History in the present day : colonialism and the impact on human rights violations

History in the Present Day:

Colonialism and the Impact on

Human Rights Violations

Name: Gerald Alston Student number: 11084251 Date: March 21, 2017 Master’s Thesis: Final

Qualification: MSc in Business Administration – International Management Institution: University of Amsterdam – Amsterdam Business School

First Supervisor: Dr. Michelle Westermann-Behaylo Second Supervisor: Dr. Johan Lindeque

Statement of Originality

This document is written by Gerald Alston who declares to take full responsibility

for the contents of this document.

I declare that the text and the work presented in this document is original and that

no sources other than those mentioned in the text and its references have been used

in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of

completion of the work, not for the content.

Table of Contents

Abstract 4

1. Introduction 5

2. Literature Review 6

2.1 – Background on Human Rights 7

2.1.1 – International Business and Human Rights 8 2.2 – Cross-National Dimensions: Institutional Distance 11

2.2.1 – Administrative Distance 12 2.3 – Colonial Relationships 14 2.4 – Legal Origin 15 2.5 – Research Gap 17 3. Hypothesis 18 4. Methodology 21 4.1 – Data Collection 21 4.2 – Research Sample 22 4.3 – Variables 23 4.3.1 – Dependent Variable 23 4.3.2 – Independent Variables 25 4.3.3 – Control Variables 25 5. Results 25 5.1 – Empirical Strategy 25 5.2 – Correlation 26 5.3 – Logistic Regression 27 5.3.1 – Main Hypothesis 27 5.3.2 – Sub Hypothesis (1) 28

5.3.3 – Sub Hypothesis (2) 29 6. Discussion 32 6.1 – Main Hypothesis 32 6.2 – Sub Hypothesis (1) 34 6.3 – Sub Hypothesis (2) 35 6.4 – Limitations 37 7. Conclusion 37 Acknowledgment 38 Appendices 39 References 41

List of Figures and Tables

Figure 1: Conceptual Framework – Main Hypothesis 19

Figure 2: Conceptual Framework - Sub Hypothesis (1) & (2) 20

Table 1: Descriptive Statistics and Correlation Matrix 26

Table 2: Logistic Regression (Main Hypothesis) 27

Table 3: Logistic Regression (Sub Hypothesis 1 – Denial) 28

Table 4: Logistic Regression (Sub Hypothesis 1 – Justification) 29

Table 5: Logistic Regression (Sub Hypothesis 2 – Acknowledge) 30

Table 6: Logistic Regression (Sub Hypothesis 2 – Apology) 30

Abstract

This study investigates the potential impact of a colonial relationship between the home and host country of multinational enterprises (MNEs). I examine if a colonial relationship influences a MNE when it responds to a human rights violation accusation that takes place in the host country. The alleged violations considered in this study take place in 58 countries from 1990 – 2013. All of the countries represented in the sample are considered former colonies. First, I test to see if a colonial relationship impacts the likelihood of a MNE responding to an alleged human rights incident. Second, I test to see if a colonial relationship impacts the type of response a MNE provides. The research indicates that a colonial relationship between the home and host country of a MNE has some influence on how it responds to an alleged human rights violation. However, this influence was not always statistically significant.

Keywords: Colonialism; Human Rights; Multinational Enterprises; Cross-National Dimensions; Institutional Distance; Administrative Distance; and Legal Origin.

1. Introduction

The Guardian recently published an article with the headline “Boris Johnson avoids questions in the Gambia about colonialism views” (Maclean, 2017). The article discusses how Boris Johnson, the Secretary of State for Foreign and Commonwealth Affairs in the United Kingdom (UK), declined to address questions about his views on colonialism during his first trip to Africa as British foreign secretary. Colonial relationships have been researched and discussed throughout multiple disciplines including international business (Bernhard et al., 2004; Bertocci & Canova, 2002; Ghemawat, 2001; Keith & Ogundele, 2007). Different scholars have argued that a colonial relationship between two nations can have an impact in numerous ways. However, there is much left to discover regarding how colonial relationships could potentially have an affect on

multinational enterprises (MNEs).

Researchers have conducted various studies on the impact of colonial relationships and consider colonial relationships to be an example of an institution (Ghemawat, 2001; Makino & Tsang, 2011; Berry et al., 2010). Institutions are constraints developed by people that structure how we interact with one another (Peng, 2002). There has been little research on how differences in institutions between countries shape the behavior of MNEs while they do business abroad. This is especially true regarding how MNEs behave in host countries involving human rights.

