODE AND SOCIAL RESPONSIBILITY STRATEGIES
10.4 INTERNATIONAL MARKET SEGMENTATION WITH SOCIAL RESPONSIBILITY CRITERIA
10.5 SOCIALLY RESPONSIBLE TARGETING AND POSITIONING IN FOREIGN MARKETS
10.6 IMPLICATIONS AND DIRECTIONS FOR FUTURE RESEARCH
10.7 CONCLUSION
ACKNOWLEDGMENT
REFERENCES
11. Ethical issues in Japanese foreign direct investment in developed versus developing countries
11.1 INTRODUCTION
11.2 NATIONAL ETHICAL ENVIRONMENT (NEE)
11.3 HYPOTHESES DEVELOPMENT
11.4 DATA AND METHODS
11.5 RESULTS
11.6 CONCLUSION
11.7 IMPLICATIONS, LIMITATIONS, AND FUTURE DIRECTIONS
NOTES
REFERENCES
12. Toward a more comprehensive CSR scorecard development for multinational enterprises
12.1 INTRODUCTION
12.2 THE KEY QUESTION: HOW DO MNEs AFFECT HOST COUNTRIES?
12.3 WHY IS THERE A NEED FOR AN MNE LOCAL IMPACTS FRAMEWORK?
12.4 METHODOLOGY
12.5 IMPLEMENTATION OF THE MNE LOCAL IMPACTS SCORECARD
12.6 FUTURE RESEARCH ON THE MNE LOCAL IMPACTS SCORECARD
12.7 CONCLUSION
NOTE
REFERENCES
13. Adapting CSR strategy to international markets: fit analysis and performance implications
13.1 INTRODUCTION
13.2 PREVIOUS RESEARCH
13.3 THEORETICAL BACKGROUND AND CONCEPTUAL MODEL
13.4 RESEARCH PROPOSITIONS
13.5 IMPLICATIONS AND FUTURE RESEARCH
REFERENCES
14. Strategic CSR and the CSR strategy-making process of international business
14.1 INTRODUCTION
14.2 STRATEGIZING CSR
14.3 THE CSR STRATEGY-MAKING PROCESS
14.4 THEORETICAL PERSPECTIVES
14.5 FRAMEWORK AND PROPOSITIONS
14.6 CONCLUSIONS, IMPLICATIONS AND FUTURE RESEARCH
REFERENCES
15. MNE-NGO global partnerships as a form of CSR strategy: how well are they working?
15.1 INTRODUCTION
15.2 MNE-NGO PARTNERSHIPS – A FORM OF CSR
15.3 MNE-NGO PARTNERSHIPS AS A GLOBAL STRATEGY
15.4 MNE-NGO PARTNERSHIP CASES
15.5 MNE-NGO PARTNERSHIPS’ CONCEPTUAL FRAMEWORK
15.6 CONCLUSION
15.7 FUTURE RESEARCH AND MANAGERIAL IMPLICATIONS
ACKNOWLEDGMENT
REFERENCES
16. How much social responsibility should MNEs strategically assume and of which kind?
16.1 INTRODUCTION
16.2 THE MNE AS A SOCIAL SERVICE PROVIDER
16.3 FIRMS, GOVERNMENTS AND NGOs AS ALTERNATIVE PROVIDERS OF SOCIAL SERVICES
16.4 SOCIAL INVESTMENT AND MNE CAPABILITIES
16.5 IMPLICATIONS
ACKNOWLEDGMENTS
NOTES
REFERENCES
APPENDIX: SURVEY OF MULTINATIONAL COMPANIES ABOUT SOCIAL SERVICES PROVISION
17. Antecedents, moderators, and consequences of political CSR in the context of MNEs
17.1 INTRODUCTION
17.2 POLITICAL CSR
17.3 ANTECEDENTS OF POLITICAL CSR
17.4 CONSEQUENCES OF POLITICAL CSR
17.5 SITUATIONAL CONTINGENCIES
17.6 DISCUSSION AND IMPLICATIONS
17.7 CONCLUSION
REFERENCES
18. Embracing sustainability through corporate communication: an international case of CSR disclosure
18.1 INTRODUCTION
18.2 CSR DISCLOSURE FROM A MULTITHEORETICAL PERSPECTIVE
18.3 READABILITY OF CSR DISCLOSURES
18.4 METHODOLOGY
18.5 RESULTS
18.6 CONCLUSIONS AND IMPLICATIONS
18.7 LIMITATIONS AND AVENUES FOR FUTURE RESEARCH
REFERENCES
19. Role of MNEs in building zero waste communities
19.1 INTRODUCTION
19.2 A HISTORY OF WASTE MANAGEMENT
19.3 MANAGING WASTE FOR A CIRCULAR ECONOMY
19.4 MARKETING FOR BUILDING ZERO WASTE COMMUNITIES
19.5 CONCLUSION, IMPLICATIONS AND FUTURE DIRECTIONS
REFERENCES
Name index
Subject index

Citation preview

Socially Responsible International Business

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NEW HORIZONS IN INTERNATIONAL BUSINESS

Series Editor: Peter J. Buckley, Centre for International Business, University of Leeds (CIBUL), UK The New Horizons in International Business series has established itself as the world’s leading forum for the presentation of new ideas in international business research. It offers pre-eminent contributions in the areas of multinational enterprise – including foreign direct investment, business strategy and corporate alliances, global competitive strategies, and entrepreneurship. In short, this series constitutes essential reading for academics, business strategists and policy makers alike.   Titles in the series include: Restoring America’s Global Competitiveness through Innovation Edited by Ben L. Kedia and Subhash C. Jain Collective Knowledge Management Foundations of International Business in the Age of Intellectual Capitalism Haruo H. Horaguchi Internationalization of Firms from Economies in Transition The Effects of a Politico-Economic Paradigm Shift Edited by Mai Thi Thanh Thai and Ekaterina Turkina Emerging Markets and the Future of the BRIC Nations Edited by Ben L. Kedia and Kelly Aceto Emerging Dynamics of Sustainability in Multinational Enterprises Edited by John R. McIntyre, Silvester Ivanaj, Vera Ivanaj and Rabi N. Kar The Evolution of the World Economy The ‘Flying-Geese’ Theory of Multinational Corporations and Structural Transformation Terutomo Ozawa Emerging Asian Economies and MNCs Strategies Edited by Robert Taylor and Bernadette Andreosso-O’Callaghan The Development of International Business A Narrative of Theory and Practice Robert Pearce The Global Factory Networked Multinational Enterprises in the Modern Global Economy Peter J. Buckley CSR and Climate Change Implications for Multinational Enterprises Edited by John R. McIntyre, Silvester Ivanaj and Vera Ivanaj Comparative Capitalism and the Transitional Periphery Firm Centred Perspectives Edited by Mehmet Demirbag and Geoffrey Wood Multinationals, Local Capacity Building and Development The Role of Chinese and European MNEs Xiaolan Fu, George Owusu Essegbey and Godfred Kwasi Frempong Socially Responsible International Business Critical Issues and the Way Forward Edited by Leonidas C. Leonidou, Constantine S. Katsikeas, Saeed Samiee and Constantinos N. Leonidou

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Socially Responsible International Business Critical Issues and the Way Forward

Edited by

Leonidas C. Leonidou Professor of Marketing, School of Economics and Management, University of Cyprus, Cyprus

Constantine S. Katsikeas Arnold Ziff Research Chair and Professor of Marketing and International Management, Leeds University Business School, University of Leeds, UK

Saeed Samiee Collins Professor of Marketing and International Business, Collins College of Business, University of Tulsa, USA

Constantinos N. Leonidou Professor of Marketing, Leeds University Business School, University of Leeds, UK NEW HORIZONS IN INTERNATIONAL BUSINESS

Cheltenham, UK • Northampton, MA, USA

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© Leonidas C. Leonidou, Constantine S. Katsikeas, Saeed Samiee and Constantinos N. Leonidou 2019 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2019951014 This book is available electronically in the Business subject collection DOI 10.4337/9781788114127

ISBN 978 1 78811 411 0 (cased) ISBN 978 1 78811 412 7 (eBook)

02

Typeset by Servis Filmsetting Ltd, Stockport, Cheshire

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Contents viii xvii

List of contributors Preface

Introduction1 OVERVIEW OF RESEARCH ON SOCIALLY PART I  RESPONSIBLE INTERNATIONAL BUSINESS  1  Socially responsible international business: review, synthesis, and directions Leonidas C. Leonidou, Constantine S. Katsikeas, Saeed Samiee, and Constantinos N. Leonidou  2  An overview of social responsibility dimensions in international business Noemi Sinkovics, Rudolf R. Sinkovics, and Jason Archie-Acheampong

6

29

INSTITUTIONAL ENVIRONMENT AND SOCIALLY PART II  RESPONSIBLE INTERNATIONAL BUSINESS  3  Trade-offs and institutional contradictions in formulating ­responsible international business strategies Gopalkrishnan R. Iyer

74

 4  Institutional drivers of stakeholder engagement and legitimacy of Chinese MNEs Peter S. Hofman, Lei Li, Sunny Li Sun, and Yanxue Sun

98

 5  Cross-country comparison of corporate social performance: how do institutions matter? Jiyoung Shin and Chang Hoon Oh

133

 6  Re-assessing risk in international markets: a strategic, operational, and sustainability taxonomy Rob van Tulder and Mihaela Roman

158

v

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Socially responsible international business

PART III  CUSTOMER REACTIONS TO SOCIALLY RESPONSIBLE INTERNATIONAL BUSINESS  7 Consumer responses to MNE socially responsible behavior Petra Riefler

184

 8 CSR, causal attributions, and a country’s legal origin Seraphim Voliotis and Pavlos A. Vlachos

209

 9  Cross-cultural consumer responses to cause-related marketing: theoretical insights and future research Melanie Tao Xue and Jaywant Singh

232

SOCIAL RESPONSIBILITY ISSUES IN FOREIGN PART IV  MARKET TARGETING 10 Social responsibility and foreign market targeting Ricky Y. K. Chan Ethical issues in Japanese foreign direct investment in 11  developed versus developing countries Paul W. Beamish, George Z. Peng, and Jean-Marie Nkongolo-Bakenda Toward a more comprehensive CSR scorecard development 12  for multinational enterprises Ayse Ozturk

262

284

313

DESIGNING AND IMPLEMENTING SOCIALLY PART V  RESPONSIBLE INTERNATIONAL BUSINESS STRATEGIES Adapting CSR strategy to international markets: fit 13  analysis and performance implications Pantelitsa Eteokleous Strategic CSR and the CSR strategy-making process 14  of international business Cezara A. Nicoara, Dayananda Palihawadana, and Matthew J. Robson MNE-NGO global partnerships as a form of CSR strategy: 15  how well are they working? Elizabeth A. Napier

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Contents ­vii

16  How much social responsibility should MNEs strategically assume and of which kind? Lilac Nachum

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PART VI  SPECIAL ISSUES IN SOCIALLY RESPONSIBLE INTERNATIONAL BUSINESS 17  Antecedents, moderators, and consequences of political CSR in the context of MNEs Daniel Korschun and Hoori Rafieian Embracing sustainability through corporate communication: 18  an international case of CSR disclosure Setayesh Sattari, Arash Kordestani, Kaveh Peighambari, and Pejvak Oghazi

462

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19 Role of MNEs in building zero waste communities Suraksha Gupta

506

Name index Subject index

525 529

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Contributors Jason Archie-Acheampong is a Postgraduate Research Student at the Alliance Manchester Business School, UK. He obtained a master’s degree in entrepreneurship and works on issues related to SMEs’ responsible behaviour. Paul W. Beamish is Professor of International Management at the Ivey Business School, Western University, Canada. He is a Fellow of the Royal Society of Canada, the Academy of International Business, and the Asia Pacific Foundation, as well as the Director of the International Business Institute at Ivey. He served as Editor-in-Chief of the Journal of International Business Studies from 1993 to 1997. His research focuses on FDI, joint ventures, emerging markets, and activities of the multinational enterprise. He has published numerous articles in top-tier journals, such as Academy of Management Journal, Journal of International Business Studies, and Strategic Management Journal, among others. Ricky Y. K. Chan is an Associate Professor in the Department of Management and Marketing at the Hong Kong Polytechnic University. His research interests lie in ethical and environmental issues relating to business operations and consumption. His research has appeared in various journals, such as the Journal of Management Studies, Journal of Business Ethics, Journal of World Business, International Business Review, and Management International Review. Pantelitsa Eteokleous is a Post-doctoral Researcher at the University of Cyprus. Her research interests are concentrated on the fields of social responsibility, ethics, entrepreneurship, and international marketing. Her work has appeared in the International Marketing Review and in various conference proceedings. Suraksha Gupta holds a PhD in marketing and is a Professor of Marketing at Newcastle University, UK. Her research focuses on international business practices of multinationals in developing markets, particularly India, and is based on her industry experience in IT, telecoms, and the food industry. Suraksha’s research output has been published in Journal of World Business, British Journal of Management, Journal of Business Research, viii

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Industrial Marketing Management, Technological Forecasting and Social Change, European Journal of Marketing, Studies in Higher Education, Computers in Human Behaviour, among others. In addition, she has participated in the editorial activities of various journals such as Journal of World Business, Journal of Business Research, and Industrial Marketing Management as guest editor. She has also published books, various book chapters, and book reviews. Peter S. Hofman is Professor of Corporate Governance and Corporate Social Responsibility at Nottingham University Business School China, located at the University of Nottingham in Ningbo, China. He received his PhD from the University of Twente in the Netherlands. His research broadly covers business-government-society interaction in the areas of innovation, corporate social responsibility, and sustainable business strategies. He has published in academic journals such as Asia Pacific Journal of Management, The International Journal of Human Resource Management, Business & Society, Journal of Cleaner Production, Energy Policy, Technology Analysis and Strategic Management, Business Strategy and the Environment, and Innovation: Management, Policy and Practice. Gopalkrishnan R. Iyer is Professor of Marketing and coordinator for the PhD programme in marketing at the Florida Atlantic University in Boca Raton, Florida. Apart from corporate social responsibility issues, his current research interests are in the areas of business-to-business marketing, entrepreneurship, innovation, global business, pricing, and services marketing. His recent research is published in Industrial Marketing Management, Psychology & Marketing, Journal of Product Innovation Management, Entrepreneurship Theory & Practice, and the Journal of the Academy of Marketing Science, among other outlets. His teaching experience spans about 26 years and courses at various levels (undergraduate, MBA, MS, PhD and Executive Education) and in various formats (lectures, seminars, online, hybrid) in the disciplines of marketing, international business, e-commerce, and management. Constantine S. Katsikeas holds the Arnold Ziff Research Chair in Marketing and International Management and is the Founding Director of the Global and Strategic Marketing Research Centre at Leeds University Business School (LUBS), University of Leeds, UK. He served as Vice President of the Academy of Marketing Science (2012–2014). He is currently the Editor-in-Chief of the Journal of International Marketing and editor for international marketing for the Journal of International Business Studies. His interests are marketing and sales management, global marketing and management, strategic alliances and competitive strategy. He has published

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widely and his articles have appeared in The Journal of Marketing, Strategic Management Journal, Organization Science, Journal of International Business Studies, Decision Sciences, Journal of International Marketing, Journal of World Business, Journal of the Academy of Marketing Science, Journal of Business Research, Industrial Marketing Management, European Journal of Marketing, Management International Review, Long-Range Planning, International Marketing Review, and International Business Review. Arash Kordestani is an Assistant Professor of Logistics at Linnaeus University in Sweden. His research interests involve transdisciplinary areas and his primary research focus is on digitalization and sustainable supply chain management. His current area of research includes forecasting using machine learning, corporate social responsibility, consumer behaviour, and supplier diversity. Daniel Korschun is an Associate Professor of Marketing at Drexel University’s LeBow College of Business, Philadelphia, USA. He is a fellow of the Center for Corporate Reputation Management and the Center for Corporate Governance at LeBow College of Business. His areas of expertise include corporate reputation management, CSR, and country reputation. His research has been published in The Journal of Marketing, MIT-Sloan Management Review, Journal of the Academy of Marketing Science, Journal of Public Policy & Marketing, Journal of Business Research, and Journal of Business Ethics. Constantinos N. Leonidou is Professor of Marketing and Head of the Marketing Division at Leeds University Business School, University of Leeds, UK. His main research interests focus on sustainability, international marketing, consumer behaviour, and advertising. His research has appeared in various journals, such as Journal of Business Ethics, Journal of Business Research, Journal of the Academy of Marketing Science, Journal of International Marketing, Journal of World Business, Industrial Marketing Management, and Tourism Management. Leonidas C. Leonidou is a Professor of Marketing at the School of Economics and Management of the University of Cyprus. His current research interests are in the areas of international marketing/purchasing, relationship marketing, strategic marketing, socially responsible marketing, and marketing in emerging economies. He has published extensively in these fields and his articles have appeared in various journals, such as The Journal of Marketing, Journal of International Business Studies, Journal of the Academy of Marketing Science, Journal of World Business, Tourism Management, Journal of International Marketing, Management International Review, International Business Review, Journal of Business Research, Long-Range

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Planning, Industrial Marketing Management, Journal of Business Ethics, Psychology & Marketing, International Marketing Review, European Journal of Marketing, and Journal of Small Business Management. Lei Li is an Associate Professor of International Business and Strategy at Nottingham University Business School China, located at the University of Nottingham in Ningbo, China. He received his PhD from the University of Texas at Dallas, USA. His research focuses on internationalization strategy and international social innovation and sustainable development. His academic work has appeared in Journal of World Business, Management International Review, and International Journal of Management Reviews, among others. Lilac Nachum is Professor of International Business at City University New York, Baruch College. Her current research interests include global supply chains and value creation in a global world, emerging market MNEs, and the relationship between firms, society, and governments as they shape the international strategies of firms. Her work has appeared in the Academy of Management Journal, Strategic Management Journal, Management Science, and Journal of International Business Studies, among others, and has been awarded several recognitions, most recently the AIB 2017 Best Paper Award of the Research Method Division. At various periods, she has served on the editorial boards of leading journals in strategy and international business. She has also held visiting positions at universities around the world and has consulted with firms and governments on issues relating to globalization and multinational companies. Elizabeth A. Napier is a PhD scholar at Georgia State University, USA. Her research focuses on the investigation of multinational firms and their interaction with local economies and environments. She studies the utilization of strategic corporate social responsibility as a competitive advantage that is economically profitable, law abiding, and ethical. Cezara A. Nicoara is a Postgraduate Researcher in Marketing at Leeds University Business School, UK. Her research interests revolve around international business, sustainability, and business ethics. Her PhD thesis focuses on corporate social responsibility within multinational organizations in emerging markets. She was the recipient of the University of Alabama Best Reviewer Award, as well as the SAMS Tom Lupton Prize for Best Doctoral Presentation. Jean-Marie Nkongolo-Bakenda is a Professor of Strategy at the Paul J. Hill School of Business, University of Regina, Canada. His recent research interests include strategies in international small and

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medium-sized enterprises, aboriginal and ethnic entrepreneurship, diaspora and immigrant entrepreneurship, and corporate social responsibility. He has published in journals such as Journal of Comparative International Management, Journal of Entrepreneurial Finance and Business Ventures, International Journal of Entrepreneurship & Small Business, World Review of Entrepreneurship, Management and Sustainable Development, Journal of International Entrepreneurship, The Geography Research Forum, SMEE Review, International Journal of Globalisation and Small Business, Recherche Qualitative, Revue Internationale PME, and Revue Organisation. Pejvak Oghazi is Professor of Business Studies and Head of Logistic Program at Sodertorn University, School of Social Sciences, Stockholm, Sweden. Prior to his current position, he worked as an industrial manager at national and international level. His current research interests revolve around topics in business studies and his research has been published in internationally renowned academic journals, such as Industrial Marketing Management, Journal of Business Research, Journal of Business Venturing Insights, Psychology & Marketing, Entrepreneurship & Regional Development, and Service Industries Journal, among others. His work is also regularly presented at international academic conferences. Chang Hoon Oh is William Saywell Professor in Asia Pacific Business at the Beedie School of Business, Simon Fraser University, Canada. His research centres on internationalization strategy, country risk, business continuity and sustainability, and globalization versus regionalization. His research has been published in journals including Strategic Management Journal, Organization Science, Journal of International Business Studies, and Global Environmental Change. Ayse Ozturk is Assistant Professor of Marketing at the Gary W. Rollins College of Business at the University of Tennessee at Chattanooga, USA. She has substantive research interests primarily in the areas of marketing strategy, global marketing, and emerging markets. She has had multiple publications in the International Business Review and Thunderbird International Business Review. She has also previously worked with globally recognized companies, including PricewaterhouseCoopers, Deloitte, and Peugeot. Dayananda Palihawadana is a Professor of Marketing and Chair in Marketing Education at Leeds University Business School, UK. His research interests include marketing ethics, international marketing, and export marketing. His research has been published in the Journal of International Marketing, Journal of Business Ethics, Journal of Business Research, and International Marketing Review, among others.

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Kaveh Peighambari is a marketing strategist, an entrepreneur, and a faculty member at Linnaeus University in Sweden. Backed by over 14 years of experience, including corporate-level marketing, product development, and start-up business development, his research interests include areas such as sustainable supply chains, the circular economy, and digital marketing channels. His work has appeared in publications such as Advances in Management, American Marketing Association (AMA), and Academy of Marketing Science Proceedings. George Z. Peng is an Associate Professor of International Business at the Paul J. Hill School of Business, University of Regina, Canada. His research has been published in Asia Pacific Journal of Management, Journal of Business Ethics, Journal of International Management, Journal of World Business, and Management and Organization Review. Hoori Rafieian is a Post-doctoral Fellow at the Wharton School of the University of Pennsylvania, USA. Her research interests include consumer judgement and decision-making, political consumerism, and consumer well-being. Petra Riefler is Professor of Marketing at the Department of Marketing & Innovation, University of Natural Resources and Life Sciences Vienna, Austria. Her research focus is on consumer behaviour and international marketing. Her work relates to consumers’ dispositions towards local and global market offerings, domestic and foreign company origins, and consumer cosmopolitanism. She has published numerous articles in international journals in this field. Matthew J. Robson is a Professor of Marketing and International Management at Cardiff Business School, Cardiff University, UK. His research interests focus on international and export marketing, franchising, strategic alliances, and retailing. His research has been published in British Journal of Management, Industrial Marketing Management, International Marketing Review, Journal of International Marketing, Journal of Marketing, Journal of World Business, Management International Review, Organization Science, among others. He presently serves as Associate Editor at the Journal of International Marketing. Mihaela Roman holds a master’s degree in International Management Studies. She has worked at the TUI Group and currently is associated as a digital product manager with Photobox (UK) as part of the site migration team. Saeed Samiee is the Collins Professor of Marketing and International Business at The University of Tulsa, USA. He has contributed to scholarly

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journals in marketing and international business as an author and member of editorial review boards, including The Journal of Marketing, Journal of the Academy of Marketing Science, and Journal of International Business Studies. He is currently an editor for international marketing for the Journal of International Business Studies and serves as Associate Editor for marketing and international business for Decision Sciences. Setayesh Sattari is Assistant Professor of Marketing at Linnaeus University in Sweden. Her research experience and interests include sustainable consumption, sustainable tourism, the circular economy, social entrepreneurship, supplier diversity, and sustainable innovation. Her work has appeared in publications such as Sustainability, Corporate Communications, and Place Branding and Public Diplomacy. Jiyoung Shin is an Assistant Professor at the Faculty of Economics and Business, University of Groningen, the Netherlands. Before she joined the University of Groningen, she worked as a Post-doctoral Research Fellow at Beedie School of Business, Simon Fraser University, Canada. Her interests include corporate social responsibility of multinational companies, non-market strategy, and sustainable development strategy of MNEs. Jaywant Singh is Professor of Marketing at the Kingston Business School, Kingston University, UK. His research examines consumer responses to marketing stimuli, such as corporate branding, brand alliances, causerelated marketing, and CSR. He has authored books on consumer behaviour and brand management and has published extensively in top-tier international journals such as Marketing Letters, Journal of Business Research, Journal of Business Ethics, Industrial Marketing Management, and the Journal of Advertising Research. Noemi Sinkovics is a Lecturer in International Business and Management at the Alliance Manchester Business School, UK, and is currently Visiting Scholar at Temple University, Fox School of Business, Philadelphia, USA. Her research focuses on international entrepreneurship, supplier capability development and upgrading in emerging markets, and issues related to the business society interface, including social value creation, business ethics, and responsible innovation. She has published in journals such as International Business Review, International Marketing Review, Journal of Business Research, Critical Perspectives on International Business, Journal of International Management, and European Journal of International Management. Rudolf R. Sinkovics is Professor of International Business at The University of Manchester, UK, Visiting Professor at Lappeenranta University of

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Technology, Finland, and Visiting Scholar at Fox School of Business, Temple University, Philadelphia, USA. He has published on inter-­ organizational governance and the role of ICT in firm internationalization, and currently works on rising powers and responsible business. His work has been published in the Journal of International Business Studies, Management International Review, Journal of World Business, International Business Review, Critical Perspectives on International Business, and International Marketing Review, among others. Sunny Li Sun is an Associate Professor of Entrepreneurship and Innovation at the University of Massachusetts Lowell, USA. His research interests cover entrepreneurship, corporate governance, venture capital, network, and institutions. He has published 40 papers in Strategic Management Journal, Organization Science, Journal of International Business Studies, Entrepreneurship Theory and Practice, Journal of Business Ethics, Journal of Management Studies, Academy of Management Perspective, Industrial Marketing Management, Journal of International Marketing, and other journals.  Yanxue Sun is a Lecturer in Business Administration/Management at the University of Greenwich, UK. Previously, she was Teaching Fellow in International Business at Nottingham University Business School China (NUBS China), the University of Nottingham (UK). Rob van Tulder is Professor in International Business at RSM Erasmus University Rotterdam. He is founder of the Department of BusinessSociety Management and Academic Director of the Partnerships Resource Centre. Both are leading academic institutes aimed at enhancing the corporate contribution to sustainable development. He has published extensively on these topics in journals and through award-winning books. He also acts as a consultant to many international organizations. Pavlos A. Vlachos is an Associate Professor of Marketing at ALBA Graduate Business School, The American College of Greece. His work has appeared in Frontiers in Psychology, Journal of Organizational Behavior, Journal of Business Ethics, and Journal of the Academy of Marketing Science, among others. He serves as an Associate Editor of Frontiers in Organizational Psychology and sits on the editorial board of the European Journal of Marketing. Seraphim Voliotis is an Assistant Professor of Strategy, ALBA Graduate School, The American College of Greece. His work has appeared in Journal of Business Ethics, Frontiers in Psychology, and Journal of Operator Theory, among others. A member of the Bar of England and Wales since

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1995, he has distinguished himself in negotiation theory. He has consulted on and successfully negotiated or mediated company mergers, a series of litigation disputes, and a number of national and international commercial deals. Melanie Tao Xue is an International Senior Teaching Fellow in Marketing at Lancaster University Management School, UK. Her research interests lie in consumer behaviour, cause-related marketing, brand strategies, and social media communications. She has presented her research at ­peer-reviewed international conferences.

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Preface Although the discipline of international business has advanced significantly and has taken many different directions over the last decades, social responsibility issues and how these are handled by international firms in foreign markets have only recently received scholarly attention. In fact, academic research has lagged behind practice development, which prevents the smooth, integrative, and balanced advancement of knowledge in this field. However, acting in a socially responsible manner, either internally (e.g., adhering to high health and safety standards) or externally (e.g., being environmentally friendly and ethical), has nowadays become a crucial success factor for many international firms due to the highly complex, competitive, and volatile global environment in which they operate. Hence, the aim of this book, by means of a systematic, integrated, and concerted effort by prominent scholars, is to contribute new ideas, contemporary knowledge, and original research to the proliferation of this important field of international business. In doing so, we have sought contributions from specialists and their associates around the world to produce a collection of readings on critical issues concerning socially responsible international business, as well as to indicate ways in which this area of research can be moved forward. The result is insightful contributions by 39 authors, from 27 academic institutions, located in ten different countries, yielding 19 chapters. These cover a wide array of topics, ranging from global environmental influences on acting in a socially responsible way and foreign buyer reactions to responsible business, to international market targeting and the development of socially responsible international business strategies. The various chapters take different formats (e.g., conceptual, empirical, review), methodologies (e.g., quantitative, qualitative, mixed method), and approaches (e.g., primary research, secondary data analysis, case studies). They offer a thorough review of extant knowledge, strong research methods, insightful findings and discussions, theoretical and managerial implications, and challenging directions for future research. We strongly believe that this book will provide a useful inventory of knowledge for researchers, educators, students, managers, public policymakers, and other parties focusing on international business, particularly those with an interest in corporate social responsibility, environmental xvii

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issues, and ethical matters. We hope you will find the chapters of this book interesting, useful, and thought-provoking and that you will have an enjoyable read! Leonidas C. Leonidou, Nicosia, Cyprus Constantine S. Katsikeas, Leeds, UK Saeed Samiee, Tulsa, USA Constantinos N. Leonidou, Leeds, UK

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Introduction This book provides an edited volume of 19 chapters focusing on socially responsible international business which are organized into six parts. Part I consists of two chapters which introduce the subject by critically reviewing the pertinent literature. Chapter 1, ‘Socially responsible international business: review, synthesis, and directions’ was written by Leonidou, Katsikeas, Samiee, and Leonidou and offers an integrative review of the extant studies on socially responsible issues published in the top six international business journals. It provides input about the key contributors and the most influential articles on the subject, as well as evaluating the theoretical underpinnings of these studies, their research methodologies, and the main thematic areas tackled. Sinkovics, Sinkovics, and Archie-Acheampong contributed Chapter 2, ‘An overview of social responsibility dimensions in international business.’ This provides an analysis of 484 studies focusing on key firm-related social responsibility issues within an international context, such as those relating to ethical practices, environmental aspects, human rights, and corruption. The results of this analysis indicate an overemphasis of the literature on positive, rather than negative, issues relating to international business social responsibility. Part II includes four chapters examining the role of the foreign external environment – particularly the institutional – on socially responsible international business. In Chapter 3, ‘Trade-offs and institutional contradictions in formulating responsible international business strategies,’ Iyer sheds light on the various trade-offs encountered by MNEs when performing their CSR strategies across countries, due to institutional differences, which may impose conflicting demands and lead to suboptimal choices. These trade-offs refer to instrumental versus non-market objectives, legal compliance versus broader norms, and voluntary versus obligatory actions relating to the firm’s socially responsible behavior. Chapter 4, ‘Institutional drivers of stakeholder engagement and legitimacy of Chinese MNEs,’ was written by Hofman, Li, Sun, and Sun. Their study focuses on Chinese MNEs when operating in Western countries and uses both stakeholder and institutional theories to examine linkages between home–host country institutional distances, stakeholder engagement, and organizational legitimacy. Shin and Oh contributed Chapter 5, ‘Cross-country comparison of 1

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corporate social performance: how do institutions matter?’, in which they examine the effect of formal and informal institutions on environmental, social, and corporate governance performance. Using empirical data from 40 different countries, these authors reveal that while a country’s formal institutions affect environmental performance, informal institutions have a significant impact on social performance. Chapter 6, ‘Re-assessing risk in international markets: a strategic, operational, and sustainability taxonomy,’ was prepared by van Tulder and Roman and enquires into the types of risks encountered by MNEs in international markets. Using a longitudinal study among firms from different countries, they reveal an increasing number of risks, particularly those relating to sustainability, which can also be regarded as opportunities or mitigation strategy. Part III comprises three chapters which focus on how foreign customers react to the socially responsible practices of international firms. In Chapter 7, ‘Consumer responses to MNE socially responsible behavior,’ Riefler provides a thorough overview of how consumers respond to the CSR activities of MNEs in various countries, highlights the role of culturebound differences that MNEs should consider when designing their CSR strategies, and recommends directions for future research that would help to advance this field of research. Voliotis and Vlachos are the authors of Chapter 8, ‘CSR, causal attributions, and a country’s legal origin,’ in which they develop a conceptual model focusing on a country’s legal origin (i.e., common law versus civil law) and their link to CSR attribution inferences (i.e., intrinsic or mixed, extrinsic, financial distress). Chapter 9, ‘Cross-cultural consumer responses to cause-related marketing: theoretical insights and future research,’ was written by Xue and Singh and provides a critical review of extant comparative consumer research on cause-related marketing. It particularly focuses on the effect of cultural orientations, temporal orientations, cross-cultural cognitive styles, and cross-cultural emotional dispositions on consumers’ responses to the international firm’s cause-related marketing. Part IV focuses on the role of socially responsible issues in targeting foreign markets, which is the object of three chapters. In Chapter 10, ‘Social responsibility and foreign market targeting,’ Chan stresses the importance of incorporating CSR considerations in international market selection, since this will have a serious effect on the firm’s CSR strategy in each foreign market. In doing so, the author stresses the need to take into consideration various foreign consumer psychographic characteristics, as well as the multidimensionality of CSR and the standardization versus customization dilemma. Beamish, Peng, and Nkongolo-Bakenda wrote Chapter 11, ‘Ethical issues in Japanese foreign direct investment in developed versus developing countries,’ which examines the relationships

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Introduction ­3

between the national ethical environment and foreign direct investment from an institutional perspective. Their analysis stresses the need for FDI behavior to take into consideration both transaction and conformity costs, as well as different sensitivities to these costs by institutions located in developing and developed countries. Chapter 12, ‘Toward a more comprehensive CSR scorecard development for multinational enterprises,’ was contributed by Ozturk, who develops a scorecard incorporating the impacts (i.e., economic, societal, environmental) of MNEs in host countries. This could be a useful tool, on the one hand, for firms to allocate resources and communicate with the various publics in foreign markets, and, on the other, for host governments (and other stakeholder groups) to monitor the activities of foreign firms operating in their countries. Part V consists of four chapters which have as their focus the development and implementation of socially responsible international business strategies. Eteokleous wrote Chapter 13, ‘Adapting CSR strategy to international markets: fit analysis and performance implications,’ in which a conceptual model is developed regarding the drivers and outcomes of CSR strategy standardization/adaptation of MNEs. The author posits that the degree of this standardization/adaptation is the result of stakeholder differences between the home and host market (which is moderated by the firm’s sensing and learning capabilities), while optimal performance can be determined by the extent of co-alignment between external forces and the choice of CSR strategy. In Chapter 14, ‘Strategic CSR and the CSR strategy-making process of international business,’ Nicoara, Palihawadana, and Robson focus on the antecedents and consequences of CSR strategymaking by international firms, thus emphasizing the importance of not only formulating CSR strategies in foreign markets but also implementing and adjusting them over time, according to changes in the environment. Chapter 15, ‘MNE-NGO global partnerships as a form of CSR strategy: how well are they working?’, was contributed by Napier and focuses on the antecedents and motivations for MNEs to form partnerships with non-governmental organizations in foreign markets. The author suggests that these MNE-NGO partnerships are a type of CSR strategy, signaling that the company is environmentally and/or socially responsible. Nachum authored Chapter 16, ‘How much social responsibility should MNEs strategically assume and of which kind?’, where the emphasis is on developing a framework that specifies the type of social causes in which MNEs should engage, the specific conditions required for their involvement, and the type of firms that should undertake them. Part VI delves into specialized issues related to socially responsible international business and includes the remaining three chapters. In Chapter 17, ‘Antecedents, moderators, and consequences of political

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CSR in the context of MNEs,’ Korschun and Rafieian focus on political CSR, which consists of investment, assertiveness, and international scope of engagement. The authors identify the drivers (i.e., value alignment, materiality) and outcomes (i.e., company performance, public policy) of political CSR by MNEs and examine several situational contingencies at the macro, meso, and micro levels. Sattari, Kordestani, Peighambari, and Oghazi wrote Chapter 18, ‘Embracing sustainability through corporate communication: an international case of CSR disclosure,’ which focuses on the crucial role played by CSR reporting in communicating in an understandable and readable way the MNE’s socially responsible activities to various stakeholders in foreign countries. Finally, in Chapter 19, ‘Role of MNEs in building zero waste communities,’ Gupta highlights the solutions for efficient recovery and management of waste when incorporated in the MNE’s global supply chain. She demonstrates that the firm’s contribution to build zero waste communities in foreign markets can enhance both its reputation and business performance.