This is an exploratory study that asks the question: does a colonial relationship between the home andhost country of a MNE influence how it responds to an alleged human rights violation? I will use logistic regressions to analyze the response behavior of MNEs at two levels. The first level will test to see if a colonial relationship impacts the chance that a MNE responds to an alleged human rights violation. The second level will examine if a colonial relationship

goal of this study is to investigate and provide further knowledge on how institutions affect MNEs at the firm level.

MNEs representing a wide range of sectors have been alleged to abuse or contribute to the abuse of one or more human rights (Wright, 2008). Establishing a connection between a colonial relationship and human rights violations could help provide insight for developing effective policies to govern human rights at the international level. These findings could also potentially shift the discussion of responsibility toward the select group of nations that once colonized the majority of the developing world. Many developing nations were once a colony at some point in history (Anghie, 1999). This study will assist managers by helping them make more informed decisions as they craft strategies in response to human rights abuse allegations.

The rest of this research paper is structured as follows. First, I will begin with a literature review discussing current research on human rights, institutional distance, colonial relationships, and legal origin. Subsequent to this section, I will present my hypothesis as well as an overview of the methodological process. Lastly, I will describe the results of the logistic regressions and provide discussion on the analysis before ending the paper with a conclusion.

2. Literature Review

I will use this section to provide an overview of the main topics of this study from a research perspective. First, I will discuss general information on human rights and how it relates to international business. Second, I will focus my attention on institutional distance and how scholars have used research to categorize its properties. Third, I will review how colonial relationships have been established in the literature. Specifically, I will explain how this relationship is defined in the context of institutional distance. Fourth, I will discuss legal origin

and review how it has been defined and used in academic research. Lastly, I will conclude by identifying a gap in the literature and proposing a research question.

2.1 Background on Human Rights

Human rights are a fundamental set of privileges that everyone should be entitled to upon birth (UDHR, 2015). The idea behind human rights is one that promotes a standard of equality and human welfare. These rights protect individuals from abuse and malpractice that result from the actions of others. It was not until 1948 that the United Nations General Assembly adopted the Universal Declaration of Human Rights (UDHR). This is the first time an international document expressed a list of rights in which each human is inviolably entitled (UDHR, 2015).

The United Nations (UN) came to form shortly after World War II in 1945. The UN originally consisted of 51 founding member states (UN, 2016). It was created with an objective of preventing another world war. Eckert (2001) reviewed Johannes Morsink’s work entitled The Universal Declaration of Human Rights: Origins, Drafting & Intent. The review detailed how World War II was a contributing factor that helped shape the creation of the UDHR. The

holocaust, which included the Nazi government’s numerous human rights violations, was one of the most influential factors. In addition to preventing another world war, the UN wanted to prevent human rights violations similar to those witnessed during World War II (Eckert, 2001). Several of the rights listed in the UDHR are responses to the acts of atrocity that occurred during the holocaust.

The founding members of the UN consisted of a diverse group of nations that included representation from Africa, Asia, Europe, North America, and South America. However, during

(Eckert, 2001). They were not included because colonized nations were not eligible for

membership. It is estimated that nearly 750 million people lived in locations that were ruled by a colonial power or in a nation that was considered non-self governing. This represented

approximately one third of the world’s population at the time (UN, 2016).

According to the official UN website, 80 former colonies have gained their independence since 1945. During this time frame, the UN has also increased its membership to include 193 states. There are currently 17 non-self governing territories not eligible for UN membership. The total population of all these countries is estimated to be nearly 2 million people (UN, 2016). The UN has now included the overwhelming majority of the world as member states in the

organization. This would suggest that the human rights listed in the UDHR and how they are implemented should be more inclusive and widespread throughout the world compared to when the UDHR was originally created.

2.1.1 International Business and Human Rights

Human rights issues rose to a state of prominence in the 1990s. Ruggie (2013) mentioned this when he presented as a distinguished lecturer at the University of Connecticut. He discussed how the amount of attention the media gave to MNEs for human rights violations increased

throughout the 90s. Some of the accused firms had relatively high profiles in the eyes of the public. This includes MNEs that carry distinguished levels of brand recognition. Popular firms in the retail industry such as Nike, Wal-Mart, and Gap were under growing amounts of pressure from the international community. They were accused of being compliant with human rights misconduct for the benefit of maximizing profit (Islam & McPhail, 2011).

The retail industry was not the only industry to feel these effects. The oil and gas industry also saw a rise in the amount of attention firms received for their alleged roles in human rights

violations. For example, it is estimated that over 4,800 oil spills occurred in Nigeria between 1970 and 2000. Watts (2005) reveals how cleanup for these spills were often limited and

frequently delayed by the involved parties. It is also mentioned that many of the oil spills during this time period were never recorded or discretely addressed to misrepresent the actual amount of damage. These types of issues illustrate a lack of willingness to accept accountability from all parties. This includes the MNEs and the involved parties that originate from within the host countries.

Former UN Secretary General Kofi Annan appointed John Ruggie as a Special Representative on Business and Human Rights in 2005 (Ruggie, 2013). This position was

created to designate a leader for a newly established special procedures mandate. The lifespan of the mandate consisted of three phases and it was centered on human rights. Ruggie (2014) says that the first phase lasted until 2007. The initial phase of the mandate focused on areas regarding “corporate spheres of influence” and “corporate complicity”. These specific areas of focus were used to examine the best practices of both MNEs and host countries (Ruggie, 2014).

The second phase led Ruggie (2008) to suggest the root issue between human rights and business is one driven by economic influences and society’s inability to manage the adverse effects. Protect, Respect, and Remedy is a framework developed for business and human rights (Ruggie, 2008). It provides a structural view to analyze the responsibility of human rights in international business. Ruggie (2008) created the framework to help bridge the governance gaps that have become more prevalent with increased levels of globalization. He argues that

globalization driven governance allows human rights violations to take place even when there is no intention of committing a violation.

“Protect,” suggests that it is the state’s duty to safeguard against human rights abuses committed by third parties. That includes a duty for the state to protect against MNE violations. “Respect” discusses how it is the corporations’ responsibility to respect the human rights of others. The protection of human rights does not solely rest with the state. MNEs have to be accountable and approach human rights within the context of corporate responsibility. “Remedy” addresses the need to have support systems in place for those whom human rights violations have impacted. This includes resources that provide a safe means for victims to express concerns.

The final phase of the mandate helped produce the Guiding Principles for Business and Human Rights (Ruggie, 2014). The UN Human Rights Council unanimously endorsed the Guiding Principles in June 2011 (Ruggie 2013). Ruggie (2013) argues that this is the first time the UN adopted a set of international standards related to both business and human rights. Furthermore, the Council’s endorsement of the Guiding Principles is the first demonstration of an intergovernmental agency adopting a set of international standards which governments did not take part in negotiating (Ruggie, 2013).

The first adoption of an international policy related to human rights took place in 1948 (UDHR, 2015). The Guiding Principles serve as an operationalization of the Protect, Respect and Remedy (Ruggie, 2008) framework. It provides MNEs, governments, and stakeholders with further insight on how to better manage the negative impact that globalization has on human rights violations (Jagers, 2011).

2.2 Cross-National Dimensions: Institutional Distance

Well known economist Douglas North defined institutions as “humanly devised constraints that shape human interaction” (Peng, 2002). Institutions are often categorized as formal or informal. Formal institutions include either laws or regulations as examples. These types of institutions tend to illustrate more of a binding nature compared to informal institutions. Examples of informal institutions include cultural and social norms (Peng et al., 2009).

Institutional distance refers to differences that exist within the institutions shared between home and host countries. This concept goes beyond the common idea of spatial distance that is associated with how far MNEs must travel to do business abroad. Ghemawat (2001) introduced the CAGE distance framework, which suggests that distance can have an impact along four basic dimensions: cultural, administrative, geographic, and economic. This framework is one of the best-known multidimensional measures of cross-national distance that scholars use. It has also been used as a tool in empirical studies to link distance with MNE strategies (Campbell et al., 2012).

Each of the cross-national dimensions influence firms in different ways. Ghemawat (2001) argues that differences in language, social norms, and religion have an impact on the cultural distance between two countries. Colonial ties between home and host country, plus differences between government policies and political hostility belong to the dimension of administrative distance. Geographic distance does acknowledge the impact of spatiality but it also includes other factors such as access to waterways and differences in infrastructure. Lastly, economic distance includes the differences related to the wealth and standard of living of consumers in home and host countries. Scholars have successfully used the CAGE distance

framework to empirically link the actions and performance of MNEs in host countries to various types of institutional distance (Campbell et al., 2012; Salomon & Wu, 2012).