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PART I

Overview of research on socially responsible international business

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1.  S  ocially responsible international business: review, synthesis, and directions Leonidas C. Leonidou, Constantine S. Katsikeas, Saeed Samiee, and Constantinos N. Leonidou 1.1 INTRODUCTION The firm’s socially responsible activities have been an issue of major academic concern since the late 1960s, with dozens of articles written on the subject. This reflects the growing challenges faced by organizations with regard to increasing criticism for causing environmental damage, engaging in unethical business practices, enforcing discrimination practices, and other irresponsible actions (Grinstein and Riefler, 2015). It also mirrors the dramatic rise in sensitivity to various social issues (e.g., climatic changes, child labor, corruption/bribery) on the part of citizens, shareholders, and other stakeholder groups, which has had serious effects on consumption, investment, and other behaviors affecting firms’ activities (Demirbag et al., 2017). It further underlines the increasing tendency of governments and other parastatal organizations to demonstrate social consciousness and to adopt the close surveillance of possibly illegal business practices, such as those violating health and safety, financial transparency, and human rights (Rathert, 2016). As opposed to extensive research on socially responsible activities among firms in a domestic context, their international business dimension has received less attention (Egri and Ralston, 2008; Pisani et al., 2017). This is paradoxical, however, because growing globalization has been the reason for an increasing number of firms to transcend national boundaries and confront various social-related issues, such as those pertaining to ethical and environmental conduct. Moreover, the widespread use of social media has put any form of anti-social business behavior by international firms on the spot, with detrimental effects on their business performance (as a 6

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Review, synthesis, and directions ­7

result, for example, of buyer boycotts, reputational damage, and legalistic actions). Furthermore, the multiplicity and diversity of business environments across countries calls for a careful adjustment and refinement of the international firm’s ethical, green, and other socially responsible strategies (Kolk and van Tulder, 2010). Despite this different emphasis of scholarly research on the firm’s socially responsible behavior in a domestic versus global context, a critical mass of international business studies on the subject has been accumulated over time. This has taken many different directions and produced multiple findings (Eteokleous, Leonidou, and Katsikeas, 2016; Zhao, Zhang, and Kwon, 2018). Hence, the purpose of this chapter is to review and synthesize the content of extant studies in this important field of research and establish trends concerning its evolution. Specifically, we have three major objectives to accomplish: (1) to identify the key contributing outlets and prolific authors in this line of research, as well as trace the most influential articles; (2) to assess the research design, scope of research, and study methodology employed by scholars in the field; and (3) to categorize knowledge on the subject into key thematic areas and indicate how these have evolved over time. Such an endeavor would be beneficial for various interested parties: (a) managers, who can become more aware of the range of social challenges confronted by firms in international markets, as well as acquire useful knowledge necessary to enhance their socially responsible international business conduct; (b) public policymakers, who can be in a better position to formulate policies at the macro level that would guide their indigenous firms to operate in a socially responsible manner in foreign markets; (c) researchers, who can have access to a rich inventory of knowledge that will help to provide the basis for further research on socially responsible issues in international business; and (d) educators, who can transfer to students insights on the socially responsible code of conduct derived from this review to be used in their future business activities as international managers. The remainder of this chapter is structured as follows. First, we explain the method adopted in this study to undertake the current review. We then present the major contributing journals on socially responsible international business, the most prolific authors on the subject, and the most impactful articles. Following this, we analyze the profiles of the studies reviewed, in terms of research design, scope of research, and study methodology. The next section provides an analysis of the key thematic areas referring to socially responsible international business and the specific issues addressed within each area. The final section draws conclusions from the study findings, offers implications, and suggests directions for future research.

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1.2  REVIEW APPROACH Our review covered all articles on socially responsible international business published in the top eight international business journals, namely Journal of International Business Studies, Journal of World Business, Management International Review, Journal of International Marketing, International Marketing Review, International Business Review, Journal of International Management, and Global Strategy Journal. The review included publications from the inception of this line of research in 1995 up to 2017, which is a sufficiently large period of time from which to derive adequate information on the subject and establish trends. The review covered all types of articles published in these journals, with the exception of editorials, case studies, educational insights, and reply comments. Eligible articles were identified electronically using various bibliographic databases, such as ABI-INFO, JSTOR, and SCIENCE DIRECT, based on various keywords, such as ‘corporate social responsibility’, ‘responsible business’, ‘environmental’, ‘sustainability’, ‘ethical’, ‘diversity’, ‘health and safety’, ‘corporate citizenship’, and so on. Altogether, 163 articles were found relevant for the purposes of our study, while after a thorough examination of their full content, seven articles had to be omitted for lacking real relevance to socially responsible international business issues. The final set of 156 articles comprised conceptual articles (31), empirical articles (114), or review/meta-analysis articles (11). These articles were categorized into three time periods: 1995–2001 (23 articles), 2008–2012 (52 articles), and 2013–2017 (81 articles). Each of the articles selected was subsequently content analyzed by two experienced researchers, who worked under the supervision of an academic with extensive knowledge of content analysis. Both coders underwent rigorous training in order to understand how to code the information contained in each article. For this purpose, we have developed a coding protocol consisting of three parts: (a) article profile – nature of article, authors’ characteristics, number of citations; (b) study ­characteristics – scope of research, research design, and study methodology; and (c) thematic areas – where a list of items was initially produced by reviewing all articles collected, and subsequently grouping them into categories based on indications derived from prior research and/or previous reviews on CSR articles. The workability of the coding protocol was tested with a small sample of articles, and the instrument employed revealed no particular problems. To increase consistency in interpreting the information extracted from the articles, a special manual was prepared, incorporating operational definitions for each item that had to be analyzed. The two coders worked

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Review, synthesis, and directions ­9

independently and transferred the information contained in each article onto the coding protocol. Inter-coder reliability tests for each item used revealed an agreement of 91 percent to 95 percent between the two coders, which reflects satisfactory levels. All discrepancies identified were resolved with the assistance of the supervisor, while the data extracted from the completed coding protocols were unified into a common database and subsequently used for descriptive statistical analysis.

1.3 MAJOR CONTRIBUTING JOURNALS, PROLIFIC AUTHORS, AND KEY ARTICLES Table 1.1 shows the contribution of socially responsible international business articles by each of the eight international business journals reviewed. Collectively, there was a significant growth of articles published in these journals, indicating a growing interest by both scholars and journal editors in investigating corporate social responsibility issues within an international business context, from three articles in 1995 to 21 articles Table 1.1 Journal article contribution to research on socially responsible international business Journals

Journal of World Business a International Marketing  Review a Journal of International   Business Studies a International Business  Review a Journal of International  Management a Management International  Review Journal of International  Marketing Global Strategy Journal Note: 

a

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

26.3 19.9

26.1 21.7

28.8 17.3

24.7 21.0

16.0

43.5

9.6

12.3

14.7

–

11.5

21.0

9.0

8.7

17.3

3.7

6.4

–

9.6

6.2

4.5

–

3.8

6.2

3.2

–

1.9

4.9

Journals with special issues on the topic during the period 1995–2017.

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in 2017. Notably, this interest on the subject is documented by the fact that the time period under examination was marked by the publication of eight special issues, as follows: International Marketing Review (Carrigan, Marinova, and Szmigin, 2005; Ghauri, Park, and Oh, 2015, 2016), Journal of World Business (Mort 2010; Shapiro, Hobdari, and Oh, 2018), Journal of International Business Studies (Rodriguez et al., 2006), International Business Review (Kolk and van Tulder, 2010), and Journal of International Management (Egri and Ralston, 2008). The three top contributing journals were the Journal of World Business (41 articles), International Marketing Review (31 articles), and Journal of International Business Studies (25 articles), accounting for approximately two-thirds (63.2 percent) of the total articles reviewed. However, there were changes over time regarding the publication contribution of these journals. For example, while there was a downward trend of articles on socially responsible international business published in the Journal of International Business Studies, the reverse was observed in the case of International Business Review (which was responsible for publishing 21.0 per cent of the articles during the period 2013–2017). Altogether, the 156 articles on socially responsible international business covered by our review were written by 404 scholars, that is, on average .38 articles per author. Notably, the top ten authors were responsible for writing 35 (i.e., 22.4 percent) of these articles, which denotes that most scholars have only sporadically published articles on this topic during the time period under investigation (see Table 1.2). Most (4) of the prolific authors were based in the UK, while the remainder were located in the USA (3), South Korea (1), the Netherlands (1), and Cyprus (1). In the case of two contributors, namely Timothy M. Devinney and Constantine S. Katsikeas, these have a current affiliation with the University of Leeds, while the remaining authors had no connection as regards their institutional affiliation. The top three authors in the field, based on their total individual contributions to socially responsible international business articles, were the following, in descending order: Ans Kolk (9), Bryan W. Husted (4), and Leonidas C. Leonidou (4). With regard to the adjusted number of publications (where the number of authors in each article is taken into consideration), the order of the top three contributors is as follows: Ans Kolk (3.66), Bryan W. Husted (2.33), and Yadong Luo (2.33). Finally, based on Google Scholar citations, the three most influential scholars in the field are: Petra Christmann (1,380 citations), Ans Kolk (1,367 citations), and Bryan W. Husted (732 citations). Based on Google Scholar citations, we have identified the 15 most influential socially responsible international business articles published during the period 1995–2017 (see Table 1.3). With the exception of two

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Review, synthesis, and directions ­11

Table 1.2 Most prolific authors of socially responsible international business articles Author

 1. Ans Kolk  2. Bryan W. Husted  3. Leonidas C. Leonidou  4. Timothy M. Devinney  5. Petra Christmann  6. Jonatan Pinkse  7. Byung Il Park  8. Yadong Luo  9. Pervez N. Ghauri 10. Constantine S. Katsikeas

Absolute Adjusted Google number of number of Scholar articles citations articles

University

Country

University of Amsterdam Business School EGADE Business School University of Cyprus University of Leeds

The Netherlands

9

3.66

1367

USA

4

2.33

732

Cyprus

4

1.03

172

UK

3

2.25

168

Rutgers University USA

3

1.33

1380

University of Manchester Hankuk University of Foreign Studies University of Miami University of Birmingham University of Leeds

UK

3

1.33

285

South Korea

3

1.16

129

USA

3

2.33

343

UK

3

1.00

96

UK

3

0.83

57

Note:  The total number of contributors is 404 from 156 socially responsible international business articles.

articles, all the remaining articles were published from 2006 onwards. Twelve of these articles have an empirical status, two are of a conceptual nature, and one is a review paper. Nine of the articles were published in the Journal of International Business Studies (the premier journal in international business), while the remaining articles appeared in Journal of World Business (3), International Business Review (1), and Journal of International Management (1). In descending order, the five most-cited socially responsible international business articles in the period under review were the following: Peredo and McLean (2006), reviewing the concept of social entrepreneurship (1,434 citations); Maignan and Ralston (2002), examining corporate social responsibility self-presentations (1,324 citations); Weerawardena and Mort (2006), providing a multidimensional model of social entrepreneurship (1,045 citations); Christmann and Taylor (2001),

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Table 1.3 Most influential socially responsible international business articles Authors

  1. Peredo and

McLean (2006)   2. Maignan and Ralston (2002)   3. Weerawardena

and Mort (2006)   4. Christmann and Taylor (2001)   5. Husted and

Allen (2006)

  6. Waldman et al.

(2006)

  7. Christmann and

Taylor (2006)

  8. Linnenluecke

and Griffiths (2010)   9. Strike, Gao, and Bansal (2006) 10. Rodriguez et al. (2006) 11. Darnall, Henriques, and Sadorsky (2008) 12. Kolk and van Tulder (2010)

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Title

Journal

Google Scholar citations

Social entrepreneurship: A critical review of the concept Corporate social responsibility in Europe and the US: Insights from businesses’ self-presentations Investigating social entrepreneurship: A multidimensional model Globalization and the environment: Determinants of firm self-regulation in China Corporate social responsibility in the multinational enterprise: Strategic and institutional approaches Cultural and leadership predictors of corporate social responsibility values of top management: A GLOBE study of 15 countries Firm self-regulation through international certifiable standards: Determinants of symbolic versus substantive implementation Corporate sustainability and organizational culture

JWB

1434

JIBS

1324

JWB

1045

JIBS

905

JIBS

630

JIBS

571

JIBS

458

JWB

424

Being good while being bad: Social responsibility and the international diversification of US firms Three lenses on the multinational enterprise: Politics, corruption, and corporate social responsibility Do environmental management systems improve business performance in an international setting? International business, corporate social responsibility and sustainable development

JIBS

412

JIBS

406

JIMAN

363

IBR

334

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Review, synthesis, and directions ­13

Table 1.3 (continued) Authors

13. Van Tulder and Kolk (2001) 14. Ioannou and Serafeim (2012) 15. Eiadat et al. (2008)

Title

Journal

Google Scholar citations

Multinationality and corporate ethics: Codes of conduct in the sporting goods industry What drives corporate social performance? The role of nationlevel institutions Green and competitive? An empirical test of the mediating role of environmental innovation strategy

JIBS

320

JIBS

310

JWB

257

Note:  Citation data were gathered during the period 15­30th January 2018. JIBS = Journal of International Business Studies; JWB = Journal of World Business; JIMAN = Journal of International Management; IBR = International Business Review.

focusing on the determinants of company self-regulation with regard to environmental issues (905 citations); and Husted and Allen (2006), dealing with strategic and institutional issues of MNEs’ corporate social responsibility (630 citations). Five of these most influential articles focused on corporate social responsibility in general, four articles were concerned with environmental/sustainability issues, two articles paid particular attention to social entrepreneurship, two articles referred to self-regulations imposed by firms themselves in their international business operations, one article focused on ethical issues, while another article concentrated on the firm’s social performance.

1.4  PROFILES OF STUDIES 1.4.1 Research Design Table 1.4 presents the research design of studies focusing on socially responsible international business. With regard to problem crystallization, the majority (48.7 percent) of these studies employed a formalized approach (as opposed to an exploratory perspective), usually expressed in the form of testable research hypotheses. This has become more evident in more recent studies, where more than half (i.e., 56.8 percent) had a formalized structure, indicating the existence of adequate material to build on

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Table 1.4 Research design of socially responsible international business articles Research design

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

Problem crystallization Exploratory Formalized Non-empirical

24.4 48.7 26.9

26.1 30.4 43.5

25.0 33.2 30.8

23.5 56.8 19.8

Topical scope Statistical study Case study Interview Other Non-empirical

51.9 5.8 13.5 1.9 26.9

43.5 – 13.0 – 43.5

42.3 13.5 9.6 3.8 30.8

60.5 2.5 16.0 1.2 19.8

Time emphasis Cross-sectional Longitudinal Other Non-empirical

64.1 4.5 4.5 26.9

47.8 4.3 4.3 43.5

65.4 3.8 – 30.8

67.9 4.9 7.4 19.8

Variable association Descriptive Causal Non-empirical

38.5 34.6 26.9

29.1 17.4 43.5

40.4 28.8 30.8

37.0 43.2 19.8

Theoretical underpinning a Institutional Theory Stakeholder Theory RBV or NRBV Legitimacy Theory Agency Theory Transaction Cost Theory Other No theory

25.6 19.9 7.7 3.8 3.2 3.2 24.3 35.9

4.4 8.7 8.7 – 4.4 4.4 17.4 56.5

21.2 15.4 9.6 9.6 3.9 1.9 23.1 40.4

34.6 25.9 6.2 1.2 2.5 3.7 27.2 28.4

Note: 

a

Studies may refer to more than one category.

other scholars’ work. The topical scope of this field of research seems to be dominated by statistical studies (i.e., 51.9 percent) – especially in more recent research, as opposed to qualitative research which usually took the form of case study analysis, in-depth interviews, or focus group discussions.

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Review, synthesis, and directions ­15

Notably, only a few studies employed a mixed method approach, combining both quantitative with qualitative research, although this could provide more insights into the subject. With regard to time emphasis, most (i.e., 64.1 percent) of the studies were cross-sectional in nature, providing only a snapshot of the research problem at a given point in time. On the contrary, the use of longitudinal research was very limited, and this was particularly the case with studies using secondary databases. None of the articles reviewed which employed primary research examined socially responsible international business issues over a long period of time, probably due to time and cost constraints. In terms of variable association, empirical articles were more or less divided into those adopting a descriptive and a causal approach. The latter was more profound in articles having a model-building method and these were primarily connected with formalized research. Interestingly, about a third (i.e., 35.9 percent) of the articles reviewed were not anchored on a specific theory or paradigm and their absence was more evident during the initial phases of this line of research. Of the remainder, Institutional Theory and Stakeholder Theory were the dominant theoretical perspectives (especially in more recent studies), reported in 25.6 percent and 19.9 percent of the articles respectively. Other theories used on a less frequent basis were the Resource-based View (and its modified version of Natural Resource-based View), Legitimacy Theory, Agency Theory, and Transaction Cost Theory. 1.4.2  Scope of Research Table 1.5 provides an overview of the scope of research conducted on socially responsible international business issues. With regard to the number of countries covered by studies in this line of research, about a third (i.e., 30.8 percent) focused on one country only, while another third (i.e., 32.1 percent) included three or more countries in their analysis. Notably, multiple countries were mainly the object of studies aiming to compare the pattern of this phenomenon on a cross-cultural basis. Both Europe (particularly countries in the European Union) and Asia (particularly China) were the focus regions for this research, with each representing 37.2 percent of the total studies reviewed. North America was the third most widely investigated region (i.e., 32.7 percent), while Latin America, Africa, and Oceania received much less attention. With regard to industry coverage, only about a quarter (i.e., 23.1 percent) of the studies concentrated on a single industry, while another quarter (i.e., 25.0 percent) included in their analysis four industries or more. In the latter case, there was a tendency to focus on industries that were more exposed to societal matters, such as those relating to petroleum, mining, and chemicals. Also, an upward trend

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Table 1.5 Scope of research in socially responsible international business articles Scope of research

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

Number of countries One Two Three or more Not specified Non-empirical

30.8 9.6 32.1 0.6 26.9

40.4 4.3 21.7 – 43.5

25.0 7.7 34.6 1.9 30.8

34.6 12.3 33.3 – 19.8

Focus region a North America Latin America Europe Asia Africa Oceania Other Not specified Non-empirical

32.7 16.0 37.2 37.2 12.2 10.9 6.4 1.3 26.9

30.4 4.3 26.1 17.4 – 8.7 – – 43.5

28.8 19.2 40.4 30.8 11.5 11.5 – 1.9 30.8

35.8 17.3 38.3 46.9 16.0 11.1 12.3 1.2 19.8

Industry coverage One industry Two industries Three industries Four industries or more Not specified Not applicable Non-empirical

23.1 1.9 5.1 25.0 9.6 1.9 26.9

4.3 4.3 – 30.4 13.0 – 43.5

36.5 1.9 1.9 17.3 11.5 2.5 30.8

19.8 1.2 8.6 28.5 19.8 1.9 19.8

Unit of analysis a Firm Consumer Student Website/Report/Ad Country Other Non-empirical

46.8 9.0 2.6 9.0 3.8 5.1 26.9

43.5 4.3 – 4.3 4.3 – 43.5

40.4 5.8 5.8 17.3 – 1.9 30.8

51.9 12.3 2.5 4.9 6.2 2.5 19.8

Note: 

a

Studies may refer to more than one category.

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was observed to cover multiple industries in articles published during the period 2013–2017. In the majority of cases (i.e., 46.8 percent), the unit of analysis was the individual firm, primarily multinational corporations or exporting/importing companies. Another tenth (i.e., 9.0 percent) obtained data from consumers and in some cases from students. Corporate websites, annual reports, and advertisements provided the unit of analysis for another tenth (i.e., 9.0 percent) of the studies reviewed, with their use being more evident during the period 2008–2012. Finally, a small proportion of studies (i.e., 3.8 percent) carried out their analysis at the country level, aiming to identify differences on how socially responsible international business is practiced on an aggregate level by indigenous firms. 1.4.3  Study Methodology Table 1.6 shows the methodological aspects of studies on socially responsible international business. With regard to sampling design, the majority (i.e., 40.4 percent) of the articles had samples characterized by a non-­probability nature, and this was particularly evident in more recent ­publications. Probability samples were more rarely employed and the same is also true with regard to studies covering the whole population. About two-fifths (i.e., 40.4 percent) of the articles reviewed used sample sizes having less than 250 units, while 17.9 percent reported samples in excess of 500 (often found in studies using secondary data). About a tenth (i.e., 10.3 percent) of the articles had a response rate of less than 30 percent, while in only 4.5 percent of them the response rate was 40 percent or more. With regard to data collection methods, a quarter (i.e., 25.0 percent) of the articles used secondary data in their analysis, and this was more obvious among studies conducted during recent years. In-depth interviews were employed in studies reported in 17.9 percent of the articles, while the survey questionnaire was the most popular data collection method, usually based on mail questionnaires (13.5 percent), drop-in questionnaires (7.7 percent), and electronic questionnaires (7.1 percent). As expected, the latter were more extensively used in more recent research due to the widespread use of the internet. In terms of analytical approaches, in the majority of cases (i.e., 37.8 percent of the articles) multivariate statistical methods were employed, especially structural equation modeling, hierarchical and probit regression analyses, and hierarchical linear modeling. Univariate/ bivariate statistical analysis and descriptive statistics were more rarely used, while modeling approaches were particularly evident in studies conducted in recent years. Our review revealed that there was a low tendency among scholars in the field to control for various types of bias. Specifically, only 12.8 percent of the articles reported that there was a control for

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Table 1.6 Study methodology in socially responsible international business articles Study methodology

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

Sampling design Probability Non-probability Whole population Not specified Non-empirical

9.6 40.4 6.4 16.7 26.9

13.0 26.1 4.3 13.0 43.5

5.8 40.4 9.6 13.5 30.8

11.1 44.4 4.9 19.8 19.8

Sample size 99 or less 100–249 250–499 500 or more Not specified Not applicable Non-empirical

21.8 18.6 12.8 17.9 1.3 .6 26.9

17.4 21.7 8.7 8.7 – – 43.5

21.2 21.2 9.6 11.5 3.8 1.9 30.8

23.5 16.0 16.0 24.7 – – 19.8

Response rate 19 percent or less 20–29 percent 30–39 percent 40 percent or more Not specified Not applicable Non-empirical

1.3 9.0 4.5 4.5 9.0 44.9 26.9

4.3 8.7 8.7 – 4.3 30.4 43.5

– 15.4 – 1.9 7.7 44.2 30.8

1.2 4.9 6.2 7.4 11.1 49.4 19.8

13.5 7.1 7.7 1.9

17.4 4.3 4.3 –

9.6 1.9 9.6 3.8

14.8 11.1 7.4 1.2

17.9 1.3 25.0 4.5 26.9

13.0 – 13.0 4.3 43.5

21.2 1.9 21.2 5.8 30.8

17.3 1.2 30.9 3.7 19.8

7.1 6.4

17.4 17.4

9.6 3.8

2.5 4.9

Data collection a Mail questionnaire Electronic questionnaire Drop-in questionnaire Mall-intercept questionnaire In-depth interviews Observation Secondary Not specified Non-empirical Analytical approach a Descriptive statistics Uni-/bivariate

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Table 1.6 (continued) Study methodology

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

Multivariate Modeling Qualitative Other Non-empirical

37.8 8.3 18.6 2.6 26.9

26.1 – 13.0 – 43.5

30.8 7.7 21.2 5.8 30.8

45.7 11.1 18.5 1.2 19.8

Controlling for bias a Non-response bias Endogeneity bias Key informant bias Common method bias Social desirability bias Not applicable Non-empirical

12.8 1.9 1.9 14.7 4.5 39.7 26.9

4.3 – – 8.7 – 21.7 43.5

9.6 1.9 1.9 11.5 7.7 40.4 30.8

17.3 2.5 2.5 18.5 3.7 44.4 19.8

Note: 

a

Studies may refer to more than one category.

non-response bias, while the existence of key informant bias was rarely examined (reported in only 1.9 percent of the articles). Common method bias was evaluated in 14.7 percent of the articles reviewed, with the testing of this type of bias showing an upward trend over time. Controlling for endogeneity bias was negligible, as this was examined in only 1.9 percent of the articles. The same was also true with regard to social desirability bias, which was reported in only 4.5 percent of the articles.

1.5  KEY THEMATIC AREAS Throughout the 23-year period examined, research on socially responsible international business has taken many and diverse courses of thematic development, with each gradually examining a variety of topics (see Table 1.7). The content of the articles reviewed was categorized into 49 thematic areas, which fell into ten broad groups as follows: external pressures for being socially responsible (6); marketing strategy and social responsibility (6); performance outcomes of socially responsible practices (6); internationalization aspects of social responsibility (7); types of focal

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Table 1.7 Key thematic areas in socially responsible international business research Thematic areas

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

25.6 9.0 18.6

26.1 4.3 26.1

19.2 5.8 15.4

29.6 12.3 18.5

1.9 5.8 5.8 10.9

4.3 – 8.7 4.3

– 1.9 1.9 7.7

2.5 9.9 7.4 13.6

Marketing strategy and SR Promotional strategy Product development  considerations Channel management and  distribution Price considerations Overall strategy Other

25.6 3.8 7.1

17.4 – 8.7

26.9 7.7 5.8

27.2 2.5 7.4

5.1

8.7

–

7.4

1.3 7.1 8.3

– – 8.7

– 7.7 9.6

2.5 8.6 7.4

Performance outcomes of SR practices Financial performance Market performance Social performance Environmental performance Export performance Other

24.4

–

25.0

30.9

4.5 4.5 3.2 3.2 4.5 9.0

– – – – – –

5.8 3.8 3.8 1.9 1.9 7.7

4.9 6.2 3.7 4.9 7.4 12.3

Internationalization aspects of SR Standardization/adaptation Internationalization HQ-Subsidiary relations Country distance Country of origin aspects Foreign direct investment Other

22.4 6.4 6.4 3.8 1.3 1.9 2.6 2.6

21.7 8.7 13.0 – – – – –

21.2 5.8 1.9 3.8 3.8 1.9 1.9 1.9

23.5 6.2 7.4 4.9 – 2.5 3.7 3.7

Types of focal SR practices Base of the pyramid Cause-related marketing/  philanthropy

21.2 4.5 1.9

39.1 – –

19.2 – 1.9

17.3 8.6 2.5

External pressures for SR Cultural environment Economic and regulatory  environment Media pressures Industry pressures Customer pressures Other

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Table 1.7 (continued) Thematic areas

Total (n = 156) %

Time period 1995–2007 (n1 = 23) %

2008–2012 (n2 = 52) %

2013–2017 (n3 = 81) %

1.3 3.2 1.3 3.8 4.5

– 8.7 8.7 – 17.4

– 1.9 – 7.7 3.8

2.5 2.5 – 2.5 1.2

3.8

4.3

7.7

1.2

Internal company influences on SR Organizational factors Managerial characteristics/  attitudes Organizational culture Other

19.2

8.7

19.2

22.2

7.7 8.3

4.3 –

7.7 7.7

8.6 11.1

8.3 1.9

– –

7.7 –

11.1 3.7

Communication of SR practices CSR/sustainability reporting Websites Advertisements Other

14.1 9.0 1.3 1.9 1.9

13.0 4.3 4.3 4.3 –

23.1 13.5 1.9 3.8 3.8

8.6 7.4 – – 1.2

Foreign consumer behavior toward SR Consumer attitudes Consumer motivations Consumer responses Other

12.2

4.3

11.5

14.8

7.7 1.9 7.7 –

4.3 – – –

1.9 – 11.5 –

12.3 3.7 7.4 –

8.3

21.7

5.8

6.2

8.3

21.7

5.8

6.2

2.6

8.7

1.9

1.2

– 12.8

– 13.0

– 11.5

– 13.6

Sustainable development Social entrepreneurship Fair trade Working conditions Environmental management  systems Other

Stimuli and barriers to SR adoption Stimuli/incentives to SR  adoption Barriers/disincentives to SR  adoption Other Miscellaneous

Note:  Articles could focus on more than one thematic area.

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socially responsible practices (8); internal company influences on social responsibility (4); communication of socially responsible practices (4); foreign consumer behavior toward social responsibility (4); stimuli and barriers to social responsibility adoption (3); and miscellaneous (1). The specific issues addressed in each of these thematic areas are discussed in the following. The first category refers to external pressures for the international firm to take socially responsible actions, identified in a quarter (i.e., 25.6 percent) of the articles reviewed. In fact, the investigation of this category has intensified during the period 2013–2017. Here, the emphasis was mainly on pressures imposed by the firm’s foreign economic and regulatory environment, which was the object of 18.6 percent of the articles. Other external issues that draw scholarly attention were related to pressures exerted by the foreign cultural environment (9.0 percent of the articles), the industry (5.8 percent of the articles), and the customers (5.8 percent of articles), which have also been more widely studied in recent years. Pressures on the firm’s activities were also exerted by mass media and/or social media, although this was reported in only 1.9 percent of the articles reviewed. Other issues were also examined in this category, such as complying with technical standards and obtaining certification from independent bodies, with each, however, being the object of a few articles only. Issues relating to the socially responsible character of the firm’s international marketing strategy also attracted a quarter (i.e., 25.6 percent) of the articles, and again the study of this area showed growth trends over time. Specifically, 7.1 percent of the articles focused on the overall marketing strategy as a whole, while of the elements of the marketing mix, product development considerations and channel distribution/­ management received most attention (tackled by 7.1 percent and 5.1 percent of the articles respectively). Conversely, pricing and promotional issues, although often confronted with ethical dilemmas, were less frequently investigated. The performance implications of the firm’s socially responsible international business practices were the focus of 24.4 percent of the articles reviewed, reaching an even higher level (i.e., 30.9 percent) during the period 2013–2017. Notably, the thrust of the emphasis was on market performance and financial performance, each reported in 4.5 percent of the articles. Another 4.5 percent of the articles connected the firm’s socially responsible actions in foreign markets with its export performance. Also, 3.4 percent of the articles studied the impact of socially responsible international business on more specialized aspects of performance, such as social performance and environmental performance. A sizeable number of articles, representing 9.0 percent of the total, included a variety of other performance measures.

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Another important thematic area, tackled by 22.4 percent of the articles reviewed, refers to various internationalization aspects of the firm’s socially responsible behavior. The emphasis here was to examine whether international firms standardize or adapt this behavior across countries (reported by 6.4 percent of the articles), while the same emphasis was put on understanding how the firm’s social responsibility changes at different stages of the internationalization process. Other issues examined on a less frequent basis focused on how the firm’s socially responsible activities are affected by the relationships between headquarters and their subsidiaries (3.8 percent of the articles), the nature of the foreign direct investment (2.6 percent of the articles), the firm’s country of origin (1.9 percent of the articles), and the distance between the home and host country (1.3 percent of the articles). More than a fifth (i.e., 21.2 percent) of the articles focused on various types of socially responsible international business areas, with the most common being based on the pyramid issues and environmental management systems (each tackled by 4.5 percent of the articles). However, although the former was an issue widely studied in recent years, the opposite was true with regard to the latter. The nature of the working conditions for producing the MNEs’ products in foreign markets was the object of 3.8 percent of the articles reviewed, while the study of social entrepreneurship in an international context was examined in 3.2 percent of the articles. Other corporate social responsibility issues which received less attention were cause-related marketing and philanthropy (1.9 percent), sustainable development (1.3 percent), and fair trade (1.3 percent). The role of internal company influences on shaping the firm’s socially responsible practices in international markets was reported by 19.2 percent of the articles reviewed, with the number of articles on this thematic area growing sharply over time. Three major issues received more or less the same attention here (each tackled by around 8 percent of the articles), namely the nature of the organizational culture (e.g., a commitment toward social values), various organizational determinants (e.g., availability of financial resources), and specific characteristics or attitudes of top managers (e.g., personal sensitivity to social issues). Notably, research interest in all three issues experienced an increasing tendency over time. About a seventh (i.e., 14.1 percent) of the articles reviewed delved into the communications aspects of the firm’s socially responsible practices abroad, with studies conducted during the period 2008–2012 showing greater interest in this thematic area. The dominant topic here dealt with by researchers was the reporting of the CSR/sustainability achievements of international firms, reported in 9.0 percent of the articles. An analysis of advertisements promoting the socially responsible character of these

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firms was observed in another 1.9 percent of the articles, while an exploration of this issue in corporate websites received much less attention (i.e., 1.3 percent of the articles). Another stream of research, which rose from 4.3 percent in the period 1995–2007 to 14.8 percent in the period 2013–2017, and averaged 12.2 percent of the articles during the whole period under investigation, referred to foreign consumer behavior toward social responsibility. The focus was on foreign consumer attitudes (e.g., likeness, beliefs, and feelings and responses (e.g., boycotting, product/store preferences, and purchasing decisions/choices) toward the international firm’s socially responsible activities, each reported by 7.7 percent of the articles). A few articles (i.e., 1.9 percent of the total) focused on specific consumer motivations, such as tangible and intangible product attributes, attributions, and value systems. The final thematic area revolved on factors pushing or preventing international firms to adopt socially responsible practices in foreign markets, traced in 8.3 percent of the articles reviewed. However, although this area was highly researched during the initial phases of the investigation period, it has gradually faded over time. Stimuli/incentives to adopt international socially responsible activities (e.g., corporate aspirations/ orientation, financial rewards, international diversification) attracted most of the attention, while barriers/disincentives to social responsibility adoption (e.g., financial constraints, market access limitations, production constraints) were recorded in only a few articles (i.e., 2.6 percent).

1.6 CONCLUSIONS, IMPLICATIONS, AND FUTURE DIRECTIONS One central conclusion that can be derived from the previous review of the literature on socially responsible international business is that this body of research, although relatively limited in quantity, has advanced remarkably during the last decades (particularly in recent years). Driving forces behind these developments were studies that appeared in specific publication outlets specializing in international business, as well as a group of prolific researchers who were responsible for a large percentage of the total articles published on the subject. The work of these scholars has been the source of many influential ideas that encouraged other current or neophyte scholars to produce more studies. Our review has also identified certain articles that have greatly influenced academic thinking on socially responsible international business and laid the foundations for the further advancement of this research.

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With regard to research design, it seems that this field of research is gradually becoming more mature, as demonstrated by the increasing use of formalized approaches, the adoption of more statistical studies, and the extensive theoretical grounding provided. However, there is still room for more causal type of research to be conducted and the execution of longitudinal studies. The scope of research has also shown signs of proliferation, as indicated by the increasing use of multi-country studies, the coverage of diverse industries, and the variety of angles of units of analysis used to examine the subject matter. However, there is still room for improvement, especially as regards the conduct of more research in emerging and developing economies, particularly focusing on unexplored regions like Latin America and Africa. In the case of methodological issues, this line of research is characterized by adequate sample sizes, reasonable response rates, and strong analytical tools, although there is a space to employ more probability samples. There is also a need to make more extensive use of various bias controls with regard to survey non-response, common method variance, endogeneity, and social desirability. With regard to the thematic areas covered, both the breadth and depth of research on socially responsible issues have increased over time, taking ideas mainly from management, marketing, operations management, and human resource management. All in all, this body of knowledge has applied a social responsibility flavor to almost all aspects of international business activity, ranging from internationalization and buyer behavior to strategic issues and performance outcomes. Thematic focus varied by time period, with some topics showing declining trends (e.g., stimuli and barriers to social responsible adoption), others demonstrating upward trends (e.g., performance implications of socially responsible activities), while still others exhibit an unclear developmental pattern (e.g., communication of social responsible achievements). 1.6.1 Implications Despite serious developments in this line of research, there is still room to advance it further through more collaborative efforts among international business scholars. It is also important to encourage doctoral students and neophyte researchers to conduct research on novel research projects on socially responsible international business. New ideas can be borrowed from recent developments in the domestic literature on corporate social responsibility, as well as from studies conducted in other business (e.g., marketing) or non-business (e.g., sociology) disciplines. There is also a need to expand the geographic scope of this research, by extending the analysis to cover understudied countries (e.g., developing economies),

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industry groups (e.g., pharmaceuticals), and market type (e.g., business to business). Journal editors should encourage more research on socially responsible international business issues, especially in crucial areas which have been under-researched, such as the analysis of consumer behavior toward foreign firms’ socially responsible or irresponsible activities. Although several special journal issues on the subject have been published in the past, producing many insightful articles, there is still room for more to cover new cutting-edge areas of research. In addition, defining relevant conference session themes, organizing special interest research groups, and setting panel discussions focusing on socially responsible issues would also be helpful to further advance this area of research. The periodic publishing of chapters in edited books will also assist in generating, disseminating, and applying new knowledge on the subject. 1.6.2 Limitations Although an adequate number of socially responsible international articles was found in the top eight international business journals to carry out our review, more articles can also be traced in other specialized (e.g., Journal of Global Marketing) or mainstream (e.g., Academy of Management Journal) business journals. In addition, in our study we excluded monographs, books, edited volumes, and conference proceedings, which can also contain rich input on the subject. Although our data were analyzed in a manual way, it is understood that the use of powerful computer software programs for qualitative analysis (e.g., NVivo, Qualrus, CATPAC) could produce more insights. Despite the insightful information provided by this review, there is room to extend the analysis to other important issues, such as the epistemological foundations and developments of this line of research, the various conceptualizations of social responsibility used by extant studies, and the nature of causal associations between constructs. With regard to the latter, the application of meta-analytical methods on the empirical results of prior research can provide an integrated picture of the strength, sign, and direction of these associations, particularly on topics where available findings are too fragmented and/or too controversial to yield concrete conclusions. The findings of this review could be enriched with additional input directly derived from scholars specializing in international business. This could take the form of surveys among academics in different parts of the world and/or focus group discussions with scholars carrying out research on socially responsible international business. The use of the Delphi

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Review, synthesis, and directions ­27

method among researchers would also be useful to generate more ideas on how this stream of research should advance in the future and prioritize the directions to be taken. Finally, forming a specialized ‘think tank’, comprising prominent researchers in the field, would help to identify cutting-edge areas of research and provide a more systematic and coordinated effort to investigate socially responsible phenomena in international business.

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2.  A  n overview of social responsibility dimensions in international business Noemi Sinkovics, Rudolf R. Sinkovics, and Jason Archie-Acheampong 2.1 INTRODUCTION Peter Buckley’s (2002) seminal paper examining the relevance of international business (IB) research marks the start of an opening towards more critical topics inherent to the nature of IB, such as labor issues in foreign locations, managerial ethics, and corporate social responsibility (CSR). One and a half decades later, Buckley, Doh, and Benischke (2017) suggest that the discipline is in a unique position to focus on the grand challenges of our time and contend that IB scholars can contribute by investigating how multinational enterprises (MNEs) are responding to pressures created by these grand challenges. However, MNEs are often seen as part of the problem rather than the solution (cf. Sinkovics, Hoque, and Sinkovics, 2016; Wettstein, 2012). As a consequence, the concept of social responsibility may be better conceived of as a continuum, or as degrees, rather than a discrete concept. This is in line with Sinkovics et al.’s (2015) proposition that, when it comes to social constraints, MNEs have three main strategies for responding. They can attempt to benefit from the existence of these constraints, try to bypass them, or leverage their resources and/or business models to eradicate/reduce them (Sinkovics et al., 2015; Sinkovics, Sinkovics, and Mo, 2014). Therefore, the continuum of socially responsible behavior stretches from irresponsible and at times malevolent conduct to meaningful action geared towards tackling the symptoms and/ or the root causes of grand challenges. Against this background, the objective of this chapter is to take stock of how the IB literature has engaged with the degrees of responsible behavior that make up the continuum of social responsibility. This stock-taking exercise is important for a number of reasons. First and foremost, there are more and more scholars wishing to incorporate responsibility-related aspects into their research endeavors. Yet, this area is relatively new for many IB scholars. It is thus important to 29

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know which topics have been covered within the field and to what extent. Furthermore, uncovering areas that are under-researched provides suggestions for future research. Hence, this chapter seeks to provide researchers who are new to this topic with a starting point, and others with inspiration for future research. The extant literature is not short of reviews on the role of businesses in addressing social and environmental problems (e.g. Doh and Lucea, 2013; Egri and Ralston, 2008; Holtbrügge and Dögl, 2012; Kolk, 2016; Kolk and van Tulder, 2010). While these studies make valuable contributions, they are not without limitations, which arise from (1) the narrowness of the search strategy (e.g. Holtbrügge and Dögl, 2012), (2) constraints imposed on the time period (e.g. Doh and Lucea, 2013), and (3) limiting the number of journals investigated (e.g. Kolk, 2016). To this end, the present review attempts to address all three of these limitations and offer a comprehensive literature review. Our search strategy covers a wide range of search terms, aiming at capturing the different degrees of responsibility. We also extend the search to 14 IB journals that are listed in the Web of Science database, arguably making up the universe of IB journals (cf. Tüselmann, Sinkovics, and Pishchulov, 2016). Lastly, we do not impose any limits on the time period covered. The structure of this chapter is as follows. The next section introduces the reader to the methodology we adopted. This is followed by a discussion of the findings, organized into eight sub-sections according to the overall themes that emerged from our analysis. The concluding remarks summarize the main observations and the limitations of this study.

2.2 METHODOLOGY We used the Web of Science database to perform our search. We downloaded the abstracts and the associated bibliographic information including the list of all cited references. Tüselmann et al. (2016) categorize 16 journals as IB journals. However, only 14 are included in the Web of Science: Journal of World Business (JWB), Journal of International Business Studies (JIBS), International Business Review (IBR), European Journal of International Management (EJIM), Asia Pacific Journal of Management (APJM), Asia Pacific Business Review (APBR), Journal of International Management (JIM), Management Organization Review (MOR), Management International Review (MIR), Critical Perspectives of International Business (CPOIB), Thunderbird International Review (TIR), Global Strategy Journal (GSJ), Multinational Business Review (MBR), and Journal of East West Business (JEWB). Neither Transnational Corporations nor the Journal of Asia Pacific

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Business is currently available in Web of Science. As we needed the bibliometric information to be in the same file format for the bibliographic coupling analysis, we concentrated our search on the former 14 journals and excluded the latter two from the analysis. The search string included a wide range of key words (see Appendix) ranging from corporate social responsibility to humiliation and crime. We cast the net as wide as possible in order to identify studies spanning the different degrees of responsibility. Search terms related to corporate irresponsibility were inspired by Wagner et al.’s (2008) operationalization. The remaining search terms were the outcome of an iterative brain-storming process including the consulting of previous review papers and the skimming of preliminary search results. The final search yielded 689 articles. Subsequently, the authors judged the relevance of each article. This process left 4841 in the sample. The main selection criterion was whether or not the article was of relevance to business responsibility. This relevance could be broad or narrow. The analysis process followed two steps. First, the freely available VOSviewer software (www.vosviewer.com) was used to perform a bibliographic coupling analysis. In such analysis, the relatedness of items ­(academic publications) is determined based on the number of references they share (Van Eck and Waltman, 2014). The underlying assumption is that articles on a certain topic will build on prior research related to the topic of the manuscript. As a consequence, the more references two publications share, the stronger is the expectation that certain commonalities will exist between them. We intentionally set the threshold for the number of shared references at 0 in order to obtain broad themes and assign each publication to a cluster. As the next step involved a textual analysis in NVivo, this very broad clustering was deemed appropriate for our purposes. The analysis yielded 20 clusters in total, of which 12 contained only one publication. In other words, 12 publications did not have any references in common with any other publication in the sample. After we had determined which article in our sample belonged to which cluster, we imported the abstracts and the bibliographic data into NVivo. The bibliographic information was assigned to each article through the source classification sheet. We supplemented this data with the cluster information obtained from VOSviewer. This allowed us to conduct crosscluster comparisons. We then performed a more fine-grained thematic analysis in NVivo. While the overall clusters provided an overview of eight general themes in the sample, the NVivo analysis allowed us to drill down and identify sub-themes. By utilizing the source classification sheet, we were also able to draw direct comparisons between journals and examine the development of certain themes over time. The remainder of this chapter will discuss our findings.

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2.3 FINDINGS Table 2.1 provides an overview of the distribution of relevant publications across journals and clusters. The last row shows the total number of relevant papers in each cluster. The last column indicates the total number of relevant papers in each journal. The largest cluster includes 105 studies related to ethics, management, and contextual factors, followed by the cluster containing 87 papers concerned with the antecedents and/or outcomes of CSR. The next three clusters encompass papers on foreign direct investment (FDI) and economic development, institutional dynamics and non-market strategies, and business models and entrepreneurship in developing countries, with 65, 61, and 59 papers respectively. Studies linked to corruption-related issues (38 papers), the drivers, implementation, and outcomes of non-market strategies in host countries (37 papers), and articles displaying a critical and/or novel angle (20 papers) represent smaller clusters. The remaining 12 papers do not share any references with other papers. We subsumed them under the category “other.” Table 2.2 offers an overview of the clusters and the main themes and sub-themes that emerged from the NVivo analysis. Our temporal analysis furthermore revealed that 2006 marked the beginning of a new trend that saw a significant rise in responsibility-related publications. Before 2006, the number of papers across all clusters ranged from one to three, with the exception of 1999, 2004, and 2005 with five, six, and four publications respectively. In 2006 there were 19 publications across the clusters. The annual number of studies published peaked in 2015 at 79. The rest of this section will discuss each cluster in more depth. 2.3.1  Ethics, Management and Contextual Factors This cluster can be subdivided into six distinctive themes: (1) leadership, (2) human resource management (HRM), (3) the impact of context and culture on responsible business, (4) marketing ethics, (5) entrepreneurial morality, and (6) theoretical integration efforts. Studies examining leadership address the contextual antecedents shaping leadership. They furthermore look at the relationship between leadership behavior and business ethics. Results indicate country and industry effects on the nature of business ethics (Schlegelmilch and Robertson, 1995), implying that managers in more modernized contexts are more inclined to recognize ethical and unethical behavior (Redfern and Crawford, 2010). The literature depicts different types of leadership, including transformational, ethical, and paternal leadership, as well as subordinate influence ethics. In doing so, studies examine the antecedents of leadership behavior and its impact on business ethics.

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APBR APJM CPOIB EJIM GSJ IBR JEWB JIBS JIM JWB MOR MIR MBR TIR Grand  total

Journals

Clusters

12  5 16  2  5

 3 87

 1 105

 4  7  4 13  1 15

 7  2  5 65

 6  7 13

16

 2  2  2  3

 5  2  6  7  2  1  3 61

13  6  1  5  2  8

 2 59

 6  3 12  2  1

 7  8  2  5  1 10

38

 5  1  8  4  7  2   2

 1

 1  7

37

11  1  7  3  2  2

 1  2  5

 2  1

2. Antecedents 3. FDI 4. Institutional 5. Business 6. Corruption 7. Non-market and and dynamics models and strategies – outcomes economic and nonentrepreneurship drivers, of CSR development market in developing implementation, strategies markets and outcomes

19  1  9  1 19  3 18  5  3

 9 17

1. Ethics, management, and contextual factors

Table 2.1  The distribution of publications across journals and clusters

12

 1  1  6

 5  1

20

 2

 2

Other

 2

 2

 8  2

8. Novel topics in IB

40 48 17 49 7 70 2 71 25 85 23 28 5 14 484

285 371 55 338 119 814 43 1542 276 795 213 1070 58 113 6092

Total Total responsibility- published related in journal2

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Cluster 4: Institutional dynamics and non-market strategies ●  Impact of institutional dynamics: Legitimacy, corporate culture, institutional constraints, market financing, innovation, diversity, MNE transaction costs, risk management, political ties (political activity/political connectedness) ●  Corporate governance: Family control, governance in weak institutional settings, owner structure influence, institutional convergence, informal institutions, tightening corporate governance, risk management ●  Institutional voids (IV): CSR as a response to IV, no business group influence

Cluster 3: FDI and economic development

Economic development as a moderating variable, economic development as a control variable, economic development as context

●  Implicit:

●  Explicit

Cluster 2: Corporate social responsibility ●  Antecedents and outcomes of CSR: Firm level, institutional level, stakeholder pressures, business case for CSR (organizational benefits) ●  Corporate political activity: Corporate diplomacy, overt and covert political activity, political activity intensity ●  Attitudes towards CSR: Consumers, business professionals, managers and students ●  CSR and brand-related issues: Brand differentiation, brand reputation ●  Environmental responsibility (ER): Factors influencing ER, firm-level outcomes ●  Governance: Antecedents and outcomes of disclosure, crosscultural research ●  Sustainability: Brand commitment, HR involvement, lean production in supply chains, sustainability in emerging economies, impact of culture and regulations, sustainability accounting, sustainable value creation

Cluster 1: Ethics, management, and contextual factors ●  Leadership: Contextual antecedents and leadership, conditions fostering firm-level ethics ●  HRM: Employee retention, representation, equality, diversity and fairness, working conditions ●  Context and culture: Impact of culture, impact of religion, cross-cultural variation ●  Marketing ethics: Online advertising, impact of nationality on ethics of sales, social marketing advertising, unethical marketing ●  Entrepreneurial morality: Determinants of entrepreneurial morality ●  Theoretical integration efforts: Business ethics and neoclassical theory, evolution of institutional ethics

Table 2.2  Thematic overview of clusters

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Cluster 8: Under-represented topics in IB ●  Critical issues: Marginalized communities, inequalities created by internationalization, globally mobile elite, pathologies of social collectives, CSR patronage, structural violence of globalization, NGO voice ●  MNE-NGO collaborations: Host-country development, impact of civil-society distance, legitimization of MNE-NGO partnerships, public-private academic research ●  Other: Improvement of CSR language resources, review of social responsibility in IB

Cluster 7: Implementation of non-market strategies operationalization: Internationalization of societal failures, global allocation of resources, global stakeholder management, CSR and sustainable development in IB ●  Non-market strategies to gain legitimacy: Environmental labeling, socially valuable goods offerings, subsidiaries and CSR certifications, overcoming legitimacy through reporting, legitimization of new tech through local endorsements ●  Other: Standards compliance, social elites, shared value creation, responses to ecological issues, CSR implementation in subsidiaries, reducing greenhouse emissions, non-market capabilities, corporate governance and knowledge management

●  Conceptual

Cluster 6: Corruption ●  Conceptualization and operationalization: Critical assessment of corruption, historical roots of corruption, negative consequence of corruption, special Asian case, summary of corruption literature ●  Country-level investigations: Antecedents and effects of corruption, role of institutions in tackling corruption, other (e.g. occurrence in cronyism) ●  Firm-level investigations: Bribery behavior in firms, firm-level outcome of corruption, MNEs as agents of change, other (e.g. trading favors)

Cluster 5: Business models and entrepreneurial markets development role: Employment, crime in EM, cross-sector partnership, environment-based issues, entrepreneurship, CSR-based issues, micro-finance, social embeddedness, markets for the poor ●  Social entrepreneurship: Factors affecting success, conceptual developments, social enterprise capabilities, other (e.g. hybrid models in SSA)

●  Business

behavior: Factors influencing philanthropic behavior (mitigate environmental outcomes/impact upon firm performance/foreign giving as a strategic resource), outcomes (mitigate environmental outcomes/impact upon firm performance/foreign giving as a strategic resource)

●  Philanthropic

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Transformational leadership is expected to encourage pro-social values among employees, as seen in behavior such as cooperation and volunteering (Muethel, Hoegl, and Parboteeah, 2011), improve firm performance (Muethel et al., 2011), facilitate authentic relationships between employees and their leaders (Bramming and Johnsen, 2011), and encourage employee voice (Wang et al., 2012; Yang and Liu, 2014). Paternalistic leadership is shown to be characterized by the compassion of leaders (Wei, Zhu, and Li, 2016). However, further studies have highlighted the ambiguity of paternalistic leadership, as it can take the form of either benevolence or exploitative behavior across different cultural contexts (Mansur, Sobral, and Goldszmidt, 2017). Subordinate influence ethics examines how the ethics of subordinates influences the behavior of superiors within organizations. Studies uncover a range of relevant macro- and micro-level factors (Karam et al., 2013; Ralston et al., 2009a, 2009b). Ethical leadership within an organization can be derived from a firm’s cultural settings (Wang et al., 2017). Other studies on the topic emphasize group harmony as an aspect of ethical leadership (Chen et al., 2016). Further evidence suggests that ethical leadership positively influences employee voice behavior, with organizational identification and organizational trust respectively mediating and moderating this relationship (Yang and Liu, 2014). Lastly, in other studies, intercultural competencies such as self-management, perception management, and relationship management are found to be important factors in effective global responsible management (Miska, Stahl, and Mendenhall, 2013). Studies subsumed under HRM can be broadly categorized into (a) equality, diversity, and fairness, (b) working conditions, (c) representation, and (d) employee retention. In the area of employee retention, intrinsic rewards lead to an increase in the latter (Tymon, Stumpf, and Doh, 2010). Furthermore, psychological ownership – which refers to the level of connectedness and commitment an individual demonstrates – is used as a tool for talent management in terms of retaining highly skilled employees (Olckers and Du Plessis, 2015). In other studies, psychological ownership explains why shareholders remain aligned and participate in their family businesses (Lepez-Vergara and Botero, 2015). Finally, in the area of employee attractiveness, Newburry, Gardberg, and Sanchez (2014) find that marginalized groups are more attracted to internationally inclined firms that have foreign headquarters. Within the sub-theme of employee representation, employee voice behavior is depicted as being influenced by organizational socialization (Wu, Tang, Dong, and Liu, 2015), with associated grievance management systems also influenced by the history and ownership form of the firm, and contributing to productivity and enhanced relationships (Cooke and Saini,

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2015). More nascent theorizing on conflict avoidance demonstrates that employees with high closure needs demonstrate greater tendency towards conflict avoidance (Zhang, Wei, Chao, and Zheng, 2017). Representational predicaments arise in employees when subordinates experience a lack of employee voice, a lack of vertical feedback channels, and an authoritarian leadership style. Within the area of unionization, early studies detail the role of nationality in the likelihood of unionization but find no relationship effect (Sanyal, 1990). They furthermore address the role of unions in gaining collective bargaining contracts in foreign-owned firms (Sanyal and Neves, 1992). Research also shows that the cultural orientation of an employee and the organizational culture of the firm impact on employees’ attitudes towards union membership (Sarkar, 2009), with trust, cooperation, and honesty depicted as key facets in enabling productive employeemanagement relationships (Mirowska, 2008). Furthermore, at the firm level, evidence shows that transnational corporations (TNCs) strategically enable shifts in organizational and geographical boundaries in order to weaken the bargaining power of unions (Ietto-Gillies, 2017). The third sub-theme within HRM deals with equality, diversity, and fairness. The role of religion is explored in order to determine its impact on how diversity is managed (Soltani, Syed, Liao, and Shahi-Sough, 2012) and the workplace affiliation of ethnic minorities (Rao, 2012). Within the theme of gender discrimination, religion is drawn upon to depict how the cultural dynamics of Islamic societies influence gender equality through both informal and formal institutions (Syed, 2008). The formal structures of governmental policies also contribute to the tackling of gender discrimination within the workplace (Patterson and Walcutt, 2013, 2014). To address gender inequalities, gender quotas are proposed as a means of creating an effective talent management strategy (Tatli, Vassilopoulou, and Ozbilgin, 2013). Furthermore, on a macro level, utilizing the global social tolerance index, Zanakis, Newburry, and Taras (2016) undertake scale development for the measurement of social tolerance, thus drawing upon gender equality. Innovation and HRM are also examined through the lens of creative capital, as firms manage the diversity of skills and knowledge in order to enhance their overall innovation performance (Veenendaal, van Velzen, and Looise, 2014). Finally studies find that diversity management has a positive effect on organizational commitment when mediated by employee perceptions of procedural justice (Magoshi and Chang, 2009). Within the theme of justice and fairness, distributive justice influences an employee’s overall level of organizational commitment and job satisfaction (Leung, Zhu, and Ge, 2009). From a negative perspective, procedural injustices during promotion processes harm employee commitment and job satisfaction (Wan, Sulaiman, and Omar, 2012). Furthermore, research

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has shown how procedural and interactional injustices can exist between host-country managers and foreign managers within strategic alliances (Gomes, Cohen, and Mellahi, 2011). The link between CSR and global talent management is made in order to depict the institutional and cultural variances in managerial competency when it comes to addressing CSR issues (Kim and Scullion, 2011). Subsumed within the category of HRM, the working conditions of employees are also explored. Evidence shows that work-life balance is influenced by gendered norms, as ideas on flexibility are treated differently across men and women (Gatrell and Cooper, 2008). Lam, Walter, and Ouyang (2014) address employee well-being by exploring the impact emotional display rules have on job performance, with further studies offering cynicism on the relationship between the happiness of a nation and its overall productivity (Kessler et al., 2008). Gendered nuances on job satisfaction are evidenced in the overall job satisfaction of female employees and managers, who are more likely to experience conflict as a result of work than family factors (Ren and Foster, 2011). Collings, Scullion, and Morley (2007) call for the need to design adaptable HRM processes that take into consideration the complexities involved in global staffing. Studies pertaining to employee working conditions address differences in the emotional management of men and women, showing that men tend to demonstrate anger and women sadness in response to hurtful events (Li, Ashkanasy, and Mehmood, 2017). Studies in this area consider the contextual variances of HRM and have also depicted the experiences of lesbian, gay, bisexual, and transgender (LGBT) expatriates who face personal risks when working in dangerous locations (McPhail and McNulty, 2015). Relational-based psychological contracts are also used as means by which managers deploy a duty of care towards their subordinates when operating in high-risk environments (Ramirez, Velez-Zapata, and Madero, 2015). Research has found that, in the case of addressing child labor, MNEs not only follow internationally agreed norms but also deploy HRM practices that are “multi-domestic” (Kolk and van Tulder, 2004). In the area of employee protection, the political orientation of the government and the electoral system have been shown to influence the extent of firm-level redundancies (Goergen, Brewster, and Wood, 2013). The third wider theme is concerned with the role context and culture play in firms’ responsible behavior. Studies exploring the interface of religion and business ethics call for a greater level of recognition and understanding of the religious and spiritual context as a pre-determining factor in ethical decision making (Ananthram and Chan, 2016; Liu and Stening, 2016). Other studies have sought to determine the relationship between the economic context of the firm and work-related values (Froese, 2013), with