Berry, Guillén, & Zhou (2010) introduced a framework largely influenced by institutional theories related to cross-national differences. This framework considers three institutional

perspectives that scholars have studied in relation to cross-national distance. The first perspective includes differences in national business systems (Whitley, 1992) across countries. The second perspective focuses on variations in national governance (Henisz & Williamson, 1999; La Porta et al., 1998). While the third perspective identifies cross-national differences related to national innovation systems (Berry et al., 2010). These three perspectives helped Berry, Guillén, & Zhou (2010) frame nine dimensions of cross-national distance that exist between two countries: economic, financial, political, administrative, cultural, demographic, knowledge, global connectedness, and geographic distance.

The framework developed by Berry, Guillén, & Zhou (2010) includes the dimensions of cross-national distance recognized in the CAGE model (Ghemawat, 2001). However, each dimension is defined differently between the scholars. For example, economic distance is defined by the differences in economic development and macroeconomic characteristics (Berry et al., 2010). Economic distance is also defined by the differences in consumer income and the cost of quality (Ghemawat, 2001).

2.2.1 Administrative Distance

Business scholars debate the impact administrative distance has on MNEs and host countries in different contexts. Campbell et al. (2012) found empirical evidence to suggest that an increasing separation of administrative distance between home and host country negatively impacts the likelihood of MNEs to engage in corporate social responsibility (CSR) within the host country.

This was determined using secondary data on categories of governance indicators the World Bank developed (Kaufmann et al., 2009). The study also framed administrative distance using the definition provided by the CAGE distance framework (Ghemawat, 2001).

Ghemawat (2001) argues that the administrative distance between home and host country greatly influences trade between them. Administrative distance is described as sharing the same currency or having identical political alliances. Additionally, institutional weakness and colonial ties are also identified as relevant elements that frame how administrative distance is defined within the CAGE model. In fact, a colonial relationship between home and host country was found to increase the likelihood of trade by 900 percent (Ghemawat, 2001; Frankel & Rose, 2000).

Berry, Guillén, & Zhou (2010: 1467) define administrative distance as “differences in bureaucratic patterns due to colonial ties, language, religion, and the legal system.” These measures were selected because they address the impact of informal and formal institutions in relation to administrative distance. The CAGE framework (Ghemawat, 2001) for example focuses on arrangements that are more regulatory which tend to be formal institutions. Scholars tend to use formal institutions more often than informal institutions when framing how

administrative distance is defined.

Scholars have researched how institutional distance can have an impact on the

relationship between MNEs and host countries. Administrative distance has shown to impact the likelihood of an MNE to engage in CSR within a host country (Campbell et al., 2012). Moreover, there are elements of administrative distance that have been identified to play a significant role in how countries interact. Colonial ties between home and host country exponentially increase the

probability of trade (Ghemawat, 2001). However, there is not much discussion involving the potential relationship between administrative distance and human rights violations.

Makino & Tsang (2011) argued the importance of comprehending the historical relationships that exist between home and host countries in the field of international business. This was argued to be particularly relevant in regard to developing countries, which tend to have “complex histories of foreign dominance involving colonization, invasion, occupation, and alliance” (Makino & Tsang, 2011: 554). Scholars have established a foundation in the literature that yields opportunities for additional research the on the impact of colonial relationships in international business.

2.3 Colonial Relationship

A colonial relationship is a dynamic in which one state has direct control over another state using multiple mechanisms and legalisms (Ratner, 2001). The colonizer would also typically adopt sovereignty over the colony (Anghie, 1999). The state that has direct control is considered to be a colonizer. The state being controlled by the colonizer is a colony. Anghie (1999) argues that major European countries colonized essentially all states in Africa, Asia and the Pacific by 1914.

One of the outlining features of international relations in this era was the expansion of colonial empires (Anghie, 1999). Ratner (2001) discusses some details regarding this particular era of European colonialism. He suggests that international law maintained power for colonizers during this time period. Furthermore, businesses that were established in these European

countries grew to become the main actors economically exploiting the colonies (Ratner, 2001). The history of colonialism and its potential impact on modern society brings forth many topics of discussion for researchers. For example, Young (1994) argues that policies carried out

by European countries that colonized Africa have an ongoing effect throughout the continent. Engerman and Sokoloff (2002) propose that colonial relationships are one of the most critical aspects to examine in understanding the disparities of economic success. It has even been argued that European colonialism reversed the levels of development in many countries outside of Europe (Acemoglu et al., 2000; Acemoglu et al., 2002).