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results showing that economic liberalization has led to higher uncertainty avoidance in firms. Furthermore, using the new institutional economics framework, von Staden (2016) shows that ideology impacts on business ethics, with further research on cultural dimensions finding that societies characterized by conservatism enhance the level of dividend payments in firms (Shao, Kwok, and Guedhami, 2010). The negative implications of culture are also addressed when examining the impact of close guanxi parties. Although close relationships may foster cooperation between guanxi parties they may also create negative externalities, such as reducing organizational social capital and limiting cooperation between guanxi and non-guanxi parties (Chen, Newburry, and Park, 2009). In detailing the value systems of entrepreneurs in small and medium-sized enterprises (SMEs), findings demonstrate how entrepreneurial values are derived from embeddedness within the local environment (Del Baldo, 2013). Although calls have been made to improve research generalizations made on cross-cultural measurements (Franke and Richey, 2010), the sub-theme of cross-cultural variations notably explains how national cultural differences impact on firm behavior. Studies have addressed the impact of culture on unethical negotiation tactics (Al-Khatib, Malshe, and AbdulKader, 2008) and moral behavior (Husted et al., 1996), and have found that cultural differences and diversity influence the contents of codes of conduct and the moral climate of a firm (Langlois and Schlegelmilch, 1990; Macklin, Martin, and Mathison, 2015; Singh et al., 2005). In determining the evolution of entrepreneurship in ethnic communities, research finds that the contextual entrepreneurial culture influences subsequent entrepreneurial activities (Li, Young, and Tang, 2012). Amongst these studies, ethical values and beliefs at the firm level are also addressed from a cross-cultural perspective (Lovett, Simmons, and Kali, 1999; Stajkovic and Luthans, 1997). In light of differences in the ethical values of different nationalities (Whitman, Townsend, and Hendrickson, 1999), Forsyth and O’Boyle (2011) demonstrate that the ethical position of a country’s inhabitants can impact upon the overall ethical position of a firm (Forsyth and O’Boyle, 2011). Furthermore, findings on the business goal profiles of managers and professionals show a move beyond goals based solely on growth and wealth, and a greater emphasis towards societal responsibility (Hofstede, 2009). Findings that emerge from the category of marketing ethics focus on consumer views and attitudes towards online advertising (Wang and Sun, 2010), cross-national comparisons of sales personnel’s ethical and work values (Dubinsky et al., 1991; Whitman et al., 1999), and the incorporation of sustainability practices into firms’ overall marketing strategies (Gupta, Czinkota, and Melewar, 2013). Ethics and trust are found to

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have an impact on marketing relationships within international marketing channels (Spais and Kaufmann, 2016). In other studies, the integration of social marketing and social entrepreneurship within educational courses is also examined (Spais and Beheshti, 2016). In the exploration of unethical marketing behavior by exporting firms, evidence indicates that, when participating firms demonstrate synergy in their values and similarity in ethical codes, the nature of their working relationship is enhanced (Leonidou et al., 2013). Studies in the category of entrepreneurial morality explore entrepreneurship from an ethical and moral perspective (Petrovskaya, Zaverskiy, and Kiseleva, 2016), and investigate how entrepreneurial values are derived from a firm’s historical, cultural, and social context (Bitros and Karayiannis, 2010). Finally, in the sixth category efforts are made to contextualize business ethics including historical perspectives (Lie, 2016; Rowley and Oh, 2016a). 2.3.2  Corporate Social Responsibility The NVivo analysis yielded eight sub-themes within this cluster: (1) antecedents and consequences of CSR, (2) the role of CSR and stakeholders, (3) corporate political activity, (4) CSR and brand-related issues, (5) environmental responsibility, (6) governance, (7) sustainability, and (8) attitudes towards CSR. Within the sub-theme of antecedents and consequences of CSR, a number of studies deal with the organizational benefits of CSR (Gupta and Kumar, 2013; Munoz, de Pablo, and Pena, 2015). Findings show that CSR contributes to firm performance through its influence on the marketing competence of the firm (Zeng et al., 2013), with marketing competence also being shown to play a mediating role in the relationship between CSR and firm performance (Bai and Chang, 2015). The interaction effect of CSR and innovation on business performance is also explored, with Costa, Lages, and Hortinha (2015) finding a positive effect of CSR on exploratory innovation. Although studies have found an effect of CSR on financial performance (Cui, Liang, and Lu, 2015; Munoz et al., 2015), Hou et al. (2016) find that CSR has more of an influence on operational performance than financial performance, and that environmental CSR is more beneficial for the bottom line than socially oriented CSR. In this cluster, the concept of legitimacy is often used in conjunction with financial-performance-related arguments (e.g. Aguilera-Caracuel et al., 2015; Zeng et al., 2013). Legitimacy also plays an important role in foreign markets, where new entrants often engage in host-market CSR to overcome their liability of foreignness (Maruyama and Wu, 2015). Furthermore,

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within emerging economies, philanthropic behavior is adopted by firms in order to acquire legitimacy with outside stakeholders (Zheng, Luo, and Maksimov, 2015), demonstrating the use of CSR as a strategic tool. The relationship between CSR and legitimacy from a governmental perspective is also examined, and findings show that CSR is used to gain political legitimacy from the host-market government (Marquis, Yin, and Yang, 2017) and that the CSR disclosures of MNE subsidiaries are used to gain legitimacy and reduce the liability of foreignness (Riaz et al., 2015). In other areas relating to the business case of CSR, it has been shown to contribute to value creation (Husted and Allen, 2009), with responsible supply chain management having the potential to improve relationship commitment between lead firms and their suppliers, as well as improving the sustainability performance of suppliers (Lee, 2016). Further research also highlights that firms tend to adopt a more business case approach to CSR, focusing on market gains rather than on their employees (Cooke and He, 2010). From a more critical perspective, Labucay (2015) proposes a revision of the business case approach to incorporate both social and economic efficiency. Studies exploring the antecedents and consequences of CSR also draw upon firm-level attributes that impact upon the overall degree of social responsibility. In the area of labor protection, research has found that state-owned enterprises demonstrate a greater tendency to implement pro-labor protection mechanisms than non-state-owned enterprises (Han and Zheng, 2016). However, state ownership has also been found to weaken unabsorbed organizational slack and therefore a firm’s overall contribution to corporate social performance (Xu et al., 2015). In terms of international diversification, its impact upon firms’ CSR behavior remains varied, as firms demonstrate both responsible and irresponsible behavior during such times (Strike, Gao, and Bansal, 2006). Furthermore, from a leadership perspective, research finds that ethical leadership affects CSR through its moderating effect on firm reputation (Zhu, Sun, and Leung, 2014), with intercultural competencies regarded as important in addressing CSR demands within communities (Miska et al., 2013). Beyond firm-level characteristics, institutional pressures impact upon the CSR behavior of the firm (Judge, McNatt, and Xu, 2011; Young and Makhija, 2014), with evidence showing that institutional differences inherent in liberal market economies (LMEs) and command market economies (CMEs) impacting differently upon firms’ CSR behavior (Purdy, Alexander, and Neill, 2010). Furthermore, findings show that firms from LMEs communicate more regarding CSR than do firms from CMEs (Carrasco-Monteagudo and Buendia-Martinez, 2013), with the governing environment of a country (whether rules-based or r­ elation-based

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g­ overnance) significantly determining the degree to which firms communicate about their CSR practices (Li et al., 2010). Li et al. (2010) find that firms from rules-based countries tend to communicate more on their CSR practices. Beyond formal institutional factors, informal cultural dynamics and norms impact upon CSR. Evidence demonstrates that a religious atmosphere strengthens CSR (Du et al., 2016), cultural systems influence social performance (Ioannou and Serafeim, 2012), human values impact upon overall consumer and entrepreneur perceptions of CSR (GonzalezRodriguez, Diaz-Fernandez, and Simonetti, 2015), and the cultural context of a firm impacts upon its overall social and environmental responsibility (Lynes and Andrachuk, 2008). Furthermore, when operating in a host country characterized by strong press and speech freedoms, firms will demonstrate a lesser tendency towards social irresponsibility (Fiaschi, Giuliani, and Nieri, 2017), and when operating in contexts with high issue salience and stakeholder power, MNEs adopt distinct CSR policies in order to manage their overall legitimacy (Rathert, 2016). Further work depicting host-country impacts upon CSR finds that, when home-country distance – that is, between the MNE headquarters and its subsidiaries – is high, the subsidiaries are less likely to engage in CSR (Campbell, Eden, and Miller, 2012). Several studies explore the influence of stakeholders on CSR behavior (Judge et al., 2011; Oetzel and Getz, 2012). Studies address this impact upon managerial perceptions of CSR (Kuznetsov and Kuznetsova, 2010) and the impacts of primary (internal) and secondary stakeholders, such as consumers (Zhao, Park, and Zhou, 2014) and subsidiaries (Park, Chidlow, and Choi, 2014; Park and Ghauri, 2015). Although subsidiaries can seek to gain autonomy from their parent firm through CSR (Morgenroth and Luiz, 2017), research shows that the power asserted by the parent firm over its subsidiaries can crowd out local stakeholder voices (Crilly, 2011). Furthermore, shareholder power has been shown to have negative implications for CSR behavior by contributing to CSR suspensions (Liu, Feng, and Li, 2015). Within the domain of corporate political activity, findings show that firms use corporate diplomacy to engage with external stakeholders (Henisz, 2016). Such behavior can take the form of either overt or covert political activity (Uldam and Hansen, 2017), with the intensity of this activity also influenced by country- and firm-specific conditions (Holtbrugge, Berg, and Puck, 2007). Studies in the category of governance examine the relationship between corporate governance structures and responsible business behavior (e.g. Cuadrado-Ballesteros, Rodriguez-Ariza, and Garcia-Sanchez, 2015; de Graaf, 2016). When investigating the firm-level characteristics that shape

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corporate governance, research finds that, when there is a high proportion of independent directors, CSR disclosures are higher (CuadradoBallesteros et al., 2015). Gallego-Alvarez and Ortas (2017) investigate the impact of community culture upon sustainability reporting, while other studies demonstrate that firms from strong collectivist and feminist societies display greater information integration within their disclosures (Garcia-Sanchez, Rodriguez-Ariza, and Frias-Aceituno, 2013). Furthermore, studies point to the role of government and the ethical decision-making behavior of auditors in shaping CSR disclosures and corporate governance (de Graaf, 2016; Rodgers, 2009). Finally, institutional characteristics are discussed as impacting corporate governance behavior, with international regimes recognized as facilitating accountability in MNEs (Omoteso and Yusuf, 2017) and standards enforcement mechanisms recognized as increasing the level of CSR reporting in firms (Fortanier, Kolk, and Pinkse, 2011). When investigating the communication of CSR through company web pages, research finds that the manner in which CSR messages are conveyed varies across different countries (Maignan and Ralston, 2002), and these differences in CSR reporting can be explained not just by formal institutional drivers but also by traditional informal factors specific to the national context (Ertuna and Tukel, 2010). Cross-listing leads to better CSR but not governance, and this relationship effect is determined by investor protection regimes (Del Bosco and Misani, 2016). With respect to environmental responsibility, we identified studies looking into factors influencing firms’ environmental orientation, strategy, and performance (e.g. Leonidou et al., 2015), such as knowledge and experience acquired from international operations (Aguilera-Caracuel, Hurtado-Torres, and Aragon-Correa, 2012), variations in motivations and attitudes towards corporate responsibility across cultures (Furrer et al., 2010; Mueller et al., 2011), and the effect of national institutional and market characteristics on environmental responsibility and sustainable development (e.g. Hartmann and Uhlenbruck, 2015; Meng et al., 2016; Wagner, 2015), including stakeholder pressures and preferences in a given country (e.g. Grinstein and Riefler, 2015; Tatoglu et al., 2014). Further topics are concerned with the impact of international treaties, agreements, and regimes (Rugman and Kirton, 1998), and how environmental challenges can be used as opportunities for developing capabilities and firm-specific advantages (Kolk and Pinkse, 2008). CSR research further relates to the theme of corporate governance. Despite evidence suggesting that reporting does not necessarily lead to greater company–stakeholder interaction (Barkemeyer, Preuss, and Lee, 2015), firms seek to acquire legitimacy through corporate environmental

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disclosures (Hu and Karbhari, 2015) and social disclosures (Shinkle and Spencer, 2012). Further evidence finds that increased disclosure of nutritional information may lead to positive CSR behavior (Choi, 2017). When considering the firm-level outcomes, good governance practices can lead to increased profitability (Ngobo and Fouda, 2012), and firms can improve their company image and reputation by integrating social and financial reporting (Polo and Vazquez, 2008). Finally, from an external perspective, the adoption of ethical standards by firms within a nation may also have developmental benefits by encouraging FDI in a host market (Robertson, Gilley, and Street, 2003). Other sub-themes that have received less attention include “CSR and brand-related issues” and “attitudes towards CSR.” Within the sub-theme of CSR and brand-related issues, research finds that firms embed sustainability as a brand differentiation strategy (Gupta et al., 2013). In managing brand reputation, nascent studies have sought to investigate how firms reconcile building a socially responsible brand with selling controversial, harmful products (Gupta, 2016), whereas other studies have shown that, when there is a high host-country distance effect, consumer loyalty and trust in a brand are weakened (Swoboda et al., 2017). When discussing attitudes towards CSR, studies have explored the views of business professionals (Ralston et al., 2015), managers (Furrer et al., 2010), and consumers (Auger et al., 2010; Grinstein and Riefler, 2015; Hume, 2010) about CSR. 2.3.3  FDI and Economic Development As the label of this cluster suggests, articles can be broadly classified into explicit (e.g. Agbloyor et al., 2016; Buckley, 2009) and implicit (e.g. Amankwah-Amoah, 2015) explorations of the relationship between FDI and economic development. Studies dealing with explicit FDI detail its impact on economic development by addressing the benefits that arise from linkages and spillovers (Firth and Ghauri, 2010; Jindra, Giroud, and Scott-Kennel, 2009; Lehrer, Asakawa, and Behnam, 2011; Santangelo, 2009), international ventures (Di Gregorio, Musteen, and Thomas, 2008), university and industry cooperation (Calori et al., 2000), investment in public goods through corporate citizenship programs (Bhanji and Oxley, 2013), and higher employee wages that are implemented to raise income levels (Maksimov, Wang, and Luo, 2017). Several studies specifically address the impact and/or role of FDI and investment in emerging and developing economies (e.g. Agbloyor et al., 2016; Allred and Park, 2007; Osabutey and Okoro, 2015). Comparative studies often use economic development as a moderating or control variable, or to contextualize a study (Hermes, Smid, and Yao,

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2007; Kandogan, 2014), and thus represent a more indirect treatment of the FDI-economic development relationship. Studies find that economic development of a nation moderates the relationship between parent-firm intangibles and foreign-affiliate performance (Contractor, Yang, and Gaur, 2016). Themes emerging in this cluster include the investigation of factors that encourage/discourage FDI (e.g. Ayentimi, Burgess, and Brown, 2016; Driffield, Jones, and Crotty, 2013; Osabutey and Okoro, 2015). Studies addressing economic development as a control variable address its role and that of economic disparity on cross-border acquisitions (Lim and Lee, 2017) and channel length, which describes the number of intermediaries between manufacturer and consumer (Jaffe and Yi, 2007). Further studies examine the impact of socio-economic distance (Drogendijk and Martin, 2015) and human mobility (Gao, Liu, and Zou, 2013) on outward FDI. Studies dealing with economic development as a contextual variable have received relatively significant coverage. A number of studies deal with topics within an emerging/developing-economy context. Studies explore conflict resolution through firm negotiation (Agbloyor et al., 2016), the HRM practices of emerging market MNEs (EMNEs) in Africa (Xing et al., 2016), the impact of patent strength on innovative activity (Allred and Park, 2007), and the adoption of investment incentive policies to attract FDI in sub-Saharan Africa (SSA) (Ayentimi et al., 2016). Other notable areas of focus include the location choices of firms and location patterns of trade (Suder et al., 2015), location pattern differences between foreignowned and domestic US firms (Shaver, 1998), the location choices of firms from newly industrialized economies (Lei and Chen, 2011), and the time effect of location choice on the performance of MNEs (Yuan, Pangarkar, and Wu, 2016). 2.3.4  Institutional Dynamics and Non-market Strategies Papers in this category are generally concerned with how various institutional dynamics influence the non-market strategies of firms and their degree of responsible business behavior. The NVivo analysis yielded the following sub-themes: (a) the impact of institutional dynamics on the firm; (b) factors shaping corporate governance in different institutional environments and its outcomes; (c) firm responses to institutional voids; and (d) the philanthropic behavior of firms across cultures. Studies exploring the impact of institutional dynamics upon the firm have addressed the impacts of social values and social justice on firms’ innovation (Carrasco-Monteagudo and Buendia-Martinez, 2013, 2015), legal and cultural characteristics on market financing (Aggarwal and Goodell, 2010), extra-territorial effects of institutions on firms (Meyer

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and Thein, 2014), and non-governmental organizations (NGOs) on MNE transaction costs (Vachani, Doh, and Teegen, 2009). Research finds that increased political activity and engagement brings benefits for firm performance (Shirodkar and Mohr, 2015). Other studies addressing the impact of institutional factors on the firm address the role of political connectedness in reducing information asymmetries (Chen, Ding, and Kim, 2010) and improving the performance of mergers and acquisitions (M&As) as well as influencing their activities (Brockman, Rui, and Zou, 2013). Evidence also demonstrates that firms that are politically connected are more likely to engage in corporate risk taking (Boubakri, Mansi, and Saffar, 2013). The notion of connectedness is also explored in reference to the relationships business owners need in order to acquire new business; evidence shows that companies achieve diversification through “economies” of connectedness (Dieleman and Sachs, 2008). Institutional convergence (Adegbite, Amaeshi, and Nakajima, 2013), informal institutions (Estrin and Prevezer, 2011), and the ownership structure of a firm (Aguilera and Crespi-Cladera, 2016; Filatotchev, Zhang, and Piesse, 2011) have all been shown to have an impact on corporate governance. Other studies have depicted the implementation of good governance mechanisms in weak institutional settings (Adegbite, 2015), in response to pressure to tighten corporate governance (Windsor, 2009). Regarding institutional voids, firms use CSR as a tool to compensate for them (Baik et al., 2015), with evidence showing there is no definitive business group influence on them (Carney et al., 2017). Philanthropy has been shown to be used as a strategic resource (Cowan, Huang, and Padmanabhan, 2016) that positively impacts on firm performance (Gao and Yang, 2016). Market and regulatory uncertainty encourages corporate giving (Gao, Lin, and Yang, 2017), with further evidence showing that philanthropy is used as a tool to mitigate environmentally irresponsible behavior (Du et al., 2016), and executives shown to be less likely to use philanthropy illegitimately (Luo, Xiang, and Zhu, 2017). When discussing the philanthropic behavior of the firm, research indicates that firms with political affiliations engage in a higher level of philanthropy (Jia and Zhang, 2013), and the institutional ownership of a firm increases the level of philanthropy (Song, Gianiodis, and Li, 2016). Other studies explore interactions between market and non-market actors (Doh and Lucea, 2013; Franco, Haase, and Fernandes, 2014), the impact of global value chains (GVCs) on economic and social upgrading processes (Omoteso and Yusuf, 2017), and the relationship between institutional characteristics and corruption (Lee, Oh, and Eden, 2010).

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2.3.5  Business Models and Entrepreneurship in Developing Markets Papers in this cluster can broadly be divided into two main themes. The first overarching topic covers micro-level investigations of the role of business in emerging markets’ economic development. The second broad topic covers a range of issues connected to social entrepreneurship. A more fine-grained analysis of each umbrella theme yielded the following sub-themes. Micro-level investigations of businesses’ developmental role can be broken down into the role of microfinance in enabling business development by fostering the internationalization of micro-enterprises (Mersland, Randoy, and Strom, 2011) and supporting women borrowers (Aggarwal, Goodell, and Selleck, 2015), with other studies detailing the performance, profitability, and mission drift of microfinance institutions (Bruton, Khavul, and Chavez, 2011; Im and Sun, 2015; Serrano-Cinca and Gutierrez-Nieto, 2014). Further studies deal with building markets for the poor through the creation of inclusive markets (Acosta et al., 2011) and strategies aimed at addressing poverty (Alvarez, Barney, and Newman, 2015; Si et al., 2015). Social embeddedness is depicted as a capability MNEs consider when entering emerging markets (London and Hart, 2004) and which they use as a local legitimization strategy (Gifford and Kestler, 2008). Environment-based issues are also addressed when discussing the environmental orientation of exporting emerging-economy SMEs (Chan and Ma, 2016) and MNE responses to institutional voids, such as climate change (Pinkse and Kolk, 2012). Further studies address the factors contributing to enterprise resilience under adverse conditions (Branzei and Abdelnour, 2010; Sinkovics et al., 2014), with studies on entrepreneurship investigating the internationalization of immigrant entrepreneurs (Sui, Morgan, and Baum, 2015) and the export orientation of entrepreneurial activity (Terjesen and Hessels, 2009). Further areas relate to public–private partnerships and collaboration with NGOs (George et al., 2015; Gifford and Kestler, 2008), criminal enterprises (Gillespie and McBride, 2013; Wood and da Costa, 2015), humanitarian logistics (Hirschinger et al., 2016), social upgrading in GVCs (Khattak et al., 2017; Lee and Gereffi, 2015), and unionization and collective bargaining (Kuruvilla and Zhang, 2016). Social entrepreneurship-related issues include conceptualization and operationalization efforts (Carraher, Welsh, and Svilokos, 2016; MendezPicazo, Ribeiro-Soriano, and Galindo-Martin, 2015; Peredo and McLean, 2006), responses to institutional challenges (El Ebrashi and Darrag, 2017), issues surrounding indigenous land rights (Anderson, Dana, and Dana, 2006), the impact of commercialization on mission drift in social enterprises (Ault, 2016), scaling up and growth-related issues (Ben Letaifa,

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2016; Sharir and Lerner, 2006; Sunduramurthy et al., 2016), and the role of institutions in social enterprise development and success (Stephan, Uhlaner, and Stride, 2015). 2.3.6 Corruption Studies in this cluster can be divided into two main themes: country-level and firm-level investigations of corruption. Macro-level studies examine topics such as the role of institutions in tackling corruption through institutional laws that reduce bribery (Cuervo-Cazurra, 2008b) and anti-corruption agencies that transform corrupt countries (Mao, Wong, and Peng, 2013). Other topics explore the antecedents and effects of corruption. Findings show that the bribery level of the firm is impacted by the presence of institutional uncertainty (Li, Yao, and Ahlstrom, 2015) and by the level of state control (Lee et al., 2010). Further evidence shows that corruption levels are higher in collectivist societies (Husted, 1999; Zheng et al., 2013). However, other research has found that, when there is greater access to information through information and communication technology (ICT), the level of national corruption is decreased (DiRienzo et al., 2007). Studies addressing the effects of corruption deal with its impact on FDI (Cuervo-Cazurra, 2006, 2008a; Demirbag, Tatoglu, and Glaister, 2010; Habib and Zurawicki, 2002; Mudambi, Navarra, and Delios, 2013), with evidence commonly suggesting a negative influence (Cuervo-Cazurra, 2006; Demirbag et al., 2015). Research finds that the level of national corruption influences the entry-strategy choice of a firm (Duanmu, 2011). Although evidence has found that very corrupt countries attract greater foreign portfolio investment than moderately corrupt countries (Jain, Kuvvet, and Pagano, 2017), local corruption may present a market entry barrier (Weitzel and Berns, 2006) and harm human development (Akhter, 2004). Firm-level corruption has been shown to lead to operational inefficiencies (Habib and Zurawicki, 2002), lower creation rates (Jimenez et al., 2017), and reduced subsidiary profitability (Lee and Hong, 2012). Other work has shown that managerial control increases the incidence of firmlevel bribery (Chen, Cullen, and Parboteeah, 2015), with bribery damaging firm growth in SMEs more than in MNEs (Zhou and Peng, 2012). Studies conceptualizing and operationalizing corruption detail its historic roots (Rowley and Oh, 2016b), provide a critical assessment of it in order to extend theories on the topic (Cuervo-Cazurra, 2016), depict its negative consequences (Rowley and Andrews, 2017), and review existing literature on its antecedents and effects (Judge et al., 2011). Other studies detailing firm irresponsibility have explored why firms

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evade tax (Gokalp, Lee, and Peng, 2017) and highlighted how product recalls damage corporate credibility (Fetscherin, Voss, and Gugler, 2010). 2.3.7  Implementation of Non-market Strategies One strand within this cluster includes attempts to theoretically integrate societal failures, CSR, and other non-market strategies (Buckley and Boddewyn, 2015, 2016; Devinney, McGahan, and Zollo, 2013). Another group of papers explores the use of non-market strategies to gain legitimacy and improve firm performance, through environmental labeling (Wang, Cui, and Liang, 2015), the offering of socially valuable goods and services (Darendeli and Hill, 2016), the development of new entrepreneurial technology (de Lange, 2016), and the use of reporting (Marano, Tashman, and Kostova, 2017) and CSR certifications (Husted, Montiel, and Christmann, 2016). Strategies aimed at tackling child labor (Kolk and van Tulder, 2004) and reducing greenhouse gas emissions (Duc and Ba, 2017) emerge at the more critical end of the spectrum. These studies are situated alongside other work discussing corporate social irresponsibility and dubious behavior (Fiaschi et al., 2017; Myers, 1999), product recalls due to design flaws (Beamish and Bapuji, 2008), and the impact of graymarket activity on strategic and economic performance (Myers, 1999). Further studies addressing firm ownership structures examine the role of cooperatives in facilitating corporate diversity and sustainability and as an alternative form of corporate organizing post the 2008 financial crisis (Michie and Rowley, 2014; Rowley and Michie, 2014). Findings also demonstrate that institutional investors with a long-term orientation bring about increased CSR rankings (Boubaker et al., 2017) and further work depicts the negative impact of oligarchic control in increasing corruption and impeding economic growth (Fogel, 2006). 2.3.8  Under-represented Topics in IB Studies in this cluster can be assigned to one of three categories. The majority of the papers in the first category are related to MNE-NGO collaborations (e.g. Herlin and Solitander, 2017; Marano and Tashman, 2012) and NGOs’ campaigning strategies (Ivanova, 2016; Reis and Guedes, 2017). The common denominator in the second category is the attempt to raise critical issues. Jagannathan, Selvaraj, and Joseph (2016) deliberate as to how IB creates and maintains inequalities for the marginalized in developing countries. Andersson and Calvano (2015) analyze how the globally mobile elite promote the perception that market-driven solutions are

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better suited to tackling social problems than national governments and civil society. Chakraborty, Saha, and Jammulamadaka (2017) examine why the voices of Third World NGOs are often not heard in global discourses. Srikantia (2016) discusses the structural violence of globalization, while Yolles (2007) models the pathologies of social collectives, pointing out sociopathic tendencies of corporations and governments. Studies in the third category are diverse. They discuss a range of ethics- and CSR-related themes, from the benefits of developing ethical capabilities (Buller and McEvoy, 1999), to how MNEs can improve their CSR outcomes through specific language resources (Selmier, NewenhamKahindi, and Oh, 2015), to taking stock of 50 years of IB research on social responsibility-related issues in the discipline’s two most important journals, JWB and JIBS (Kolk, 2016).

2.4  CONCLUDING REMARKS This chapter has attempted to provide an overview of the main themes and sub-themes connected to the various forms and degrees of firmrelated responsibility discussed in the IB literature. Our stock-taking exercise has yielded the following overall insights. While research on the positive side of the spectrum of responsibility is on the rise, the negative side is comparatively under-represented in the IB literature. Furthermore, a large proportion of studies in our sample look at macro-level relationships. A notable example is the impact of FDI on economic development. In connection with this theme, our investigation has also uncovered that IB studies frequently use economic development as a context variable. Thus, conclusions about the nature of the developmental impact of firm ­activities are more implicit than explicit. As a consequence, there is a need for more micro-level studies documenting the ways businesses can contribute to local, regional, national, and international economic development. Similarly, research on corruption has been more concerned with country-level analyses than with explicit firm engagement in corruptionrelated activities including bribery, blackmail, and other criminal activities. Further dimensions of irresponsible firm behavior (cf. Wagner et al., 2008), including human rights violations, tax evasion, the manufacturing and distribution of harmful products, pollution, etc., also need more attention. Finally, there is room for more studies with a critical and provocative stance to direct attention towards current blind spots in IB research. Relatedly, scholars who want to dedicate themselves to uncovering and unpacking such blind spots are well advised to look to neighboring

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­ isciplines for inspiration, such as development studies, political science, d and economic geography. Like any study, our chapter also has limitations. Despite our effort to address what we perceived as shortcomings in other review papers on this topic, no search strategy is perfect. To ensure that no papers are overlooked, future studies may wish to go through all the articles published in the selected journals. Furthermore, as outlined in the methods section, we omitted two IB journals because they were not included in the Web of Science database. Future research may wish to extend the search to all 16 journals. We would also like to note, that using these 16 journals as a proxy for the universe of IB publications introduces the problem of not capturing the work of IB scholars published in other journals. Lastly, due to space limitations we are not able to provide the reader with a more comprehensive list of future research avenues. However, we have attempted to provide a synthesis of existing topics and findings. This, together with Table 3.2, offers a starting point for the identification of future research questions.

NOTES 1. The list of references can be obtained from the authors. 2. The cut-off point for the data collection was October 2017.

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Sanyal, R. N. (1990). An empirical-analysis of the unionization of foreign manufacturing firms in the United States. Journal of International Business Studies, 21(1), 119–132. doi: 10.1057/palgrave.jibs.8490330. Sanyal, R. N., and Neves, J. S. (1992). A study of union ability to secure the 1st contract in foreign-owned firms in the USA. Journal of International Business Studies, 23(4), 697–713. doi: 10.1057/palgrave.jibs.8490284. Sarkar, S. (2009). Individualism-collectivism as predictors of BPO employee attitudes toward union membership in India. Asia Pacific Journal of Management, 26(1), 93–118. doi: 10.1007/s10490-007-9080-1. Schlegelmilch, B. B., and Robertson, D. C. (1995). The influence of country and industry on ethical perceptions of senior executives in the US and Europe. Journal of International Business Studies, 26(4), 859–881. doi: 10.1057/palgrave. jibs.8490823. Selmier, W. T., Newenham-Kahindi, A., and Oh, C. H. (2015). “Understanding the words of relationships”: Language as an essential tool to manage CSR in communities of place. Journal of International Business Studies, 46(2), 153–179. doi: 10.1057/jibs.2014.58. Serrano-Cinca, C., and Gutierrez-Nieto, B. (2014). Microfinance, the long tail and mission drift. International Business Review, 23(1), 181–194. doi: 10.1016/j. ibusrev.2013.03.006. Shao, L. A., Kwok, C. C. Y., and Guedhami, O. (2010). National culture and dividend policy. Journal of International Business Studies, 41(8), 1391–1414. doi: 10.1057/jibs.2009.74. Sharir, M., and Lerner, M. (2006). Gauging the success of social ventures initiated by individual social entrepreneurs. Journal of World Business, 41(1), 6–20. doi: 10.1016/j.jwb.2005.09.004. Shaver, J. M. (1998). Do foreign-owned and US-owned establishments exhibit the same location pattern in US manufacturing industries? Journal of International Business Studies, 29(3), 469–492. Shinkle, G. A., and Spencer, J. W. (2012). The social construction of global corporate citizenship: Sustainability reports of automotive corporations. Journal of World Business, 47(1), 123–133. doi: 10.1016/j.jwb.2011.02.003. Shirodkar, V., and Mohr, A. T. (2015). Explaining foreign firms’ approaches to corporate political activity in emerging economies: The effects of resource criticality, product diversification, inter-subsidiary integration, and business ties. International Business Review, 24(4), 567–579. doi: 10.1016/j.ibusrev.2014.10.014. Si, S., Yu, X. B., Wu, A. Q., Chen, S. M., Chen, S., and Su, Y. Y. (2015). Entrepreneurship and poverty reduction: A case study of Yiwu, China. Asia Pacific Journal of Management, 32(1), 119–143. doi: 10.1007/s10490-014-9395-7. Singh, J., Carasco, E., Svensson, G., Wood, G., and Callaghan, M. (2005). A comparative study of the contents of corporate codes of ethics in Australia, Canada and Sweden. Journal of World Business, 40(1), 91–109. doi: 10.1016/j. jwb.2004.10.007. Sinkovics, N., Hoque, S. F., and Sinkovics, R. R. (2016). Rana Plaza collapse aftermath: Are CSR compliance and auditing pressures effective? Accounting, Auditing and Accountability Journal, 29(4), 617–649. doi: doi:10.1108/AAAJ-07-2015-2141. Sinkovics, N., Sinkovics, R. R., and Mo, Y. M. (2014). The role of social value creation in business model formulation at the bottom of the pyramid – ­implications for MNEs? International Business Review, 23(4), 692–707. doi: 10.1016/j.ibusrev.2013.12.004.

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Zeng, F., Li, J., Zhu, H., Cai, Z. Y., and Li, P. C. (2013). How international firms conduct societal marketing in emerging markets. Management International Review, 53(6), 841–868. doi: 10.1007/s11575-013-0179-y. Zhang, Z. X., Wei, X., Chao, M. M., and Zheng, Y. (2017). When do conflicts feel right for prevention-focused individuals? The debiasing effect of low need for closure. Management and Organization Review, 13(2), 375–397. doi: 10.1017/ mor.2017.7. Zhao, M., Park, S. H., and Zhou, N. (2014). MNC strategy and social adaptation in emerging markets. Journal of International Business Studies, 45(7), 842–861. doi: 10.1057/jibs.2014.8. Zheng, Q. Q., Luo, Y. D., and Maksimov, V. (2015). Achieving legitimacy through corporate social responsibility: The case of emerging economy firms. Journal of World Business, 50(3), 389–403. doi: 10.1016/j.jwb.2014.05.001. Zheng, X. L., El Ghoul, S., Guedhami, O., and Kwok, C. C. Y. (2013). Collectivism and corruption in bank lending. Journal of International Business Studies, 44(4), 363–390. doi: 10.1057/jibs.2013.19. Zhou, J. Q., and Peng, M. W. (2012). Does bribery help or hurt firm growth around the world? Asia Pacific Journal of Management, 29(4), 907–921. doi: 10.1007/ s10490-011-9274-4. Zhu, Y., Sun, L. Y., and Leung, A. S. M. (2014). Corporate social responsibility, firm reputation, and firm performance: The role of ethical leadership. Asia Pacific Journal of Management, 31(4), 925–947. doi: 10.1007/s10490-013-9369-1.

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APPENDIX: SEARCH TERMS Corporate social responsibility, CSR, responsible business, responsible behavior, responsibility, social responsibility, social performance, society interface, triple bottom line, environmental sustainability, environmentally sustainable, green innovation, green supply chain, green management, social value, social entrepreneurship, social upgrading, social entrepreneur, social business, corporate social entrepreneurship, economic development, bottom of the pyramid, base of the pyramid, BOP, economically marginalized, developmental impact, corporate citizenship, NGO, nongovernmental organization, private standard, private regulation, civil society, civil society organization, CSR standard, labor standard, sustainability standard, CSI, CSIR, corporate social irresponsibility, corporate irresponsibility, irresponsible, irresponsible business, irresponsible behavior, business ethics, unethical, ethical, ethics, natural environment, local businesses, working condition, discrimination, labor, overtime, living wage, health and safety, captive, sales practices, worker voice, worker rights, employee voice, unionization, worker union, labor relations, offensive material, pricing policies, pollution, climate change, discrimination, extreme weather, poor, poverty, corruption, tax avoidance, dishonesty, false advertisement, offensive material, working condition, abuse, human rights, forced labor, modern slavery, slavery, bonded labor, downgrading, child labor, insecurity, fraud, bribe, greed, unfairness, social justice, injustice, crime, greenwashing, whitewashing, social exclusion, organizational misbehavior, philanthropy, humiliation, and gender inequality.

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PART II

Institutional environment and socially ­responsible international business

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3.  T  rade-offs and institutional contradictions in formulating responsible international business strategies Gopalkrishnan R. Iyer 3.1 INTRODUCTION The idea that business has several obligations to society is rooted in the fact that economic activities were always embedded in social relations. Merchants and traders occupied a distinct status in the social structure in ancient India, China and the Roman Empire, and the lines between economic asset ownership (such as land ownership) and social obligations (such as protection and security) were blurred in feudal Japan and much of Europe in the Middle Ages (Candidus 1809; Cunningham 1891; Iyer 1999; Toynbee 1958). However, it is with the advent of modern factories in the post-Industrial Revolution in the UK that a sharp distinction was made between the economic activities of the business and its social responsibilities. Business was now called upon to do something more than merely engage in economic activities. Among the first legally mandated obligations was the 1833 Factories Act that mandated the provision of better working conditions and reasonable hours of labor. The publication of Berle and Means’ The Modern Corporation and Private Property in 1932 called attention to the increasing separation of ownership and control that characterized business firms. Berle and Means (1932) argued that the concentration of economic power was a threat to democracy, although their thesis has had greater impacts on agency theory views of the firm in economics and finance and the issue of fiduciary constraints in corporate law (Bratton 2001; Jensen and Meckling 1976; Mizruchi 2004). While Berle and Means brought attention to the rising managerial class and their responsibilities to the owners, the issue of social responsibilities was more presciently advanced by Bowen (1953), who called for an evaluation of business from the “social point of view” (p. 155). 74

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Discussions on social responsibility of business began in earnest within various academic and trade journals, with the Harvard Business Review supporting social audits (Blum 1958), and emphasizing, among others, the “transcendental aspects” or the supra-material aspects of business (Cole 1958). The dual responsibilities of the business executive in seeking profits for the business as well as working towards the eradication of poverty, disease and ignorance were sharply brought out by Bunke (1965) who dubbed business executives as “priests without cassocks” (p. 103). However, dissenting opinions also emerged, with Theodore Levitt (1958) pointing out that “welfare and society are not the corporation’s business” (p. 47) – sentiments that still echo in debates on social responsibility even today. Thus, the primary issue of whether a for-profit corporation should pursue only economic interests and material objectives, or whether it should strive to engage in non-economic objectives and actions that benefit the larger society, has not yet been settled completely. Complicating matters is the issue of transnational social responsibility when corporations venture beyond national borders as in the case of multinational corporations. In the mid-1970s, Professor Raymond Vernon called attention to the wide disparity of objectives, strategies and intended consequences of multinational enterprises (MNEs) in their operations outside of their own host-country borders. Specifically, he observed that “the multinational spread of enterprises, as is evident, has generated powerful tensions and stirred sharp reactions, both in developing countries and in the industrialized nations, among many leaders in government, business, labor and other activities” (Vernon 1977, p. 244). These tensions were due to a variety of causes, but two main factors that stood out were the “revolutionary shrinkage in international space” (Vernon 1977, p. 243) – a precursor to the later more common use of the term “globalization” – and that each affiliate of the MNE operated with a “double personality” (p. 245). This double personality of the MNE was due from the fact that “it is an entity created under the laws of the country in which it operates, responsive to the sovereign that sanctions its existence. Yet, at the same time, as a unit in a multinational network, each affiliate must also be responsive to the needs and strategies of the network as a whole” (p. 245). Existing conceptualizations and frameworks of corporate social responsibility fall short of providing an in-depth understanding of a corporation’s trans-border activities and multinational engagement. This chapter advances the view that focusing on prevailing rules and norms within the host country society may provide a deeper understanding of the various areas in which MNE objectives and strategies may be quite contrary to those suggested by social, cultural and ethical norms in that society. In this

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context, institutional analysis or the examination of the “humanly defined constraints that structure political, economic and social interactions” (North 1990, p. 97) may provide a comprehensive understanding of MNE operations and environment. This is because a focus on institutions allows for the study of even informal organizations, processes, routines, norms and codes that may guide or constrain actions, and not just formal or structured entities. Pertinently, “institutional analysis – by focusing on relevant actors, conventions, and patterns of behavior – enables a better grasp of the structure of the environment as well as the historical conditioning of current and future choices” (Iyer 1997, p. 555). For MNEs, understanding the institutional context provides a deeper understanding of the context in which they can seek legitimacy – a critical question since the form and site of such legitimacy may only be a negotiated space between multiple institutional environments (Kostova and Zaheer 1999). The remainder of the chapter identifies various conceptions, frameworks and unresolved issues in corporate social responsibility, with a specific focus on MNEs. An institutional perspective on MNE social responsibility is then offered along with a discussion of the institutional contradictions that call attention to the responsibility or irresponsibility of MNE operations.

3.2 APPROACHES TO CORPORATE SOCIAL RESPONSIBILITY (CSR) In general, the ambit of CSR is any responsibility of the business to the environment in which it operates. Simply stated, the responsibility of the corporation is to its mission and to those for whom such a mission is to be achieved. This simple view also conceals the most contested aspects of corporate social responsibility, namely, (1) what are these responsibilities? (2) what is the corporation’s mission? and (3) who is the primary beneficiary (or beneficiaries) of the accomplished mission? Figure 3.1 provides a brief but by no means non-exhaustive summary of the contested aspects of each corner of the triangle. Only the most idealistic would subscribe to all elements and only the most naïve would believe that there would no conflicts in the pursuit of all the responsibilities for all the beneficiaries. Carroll (1999) traces the evolution of the construct of social responsibility since Bowen’s 1953 book and notes that definitions of CSR expanded first during the 1960s, and alternative themes such as corporate social performance, stakeholder theory and business ethics came into prominence during the 1980s. Davis (1973) broadly defined CSR as “the firm’s consideration of, and response to, issues beyond the narrow economic,

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Formulating responsible international business strategies ­77 Mission Profit maximization Growth Competitive advantage Stakeholder welfare Societal benefits Environmental preservation

Responsibility Instrumental Social/Legal/Political Ethical Environmental

Beneficiaries Shareholders Internal stakeholders External stakeholders Community Society Nation-state Ecology

Figure 3.1  CSR: what and for whom? technical, and legal requirements of the firm” (p. 312). Similarly, Eells and Walton (1974) offered the view that CSR “represents a concern with the needs and goals of society which goes beyond the merely economic” (p. 247). During the 1960s, when business actions were coming under increasing public scrutiny and the US government enacted regulations focused on the safety and environmental impacts of various industries, practitioners were also now sensitized to the broader impacts of their firm’s operations. Henry Ford II, then Chairman and CEO of the Ford Motor Company, observed in his speech in 1969 that “. . . we are now being asked to serve a wider range of human values and to accept an obligation to members of the public with whom we have no commercial transactions” (as cited in Donaldson 1982, p. 36). The academic field of CSR has produced multiple perspectives on various non-economic and non-market responsibilities and the potential of business to contribute beyond the market. However, there are still debates on the nature and scope of these responsibilities. As Campbell (2007) observed, “. . . socially responsible corporate behavior may mean different things to different people and at different times, so we must be careful in how we use the concept and how we define it” (p. 950). Carroll (1979) offered that corporate social responsibility “encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point of time” (p. 500). Discretionary responsibility, or the

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pinnacle of the pyramid of social responsibility, was later renamed “philanthropic” (Carroll 1999; Schwartz and Carroll 2003). However, Schwartz and Carroll (2003) argued that philanthropy could not be considered a responsibility or a duty in the Kantian sense but something voluntary and discretionary and thus, may even find a place within the category of ethical responsibilities. Therefore, they proposed a three-domain model of economic, legal and ethical responsibilities in which there may be overlaps between two or all three domains (Schwartz and Carroll 2003). From an analysis of 37 definitions offered by various academic and institutional sources, Dahlsrud (2008) identified five distinct dimensions of corporate social responsibility that included stakeholder, economic, social, voluntariness and environmental. From the examples provided by Dahlsrud (2008), CSR definitions may include interactions with key stakeholders (such as customers and employees), a focus on profitability and economic development, integration of social concerns, and emphasis on ethical values and promotion of environmental stewardship. Garriga and Melé (2004) classify CSR theories into four groups – instrumental (e.g., a focus on profits, firm advantages), political (e.g., implicit social contracts, corporate citizenship), integrative (e.g., social responsiveness, public responsibility) and ethical (e.g., universal rights, sustainable development). While prior reviews have focused on domains, definitions or theories, another approach to understanding CSR is to uncover the nature of responsibilities. Prior research has identified several responsibilities that could be grouped into instrumental, social/legal/political, ethical and environmental categories. CSR approaches focusing on the instrumental nature of the responsibility advance the corporate cause as the primary responsibility of business. Thus, pursuit of profits and competitive advantages as well as doing good with an eye on the bottom line would all be instrumental to corporate performance (Rangan, Chase and Karim 2015). political Another set of responsibilities – clubbed here as social/legal/­ – acknowledges that the responsibilities of the corporation should go beyond its own self-advancement. In this set of perspectives, corporations should not only fulfill their legal obligations but also social obligations. The idea that there is an implicit social contract between business and society (Donaldson 1982) is subsumed in this set, as also the notion that corporations should fulfill their duties and obligations as citizens of the nation-states in which they operate and perform quasi-governmental roles such as self-regulation (Campbell 2007; Logsdon and Wood 2005). Such a citizenship, as Logsdon and Wood (2005) clarify, “ordinarily contains rules for qualifying for, expressing, and maintaining membership in a polity” (p. 58). Yet another set comprises of ethical responsibilities. At one level, such responsibilities are expected from any corporation, but at another

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level, the difficulties of recognizing and responding appropriately to ethical challenges, given economically advantageous alternatives, make it more probable that such ethical obligations may be sometimes overlooked (Donaldson and Dunfee 1999; Freeman and Gilbert 1988; Schwartz and Carroll 2003). Finally, environmental responsibility is included within CSR given the heightened awareness of environmental issues that are directly the result of corporate actions, including global consciousness towards ecological concerns and imperatives of sustainable development (Davis, Whitman and Zald 2008; Garriga and Melé 2004; Vogel 2005). A summary of these perspectives is provided in Table 3.1. For each set of responsibilities, Table 3.1 provides a summary of the various dimensions of CSR and the primary beneficiaries of the responsibility focus. It also offers some key issues that may be within the purview, or due to the operations, of MNEs. Most CSR questions are quite complicated for MNEs since they need to understand and react to a variety of diverse host country environments as well as find a balance between the home-country and host-country expectations of CSR. Also, applicable social norms and codes of conduct from various national environments and various transnational institutions may not only be quite numerous and onerous but also conflicting (Kostova, Roth and Dacin 2008). Moreover, much of the discussion on the CSR of MNEs has focused around ethical issues including corruption, human rights in labor practices, operational lapses and political involvement of MNEs (Amba-Rao 1993; Donaldson and Dunfee 1999; Iyer 2001; Palmer 2001; Rodriguez et al. 2006). Thus, conceptualizations and enactments of CSR may have to contend with various trade-offs as elaborated in the next section.

3.3 TRADE-OFFS IN FORMULATING RESPONSIBLE STRATEGIES When various contentious issues of CSR are examined in the context of MNE operations, one can understand the extent to which current conceptualizations of CSR are appropriate for MNEs. The following are some of the contentious issues in the last half-century of evolution of CSR, both as a philosophy and as guidelines for practice. 3.3.1  Issue 1: Instrumental Versus Non-market Objectives The notion that business should do more than pursue economic interests was vigorously challenged by Milton Friedman (1970) who even labeled the idea of social responsibility of business a “fundamentally subversive

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Table 3.1  Summary of CSR perspectives Nature of responsibility

Dimensions of CSR

Primary beneficiaries of CSR

MNE context issues and criticisms

Instrumental

Corporate financial and   strategic objectives Competitive advantage Economic efficiency Cause-related focus

Shareholders Employees Business network

Social/Legal/ Political

Responsibility to task  environment Responsibility to   broader society Legal compliance Adherence to  contractual and supracontractual norms Responsible use of   business power Activism for justice Corporate citizenship   duties and obligations Adherence to moral and  ethical standards and norms Upholding universal  values and core human rights Development and  implementation of binding codes of conduct Pursuit of environmental  sustainability Ecological sensitivity in   business practices Environmental  conservation and preservation

Stakeholders Publics

Pursuit of solely  economic activities benefit all Possibility of social  irresponsibility MNE objectives may  collide with host country expectations MNE must also benefit  (or at least cause no harm to) societies everywhere MNE political  involvement should be restricted to mutually beneficial business environment MNEs should comply  with all laws, regulations and social obligations MNEs should uphold  universal values and human rights MNEs should conform  to transnational codes of conduct MNEs should bring  about ethical and value changes Whose ethics? MNEs should  not violate local environmental laws Host governments are  responsible Environmental  responsibility is not part of CSR

Ethical

Environmental

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Stakeholders Consumers Publics Nations

Societies Species Nature Posterity

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doctrine” (p. 124). His argument was that a business executive is merely an employee of the owners of a business and, therefore, any social responsibility of the executive must be to “conduct the business in accordance with their desires” (Friedman 1970, p. 33). The debate on whether a corporation has social obligations or whether it should restrict itself to shareholder interests has still not been settled. The chief executive of one of the largest investment firms, BlackRock, that manages over US$6 trillion in assets announced in early 2018 that business leaders, apart from pursuing profits, must “contribute to society as well if they want to receive the support of BlackRock” (Sorkin 2018, p. B1). However, soon after, The Wall Street Journal’s opinion pages offered the Friedman-ian theses on business responsibility and criticized BlackRock’s stance on socially responsible investing: “In reality there is no trade-off of Vice vs. Nice. There are only returns” (Kessler 2018, p. A15). MNE financial performance across the world are impacted by eclectic use and deployment of local resources, internalization of value chain activities and thus, the reduction of transaction costs of dealing across the market, and knowledge-based competitive advantages. Some perspectives on MNE operations could completely ignore non-market and broader social responsibilities of MNEs and, instead, contend that MNE operations, especially in “Third World” countries, bring out much needed ­economic change and contribute to economic development of such countries. Therefore, according to these views, MNE operations may, by itself, be beneficial to the host countries in with they operate. With the more euphemistic emphasis now on emerging markets, MNEs and associated foreign direct investment (FDI) flows are often viewed as coveted agents of change and, thus, invited under a variety of government programs and policies. However, social responsibility issues even in the realm of economics have now surfaced, with calls for greater scrutiny of MNEs, including their operations of shell companies, evasion of local taxes and unfair market dominance (Economist 2017; Roberts 2017). Another issue is an explicit focus on including the world’s poor – a call made prominent by the discovery of a “fortune” at the “bottom of the pyramid” (Prahalad 2004). Philosophically, the ideas of inclusion and a corporate focus on those with limited economic means do deserve unconditional support. Firms responding to such calls offer their products in small “affordable” sizes and provide various financing schemes for purchase. However, practical implementation may run into various issues such as the poor having to pay more for small packages, the environmental impacts of small plastic packages, and interest rates on much applauded “micro-loans” that may not be favorable to the borrower (Karnani 2007).

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3.3.2  Issue 2: Legal Compliance Versus Broader Norms The legal domain of CSR occupies a distinct and prominent space in current conceptualizations of CSR (e.g., Schwartz and Carroll 2003). In this perspective, legal compliance is a clear social responsibility, as are the “avoidance of civil litigation” and “anticipation of the law” (Schwartz and Carroll 2003, p. 507). However, the broader social contracts view subsumes legal obligations and calls for explicit attention to the social contract that exists between business and society (Donaldson 1982; Jeurissen 2004). In such a view, the corporation’s obligations are not merely to laws and regulations but also to a broader set of duties and obligations with associated focus on norms of fairness, justice and compliance to prevalent social norms (Donaldson and Dunfee 1994). In the context of MNE operations in various countries, one can readily discern that even legal responsibilities may not be well-defined, given not only differences in legal systems but also differences in laws and regulations and their interpretations and implementations. This makes the MNE task of legal conformity quite complex (Palmer 2001). At the same time, MNE organization across boundaries provides them with unique institutional advantages (Regnér and Edman 2014). Practices such as transfer pricing, choice of where to report profits, repatriation of profits as well as strategies that build, leverage and enhance competitive advantages may be viewed as particularly irresponsible in some national and regional environments. The unanswered issue often is “whose standards should prevail?” (Donaldson and Dunfee 1999; Michaelson 2010). Given the differences, disparities and contradictions across national laws, MNEs are often guided by several “universal” norms such as those developed by multilateral agencies. Thus, some contend that codes and guidelines for MNEs developed by the UN, WHO, ILO, WTO as well as the various rounds of multilateral agreements on organizational codes of conduct may provide the frameworks for MNE conceptualizations and actions towards social responsibility (Amba-Rao 1993; Byrne 2014). From the institutional perspective as well, the pressures to conform may play a strong part in the MNE’s adherence to “universal” standards so long as these are readily available and applicable to the specific context. 3.3.3  Issue 3: Voluntary Versus Obligatory Several scholars, including Rodriguez et al. (2006) conceptualize the domain of CSR as “instances where the company goes beyond compliance and engages in actions that appear to advance a social cause” (p. 736). Such a view retains the voluntary nature of CSR. However, what constitutes

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compliance? Apart from legal compliance, should it extend to compliance to prevailing norms, conventions and codes of conduct? Should corporations be proactive in contributing to society and social causes? (Donaldson 1982; Freeman and Gilbert 1988). On the other hand, those who contend that the social responsibility of the business is to its shareholders (e.g., Freidman 1970; Levitt 1958) bring out the fiduciary obligations of the business to its owners. In this view, the corporation’s obligatory responsibility is threatened by pursuit of voluntary social objectives. However, this tension between obligations and voluntary conduct is amplified when economic obligations clash with society such that actions beneficial to the corporation may have adverse effects on society. Here, the resolutions are often obtained through specifying universal norms or minimal duties (Donaldson and Dunfee 1999). In the context of the MNE, this would imply, at the minimum, upholding “universal” principles such as human rights. Matten and Moon (2008) contend that CSR could be embedded in a country’s institutions and culture, as in the case of the US, where such embedding provides greater incentives and opportunities for voluntary expression of social responsibility. In contrast to such an “explicit CSR,” they note that CSR in other contexts such as Europe is more implicit since values, norms and rules may often result in codes and mandates for corporations (Matten and Moon 2008).

3.4 INSTITUTIONAL PERSPECTIVES OF MNEs AND INSTITUTIONAL CONTRADICTIONS North’s (1990) view of institutions offered earlier clearly leaves room for the study of any set of rules or norms in society. Thus, institutions could be formal or informal, organized or amorphous, and could be observed at any level ranging from organizations to the broader environmental system (Scott 1995). As Scott (1995, p. 33) elaborated: “Institutions consist of cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior . . . institutions are transported by various carriers – cultures, subcultures, and routines . . . .” Also, each of its constituent elements of cognitive meanings, regulative processes and normative obligations could provide legitimacy, depending upon which “elements of institutions are featured” (Scott 1995, p. 47). Applied to the field of international business, institutional analysis provides a unique and comprehensive understanding of transnational organizations, including MNES, in their institutional environments. According to Davis and North (1971), such institutional environments

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are the “set of fundamental political, social and legal ground rules that establishes the basis for production, exchange and distribution” (p. 6) and include rules governing political processes, regulations, property rights and technology as well as the shared values, norms and ideology within the society. Institutional analysis has been previously applied to understand how MNEs respond to their international environments, how they obtain legitimacy in their international contexts and how they influence as well as are influenced by institutional change (Kostova and Zaheer 1999). Institutional theory explanations of the MNE as well as international business activities have gained considerable traction within the fields of management and international business (Kostova, Roth and Dacin 2008). Extended to the area of CSR, institutional theory provides a more cogent understanding of formal and informal norms as well as implicit and explicit obligations of the modern corporation. Viewed from the lens of institutions, CSR could be understood to be resulting from major forces such as external coercion, organizational environment and internal evolution of various policies and routines (Husted and Allen 2006). Institutional theory also enables the understanding of various aspects of the institutional environment in both home and host countries as well as the incentives, pressures and processes through which the MNE conceives, implements and engages in CSR (Busenitz, Gómez and Spencer 2000; Gjølberg 2009; Kostova and Zaheer 1999; Williams and Aguilera 2008). Institutional theory also points to the sharp differences in the environment that the MNE may be most familiar with and the ones presented in a new country context, including absence of specific institutions (or a void), explicit challenges of home institutions, and traditional norms and practices that counter corporate policies and activities (Banerjee 2008; Karnani 2007; Khanna and Palepu 2010). In their international activities, MNEs often also encounter institutional contradictions, or “ruptures and inconsistencies both among and within the established social arrangements” (Seo and Creed 2002, p. 225) that challenge established definitions, processes, policies and applications of CSR in the international context. Institutional contradictions may detract from the supra-economic objectives, activities and impacts of the MNEs given the disparities in the institutional environment as well as the unintended consequences of MNE actions. Understanding the institutional environment could be facilitated by the construction of a “country institutional profile” as suggested by Kostova (1997). Such profiles use cognitive, normative and regulatory dimensions suggested by Scott (1995) to understand differences across country environments and, therefore, the challenges to MNE legitimacy (Kostova and Zaheer 1999). In the context of emerging markets, Khanna and

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Palepu (2010) note that many of the institutions needed for viable business operations may be underdeveloped or even not available; hence, MNEs may have to address such “institutional voids” for strategic success. Such institutional voids may be hindrances or they may be sources of advantage that may keep competitors at bay. The ability of the MNE to overcome the hindrance of institutional voids or convert such voids into advantages may require a deeper understanding of the institutional environment as well as the legitimacy requirements and challenges presented by the environment. The complexity of defining CSR as well as responding to it is most vexing for MNEs since “such firms operate in diverse environments and cultures, and thus are more likely to encounter numerous stakeholder groups and non-governmental organizations (NGOs)” (Rodriguez et al. 2006, p. 736). Campbell (2007) advanced the view that institutions beyond the market must be analyzed and understood to evaluate the corporation’s CSR engagement. Such institutional factors include state regulation, industry self-regulation, actions of private, independent organizations such as NGOs, norms favoring social responsibility, engagement with trade and employer associations and with various other groups such as unions and community groups (Campbell 2007). Calling attention to the shift from implicit to explicit CSR, especially in Germany, Hiss (2009) notes that CSR research must include the explicit study of institutional forces. Institutional theory and analysis have been applied to the context of CSR as well, albeit not in the form advanced by Kostova et al. (2008). Analyzing the period of prosperity and emergence of CSR in the 1920s, Hoffman (2007, p. 67) concludes: “The development of corporate social responsibility is inextricably involved in the historical, socio-economic, political, and organizational features of the society and the time period under consideration. These are the institutional forces that seem to shape the concepts of what exactly that responsibility should be.” The particularly neo-institutionalist emphasis on informal institutions, especially norms, along with formal institutions, enables the recognition that the environments in which companies, especially MNEs, operate are quite complicated and that the emergence and emphasis on CSR may be quite different across environments and time periods (Doh and Guay 2006; Williams and Aguilera 2008). For example, comparing the institutional variations in the USA and the EU, Doh and Guay (2006) find that apart from similarities in the contributions of social, political and legal institutions at various levels, cultural influences such as religion, and informal political institutions such as interest groups, mattered more in the USA than in the EU. More importantly, they argue that the differences in institutional environments are reflected in political activism as well as corporate approaches towards CSR (Doh and Guay 2006).

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Husted and Allen (2006) find that the impacts of local institutional environments would vary based on the type of MNE. They find that while global CSR issues may be of importance to all types of MNEs, those that are multi-domestic and transnational (rather than global) would more likely respond to country-specific CSR issues (Husted and Allen 2006). Gjølberg (2009) contends that “certain combinations of structural factors promote higher CSR performance and that national and global factors can enhance as well as limit a company’s ability to respond effectively to the CSR challenge, depending on the precise combination of contextual factors” (p. 627). Interpreting the findings in the context of MNEs, CSR strategies successful in one country may not be directly transferable to another. Therefore, MNE subsidiaries may have to understand their idiosyncratic institutional environments, especially the strength of the “welfare state” (in other words, policies and regulations favoring supra-economic objectives), “corporatists arrangements” (or, cooperation between social partners), as well as “culture, norms and values” – all of which shape the political-economic institutions that create conditions for the success of CSR actions (Gjølberg 2009). But, can managers at the MNE subsidiaries recognize and respond effectively to their institutional environments? Managerial outlooks, perspectives and choices may be shaped by the institutions themselves (Friedland and Alford 1991), with local managers’ interest shaped by the local environment while global managers’ worldviews are influenced by their prior experiences. Moreover, Friedland and Alford (1991, p. 241) emphasize: “Institutions cannot be analyzed in isolation from each other, but must be understood in their mutually dependent, yet contradictory relationships.” As they observe, institutional contradictions may also be historically specific, such as guanxi relationships in China where the gift that is exchanged is not merely an object, but an “aggressive material and symbolic construction of commonality, of ‘insideness,’ from which obligation logically flows” (Friedland and Alford 1991, pp. 258–259). Thus, guanxi involves accumulation of “symbolic capital,” through which “lower-status persons” can “compensate for lack of material wealth or bureaucratic office” (Friedland and Alford 1991, p. 259). The symbolic nature of exchange and the historical embeddedness of the socio-political norms in what may otherwise be an economic relationship are often lost on the casual outside observer. For the MNE looking in, such relationships may appear quite unethical and as if gift relationships are obligatory for everyone. However, since the MNE is an outsider and is not party to the same historical, socio-political context, it may well be that a different set of institutional rules may be applicable for the MNE. Parallel institutions so created may even enable the MNE to avoid the institutional norms applicable to other local firms, and it may well be that MNEs that

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Table 3.2  Institutional contradictions Sources of institutional Elaboration contradiction Inefficiency Non-adaptability Inter-institutional incompatibilities Misaligned interests

Conformity to institutional arrangements may be at odds with technical activities and contribute to inefficiency Institutionalized (adapted) structures and activities are less adaptable to later requirements for adaptations given changes in external environments Several institutions, even though connected and related at some level, may be contradictory such that conforming to one may result in being inconsistent to another Political processes underlie social institutions such that participants have “divergent interests and unequal power” and all these interests cannot be satisfied, especially those of the less powerful

Source:  Constructed from Seo and Creed (2002).

do not understand the context well may even engage irresponsibly in the naïve assumption of institutional conformity. Seo and Creed (2002) develop a more comprehensive framework of institutional contradictions. While their focus is primarily on understanding institutional change as mediated by institutional contradictions and human praxis, their categorization of the sources of institutional contradictions provides a useful framework for understanding the institutional context of CSR for MNEs. Particularly, unraveling and elaborating these institutional contradictions reveals a new institutional approach to identify, assess and evaluate the MNE’s CSR responsibilities and thus, provides a useful framework for guiding further research and practice. A summary of the institutional contradictions from Seo and Creed (2002) is provided in Table 3.2. These contradictions are elaborated below in the context of MNE’s CSR perspectives and policies. 3.4.1  Undermining Functional Efficiency While organizations attempt to conform to the institutional demands in their quest for isomorphism with the environment, such attempt may detract from technical efficiency and economic success and would thus be suboptimal (Powell 1991). The trade-offs between the conformity to

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institutional environment and organizational performance have been well noted in the institutional literature (e.g., Scott and Meyer 1991; Zucker 1987). However, Seo and Creed (2002, p. 227) contend that despite institutional theories favoring decoupling and loose coupling of formal structures, they are of “questionable effectiveness” in “protecting organizations from the accumulation of inefficiencies over the long run.” Also, even if organizations achieve both legitimacy and technical efficiency in the short run, these may soon become suboptimal if the institutionalized outcomes are not frequently updated (Seo and Creed 2002). In the context of organizational pursuit of CSR objectives, it is quite apparent that seeking conformity to the demands of the institutional environment, or even attempting to compete for a reputation for social responsibility, detracts from the core economic performance objectives of a firm – a criticism that is all too common among those who contend that business responsibilities should solely be economic in nature. In many instances, corporations are induced to conform to labor practices and policies that may not be standard or universal in nature, or there may be mandates in place for social responsibility activities. For example, corporations in India often provide a position for a near-relative at an appropriate level in the event of a death of an employee, even if such death was not job related. The practice, which was inspired by the government’s benevolent policies in its own employment, shifts the corporation’s focus towards employee welfare, even if detracts from organizational efficiency. Similarly, manufacturing firms located in distant areas created an entire “township” around the manufacturing facility to provide for the employee’s family needs, including housing, medical care, school education and fair-priced retail cooperatives – again, a practice common to large public-sector organizations in India. Another recent practice, ostensibly for enhancing efficiency, is that of spouse hiring; it is argued that when both partners work for the same firm, attrition is lower and employee engagement is greater (Verma 2015). Thus, while isomorphism enhances the CSR objectives of the company and may also raise its local reputational profile, the specific adaptations made to corporate policies may place the MNE subsidiary at odds with the rest of the corporation. Thus, unless the MNE constantly reviews and revises its company-wide objectives, strategies and operations, decisions taken in the short run in response to institutional demands may soon emerge as suboptimal (Seo and Creed 2002). 3.4.2  Non-adaptability Due to Lock-Ins Another source of institutional contradiction noted by Seo and Creed (2002) occurs when institutionalized structures and activities are maintained