The impact of colonial history has shown to have consequences in current times (Bernhard et al., 2004). Keith and Ogundele (2007) examined the influence of British and French colonial ties on human rights behavior in former colonies located in Africa. They found evidence to suggest that former British colonies have worse human rights records than former French colonies.

Colonial relationships have many layers to consider. Some studies have argued that differences in the implementation process between colonizers help shape the cultural and socioeconomic institutions of former colonies (Landes, 1998; Yong, 1994). Additionally, there have been quantitative studies linking colonialism to multiple fields of study. A colonizer link has been argued to have an affect on outcomes such as democratic survival (Bernhard et al., 2004), growth rates (Bertocci & Canova, 2002), and human rights (Keith & Ogundele, 2007; Carey, 2002). Researchers have established a sound basis for additional analysis regarding the potential affects of colonial relationships.

2.4 Legal Origin

Carothers (1998) discusses what he calls “rule of law.” He defines this as “a system in which the laws are public knowledge, are clear in meaning, and apply equally to everyone. They enshrine

and uphold the political and civil liberties that have gained status as universal human rights over the last half-century” (Carothers, 1998: 96).

Scholars have researched the effectiveness of rule of law and have provided a range of insights. Joireman (2001) examined the effectiveness by comparing countries with a common law system versus countries with a civil law system. Lawyers and judges that come from civil law systems are likely to believe that common law is inferior to civil law and the same is true vice versa (Joireman, 2001). The fundamental rules that apply to common law and civil law were developed from a combination of Roman law concepts and local practices (Mahoney, 2001). However, since the beginning of their development these two systems have had fundamental differences (Joireman, 2004).

Common law and civil law are the two general traditions that compose commercial laws (La Porta et al., 1998). Common law was developed in England to help protect Parliament and property owners from expropriation (La Porta et al., 1999). The common law tradition is a more favorable law system compared to civil law when it comes to individuals protecting themselves from the infringement of the state. The laws are typically created using precedents from judicial decisions (La Porta et al., 1998). Joireman (2004) suggests that process and procedure are the preferred method of justice in a common law system. In a civil law system legal statutes are typically used to help influence the judge’s decision. This is one of the distinct differences between common and civil law systems.

La Porta et al. (1998) discusses the history and influence of civil law around the world. They suggest that civil law derives from Roman-Germanic law and pre dates the existence of common law. Napoleon oversaw the creation of the French civil law system in 1804 (Levine et al., 2000). Many countries were forced to embrace a legal system through colonization or

sometimes occupation (Levine et al., 2000). Joireman (2004) says that civil law is the most widespread and influential system practiced on earth. Civil law was often used as a tool by the state to regulate its citizens (Joireman, 2004).

Researches have conducted many studies using different types of legal systems as categories (Joireman, 2001; La Porta et al., 1998; Poe & Tate, 1994). Academic research has considered institutional environments between countries as one of the principal explanations for cross-national variation in economic and political variables (Joireman, 2004). The laws that fall within a legal system are an example of formal institutions.

Evidence suggests between 1960 – 1992 countries with common law systems had faster economic growth than countries with civil law systems (Mahoney, 2001). La Porta et al. (1997) argue that countries with a civil law system have weaker investor protections compared to countries with a common law system. Carothers (1998) suggests that strong legal intuitions tend to lead to a better human rights record. The academic research from multiple fields of study has consistently indicated that a country’s legal origin could have an impact in various ways.

2.5 Research Gap

The Guiding Principles for Business and Human Rights provides groundwork for MNEs to consider their position in the fight to protect against human rights violations (Ruggie, 2014). The attention that MNEs receive for human rights violations became a popular topic of discussion in the 1990s and has since continued to gain popularity (Ruggie, 2013). Furthermore, Ruggie (2008) argues that firms have a responsibility to respect the human rights of others in his Protect, Respect and Remedy framework. This type of insight shifts the focus and attention to the

behavior of the MNE. More academic research should be done to examine how MNEs behave in situations involving human rights violations and allegations of abuse.