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even though it may be time to change them. Resistance to change may be encountered due to individual perceptions of insecurity, necessity of changes to the other elements of network, “lock-in” of economic resources and economic dependencies across organizational boundaries (Seo and Creed 2002). In an environment that has otherwise changed over time, such institutions may appear quite divergent from their environment and unresponsive to needed changes, thereby resulting in deepening contradictions between institutions and external environments (Pache and Santos 2010; Seo and Creed 2002). A case in point is that of skin lightening cosmetics widely available in various Asian countries. Drawing upon prior literature, Li et al. (2008, p. 444) contend that the superiority accorded to fair or white skin in these countries reflects a colonial, or even pre-colonial, past where the “dark other” was viewed as “primitive” and “inferior.” In different societies across Asia, “whiteness” and “darkness” came to symbolize distinctive cultural meanings, with fairness conveying purity and moral virtue, among other desirable properties, and darker skin colors representing undesirable characteristics such as filthiness and ugliness (Li et al. 2008). Some MNE subsidiaries as well as local companies have been endorsing and further promoting these cultural meanings to market skin-lightening cosmetics. On one hand, there is institutional support for such products since they add to the cultural capital of the user (Li et al. 2008) along with corporate promotion of such products as empowering the consumer (Karnani 2011). However, changing institutions in these societies present challenges to existing norms as well as corporate focus and have pointed out not only the inherent “classism and racism” of such products and promotions (Li et al. 2008) but also the discrimination and health impacts wrought by the firms marketing such products (Bedi 2008; Hoskins 2014). But continuing promotion and market expansion strategies of such products reveals that even though the external environment is changing, some institutions and certainly the organizations appear resistant to change. 3.4.3  Interinstitutional Compatibilities Seo and Creed (2002, p. 228) highlight yet another contradiction as those that occur when “. . . conformity to certain institutional arrangements within a particular level or sector may cause conflicts or inconsistencies with the institutional arrangements of different levels or sectors.” Increasing complexity, disparate central logics, ongoing learning and innovation are among the many factors that may contribute to inconsistencies or contradictions across different levels and sectors. In the case of CSR, social responsibility may involve actual engagement in social activities that

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benefit society and these activities often conflict with the economic raison d’être of the corporation. Considerable attention has been placed in the recent past on the environmental responsibility of corporations, particularly MNEs. Recent environmental disasters have called attention not only to the environmental impacts of MNE activities but also their responsibilities towards the environment in crisis situations. However, in non-crisis situations, it appears that a form of uncomfortable “truce” exists between the economic goals of the corporation and its presumed responsibilities towards the environment. Some have attempted to resolve the conflicts and inconsistencies by suggesting that environmental practices can lead not only to profits but also to long-term competitive advantages (e.g., Elkington 1994; Porter and van der Linde 1995). However, for others, the conflicts between economic objectives and sustainability ambitions are quite real and are enacted not only within corporations but also in terms of the various relationships of the corporation to its external environment as well as various levels of society and governments. 3.4.4  Misaligned Interests The starkest realities laid bare by institutional analysis involve its identification of winners and losers (Denzau and North 1994). In the Seo and Creed (2002, p. 229) framework as well, “. . . the formation and reproduction of institutional arrangements are unlikely to satisfy the divergent interests of all participants, least of all those interests of the less powerful.” At the same time, Seo and Creed (2002, p. 229) are more optimistic in their prognosis that “actors whose ideas and interests are not adequately served by the existing social arrangements” would be “potential change agents.” That may be possible in situations where such contradictions gain political momentum and confer power on those marginalized or supporting the less powerful. Maybe such an event is the ultimate end goal, but until that time, institutional arrangements that do not favor some actors bring out sharply the questions of responsibility and redress. An analysis of the high incidence of farmer suicides in India in the post-liberalization period reveals a change in institutional conditions that were less favorable to small farmers, at least in some states of the republic (Iyer 2009). Directives by the World Bank and IMF contributed to India’s reduction of investments and expenditures in agriculture. At the same time, the opening-up of agriculture to world competition in a regime of government price fixations contributed to lower margins for the farmer. High reliance of output on the vagaries of weather (in the absence of well-developed irrigation systems) only assured low yield which

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competed with lower-priced imports in a liberalized economy (Iyer 2009). Moreover, policy making was quite centralized and uninformed of local realities (Mooij 1999). Frequent crop failures contributed to an increase in borrowing simply to make ends meet; in the absence of institutional credit, farmers had to resort to high-interest loans from rural moneylenders (Jeromi 2007). In this environment, the introduction of new and innovative pesticides, fertilizers and seeds by MNEs, among others, only increased the costs for the farmer and, therefore, the amount that had to be borrowed (Iyer 2009). Increased indebtedness was one of the main reasons for an increased incidence of farmer suicides in post-liberalization India (Jeromi 2007; Mohanakumar and Sharma 2006). As Iyer (2009, p. 440) observes, “. . . one of the lessons we learn from the plight of these farmers is that liberalism is based on social contracts where parties come to the table with equal power and information. In the absence of these conditions, it can quite literally be deadly for the unsuspecting.”

3.5 CONCLUDING THOUGHTS FOR CONCEPTUALIZATION AND PRACTICE The above presentation of institutional contradictions, especially in the field of CSR, only offers imperfect extensions that deserve a better and more cogent elaboration elsewhere. At the current level, the emphasis was more on demonstrating that institutional analysis provides a rather powerful method of unraveling the multiple meanings, power and perspectives of the multiple actors and institutions that interact with the environment to bring about change. Also, as warned by Seo and Creed (2002), various institutional contradictions may not be so sharply demarcated. Much of the criticism of MNEs in international business literature stemmed from the fact that the size, scale and scope of the operations of some large enterprises gave them tremendous economic power over several of the poor, developing countries in which they operate. In fact, despite economic, social and environmental irresponsibility, large multinationals continued to grow stronger with only minor changes to their conduct (Banerjee 2008). Prior to the early-1990s, criticisms leveled on the multinationals’ scope of operations and global power came primarily from within the host countries in which they operated. This situation changed with the break-up of the Soviet Union and, thus, the opening-up of several erstwhile closed economies as well as the liberalization of various restricted markets in developing countries. The newly emerging markets now recognized MNEs as critical to obtaining the scarce capital and knowledge needed for economic growth and development and started actively courting the

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MNEs. The major criticisms of MNEs were now on practices that violated human rights and/or damaged the environment. However, these charges came from the MNEs’ own home country. Thus, companies such as Levi’s and Nike came under fire for their labor practices including employment of child labor (Locke 2002; Schoenberger 2000). MNEs now enjoy the welcome patronage of some host countries, especially those that are at the forefront of the group of emerging markets; at the same time, voluntary self-regulation, stricter conformity to international laws and codes of conduct have ensured that the operations of multinationals abroad are not subject to the same harsh criticism from their own home countries. In fact, far from being considered as one of the main hindrances to the development of the poorer nations in which they operated (Paul and Barbato 1985), there is now a growing sentiment that MNEs could be major agents of growth and poverty reduction in the erstwhile developing economies (Kaplan, Serafeim and Tugendhat 2018). In terms of CSR practice, the discussions on institutions and contradictions reveal that MNEs need to place more attention to their institutional structures, processes and interactions at the level of each subsidiary. At the same time, due emphasis must be paid to managerial worldviews and actions, since one of the core requirements of enabling institutional change is the apprehension of institutional contradictions (Voronov and Yorks 2015). Moreover, it can be discerned that any unquestioned adoption of policies, mandates and processes may be fraught with issues that may further deepen existing contradictions. Periodic reviews of CSR criteria need to be conducted and such criteria may need to be updated frequently. Also, dialogues – both internal as well as external to the organization – might yield insights into the direct as well as indirect impacts of the corporation’s actions. In terms of conceptualizations, an institutional approach to CSR calls deeper attention to norms and social values that not only facilitate social change but also hinder CSR efforts, particularly for MNEs. As Cantwell, Dunning and Lundan (2010, p. 572) argue, “MNEs are confronted with institutional tensions more frequently than are uninational firms . . .”. But, this may be a source of opportunity for institutional entrepreneurship as well. Rather than assuming that CSR is understood very similarly by various participants and in various contexts, future research could explore differences in how managers and stakeholders understand business responsibilities in various institutional contexts. In this regard, what may also be needed is the examination of primacy accorded to multiple domains in disparate institutional contexts. In studies of emerging markets, it may well be that researchers may find that the instrumental domain of CSR is of primary importance, while some other domains of CSR may be mandated or made

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obligatory by governments. Another fruitful area of future research would be the various specific instances of CSR objectives of MNEs that may contradict dominant institutions in the host country. In a similar vein, future research could also address how MNE products, policies and operations, while conforming to dominant ideologies, may actually be socially harmful. Campbell (2007) contends that the social responsibility of corporations consists of two fundamental responsibilities: not knowingly harming stakeholders, and rectifying any harm that has been caused once it is discovered. Institutional analysis and a focus on contradictions expand on these foundations by explicitly including active discovery of inconsistencies that may now, or in the future, be deemed irresponsible. In that sense, recognition, resolution and restitution may be the three pillars for the future development of a more comprehensive institutional theory of CSR.

ACKNOWLEDGMENT The author thanks Dr. Lee Jarvis and anonymous reviewers for comments on earlier versions of this chapter.

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4.  I nstitutional drivers of stakeholder engagement and legitmacy of Chinese MNEs Peter S. Hofman, Lei Li, Sunny Li Sun, and Yanxue Sun 4.1  INTRODUCTION China has become one of the leading players in global foreign direct investments (FDIs) with its outward FDI being the second largest worldwide in 2016 (UNCTAD, 2017). Chinese enterprises are increasingly adopting internationalization strategies. Despite its potential benefits in terms of economies of scale, scope and arbitrage, internationalization often seems to be difficult to execute for Chinese enterprises (He and Lyles, 2008; Sun et al., 2013; Li et al., 2016). It is well established in the international business literature that firms entering foreign markets need to overcome institutional distance or more generally liability of foreignness. Recent research has focused on the role of stakeholder engagement as a way to enhance the legitimacy of multinational firms and their activities in host countries, and to facilitate access to resources held by local stakeholders that are critical to the success of multinational firms in host countries (Harrison et al., 2010; Henisz et al., 2014; Nartey et al., 2018). Legitimacy challenges for emerging market multinational enterprises (EM-MNEs) in major Western developed countries tend to be significant due to host-country governments and civil societies’ inclination to associate the EM-MNEs home-country record of relatively low transparency, weak environmental performance and poor labor conditions with the host-country operations of EM-MNEs (Campbell et al., 2012; Marano et al., 2017). EM-MNEs thus face liability in the country of origin (Ramachandran and Pant, 2010; Marano, et al., 2017). Despite significant success in the international arena as low-cost suppliers of product and services, Chinese EM-MNEs face more difficulties to establish themselves and have yet to be widely embraced by the stakeholders in developed Western countries (He and Lyles, 2008). While Chinese MNEs have been 98

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relatively successful in contributing to a “harmonious society” as expected from a key stakeholder – government – in their home country (Hofman et al., 2017), they tend to have more difficulties in developing positive stakeholder relations in developed Western countries, due to a lack of alignment of norms and priorities between them and stakeholders in the host country (Bundy et al., 2018). A recent example is the challenge a leading Chinese auto-glass manufacturer faced in the USA when the United Automobile Workers union supported unionization of its factory in Ohio (Bradsher and Scheiber, 2017). Other examples include the blocking of various acquisitions of North American companies by Chinese firms in the semiconductor and lighting industries, based on national security issues raised by the U.S. committee on foreign investment (Brown and Robinson, 2016; Donnan, 2016; Donnan and Hook, 2017). While a holistic approach of managing stakeholder relationships was implemented by traditional MNEs such as Motorola and Royal Dutch Shell more than a decade ago (Lawrence, 2002; Post et al., 2002), it is still relatively new even for the largest Chinese enterprises (Gao, 2009; Tan-Mullins and Hofman, 2014). Part of the challenge is to find a balance between global CSR standardization and local CSR responsiveness (Miska et al., 2016). While Chinese EM-MNEs increasingly have adopted global CSR (reporting) standards such as GRI and the Global Compact, their response to local stakeholders tends to be weak, for example due to limited experience with forms of stakeholder engagement that are common in developed Western countries, such as setting up stakeholder dialogues with local stakeholders (communities, employees/unions), non-governmental organizations (NGOs) and consumers (Lawrence, 2002; Van Huijstee and Glasbergen, 2008). Some studies indicate that international expansion of Chinese MNEs in the Asian markets has been more successful than outside of Asia (Chen and Tan, 2012). One explanation is that most of the Asian countries are closer to China in their institutional environments than to developed Western countries so that the intra-regional stakeholder engagement tends to be less challenging for Chinese MNEs than inter-regional stakeholder engagement (Rugman and Verbeke, 2008). This suggests that EM-MNEs coming from the East, such as Chinese MNEs, may encounter difficulties understanding appropriate business behavior in the West, and adapting to those norms in order to be perceived as legitimate in the eyes of various stakeholders. This chapter adopts an exploratory case-study method to examine cross-border stakeholder engagement and corresponding consequences of Chinese MNEs in the developed Western world, which has seemed to be “hostile” to the investments of Chinese MNEs (He and Lyles, 2008). The key questions to be addressed include: What is the current gap of stakeholder engagement for Chinese enterprises vis-à-vis those based in

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the developed Western world? What are the key stakeholder relations for and the impacts thereof on Chinese MNEs in the developed countries such as Australia and the USA? What may be needed to enhance stakeholder engagement for the sake of local legitimacy? The chapter proceeds as follows. First, we review the relevant literature on stakeholder engagement and compare the portfolio and nature of stakeholders in China and in the developed Western world. Then, we introduce our case-study method. Next, we develop a conceptual framework for cross-border stakeholder engagement based on the emerging case evidence. Finally, we discuss the scholarly and managerial implications and draw a conclusion.

4.2  LITERATURE REVIEW The relevance of stakeholders for the long-term success of companies has now been well-established both in academic and business circles. The main debate has been on how to divide attention within firms between creating value for shareholders and other stakeholders, and which one should be the principal orientation. Many scholars have been trying to address how stakeholder relationships bring long-term business success (Donaldson and Preston, 1995; Laplume et al., 2008; Harrison et al., 2010) and which stakeholders to connect to with what intensity (Hillman and Keim, 2001; Garcia-Castro and Francoeur, 2016; Bundy et al., 2018). Scholars specializing in corporate social responsibility (CSR) studies have also pointed out that a strategic and holistic approach for managing CSR centers on engaging various stakeholders (Miles et al., 2006; Wang and Chaudhri, 2009). Failure to manage CSR strategically may have severe economic consequences (Husted and Allen, 2006). Post et al. (2002) developed a stakeholder view which categorizes a wide range of stakeholders by their roles in a firm’s business environment, which resembles the view of open system organization theories that distinguishes between technical and institutional environments (Scott, 1998). The technical environment affects firm survival because a firm’s continued existence relies upon the effective exchange of resources, information and personnel with external stakeholders such as customers, suppliers, creditors, etc. (Pfeffer and Salancik, 1978). The institutional environment matters for the firm as it imposes the ‘rules of the game’ for their activities and consists of both formal and informal institutions that regulate and constrain behavior (North, 1990) as firms must conform to human-devised rules and collective norms to gain legitimacy (Meyer and Rowan, 1977; Oliver, 1991). This stakeholder view and the institutional perspective serve as the foundations for the present study.

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4.2.1  A Holistic Stakeholder View Freeman’s (1984) seminal work on a stakeholder approach to strategic management developed the argument that firms should take into account stakeholders beyond stockholders to ensure survival and good performance. “The stakeholders in a firm are individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers” (Post et al., 2002: 8). Freeman’s (1984) path-breaking contribution triggered academics to develop an instrumental perspective that suggests how organizations might effectively leverage stakeholder relations in their favor (McWilliams and Siegel, 2001; Porter and Kramer, 2006). A number of studies have demonstrated a link between the implementation of stakeholder management and the economic performance of organizations (Pava and Krausz, 1995, 1996; Margolis and Walsh, 2003; Orlitzky et al., 2003; Henisz et al., 2014; Garcia-Castro and Francoeur, 2016). The capacities of a firm to create sustainable wealth over time, and hence its long-term value, are determined by its relationships with key stakeholders. These critical stakeholders tend to have information, resources and power which are important for the firm, and may influence the legitimacy of the firm as well as the effectiveness of its activities. Post et al. (2002) categorized the various stakeholders according to three dimensions, namely, resourcebase (shareholders, lenders, employees and customers), industry structure (supply chain associates, joint venture partners, regulatory authorities, unions) and social and political arena (governments, communities and nongovernment organizations). As noted earlier, through the lenses of open system ­organization theories and especially the institutional perspective, these stakeholders mainly function in the technical (or task) environment and institutional environment respectively (Peng et al., 2008; Scott, 1998). Stakeholder engagement involves interacting with and influencing stakeholders to allow, constrain or withdraw access to their resources (Frooman, 1999). Firms need to know what the interests of their salient stakeholders are and may need to respond to the requests and claims of these stakeholders. They also need to ensure that their strategies benefit rather than harm the interests of the key stakeholders. Thus, firms need to establish and maintain a high level of interaction with salient stakeholders. Since the nature and management of the portfolio of stakeholders in the technical and institutional environments may vary across different contexts, we seek to make a comparison between the context of the developed Western world and that of China based on the extant literature. Table 4.1 provides a stylized overview of the main characteristics and differences in stakeholder engagement in China and the developed Western world.

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Western countries

Firms have to work with a wide  range of stakeholders; the largest firms tend to adopt a holistic stakeholder engagement approach. CSR reporting has become a  routine. Many firms conform to global reporting initiatives (such as GRI) (Post et al., 2002; Crane and Matten, 2010; KPMG, 2017). Stakeholder dialogues with various stakeholder groups common in MNEs.

Mature regulatory frameworks  are put in place to safeguard interests of various shareholders and to ensure appropriate accountability and transparency, especially for listed companies.

Stakeholders

Overview: A range of stakeholders

Stockholders/ Shareholders

The overall differences can be  attributed to institutional distances (regulatory, cognitive and normative). The deep-rooted cognitive and  normative institutions in the Western world emphasize “impartiality,” “justice” and “individual rights” and require firms to take into account demands and expectations of a broad set of stakeholders. In China, the government is the most  critical stakeholder due to its long tradition of hierarchical collectivism. Significant regulatory distance  still exists but there is a gradual convergence with the Anglo-Saxon corporate governance system in China. This indicates a shift from relation based to rule-based governance though in practice this is a very slow process. Firms tend to pay attention to only  a small subset of stakeholders, with the government as the most critical stakeholder. Largest Chinese enterprises  increasingly issue CSR reports; firms face certain government pressures to develop CSR but societal pressures are still limited (Von Weltzien Hoivik, 2007; Lattemann et al., 2009; Xu and Yang, 2010). Limited stakeholder dialogue.

Emerging regulatory frameworks  are enacted to protect interests of various shareholders. Emerging codes of corporate  governance are guiding listed firms.

Institutional distance-based interpretation

China

Table 4.1  A comparison of stakeholder engagement between Western countries and China

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Customers/ Consumers

Employees

Various laws and regulations in  place to safeguard interests of consumers, strong consumer interest organizations, and significant media attention related to protection of consumer interests (Crane and Matten, 2010).

Codes of corporate governance  are expected to ensure effective functioning of boards of directors (Du Plessis et al., 2005; Aguilera and Cuervo-Cazurra, 2009). Labor laws are well-developed,  specific regulations for minimum wages, labor conditions, welfare, insurance and health. Labor relatively strongly organized  through unions and unions have significant political and societal power (Bamber et al., 2004; Crane and Matten, 2010).

Very significant institutional distances  along regulatory, cognitive and normative dimensions. Regulatory distance has been reduced  in the past decade as labor rights are more strongly protected by law in China. Both cognitive and normative  distances are large.

Labor law is still in development;  recent advances through new contract labor law. Enforcement still relatively weak; most impact comes from more spontaneous labor actions which receive significant media attention. Safety and health still downplayed  considerably (Welford, 2004; Clarke et al., 2004; Wang et al., 2010). Consumer rights not effectively  protected by legislation and enforcement; and consumers not yet effectively organized, though this is changing (Luo, 2008; Kolk et al., 2010; Wang et al., 2011). Product responsibility and safety  not among priorities of firms.

Significant regulatory distance  reflecting safeguards for consumers are less developed in China. Cognitive distance mostly related  to post-sales responsibilities where consumers have a much stronger voice in the Western world.

Institutions in the Western world  focus on rights of dispersed shareholders whereas the controlling shareholder is still dominant in China.

Market-based mechanisms are  expanding, but relations with the state are still crucial for firms and shareholders (Tam, 2002; Li et al., 2004; Xu and Yang, 2010).

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Established laws and monitoring to  prevent monopoly power and cartel activities. Strong framework to protect IPR,  advocate fair competition, and collaboration (Nelson, 1993; Porter, 1998).

Mainly rule-based and contractual  relations with governments. Some roles for firms in policy  formulation. Governments play a key role  to promote the development

Governments

Significant pressures on firms for  taking responsibility to ensure that their suppliers and co-partners conform to good labor standards and preclude the use of child labor in developing countries (Welford, 2004; Crane and Matten, 2010).

Suppliers/ Co-partners

Competitors

Western countries

Stakeholders

Table 4.1  (continued)

Increasing regulation related to  responsibility of firms for suppliers’ activities in the Western world but still relatively limited in China. Stronger normative and cognitive  pressures in the Western world to take interests of suppliers into account.

Not many large firms include  suppliers/co-partners in their CSR concerns. Respecting the supply contract and concern with co-partners’ interests were less emphasized. Often safeguarding interest is  based on relational reliability (Welford, 2004; Kolk et al., 2010; Zhou and Poppo, 2010). Less developed laws and  monitoring to prevent cartels and exploitation of monopoly power. Weak framework for protection of  IPR (Swike et al., 2008; Zhou and Poppo, 2010; Deng et al., 2013). More relation-based interactions  with governments, personal and informal ties play important roles in protecting firms’ interests.

Large regulatory distance reflected by  anti-monopoly framework is much more developed in the West. Framework for IPR slowly developing  in China; but normative and cognitive distances very large as copying and imitating is seen as an art in itself in China. Significant regulatory distance with  high state control of firms in China relative to private firms in the Western economies.

Institutional distance-based interpretation

China

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Unions

Communities

Unions considered as important  stakeholders which can put strong pressures on firms. Unions particularly strong in  traditional manufacturing sectors (Bamber et al., 2004).

 of industries, to support the development of industrial standards and to create good infrastructure (Crane and Matten, 2010). Understand the importance  of meeting the needs of and keeping good relations with local communities, whose agreement with the local practices and resources is always vital to the legitimacy of firm business activities (Porter and Kramer, 2006; Kemp, 2010).

Unions controlled by firms and  the state, relatively weakly organized and not so powerful. Unions often not seriously  considered as stakeholders. Unions often dominated by company management (Clarke et al., 2004; Gao, 2009; Chan and Hui, 2014).

Largest Chinese enterprises  tended to have strong connections with governments and to follow government policies (Gao, 2009; Su and He, 2010). Sponsor various philanthropic  activities in less developed areas, improve infrastructure and donate equipment for schools and universities, internship programs, often in ad hoc fashion (Gao, 2009; Su and He, 2010; Yin and Zhang, 2012). The role of communities is important  both in the Western world and in China. Significant regulatory distance, as  rules to protect community interests are well developed in the Western world. Normative distance is significant as  donations are seen as most important in China, whereas real impacts are most important in the Western world. While regulatory distance has  been reduced with formal roles for unions and employee bargaining, implementation of this is weak in China. Cognitive and normative distances  are large as unions are not seen as powerful actor in China, whereas they still have significant salience in the Western world.

Large cognitive and normative  distances, as developing strong informal ties is a crucial stakeholder strategy in China.

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Western countries

Civil society and NGOs have  significant power regarding sustainability issues. Business-NGO partnering is  increasingly developed as a strategy (Hartman et al., 1999; Oetzel and Doh, 2009).

Sustainability is a major societal  concern and receives significant media attention. Responsible behavior and  contribution of firms to society is closely scrutinized by a range of stakeholders (Hartman et al., 1999; Post et al., 2002; Porter and Kramer, 2006).

Stakeholders

NGOs

Society as a whole

Table 4.1  (continued)

Large normative and cognitive  distances. NGOs seen as powerful and  legitimate actors, and sometimes credible partners in Western countries. In China NGOs not perceived as  powerful and credible. Regulatory distance is significant  but decreasing as various laws are put in place to safeguard stakeholder interests, such as reducing environmental impacts. However cognitive and normative  distances are large as a holistic stakeholder orientation is becoming the norm in the Western world whereas various stakeholder groups are largely left out in China.

NGOs often not considered or  taken seriously as stakeholders. Weak institutional framework  for NGOs in China (Gao, 2009; Hofman et al., 2017).

Firms start to consider  environmental protection, but more broader sustainability issues receive less attention. Limited attention to broader  responsibilities for society in terms of health and well-being related to people and products (Gao, 2009; Wong, 2009; Yin and Zhang, 2012).

Institutional distance-based interpretation

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4.2.2  Stakeholder Engagement in Developed Western Countries Firms from the developed Western world now generally accept that engaging a wide range of stakeholders – including corporate stockholders, employees, customers, suppliers, competitors, unions, governments, business associations, non-government organizations (NGOs) and ­communities – is crucial for long-term business success. Holistic stakeholder engagement has evolved to be a complex and dynamic approach for business firms (Habisch et al., 2005) and a recent survey of the 250 largest multinational companies showed that more than 90 percent of these firms engage stakeholders in a structured way (KPMG, 2017). One of the key reasons is that developing stakeholder relations plays an important role in enhancing firm intangible resources and productivity. For example, through its relations with suppliers, knowledge institutes and consumers, a firm can increase its capacity to bring in ideas for new product developments. Good relations with employees may reduce turnover and increase productivity (Surroca et al., 2010). Moreover, reputation is crucial for firms because as the celebrated scientist, entrepreneur and sustainable business strategist Amory Lovins stated, “if [firms] want to succeed in any business, you have to be the kind of business people [others] want to do business with and feel good about. Conversely, if you screw up, especially environmentally and increasingly in social issues, you will lose your franchise, your social license to operate, and then you’re dead” (Hopkins, 2009: 40). Indeed, Lovins’ remark indicates why relations with civil societies play a critical role for firms to establish and maintain legitimacy in developed Western countries. In particular, many firms found that they had to build partnerships with NGOs to get support for their business activities. In the case of the sinking of the Brent Spar oil platform, Royal Dutch Shell learned that a license to operate from government was not necessarily enough without effective responses to the negative reactions of environmental NGOs and the general public. The MNE realized it had to set up mechanisms to interact and engage with the broader public to understand their opinions regarding the potential activities and impacts of the oil company (Lawrence, 2002). In general, research on NGO-business partnerships has shown that such partnerships can facilitate the access to and enhance the stability and quality of key resources for firms (Porter and Kramer, 2006; De Lange et al., 2016). Apart from NGOs as an important stakeholder in civil society, firms also need to consider local communities as salient stakeholders. In the global mining industry for example, firms increasingly develop community relations, and some of the leading mining companies have made strong commitments to community engagement

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to alleviate poverty and facilitate human development, as Kemp (2010) reported in her study of mining in Australia and New Zealand. Firms in the developed Western world increasingly understand the importance of meeting the needs of and keeping good relationships with local communities, whose agreement with the local practices and resources are vital to the legitimacy of their business activities. Moreover, firms also pay significant attention to industrial and employer associations as the latter tend to play important roles in the relationships between government and industries in the developed Western world, such as in the development of industrial policies and regulations, while the interaction with unions is an important part of labor relations. The traditional CSR practices involving employees focused on staff health, work safety, decent salaries and welfare, etc. More recently these practices have expanded to cover the fair treatment of employees irrespective of gender, race, religious orientation, age and disability, and the responsibilities employers might take when closing operational facilities or replacing staff. Firms from the developed Western world also make efforts to ensure that their suppliers and co-partners conform to good labor standards and conditions, and preclude child labor in developing countries. In addition, the environmental impacts of business activities throughout the supply chains and the corporate roles in setting green standards have become an important part of the business agenda for many large firms (Habisch et al., 2005; Aragon-Correa et al., 2016). 4.2.3  Stakeholder Management in China For Chinese enterprises, stakeholder management and CSR practices were much neglected until the middle of the last decade when the public and government started to expect the enterprises to not only deliver economic benefits but also contribute to the “harmonious society” (Gao, 2009; Wong, 2009; Tan-Mullins and Hofman, 2014). Comparing 68 of the largest multinational companies in China and India, Lattemann and colleagues show that Chinese firms communicate more CSR primarily due to a more relation-based environment, as opposed to a rule-based environment in Indian firms (Lattemann et al., 2009). In recent years, the leading Chinese companies have started to understand holistic stakeholder engagement but tended to consider it generally in terms of to “create wealth for the society,” “promote the nation’s development” or simply in terms of generating profits for shareholders (ChinaCSR, 2007). In reality, the key motivators for stakeholder engagement of Chinese firms are mainly corporate reputation and/or corporate culture, and Chinese firms view philanthropic donations as an important way to

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establish, maintain and enhance their reputation (Wang and Chaudhri, 2009; Kolk et al., 2010; Su and He, 2010). One reason is that philanthropic donations are important for establishing and maintaining good political connections, and research has demonstrated that philanthropic donations are positively associated with firm performance while the lack of philanthropic donations may have detrimental effects for Chinese firms (Su and He, 2010). Thus some of the main stakeholder engagement activities tend to be philanthropic, in particular in the area of disaster relief (Wang and Chaudhri, 2009). To a certain extent, this “shows Chinese enterprises’ local responsiveness to exigencies . . . [but] also demonstrates the lack of a comprehensive and coherent [stakeholder engagement] strategy” (Wang and Chaudhri, 2009: 249). Stakeholders such as shareholders, employees, consumers, suppliers and governments have recently been addressed by many Chinese enterprises, in particular the large ones. Typically, such enterprises provide educational opportunities and foster a benevolent corporate environment and culture for their employees. They also invest in social programs to support charities and environmental protection initiatives which help enhance corporate image. Some leading firms such as Huawei could even promote the establishment and implementation of some industries and pay attention to broader sustainable development goals (Huawei Technologies Co. Ltd, 2016). Nevertheless, the majority of Chinese companies are not experienced in stakeholder relationship management and CSR practices. In particular, the neglect of basic CSR commitments in small and medium-sized enterprises – including work safety, the welfare of employees and pollution – still exists widely in many industries and has frequently caused many tragedies such as chemical explosions, coal mine blasts, occupational accidents and incidents of food-poisoning (Wang et al., 2010). In addition, the communities, labor unions and NGOs don’t play as important a role in China as they do in the developed Western countries since they have neither been entitled to the same extent of power in the Chinese society nor have been paid enough attention by the Chinese public (Gao, 2009; Cheung et al., 2010). As the legal system relating to NGOs has yet to be developed in China, only some Western MNEs take a longterm outlook by building strong cooperative relationships with Chinese grassroots NGOs and making good use of these relationships to promote philanthropic programs. They consider that cooperation with NGOs is useful for identifying local needs and implementing CSR initiatives that match those needs (Higgins, 2009). Until the mid-2000s CSR reporting by Chinese firms was still very limited, with 11 Chinese companies disclosing reports on their e­ nvironmental

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and social performance in 2004 (Li, 2005). However, promoted by the China Securities Regulatory Commission and the Shanghai/Shenzhen Stock Exchange, the number of Chinese listed firms publishing social responsibility reports soared from 32 to 582 from 2006 to 2009 and reached about 1,700 in 2016. The discrepancies between Chinese companies and the public and developed Western countries in terms of understanding and practices of stakeholder engagement entail a strategic framework to help Chinese MNEs to improve stakeholder relationship management in the international arena.

4.3 METHOD Given the limited literature on the cross-border stakeholder engagement of Chinese MNEs, the inductive case study is a good approach for feeding insights into the theory-building process (Eisenhardt and Graebner, 2007). Following Yin’s (2013) theoretical sampling principles, we first identified 32 relevant cases in the Harvard and Ivey case database with the content of Chinese firms’ internationalization from 1999 to 2015. There are only few cases related to Chinese MNEs’ stakeholder management and institutional context. We then selected CITIC Pacific Mining Co. in Australia and Huawei (an exemplary Chinese high-technology company) in the USA as two significant cases. In both cases, these Chinese MNEs encountered serious stakeholder engagement issues in developed Western countries. Since emerging markets including China “are novel contexts that differ from the regions in which the [stakeholder engagement] theories originated” (Tsui, 2007: 1357), we endeavor to develop a context-specific theory to explain the uniqueness of stakeholder engagement in China, the stakeholder relationship challenges for Chinese MNEs (especially in the developed world) and the possible mechanisms that may help Chinese MNEs to improve cross-border stakeholder engagement. 4.3.1  Data Collection and Analysis We relied on archival data from news releases, existing business case materials, company websites, CSR reports, and interviews. To gain a further understanding of Chinese firms’ stakeholder management, we invited three senior managers in CITIC and Huawei, one lawyer and three media reporters for interviews. We discussed several open-ended questions and explored how Chinese firms interact with multiple stakeholders in developed Western countries. Some follow-up calls took place for further clarification and feedback. The typical questions included: Who are the

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main stakeholders in your firm’s international expansion? Did your firm encounter any serious conflicts with stakeholders? What would be the best solution for those conflicts? How did your firm engage any corporate social responsibility activities? Did your firm collaborate with foreign nonprofit organizations? If yes, what kind of activities or events? What kind of social impacts did these activities generate? In these interviews, most senior managers and reporters indicated that organization legitimacy in the eyes of foreign stakeholders is their major concern. Overall, the data collection from multiple sources helped us to triangulate our data. As for data analysis, we started with the narratives briefly covering company history and current situation in stakeholder engagement, in particular in the focused host countries. We then conducted an exploratory cross-case analysis looking for similarities and differences. We followed Rindova and Kotha (2001)’s method of systematic “open coding” of important firm events in engaging stakeholders, including some negative impact of the mismatch of stakeholder management. We further verified these impacts from the media reporters, who have a broad view with wide connections of many different kinds of stakeholders. To follow Eisenhardt and Graebner’s (2007) and Yin’s (2013) suggestion, we used comprehensive tables to strengthen the depth of the empirical grounding of our theoretical framework and to triangulate research questions, theories and case narratives.

4.4  CASE STUDIES AND RESULTS 4.4.1  Chinese Mining Enterprises in Australia The ever-increasing demand for iron ore resources in China has recently triggered many (mostly state-owned) Chinese mining enterprises to acquire iron ore mines located in foreign countries, in particular in Western Australia (Hendrischke and Ferguson, 2012). Despite its resource abundance, Western Australia has proved to be a very difficult location for these Chinese enterprises to undertake mining businesses. The Sino Iron magnetite project being operated by CITIC Pacific Mining is clearly exemplary (see Table 4.2). The US$5.2 billion Sino Iron magnetite project, located in Cape Preston (near Karatha), a remote region in Western Australia, was by far the largest investment made by a Chinese enterprise in the Australian natural resources sector. In fact, it has been the largest magnetite mining and processing operation under construction in Australia. Upon completion, it will be one of the world’s largest mines. The project, however, has s­ uffered from

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Due to the  huge costs of the project, no local companies

Difficulties of  establishing sub-national legitimacy initially

Increase  compensation Employ local  management to solve related cultural disputes (Sun and Chen, 2010)

Negotiate with the  Australian government for preferential policies (Sun and Chen, 2010)

Difficulties of  establishing national level legitimacy in Australia

CITIC as a state owned enterprise may threaten the national security and disturb the market order (Sun and Chen, 2010) The government  wishes to discourage large-scale Chinese investment (Ker, 2011) CITIC was not  happy with the cost increase but was confident that it identified the problem Common  problems for Chinese mining enterprises in Australia (Sun and Chen, 2010)

Central  government Public media

Government  assessment process is much longer than expected (Sun and Chen, 2010) The project  operates under intense scrutiny from the Australian government and media (Sun and Chen, 2010)

CITIC Pacific  Mining's Sino Iron magnetite project Started construction  in 2006 In 2009 CITIC  Pacific announced that production would be delayed In 2011 production  was delayed again to 2012 (Sun and Chen, 2010)

High competition Local  employees  in local labor market leading to huge labor costs (Sun and Chen, 2010)

Actions/measures

Legitimacy

Australian/ Western media

Chinese media

Key stakeholders

Main challenges

Internationalization and investments in Australia

Table 4.2  Chinese mining companies’ stakeholder engagement and legitimacy in Australia

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 were willing  and could better manage to take on the cost and the project. performance This may (Resourcesexplain why Career, 2011) the Foreign Investment Review Board finally gave permission to the 100% equity purchase by CITIC (Sun and Chen, 2010) Company Different Local Land use of  communities  cultures and  does not fully  aboriginals understand management Local and getting the “rights” styles  authorities exploration of native between permits/licenses communities China and (Sun and Australia Chen, 2010) (Sun and To get Chen, 2010)  environmental permit (Sun and Chen, 2010)

Tension with  local labor on working time and compensation, etc. (Sun and Chen, 2010)

Gradually  establishing sub-national legitimacy

Gaining  recognition and acceptance over time

Different panels to  work with and reach agreements with aborigines Keep close contact  with aborigines Monitor the local  environment and audit the subcontractor’s environmental protection performance (Sun and Chen, 2010)

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Shareholders Discrimination  and “white Central Australian”  government thoughts Public media were the Local commureasons rather  nities than state ownership (Guan, 2009) The competitor  lobbied the public and impacted the government decision Chinalco  failed to have sufficient communication with the major shareholders (Xuan, 2010)

Shareholders  disagreed on the buy due to the lengthy process of government assessment (Sun and Chen, 2010) Rio Tinto  investors were broadly opposed to the deal (Guan, 2009) Many objections  from Australian politicians, media and people (Guan, 2009)

Chinalco bid for  Rio Tinto Australia Corp. In 2006 proposed to  exchange shares In 2008 reached a  strategic cooperation agreement. In 2009 Rio Tinto  abolished the transaction (News, 2009)

Chinese media

Key stakeholders

Main challenges

Internationalization and investments in Australia

Table 4.2 (continued) Actions/measures

Engage with Rio  Tinto to make appropriate amendments to the transaction terms (News, 2009) Summarize the  overseas acquisition experience from the bid failure (Xuan, 2010) Global responsibilities  are firstly included in 2009 CSR report and dramatic improvements and changes in 2010 CSR report (Chinalco, 2009, 2010)

Legitimacy

Lack of national  legitimacy Lack of  sub-national legitimacy

Australian/ Western media National security  concern that the Communist dictatorship pulled the strings behind the scenes (Sheridan, 2009) The Chinese  company’s way of extending its power in Australia (News, 2009)

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The  Mungada East plan was rejected by Western Australian Environment Protection Agency (EPA) (CNSB, 2009)

Huge costs Sinosteel Weld  caused by   Range project the delay in 2010 July finished building local  the feasibility study infrastructure 2011 July adjusted and ports  schedule of the (Yan, 2011) project (Jiang, 2011) 2013 plan for  operation

Sinosteel  MungadaEast project 2005 collaboration  agreement 2006 assessment  procedure 2008 took over  MidWest Corp. 2009 June rejected  then appealed (Bell, 2009; Sinosteel Midwest, 2009a) 2009 September  approved (Sinosteel Midwest 2009b)

Business  partners

Local  authorities

Due to the  dramatic shrinkage of the assets, the loss outweighed the gains from this project (Yan, 2011)

Lack of Temporary  sub-national  setback legitimacy has notable commercial and strategic motives (Kennedy, 2011) The move  was merely a bargaining ploy (Kennedy, 2011)

Lack of national EPA's decision Since hostile  increased the  takeover of an  and subnational Australian iron difficulties legitimacy. ore company, and risks of The support the government carrying out from local has tried to the project. communities cap Chinese It may result helped to gain ownership as it in loss of legitimacy seeks to address jobs and local by local concerns subcontracts, authorities about China’s and other and central influence on economic government the key export benefits to a certain sector (Bell, (Sinosteel extent 2009) Midwest, 2009a)

Appealed against the  rejection (Sinosteel Midwest, 2009a) Won the support  of various local stakeholders (Sinosteel Midwest, 2009b) Since 2008,  incremental improvements are made in Sinosteel CSR reports In 2009, the first  Sinosteel corporation sustainability Australian report (Sinosteel CSR Report, Sinosteel, 2008, 2009, 2010) Sinosteel adjusted the  progress and delayed the project (Yan, 2011) Continued to seek  other means of transportation (Jiang, 2011)

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repeated delays and substantial extra costs beyond the original estimate. Dr. Dongyi Hua, the head of the project, acknowledged that it was “a truly unique, immensely challenging and exciting project” (Sun and Chen, 2010). The main challenges, which are more or less common to Chinese mining enterprises, lie in the domain of key stakeholder engagement involving the central and local governments, employees and local communities. Government relations: In contrast with its experiences in many African countries where its state ownership (and sometimes intergovernmental negotiation) resulted in a range of preferential treatments in custom duties, product inspection, banking services, to name a few, CITIC Pacific Mining found that the Australian governments were not “friendly.” As a matter of fact, the Australian governments were suspicious of Chinese state-owned enterprises. In particular, they were concerned with possible non-marketbased transfer pricing practices, potential losses of local employment, environmental hazards and national securities, etc. Indeed, several highprofile acquisition deals proposed by Chinese state-owned enterprises, most notably Chinalco’s bid for Rio Tinto assets in 2009, failed to pass the screening of the foreign investment review board (FIRB) of the Australian government. To engage the Australian government more effectively, some Chinese mining enterprises such as Sinosteel, a Fortune Global 500 company, started to issue a customized CSR report for Australia (Sinosteel Corporation Sustainability Australia Report, Sinosteel, 2009). Labor relations: Labor costs are extraordinarily high due to the scarcity of mining workers and competition among various mining operations in Western Australia. An average mining worker in Western Australia can make well over AUS$100,000 (AUS$160,000 for an average bulldozer operator) which is comparable to the salary of a typical Australian professor. Moreover, according to Dr. Hua, Australian employees lacked a sense of belonging and loyalty compared to Chinese employees (Sun and Chen, 2010). For example, the Australian managers working for the Sino Iron project “still follow the routine working hours and holidays and look forward to the end of the year bonus” irrespective of the extra operating costs and missed deadlines. One Australian manager even made a cynical remark that it didn’t matter because all the money was from the Chinese government, though CITIC Pacific is a Hong Kong listed firm with diverse shareholders. When Dr. Hua’s complaints were reported by the Chinese media, they were quickly translated and reported by the Australian media, creating severe backlashes among the local workforces. Dr. Hua’s efforts in hiring several thousand migrant workers from China to boost efficiency were also deterred by the Australian government, which denied the majority of the visa applications – on the grounds that most of these proposed Chinese migrant workers did not meet the English proficiency

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requirements. The senior executives of CITIC Pacific Mining realized the importance of trusting local employees and delegating responsibilities so as to build their corporate reputation. Communities and environments: To prepare for the Sino Iron project, CITIC Pacific Mining found that the infrastructure in rural Western Australia was even worse than in many developing countries. The company had to build roads, ports, power generation stations and other facilities first. More importantly, the company had to reach an agreement with the aboriginal population regarding land use, the protection of sacred sites and cultural relics. Further, they needed to obtain environmental licenses and audit subcontractors’ social and environmental performance. For example, a great deal of time was devoted to the protection of the local wildlife. The project meeting often started with environmental issues such as how to help animals if they happened to fall into the crates in the mining area. For environmental protection, every construction project cost substantially more than in China. For instance, a double arch bridge would cost AUS$50 million whereas the same bridge would need a budget of about RMB 5 million (less than AUS$1 million). Dr. Hua and his Chinese colleagues realized that those social and environmental aspects, while essential in Western Australia, would not draw as much attention in China. 4.4.2  Huawei in the United States Established in 1988 with a loan of US$9 million and 30 employees, Huawei has become the second largest telecom equipment provider worldwide within two decades. Business Week included Huawei as one of the “World’s 10 Most Influential Companies” in 2008 while Fast Company listed Huawei as the fifth “Most Innovative Company” in 2010. As revealed in its 2016 CSR report, Huawei has started to develop and execute a comprehensive stakeholder engagement strategy (see Table 4.3). Despite its apparent business success and its contributions to local communities (e.g., disaster relief, equipment donation, training) worldwide (Huawei Technologies Co. Ltd, 2016), Huawei’s international stakeholder engagement has encountered a number of challenges, particularly in the USA where the company, though privately owned, has been perceived as having strong connections with the Chinese government and military, mainly because its founder, Mr. Zhengfei Ren, is a former military officer. Among various stakeholders, U.S. industry peers and governments seemed to be the most difficult for Huawei to work with. Industry Peers and Associations: Huawei’s initial failure in the USA could be attributed largely to its neglect of connections with industry peers

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Failure to acquire  large customers such as AT&T, Verizon, Sprint and T-mobile in the USA (Vance and Einhom, 2011) Absence of trust The first big contract in  European market to build  between Chinese

2004–2007 Withdrawing the products  from the USA and entering the European market in 2003 (Luk, 2003) Large  customers Governments Public media

Very few customers Customers  (sales less than Governments US$50,000 by Competitors 2003) Objections from U.S.  Western media and politicians (Vance and Einhom, 2011) Cisco’s IP  infringement lawsuit in January 2003

1999–2003 R&D center in Bangalore,  India 1999 Set up its first U.S. office  in Plano, Texas and four research centers in 2001 Joint venture with 3Com  in 2003 Using a brutal force  approach to cracking markets (Vance and Einhom, 2011)

Key stakeholders

Main challenges

Internationalization and investments in the USA

Establishing  subnational legitimacy by winning small and medium  sized customers

Lack of  subnational and national legitimacy in the USA

Huawei Huawei as  well as  was stealing other technologies Chinese and undercut firms lacked competitors knowledge (Markoff and about the Barboza, 2010; rules of IP Vance and protection Einhom, 2011) (Wang, 2003) Western  companies overused (or abused) the IP protection weapon to maintain monopoly (Wang, 2003) Huawei’s Concerns with  efforts  national security blocked and economic due to espionage ideological (Gertz, 2010) prejudice or stereotyping Chinese  business lacking

Legitimacy

Chinese media US/Western media

Table 4.3  Huawei’s stakeholder engagement and legitimacy in the USA

Ranked no.4 among  firms in application for

More efforts in other markets Employ local lobbyists, lawyers  and consultants to help negotiate with U.S. government (Markoff and Barboza, 2010)

Intensifying patent applications  (Zhao, 2009) Modifying products/codes Modeling after U.S. company  IBM to learn management experiences (Chang et al., 2009) Participating in standard  organizations such as ITU

Actions/measures

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 corporation and U.S. government (Pomfret, 2010) The cross-border  projects involving critical technologies should be reviewed and approved by CFIUS Increasing suspicion  from the government (Gertz, 2010)

Failure in strategic  acquisitions involving 3Com, 3Leaf Systems (a Silicon Valley software start-up) (Perez, 2008) Politicians’ growing  apprehension about Chinese companies’ acquisition activities (Lake, 2011; Vance and Einhom, 2011) The transaction  under close scrutiny by CFIUS (Perez, 2008)

 Telfort 3G network in the Netherlands in 2004 Acquired British Telecom  as the key customer in 2005 Alliances (or JVs) with  Marconi, Vodafone, Leap and Symantec, etc. from 2005–2007 Winning the Thailand  CDMA bidding in 2005 Huawei’s overseas order  surpassed domestic market in 2005

2008–2011 Expanding globally but  the U.S. market share still relatively small Winning contracts with  Bell and Telus in 2008 to build joint network Becoming a member of  OCRI in 2010 to help ease tension between Huawei and Washington (Sturgeon, 2010) Joint venture with  Mediacom communications in 2009 Huawei’s new regional HQs  established in North Texas in 2010

 due to its competitive and quality products. Difficulties of  establishing national legitimacy in the USA

Increased sub national level legitimacy Lack of  improvement of nationallevel legitimacy

 transparency and overreliance on governments (O’Neill, 2004)

Huawei’s Adoption of Business  partners  efforts  Huawei Customers blocked due products might Governments to fact that affect national China was security demonized (Gertz, 2010) by Western media and Western governments (Perez, 2011)

Collaborating with former  Speaker of the House Richard Gephardt and former World Bank President James Wolfensohn Strengthening IP protection  (suing Motorola for disclosing its confidential information to its rivals) (Perez, 2011) Opening source codes for  investigation (Vance and Einhom, 2011) Targeting low-profile customers  (Vance and Einhom, 2011) Adopting a strategy of localizing  management by hiring local elites and setting up independent board of directors (Huawei Technologies Co. Ltd, 2016) Inform the public through  releasing CSR reports

  patents worldwide Joint R&D centers with  Vodafone, British Telecom, Motorola and others (Toloken, 2008)

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and associations. Emboldened by its competencies of offering quality products at very competitive prices, Huawei seemed to take it for granted that it could penetrate the U.S. market the same way as it had done in its domestic market. Considering that the legal infrastructure and law enforcement were still lax in China, Huawei was unprepared to deal with the stringent intellectual property protection institutions in the USA. In 2003, shortly after Huawei’s entry into the USA, Cisco brought a lawsuit of intellectual property rights (IPRs) infringement against the company (Einhorn, 2003a, 2003b). Allied with 3Com, Huawei reached a settlement with Cisco six months later, and withdrew almost all of its products from the U.S. market. Huawei learned its lesson and began to establish relationships with many industrial associations such as the International Telecommunications Union which was responsible for setting standards for technology. In 2004, Huawei submitted some 200 proposals on standards to such groups, leaping from just 17 in 2001. Huawei has also established joint R&D programs with Texas Instruments, Motorola, IBM, Intel, Agere Systems, Sun Microsystems, Altera, Qualcomm, Infineon and Microsoft. Huawei’s efforts paid off. In 2009, Huawei was selected by Mediacom Communications, one of the largest cable television companies in the U.S., to deploy large-scale next-generation DWDM in North America. Government relations: Huawei has been grappling with the U.S. national security concerns mainly due to its founder’s previous military background. Consequently, the company has been trying to forge political (and business) alliances (Ante and Raice, 2010). Despite its enormous efforts, the challenges still remain significant. For example, Huawei partnered with Bain Capital, a private equity firm, to take over 3Com in 2007. The acquisition failed to pass the national security review by the Committee on Foreign Investment in the US (CFIUS) and thus had to be abandoned in 2008 (Globerman and Shapiro, 2009). A recent acquisition of 3Leaf Systems, a very small U.S. company, has also brought Huawei some troubles with certain U.S. government agencies (The Wall Street Journal, 2010). Huawei’s collaboration with Amerilink Telecom Corp., whose board of directors includes former U.S. congress leader Richard Gephardt and former World Bank President James Wolfensohn, reflects its ever-increasing efforts in improving its engagement with the U.S. government (The Economist, 2009). More recently, a major retailer in the USA announced it would not sell Huawei products anymore, reportedly because of the security concerns raised by officials in the Trump administration (Strumpf and Woo, 2018; Woo, 2018).

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4.4.3 Stakeholder Management of Chinese MNEs: A Synthesis of Case Evidence The two exploratory case studies helped deepen our understanding of the unique issues of Chinese MNEs in dealing with international stakeholder relations, which is beyond the existing literature. The cases also provided fairly rich evidence to uncover the ensuing consequences of ill-adapted stakeholder engagement in institutionally distant host countries. In addition, there emerged some preliminary viable solutions in the process of examining and comparing the case data. First and foremost, the case studies revealed in detail why and to what an extent the salient stakeholder relationships were different in the developed Western countries such as Australia and the USA compared to China. The institutional distance as well as economic distance between China and the developed Western world was extensively discussed in the IB literature (e.g., Child and Rodrigues, 2005; Peng et al., 2008). Our case studies indicated that as a result of these distances, Chinese MNEs found themselves having to deal differently with relatively unique stakeholders on the one hand (e.g., the local community in Western Australia) and the seemingly same stakeholder relations on the other hand (e.g., the government relations in Australia and the USA). The former was atypical for Chinese mining enterprises, for instance, because the local communities were generally not vocal in China as well as in many other developing countries. The latter entails totally different communication and management styles because the governments tend to be suspicious of (and at times hostile to) the Chinese enterprises, especially the state-owned ones. This is in sharp contrast with the often closely bonded ties between these companies and the Chinese government. Second, the existing literature shows a diversity of findings regarding the causal links between stakeholder engagement and firm performance. Our case studies show that the ill-adapted stakeholder engagement resulted in lack of legitimacy and lack of efficiency. For example, the Chinese mining MNEs either incurred enormous extra expenses in construction projects (in the case of the Sino Iron project undertaken by CITIC Pacific Mining) or faced the rejection of acquisition deals by the Australian government (in the case of Chinalco’s bid for Rio Tinto). In a similar vein, Huawei experienced severe setbacks and had to abandon its acquisition plans repeatedly in the USA. Third, given the persistence of institutional distance and organizational inertia (with strong home-country embeddedness), stakeholder management is inherently difficult for Chinese MNEs, in particular the stateowned enterprises. Nevertheless, two related solutions might be available to

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alleviate the problems. One requires key stakeholder identification. Husted and Allen (2006) noted that the salience of specific stakeholders depended upon the local contexts. The other calls for strategic and proactive engagement of key stakeholders. Sinosteel enhanced its communication with the important local stakeholders by issuing a customized CSR report for Australia. As for Huawei, the company has been trying to engage highprofile U.S. politicians and seeking participation in global organizations such as the International Telecommunications Union. 4.4.4  Cross-Border Stakeholder Management: A Conceptual Framework Stakeholder relationships have long been a touchstone of corporate sustainability (Sloan, 2009). Effective stakeholder engagement helps ensure that business conduct converges with regulatory, normative and cognitive institutions in the environment in which a firm operates. Our literature review shows that substantial differences exist in the institutional as well as the technical environments between the developed world – where marketoriented institutions are strong and have high degrees of formalization and where the civil society plays an important role in shaping the evolving “rules of the game,” – and emerging markets such as China – where market-oriented institutions are relatively weak and the civil society’s roles may also be limited relative to more powerful governments and business enterprises. The environmental differences resulted in discrepancies in the portfolio and nature of stakeholder relations and the mismatch of stakeholder engagement approaches between an emerging market such as China, and developed Western countries such as the USA and Australia. Our case evidence indicates that a conceptual framework as shown in Figure 4.1 appears to be appropriate for explaining the challenges encountered by Chinese MNEs in engaging key stakeholders in foreign countries, especially in the developed Western world. As will be detailed later, we also contend that such a framework is scholarly valuable and practically useful to inform cross-border stakeholder management for Chinese MNEs or more broadly the emerging market MNEs. We argue that Chinese MNEs tend to adopt a stakeholder engagement approach abroad which is based upon the competences, routines and experiences they have accumulated in China. This is likely to result in a mismatch with what is perceived as appropriate in developed Western countries such as Australia and the USA due to the environmental differences between China and the developed host countries. Specifically, Chinese MNEs often fail to engage the salient stakeholders in the developed Western countries, and neglect those issues that are regarded to be the most important by the stakeholders in these host countries. Consequently, the local stakeholders

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China-Western country institutional distances • Regulatory distance • Cognitive distance • Normative distance

Western Country stakeholder engagement deficiencies

Western country sub-national level legitimacy

Stereotyping of Chinese MNEs’ stakeholder engagement

Western country national level legitimacy

Figure 4.1 Institutional distance, stakeholder engagement and legitimacy: an exploratory conceptualization tend to perceive the conduct of Chinese MNEs as lacking legitimacy because these MNEs do not effectively follow or adapt to certain rules, norms and/or the ways things work in the local environments. Establishing local legitimacy is critical for success and survival and can be defined as the acceptance of the firm by the local stakeholders. Furthermore, the mismatch also tends to result in direct efficiency losses for Chinese MNEs as the operational expenses incurred are often way beyond their budgets, as demonstrated in the Sino Iron project in Australia. We note the important role of Chinese MNEs’ engaging capability with different stakeholders in corporate social responsibility (CSR) strategy formation. Firms that are explicitly engaging stakeholders in the CSR strategy-making process, such as through the mechanism of strategic conversations, will minimize future stakeholder concerns and enhance CSR strategy making effectiveness of firms (Miles et al., 2006). We define MNEs’ stakeholder engaging capability as an additional organizational capability that can promote CSR through strategic conversations from a stakeholder perspective. The strategic objective of this capability is to develop meaningful relationship with key stakeholders so as to be able to understand the key issues and interests of stakeholders and to be able to respond effectively to stakeholders’ concerns and claims so as to maintain and enhance legitimacy. As such, it comprises practices and routines that aim at attaining a good corporate reputation and enhanced legitimacy/efficiency. We argue that the negative impact of the mismatch of stakeholder management approaches can be alleviated by: (1) identifying the key stakeholders and their interests, which is not necessarily an essay task for

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Chinese MNEs at the early stage of internationalization, as indicated by Huawei’s initial experience in the USA, (2) building and leveraging social networks which consist of local stakeholders as well as global stakeholders such as various international organizations and NGOs, and (3) strategic conversations with salient stakeholders (in the case of Sino steel) and longterm partnerships (Sloan, 2009).

4.5  SUMMARY AND CONCLUSIONS Academic studies on cross-border stakeholder management are still limited. In particular, little is known about the stakeholder engagement of Chinese MNEs in foreign countries. Although general stakeholder views have been developed in the past few decades, such views have seldom been applied and extended in the IB area. The present study contributed to the stakeholder management literature in several ways. First, we examined the current literature and highlighted the specific gaps between China (a major emerging market) and the developed world in terms of the portfolio and nature of stakeholder relationships. Although the existence of such gaps was not surprising, a systematic investigation through the lenses of the stakeholder view and institutional theory paved the way for our case studies. Second, the two case studies on Chinese MNEs in Australia and the USA generated some rich evidence revealing the salient local stakeholder relations and the impact thereof on the legitimacy and efficiency of these Chinese MNEs. Third, we explored some possible instruments for improving stakeholder management for Chinese MNEs, especially in the developed world. Since China’s accession to the World Trade Organization, a good number of Chinese enterprises have followed the “go global” policy of the Chinese government. Several of the major foreign investments in the developed countries encountered serious setbacks. A key reason is that these Chinese MNEs, though clearly successful in their domestic market and even in some other developing countries, overlooked the importance of engaging salient local stakeholders who appear to be unimportant in China. This study examines the current gap of stakeholder engagement in China as opposed to the developed world. Through two exploratory case studies, we highlighted the main problems of stakeholder engagement in Australia and the USA and developed a conceptual framework to facilitate cross-border stakeholder engagement. We pointed out some valuable implications for both academics and practitioners.

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4.6  IMPLICATIONS AND FUTURE RESEARCH A holistic approach of managing stakeholder relations tends to be overlooked by Chinese MNEs in the process of formulating their internationalization strategies. This is manifested very clearly in Dr. Dongyi Hua’s reflection on relations with the local governments, employees and communities in Western Australia, “what is easy in China tends to be difficult in Australia and vice versa.” For MNEs in general and Chinese MNEs in particular, a clear understanding of the different portfolios of salient stakeholders is essential prior to investment decisions. More importantly, Chinese MNEs need to sharpen their capabilities to engage in strategic conversations with key stakeholders in developed countries. This capability can be regarded as an organizational competence which has become important for the long-term market success and continued legitimacy of the firm and its activities from a stakeholder perspective. Our conceptual framework provides a good foundation for further academic inquiries into cross-border stakeholder engagement for Chinese MNEs and the like. Several specific issues need to be studied in a finergrained manner. According to our framework, the stakeholders reside in the technical and institutional environments respectively. It’s not yet clear whether different engagement strategies or management approaches are needed for dealing with stakeholders embedded in these two environments with different complexities. The IB literature addressed extensively how MNEs might find a balance between global (standardization) strategy and local adaptation strategy (Bartlett and Ghoshal, 2000; Hennart, 2009), mainly in terms of business/product strategies. Future research is warranted as to whether different stakeholder relations in the technical and institutional environment can be addressed through the same lens. Moreover, many Chinese MNEs, especially the state-owned ones, are widely known to have strong relationships with the Chinese government. Such strong ties often backfire in the developed countries where the institutions are mature and the roles of the governments are conceived differently. Moreover the accumulated engaging capabilities are likely to be ineffective to engage diverse stakeholders such as NGOs, unions and communities in developed economies’ settings. So far, there is a lack of theoretical arguments and empirical tests as to whether the bond with the Chinese government affects the stakeholder engagement positively or negatively. This issue is important considering many of the social and environmental issues can only be resolved via intergovernmental collaboration and coordination at the supra-national level. Further research could therefore explore how Chinese MNEs can improve their stakeholder engagement capability and strategies in developed Western countries to

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enhance their legitimacy there, without endangering effective stakeholder engagement and the firm’s legitimacy at home.

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Sheridan, G. (2009), ‘Say no to Chinalco’, The Australian, February 26, accessed December 1, 2010 at http://www.theaustralian.com.au/news/say-no-to-chinalco/ story-e6frg6v6-1111118965067. Sinosteel (2008, 2009, 2010), Corporate Sustainability Report, Beijing: Sinosteel. Sinosteel (2009), Sinosteel Corporation Sustainability Australia Report, Beijing: Sinosteel. Sinosteel Midwest (2009a), ‘SinoSteel Midwest appeals EPA recommendations’, Sinosteel Midwest Media Release, June 12, accessed December 1, 2011 at http:// www.smcl.com.au/pdf/0906%2012%20Sinosteel%20Midwest%20appeals%20EP​ A%20recommendations.pdf. Sinosteel Midwest (2009b), ‘Sinosteel Midwest welcomes environment minister’s decision on appeals for Koolanooka project’, Sinosteel Midwest Media Release, September 24, accessed December 1, 2011 at http://www.smcl.com.au/pdf/0909%20 24%20Sinosteel%20Midwest%20welcomes%20Environment%20Minister’s%20de​ cision%20on%20appeals.pdf. Sloan, P. (2009), ‘Redefining stakeholder engagement: from control to collaboration’, Journal of Corporate Citizenship, 36, 25–40. Strumpf, D. and S. Woo (2018) ‘Best buy to stop selling Huawei phones’, Wall Street Journal, March 22. Sturgeon, J. (2010), ‘Huawei joins Canadian tech incubator’, National Post, August 26, p. 5. Su, J. and J. He (2010), ‘Does giving lead to getting? Evidence from Chinese enterprises’, Journal of Business Ethics, 93, 73–90. Sun, L.S. and Z. Chen (2010), ‘Sino Iron project in Australia’, case study (in Chinese). Sun, S. L., Y. Zhang and Z. Chen (2013), ‘The challenges of Chinese outward investment in developed countries: the case of CITIC Pacific’s Sino Iron project in Australia’, Thunderbird International Business Review, 55 (3), 313–322. Surroca, J., J.A. Tribo and S. Waddock (2010), ‘Corporate responsibility and financial performance: the role of intangible resources’, Strategic Management Journal, 31, 463–490. Swike, E., S. Thompson and C. Vasquez (2008), ‘Piracy in China’, Business Horizons, 51 (6), 493–500. Tam, O.K. (2002), ‘Ethical issues in the evolution of corporate governance in China’, Journal of Business Ethics, 37, 303–320. Tan-Mullins, M. and P.S. Hofman (2014), ‘The shaping of Chinese corporate social responsibility’, Journal of Current Chinese Affairs, 43 (4), 3–18. The Economist (2009), ‘Up, up and Huawei’, The Economist, September 24, accessed January, 2011 at https://www.economist.com/special-report/2009/09/24/ up-up-and-huawei. The Wall Street Journal (2010), ‘Huawei hires consultants for the acquisition in the U.S.’ (in Chinese: 华为聘请顾问公司为在美收购清障), The Wall Street Journal, July 12, accessed December 8, 2010 at http://chinese.wsj.com/big5/20100712/ tec123027.asp. Toloken, S. (2008), ‘Don’t underestimate IP potential of China’, Plastics News, July 10. Tsui, A.S. (2007), ‘From homogenization to pluralism: international management research in the academy and beyond’, Academy of Management Journal, 50 (6), 1353–1364. UNCTAD (2017), World Investment Report 2017, Geneva: UNCTAD. Vance, A. and B. Einhorn (2011), ‘At Huawei, Matt Bross tries to ease U.S. security

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fears’, Bloomberg Business Week, Sept 16, assessed November 15, 2018 at https:// www.bloomberg.com/news/articles/2011-09-15/at-huawei-matt-bross-tries-to-ea​ se-u-dot-s-dot-security-fears. Van Huijstee, M. and P. Glasbergen (2008), ‘The practice of stakeholder dialogue between multinationals and NGOs’, Corporate Social Responsibility and Environmental Management, 15 (5), 298–310. Von Weltzien Hoivik, H. (2007), ‘East meets west: tacit messages about business ethics in stories told by Chinese managers’, Journal of Business Ethics, 74 (4), 457–469. Wang, H. (2003), ‘Behind the lawsuit of Ciso against Huawei’ (in Chinese: 思科状 告华为的背后), China Telecommunications Trade, 3, 10–11. Wang, J. and W. Chaudhri (2009), ‘Corporate social responsibility engagement and communication by Chinese companies’, Public Relations Review, 35, 247–250. Wang, J., S. Qin and Y. Cui (2010), ‘Problems and prospects of CSR system development in China’, International Journal of Business and Management, 5 (12), 128–134. Wang, J.J., X. Zhao and J.J. Li (2011), ‘Team purchase: a case of consumer empowerment in China’, The Journal of Consumer Affairs, 45, 528–538. Welford, R.J. (2004), ‘Corporate social responsibility in Europe and Asia: critical elements and best practice’, Journal of Corporate Citizenship, 13, 31–47. Wong, L. (2009), ‘Corporate social responsibility in China: between the market and the search for a sustainable growth development’, Asian Business and Management, 8 (2), 129–148. Woo, S. (2018), ‘Why Washington is so obsessed with China’s Huawei’, The Wall Street Journal, March 6. Xu, S. and R. Yang (2010), ‘Indigenous characteristics of Chinese corporate social responsibility conceptual paradigm’, Journal of Business Ethics, 93 (2), 321–333. Xuan M. (2010), ‘China concluded five lessons of the failed acquisition of Rio Tinto by Chinalco’ (in Chinese: 中国总结中铝力拓联姻失败案五大教训), XKB, March 16, assessed December 1, 2011 at http://www.xkb.com.au/html/news/ aozhoucaijing/2010/0315/29727.html. Yan, J.N. (2011), ‘Chinese ten billion yuan iron ore is abandoned’ (in Chinese: 中 国澳洲百亿元铁矿撂荒 资产缩水产能成空), Caixin Century, June 27, accessed December 14, 2011 at http://big5.ifeng.com/gate/big5/finance.ifeng.com/news/ corporate/20110627/4196034.shtml. Yin, J. and Y. Zhang (2012), ‘Institutional dynamics and corporate social responsibility (CSR) in an emerging country context: evidence from China’, Journal of Business Ethics, 111 (2), 301–316. Yin, R.K. (2013), Case Study Research: Design and Methods, Thousand Oaks, CA: Sage Publications. Zhao, J.W. (2009), ‘Chinese manufacturers’ breakthrough in patent applications’ (in Chinese: 中国厂商专利申请获突破: 展开LTE底层专利争夺), Sina, March 16, accessed December 1, 2010 at http://tech.sina.com.cn/t/2009-03-16/11122912511. shtml. Zhou, K.Z. and L. Poppo (2010), ‘Exchange hazards, relational reliability, and contracts in China: the contingent role of legal enforceability’, Journal of International Business Studies, 41, 861–881.

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5. Cross-country comparison of corporate social performance: how do institutions matter? Jiyoung Shin and Chang Hoon Oh 5.1 INTRODUCTION Country institutions affect the way of thinking, decision-making, and behaviors of both organizations and individuals in society. What is essential to both researchers and practitioners is that institutional environments vary across countries. Different countries have different legal systems, norms, and cultures and these differences affect firms’ corporate social responsibility (CSR) (Chapple and Moon, 2005; Ioannou and Serafeim, 2012; Young and Makhija, 2014). One example of such differences and their associations with CSR is environmental protection, which is generally considered to be a more important social issue in economically and socially developed countries than in less developed countries (Becker and Henderson, 2000; Cole, 2004; Greenstone, 2002). CSR information disclosers can be another example. According to Ali, Frynas, and Mahmood (2017), multinational corporations (MNCs) in developed countries experience more public pressure to disclosure their CSR information than MNCs in developing countries. In addition, the pressure from regulators, shareholders, ­creditors, environmentalists, and the media have significant impacts on CSR disclosure in developed countries whereas pressure from international buyers, foreign investors, and international media have impacts on CSR disclosure in developing countries (Ali, Frynas, and Mahmood, 2017). Differences in CSR also exist across developed countries. For example, the number of firms that adopted the ISO 14001 certification, which provides the standards for the Environmental Management System (EMS), is larger in Western Europe than the United States (Delmas, 2002). In 2017, the United States had 594 certified facilities, while Western Europe had 7,045 certified facilities.1 Even considering the GDP of the United States 133

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and Western Europe, Western European firms are more likely to have better EMSs than American firms. As such, expectations about social responsibilities and practices vary across countries because of differences in their institutions. Although a significant relationship between institutions and CSR could exist, previous studies have paid less attention to this relationship. Since firms engage more in international trade and foreign direct investments, MNCs should pay attention to differences in institutional environments across countries. It is important to understand different institutional environments to understand local needs and expectations in host countries (Ho, Wang, and Vitell, 2012). Recently, an increase has been seen in the amount of literature examining what institutional factors affect firms’ corporate social performance (CSP). While CSR is considered to be a firm’s response and actions pertaining to its principles, CSP explains the outcome and measure of the firm’s CSR actions (De Bakker, Groenewegen, and Den Hond, 2005; McWilliams and Siegel, 2000). Using the institutional theory, these studies found that CSP varies across institutional environments, such as regulation and culture (Chapple and Moon, 2005; Ioannou and Serafeim, 2012). These studies focus more on whether institutional factors affect the level of CSP and less on the effect of the different types of the institutions on the different dimensions of CSP (i.e., environmental, social, and corporate governance (ESG) performance). Investors and shareholders are interested in a firm’s ESG performance as it allows them to evaluate risks and opportunities. For example, a firm’s environmental performance can be a signal of its future risks and opportunities. If a firm has high environmental performance through advanced technologies and practices, then it may seize comparative advantages with its technologies and practices in countries with stringent regulations or caring societies. Unlike the case of high environmental performance, firms with low environmental performance may face huge risks with increased taxation, fines, and development costs (Bassen and Kovacs, 2008) as well as boycotts from consumers and societies. The literature on socially responsible investing (SRI)2 has paid more attention to ESG performance, which explains firms’ non-financial performances (Bassen and Kovacs, 2008; Revelli, 2017), than on the impact of the country institutions on ESG performance. Considering that different types of stakeholders are influenced by different types of country institutions, we infer that each ESG performance is affected by different types of country institutions. According to Peiró-Signes, Segarra-Oña, MondéjarJiménez, and Vargas-Vargas (2013), for instance, MNCs in Europe generally have higher ratings on environmental and social performance, while MNCs in the United States have higher ratings on corporate governance performance.

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In this chapter, we first focus on the impact of institutions on ESG performance and then establish links between formal and informal institutions and ESG performance. Next, using the ASSET4 database, which provides ESG information for 40 countries between 2002 and 2016, we examine the effect of formal and informal institutions on ESG performance at the country level. We conclude with future research directions.

5.2  LITERATURE AND THEORIES 5.2.1 Three Dimensions in CSP: Environmental, Social, and Corporate Governance For decades, non-financial performance has rarely been considered by investors and shareholders. However, as various stakeholders have obtained increased power over firms, private investment institutions have devised evaluating tools in regard to firms’ non-market risks and opportunities for investors, and firms have reported non-financial performance. As a result, international institutions, such as the United Nations Environment Programme (UNEP) and the Global Reporting Initiative (GRI), have introduced guidelines for CSR reporting related to a firm’s ESG performance.3 These guidelines also affect how international vendors, such as Thomson Reuters, provide ESG information to scholars and practitioners. Although scholars and international organizations have lacked a consensus on the definitions related to ESG concepts, ESG has been a measurement for CSP (McWilliams and Siegel, 2000). As a measurement, ESG performance refers to “a proxy for management quality, in so far as it reflects the company’s ability to respond to long-term trends and maintain competitive advantage” (UNEP-FI, 2007, p. 51). The ESG performance should reflect business practices focused on stakeholders and each ESG should include key performance indicators (KPIs) to evaluate firms’ non-financial performances. KPIs in ESG present firms’ important activities for sustainability, which cannot be captured by financial measurements (Kocmanová, Nemecek, and Dočekalová, 2012). Although KPIs in ESG differ from the guidelines proposed by organizations, such as the United Nations and CFA Institute Centre, generally, high ESG performance correlates with a firm’s efforts to improve KPI indicators in ESG. From a theoretical perspective, stakeholder theory states that it is important to maintain good relationships with stakeholders (e.g., investors, customers, supplier, media, environments, etc.) in order to ensure the longterm success of firms. When firms engage in stakeholder ­management,

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firms are legitimized and build good reputations, which leads to sustainability (Ng and Rezaee, 2015). CSR fulfills the needs of various stakeholders and provides both opportunities and risks to firms. Mitchell, Agle, and Wood (1997) argued that, because firms’ resources are limited, and external environmental differences affect decisions relating to CSR, firms should consider stakeholders’ legitimacy as well as urgent and normative factors when engaging in CSR. Considering that, firms should engage in various CSR activities to meet the needs of various stakeholders. Such CSR activities can be categorized as ESG performance in order to ensure non-financial sustainability (Cheng, Ioannou, and Serafeim, 2014; Eccles, Ioannou, and Serafeim, 2014; Ng and Rezaee, 2015). Although the CSR literature does not directly define or mention ESG performance, the literature has dealt with various ESG performances. First, environmental performance includes a reduction of resources, pollution prevention, and the improvement of the efficiency of limited natural resources (Kocmanová and Dočekalová, 2013). A series of environmental accidents caused by firms has shown the importance of why firms should pay attention to environmental issues. When firms are involved in environmental accidents, these accidents directly cause critical management crises for both the focal firms and their peers (Pek, Oh, and Rivera, 2018). Kalra, Henderson, and Raines (1995) investigate the stock markets’ response to the Bhopal chemical disaster by comparing the stock returns of Union Carbide (i.e., the company responsible for the Bhopal accidents), chemical firms that produce isocyanate (i.e., a similar material to the material involved in the Bhopal accident), and chemical firms that do not produce isocyanates. The results of the study show that a contagion effect existed, such that the event affected not only the focal firm, but the chemical industry as a whole, which experienced stock loses, via spillover effects. Similar results were found in studies that used other environmental accidents, such as the nuclear disasters on Three Mile Island and at Chernobyl (Fields and Janjigian, 1989; Hill and Schneeweis, 1983), and oil spill incidents (Herbst, Marshall, and Wingender, 1996). Contrasted to the negative environmental accidents, the environmental and ethical behaviors of firms contribute to good reputations from their stakeholders and provide new opportunities for the firms. Multiple studies have found that eco-friendly initiatives and programs lead to positive responses from the stakeholders (Flammer, 2015; Gupta and Goldar, 2005). More importantly, these initiatives and programs, which help firms gain certifications, such as ISO 14001, not only lead to higher financial performance for the firms but also provide a source of competitive advantages to the firms. Second, when firms pay attention to the welfare of their employees,

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suppliers, and communities, it may result in high social performance (Kocmanová and Dočekalová, 2013). For example, customers in China boycotted McDonald’s and KFC after the 2008 Sichuan earthquake because these firms donated less of their Chinese revenue to disaster relief compared to their competitors and domestic counterparts (McGinnis et al., 2009). CSR can also focus on the protection of human rights. For example, when Nike used suppliers that employed child labor in developing countries, customers boycotted the company and domestic and international NGOs investigated and reported on the company’s unethical practices (Lutz, 2015). This situation created management risks for Nike as well as significant market and financial performance losses (Forbes, 2001). Improving the relationship between firms and communities has been an increasingly important part of CSR. MNCs often face conflicts with communities in host countries and suffer from increased business costs and negative reputations, both of which decrease their revenues (Berman, Couttenier, Rohner, and Thoenig, 2017; Jenkins, 2004). MNCs in the extractive industry, where obtaining a social license to operate (SLO) is a critical issue, may experience operation delays, suspensions, and even shutdowns that may result in significant losses for both the company and community (Owen and Kemp, 2013; Prno and Slocombe, 2012). Firms should create and maintain good relationships with their communities and CSR is a tool for conflict prevention and reduction (Jenkins, 2004; Jenkins and Obara, 2006; Kemp, Owen, Gotzmann, and Bond, 2011). As CSR includes provisions of community programs and job opportunities, firms can achieve peaceful operations and long-term success by meeting stakeholders’ expectations (Donaldson and Preston, 1995; Freeman et al., 2010; Porter and Kramer, 2006; Waddock and Graves, 1997). Positive relationships with communities can increase firms’ financial performance (Waddock and Graves, 1997). Third, traditionally, corporate governance performance has been an important factor in reducing agency problems, increasing accountability and transparency, and supporting firms’ long-term visions and strategies between managers and shareholders. However, the relationship between corporate governance and CSP has not been clearly defined. Responsible firms have good corporate governance that they use to meet the needs of key stakeholders (Grosser and Moon, 2005). Elkington (2006) argues that CSR includes responsibility to corporate governance, such as corporate boards. Due to the growing number of international investors, the standards of overall corporate governance continue to improve in regards to firms’ responsibilities toward investors and shareholders (Kocmanová and Dočekalová, 2013). Additionally, firms should have clear visions and strategies to ensure cooperation with various stakeholders, which results

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in long-term success. Harjoto and Jo (2011) found that good corporate governance reduces conflicts among firms, investors, and non-investing stakeholders because it decreases information asymmetry and increases transparency by providing effective monitoring mechanisms (Jo and Kim, 2008; Yu, 2008). 5.2.2  Institutions and CSR Institutions vary across countries. Country institutions are embedded in the legal, economic, and cultural systems of a country and affect the thinking, decision-making, and behavior of both individuals and organizations (DiMaggio and Powell, 1991; North, 1990; Scott, 1995). Various institutions affect the legitimacy of a firm’s CSR and, as a result, the firms’ CSR strategies, practices, and behaviors differ across countries (Brammer, Jackson, and Matten, 2012; Campbell, 2007; El Ghoul, Guedhami, and Kim, 2017; Husted and Allen, 2006). Thus previous studies have considered institutions as a missing factor in explaining firms’ CSP (Brammer, Jackson, and Matten, 2012). For example, Chapple and Moon (2005) found that CSR practices differ across Asian countries; India and South Korea devote more resources to production process issues, while Malaysia and the Philippines are more concerned with community involvement issues. Doh and Guay (2006) found that NGOs’ impact on firms’ behaviors differs between the United States and European countries because of institutional structures and their impact on politics. MNCs face institutional environments that are different from their home environments. Thus, understanding institutions is a critical factor in a firm’s survival and success in host countries as well as in the firm’s ability to gain social legitimacy in these societies. Country institutions can be divided into formal and informal parts of institutions, as described by North (1990). Formal institutions include laws and regulations while informal institutions include cultural norms, which are shared by members of the society (North, 1990). These formal and informal institutions affect the thinking and behaviors of all actors in a society, including individuals and organizations. Formal institutions constrain explicit behaviors by enforcing the rules, laws, and sanctions of society. According to Ioannou and Serafeim (2012), laws and regulations facilitating market competition result in firms’ low involvement with CSR due to a lack of resources caused by high market competition. In previous studies, formal institutions such as corruption and political systems explain international variations in CSR (Campbell, 2004; Clotfelter, 1985). Firms are less devoted to CSR in highly corrupt countries because the benefits of engaging in bribery are greater than

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the benefits gained from CSR (Ioannou and Serafeim, 2012; Luo, 2006). Matten and Moon (2008) compared the political systems of the United States and various European countries and found that, because laws and regulations in Europe already reflected the interests and concerns of various stakeholders, European firms engaged with wider aspects of CSR to meet such interests and concerns. Institutions also affect the behaviors of other social members. For instance, El Ghoul, Guedhami, and Kim (2017) argued that well-developed regulative institutions influence suppliers’ engagement in long-term contracts, which impacts a firm’s long-term success. In contrast, stakeholders in countries lacking enforcement of regulations are often reluctant to enter long-term contracts. In these countries, CSR can improve firms’ reputations and encourage the stakeholders by reassuring them that the firms compensate for institutional voids. Thus, in countries with weak regulatory institutions, CSR can be an effective strategic tool to gain a competitive advantage in countries with institutional voids in order to improve the firms’ reputation. Next, informal institutions constrain firms’ behaviors implicitly through shared values, norms, and culture by offering moral standards without enforcement. For example, in Japan, lifetime employment with a company was a social norm, so Japanese firms faced criticism from stakeholders when job security was an issue or employees were laid off (Ahmadjian and Robinson, 2001). Hofstede’s (1984, 2001) cultural dimension is an institutional framework that is frequently used by the international business field. Scholars have debated the impact of cultural dimensions on CSP. Deephouse, Newburry, and Soleimani (2016) argued that countries with individualism, such as Canada, favor equity in reward allocation. Ringov and Zollo (2007) also argued that a negative relationship exists between individualism and social and environmental performance. Stakeholders in individualistic societies are not incentivized to appreciate firms that help others unless specific stakeholders benefit directly from CSR. In contrast, Ioannou and Serafeim (2012) focused on managers’ behaviors and found that managers are more likely to engage in self-interest behaviors and use firms’ CSR to build their own reputations. Deephouse, Newburry, and Soleimani (2016) argued that a high collectivism country, such as Senegal, favors equality and social contributions, and such countries appreciate firms’ CSR. The impact of power distance on CSP is also inconsistent. A positive relationship exists between power distance and CSP because managers in countries with high power distance face high stakeholder expectations (i.e., noblesse oblige) (Waldman et al., 2006). In societies with high power distance, highly ranked managers prioritize their self-interests rather than

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care about the interests of stakeholders (Ioannou and Serafeim, 2012). Contrary to power distance and individualism dimensions, the relationship between masculinity and CSR is clearly negative because masculinity emphasizes material success, career advancement, and individual gains (Ringov and Zollo, 2007). 5.2.3  Institutions and ESG The current literature on ESG performance is in an early stage. The SRI literature considers ESG performance as a measurement by which to analyze a firm’s financial value. For CSP, the literature uses an aggregate index of ESG (Tarmuji, Maelah, and Tarmuji, 2016). Also, these studies did not consider different institutional practices when addressing CSP. However, as the influence of ESG reporting and performance extends to various types of stakeholders, discussions on ESG performance need to go beyond investors and shareholders. This chapter argues that the effects of formal and informal institutions on the sub-dimensions of ESG performance are different; specifically, formal institutions are most likely to affect environmental performance and corporate governance performance, while informal institutions are more likely to affect social performance. While CSR has been developed as a tool to receive legitimacy from stakeholders by supplementing institutional voids (Brammer, Jackson, and Matten, 2012), formal institutions often set standards through laws and regulations. Through such external pressures by stakeholders and formal institutions, CSR implicitly places at the major part of firm activities (Brammer, Jackson, and Matten, 2012; Matten and Moon, 2008). Specifically, environmental performance is influenced by formal institutions because it is a dimension of CSP that is easy to quantify based on a firm’s activities (Bassen and Kovacs, 2008). The majority of environmental KPIs are quantifiable, such as the amount of CO2 emissions. Such quantifiable KPIs help standardize firms’ practices and allow formal institutions (specifically, environmental regulations) to set specific regulations based on quantity-driven environmental performance. In addition, the pollution haven and Porter hypothesis were discussed to show the relationship between formal institutions and firms’ behaviors (Ambec, Cohen, Elgie, and Lanoie, 2013; Lanoie, Laurent-Lucchetti, Johnstone, and Ambec, 2011; Li and Zhou, 2017) by explaining why MNCs relocate factories from countries with stringent environmental regulations to countries with lax environmental regulations (Lanoie et al., 2011; Rivera and Oh, 2013). In a country with stringent regulations, firms tend to spend more resources in order to comply with the high standards of the well-developed and impartial monitoring system. Thus, operation

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in a country with stringent environmental regulations increases firms’ compliance risks; thus, the regulations could be an effective tool by which to control environmental performance. Corporate governance performance is also influenced by formal institutions because firms fulfill the regulations to do business in a country. For instance, the International Accounting Standard Board recommends using International Financial Reporting Standards (IFRS) to achieve transparency of both financial information and international capital flow (DeFond, Hu, Hung, and Li, 2011; SEC, 2008). In the same vein, firms in the United States with developed financial markets are forced to disclose information such as board structure, diversity, and board meetings to the SEC (Securities and Exchange Commission), which is enforced by law (Aguilera, Williams, Conley, and Rupp, 2006). However, not all countries enforce firms to adopt the IFRS system. As such, in a country with stringent regulations, monitoring systems properly work so that investors can trust financial and non-financial information about companies, reducing contracting costs with firms (El Ghoul, Guedhami, and Kim, 2017). Thus, corporate governance performance is influenced by regulative institutions. Social performance includes firms’ relationships with employees, customers, and communities. Contrary to environmental performance, social performance is more affected by informal institutions. As Bondy, Moon, and Matten (2012) argued, CSR is a “taken-for-granted concept” (p. 281) in certain countries. For example, from 2007 until 2013, among the employees of Foxconn, a supplier of Apple, there were 19 confirmed and three unconfirmed deaths by suicide due to poor working conditions (Hefferman, 2013; Sherman, 2013). Apple and Foxconn received much scrutiny from their primary stakeholders as well as from the media and the public at large. The majority of the media in the United States and Europe heavily criticized Apple’s practice which ignored its suppliers’ labor and human rights issues, while most of the Asian media were quiet about such accidents (StockRiters, 2012; Zielenziger, 2012). Another example can be found in child labor, which is considered wrong by and has been boycotted in Western countries; however, it is a common business practice in countries such as Bangladesh and Vietnam, which shows that some countries and their institutions are most concerned with a firm’s social performance. Moreover, informal institutions may not incur direct costs to firms but can cause indirect costs because stakeholders in some countries value firm social performance as much as environmental or financial performance. In some countries, firms are recognized as social entities with basic obligations and responsibilities to cooperate with other social members (Bondy, Moon, and Matten, 2012). The cultural dimension is also important to informal institutional factors.

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Previous studies have argued that a negative relationship exists between masculinity and CSP because caring about other social members, such as communities, employees, suppliers, and customers, is considered a CSR symbolized in feminine society (Deephouse, Newburry, and Soleimani, 2016). Therefore, informal institutions drive high CSP, especially high social performance.

5.3  EMPIRICAL EVIDENCE 5.3.1 Data We obtain environmental, social, and corporate governance data from the ASSET4 database provided by Thomson Reuters (2012). The ASSET4 offers comprehensive ESG information for approximately 5,000 individual firms in 40 countries. The ASSET4 database is compiled from publicly available information, such as sustainability/CSR reports, company websites, annual reports, proxy filings, NGOs, and the news of all major providers. By using 750 data points, the ASSET4 calculates 250 key performance indicators with equal-weighted frameworks and then categorizes the information into ESG dimensions with sub-dimensions. These are: (1) environmental dimension including the sub-dimensions of resource reduction, emission reduction, and production innovation; (2) social dimension including the sub-dimensions of employment quality, health and safety, training and development, diversity, human rights, community, and product responsibility; and (3) corporate governance including the sub-dimensions of corporate governance-board structure, compensation policy, board functions, shareholders rights, and vision and strategy. For country-level ESG performance, we calculated the averaged ESG performance score per country per year from individual firms’ ESG scores. Table 5.1 presents the composite ESG, environmental, social, and corporate governance scores of the sample countries. Theoretically, each ESG score (and the composite score) can be as high as 100. Each ESG score varies across the countries; Luxembourg has the highest score in the composite ESG, environmental, and corporate governance. Overall, the countries in Europe have a high ESG. Canada and the United States take the second and third place in high corporate governance among 40 countries, but they show low environmental and social performance (Canada is second bottom in environmental and fourth bottom in social performance; the United States is fourth bottom in environmental and third bottom in social performance). In contrast, South Korea has a high score in environmental performance but a low score in corporate governance performance.

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Table 5.1 Environmental, social, corporate governance performance scores (out of 100) by country Country

Australia Austria Belgium Brazil Canada Chile China Czech Rep. Denmark Finland France Germany Greece Hungary India Indonesia Ireland Israel Italy Japan Korea, Rep. Luxembourg Malaysia Mexico Morocco Netherlands New Zealand Norway Panama Peru Philippines Poland Portugal Russia Singapore South Africa Spain Sweden

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Environmental performance

53.106 47.877 50.877 58.712 52.966 34.746 30.337 47.553 46.174 65.314 67.406 56.816 42.064 64.833 46.988 42.654 53.461 34.095 51.385 40.226 51.544 81.531 45.375 50.233 29.484 68.320 46.494 63.040 24.909 27.386 36.138 32.621 61.125 41.244 40.888 63.054 63.648 60.359

46.392 57.557 57.476 70.577 41.900 44.095 33.789 54.164 54.029 74.089 75.660 69.211 50.489 77.335 53.869 44.097 49.933 31.193 53.689 63.280 71.917 85.730 39.163 61.959 28.204 67.644 41.332 63.694 21.165 25.965 37.694 38.484 65.936 55.504 36.343 56.659 69.974 66.823

Social Corporate performance governance performance 47.517 56.783 51.696 76.832 44.206 50.373 33.738 69.777 51.879 68.074 75.947 68.935 53.026 79.319 55.845 59.978 43.016 31.864 61.989 47.036 61.596 76.445 51.030 62.059 55.104 73.610 43.515 69.630 22.240 23.015 39.726 40.290 70.625 48.581 41.859 71.289 73.529 64.746

65.410 29.291 43.458 28.727 72.790  9.771 23.486 18.717 32.613 53.777 50.613 32.303 22.678 37.845 31.250 23.888 67.433 39.229 38.477 10.364 21.119 82.419 45.931 26.680  5.144 63.707 54.633 55.796 31.322 33.178 30.994 19.088 46.816 19.645 44.461 61.215 47.441 49.507

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Table 5.1 (continued) Country

Switzerland Thailand Turkey United Kingdom United States Average score Highest score Lowest score

Composite index of ESG performance

Environmental performance

53.459 50.199 43.815 64.482 52.571 49.756 81.531 24.909

57.866 49.210 53.209 59.135 41.139 53.432 85.730 21.165

Social Corporate performance governance performance 56.957 56.778 55.529 63.061 44.850 55.672 79.319 22.240

45.554 44.609 22.707 71.250 71.724 40.164 82.419  5.144

Note:  The authors’ calculation. See the text for the detailed explanation of scores in each dimension.

For the other variables, we gathered information on the country institutions and general information from Worldwide Governance Indicators (http://info.worldbank.org/governance/wgi/#home), World Development Indicators (http://data.worldbank.org/products/wdi) provided by the World Bank, and the Global Competitiveness Index (http://reports.­weforum.org/ global-competitiveness-index/) provided by the World Economic Forum. After matching these four datasets, the number of country-year observations is 492 for 40 countries from 2003 to 2016. 5.3.2 Variables Dependent variables We used the composite ESG, environmental, social, and corporate governance performance as a dependent variable. As noted earlier, the ASSET4 provides economic, environmental, social, and corporate governance performance from over 900 sources of information.4 This information is categorized into 18 subcategories within four categories and then offers the performance score for each category. We used the individual categories of environmental, social, and corporate governance performance as well as a composite performance, which is an average of the country’s ESG performance. The environmental performance explains firms’ efforts to reduce negative impacts on the natural environment caused by firms’ operations. The emission and resource reduction categories measure a firm’s commitment and effectiveness toward both reducing environmental pollution and

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increasing an efficient use of natural resources during their operation. The product innovation category measures the commitment toward developing eco-friendly and eco-efficient goods and services. The social performance measures trust and loyalty a firm received from employees, customers, and communities by providing programs and activities. For example, the community category measures not only the amount of donations and foundations to the communities but also the commitment toward not engaging in industrial accidents, bribery, and corruption. The corporate governance performance reflects firms’ systems and processes that enable firms’ board members and executives to engage in best practices for their shareholders and investors in a long-term perspective. Independent variables We measured the formal institutions with a political constraint index (POLCON) produced by Henisz (2000). This measures the policy stability of 226 countries between 1800 and 2017 in explaining a country’s underlying political and regulatory structures (Henisz and Zelner, 2012). High scores in POLCON mean that the policies are stable and credible. The country with the highest value of POLCON is Morocco with 0.726, and the country with the lowest value of POLCON is China with 0. For the informal institutions, we used masculinity (vs. femininity) of the cultural dimension as provided by Hofstede (1984, 2001). In our sample, Japan has the highest score (95) in masculinity, while Sweden has the lowest score (5). We chose masculinity over five other dimensions because it included the concept of social welfare, which is prioritized over economic development. Control variables We included several control variables that might affect the firms’ behaviors regarding their economic and socio factors. We included the GDP annual growth (%), unemployment rate (%), a log of population, and log of foreign direct investment (FDI) inflow in order to control for macroeconomic factors. We also included the firm’s research and development expense, financial market development, local market competition, and labor market index in order to control for the characteristics of financial and labor market development. The source of GDP annual growth, unemployment rate, population, and FDI inflow is World Development Indicators. The source of a firm’s research and development expense (level of expense), financial market development (level of financial market development), local market competition (intensity of local competition), and labor market (intensity of labor market efficiency) is Global Competitiveness Index. Lastly, we controlled for year and regions (North America, Eastern

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Europe, Asia, Africa, Latin America, Western Europe and Pacific Islands countries) using fixed dummies. 5.3.3 Results Table 5.2 presents the summary statistics and correlation matrix for all of the variables. As the correlation matrix shows, our data do not have high correlations that may bias the results. Table 5.3 presents the results of our empirical analysis. We used ordinary least squares (OLS) regression models with year and region fixed effects. We also used autocorrelation and heteroskedasticity robust standard errors to lower the statistical concerns. In Model (1), we only include the control variables and used a composite measure of CSP (i.e., an average of environmental, social, and governance performance) as a dependent variable. Regarding the control variables, GDP growth has a negative impact on the composite measure of CSP, while financial market development has a positive impact on the composite measure of CSP. In addition, net FDI inflow and local market competition have positive impacts on the measure. Thus, when the financial market is developed, FDI inflows increase and domestic market competition is severe, firms are more likely to engage in CSR. In Model (2), we include two institutional variables (i.e., formal and informal institutions) to the original Model (1). These two institutional measures are significantly associated with the composite measure of CSP. Specifically, stable and credible formal institutions (β=12.001, p