Campbell et al. (2012) found empirical evidence to link several forms of institutional distance to the actions and performance of MNEs in host countries. Moreover, Ghemawat (2001) suggests that administrative distance has a significant influence on trade between a MNE and its host country. He argues that a colonial relationship between the home and host country of a MNE can increase the likelihood of trade by up to 900 percent (Ghemawat, 2001; Frankel & Rose, 2000).

Scholars have discussed the potential affects of colonial relationships as a form of institutional distance (Ghemawat, 2001; Makino & Tsang, 2011; Berry et al., 2010). There is also research to suggest that other forms of institutional distance can have an impact. Scholars have also argued that legal origin has its own type of affects (Joireman, 2001; La Porta et al., 1998; Mahoney, 2001). However, these measures are seldom used together to examine MNE behavior. Considering Ruggie’s (2008) argument that firms have a responsibility to respect others’ human rights, I propose the following research question: does a colonial relationship between the home andhost country of a MNE influence how it responds to an alleged human rights violation?

3. Hypothesis

The focus of this study is MNE response behavior. As previously discussed, there is little research on how different types of institutional distance impact MNE conduct. I will try to determine if a colonial relationship between an MNE’s home and host country influences how it responds to alleged human rights violations. I will examine the MNE responses at two levels.

The main hypothesis will concentrate on the first level. The second level will be evaluated using two sub hypotheses.

The first level will concentrate on MNEs responding in general to an alleged violation. Specifically, I want to determine if a colonial relationship has any impact on the likelihood of an MNE responding to an alleged human rights violation. The type of response is not the focus at this level of evaluation. First I only want to determine if a colonial relationship impacts the ability of the MNE to respond regardless of what the response may be. Considering how Keith & Ogundele (2007) argued that colonial legacies influence human rights records, I propose the following as the main hypothesis:

Main Hypothesis: a colonial relationship between the home and host country of a MNE affects the likelihood of it responding to an alleged human rights violation.

Figure 1: Conceptual Framework – Main Hypothesis

The second level will examine actual MNE responses to alleged human rights violations. The responses are categorized using the following categories: Acknowledge, Apology, Denial, Justification, and Plan for Change. This level of evaluation will help analyze the impact of a

Colonial Link MNE Response Colonial Interaction

human rights abuse it is not only important to focus on if they respond. It is also important to consider how MNEs choose to respond when they engage in human rights abuse allegations. I do not expect that a colonial relationship will have a consistent impact on the different categories of MNE responses. For this reason I propose the following two sub hypotheses:

Sub hypothesis (1): a colonial relationship increases the likelihood of Denial and Justification responses.

Figure 2: Conceptual Framework - Sub Hypothesis (1) & (2)

Sub hypothesis (2): a colonial relationship decreases the likelihood of Acknowledge, Apology and Plan for Change responses.

Colonial Link Denial & Justification Colonial Interaction Increase Acknowledge, Apology & Plan for Change

4. Methodology 4.1 Data Collection

In order to collect the appropriate data for this study I will make use of multiple sources. I will be using secondary data provided by trusted sources that have also been used in pervious studies. The Corporations & Human Rights Database (CHRD) will be used to collect information regarding the dependent variable of this study. I will also use previous studies conducted by Lange et al. (2006) and La Porta et al. (1999) to gather the necessary data for the independent variables. Lastly, I will use the Central Intelligence Agency (CIA) World Factbook as a tool to collect any additional data needed to complete this study.

The CHRD uses data from the Business & Human Rights Resource Center to document claims of human rights abuses by companies around the world. The CHRD is coded directly from qualitative sources. This database has a standardized collection of information for abuse claims, including data on the type of abuse, location of the claim, and company response. It consists of over 1200 cases in which firms have been accused of committing human rights violations in more than 60 countries. At the time this study was conducted the incidents ranged in date, starting before 1980 and continuing to the year 2013. Previous studies involving business and human rights have used the CHRD and will allow me to collect data necessary for the

dependent and independent variables of this study.

Lange et al., (2006) and La Porta et al., (1999) provide country specific information that I will use as data in this study. These two studies provide information helpful in determining a colonial relationship between the home and host country (Lange et al., 2006), and the legal origin of the host country (La Porta et al., 1999). I used the CIA World Factbook in conjunction with

the data provided by Lange et al., (2006) to determine the colonizer relationship for countries represented in the sample.

4.2 Research Sample

For this study I examine alleged human rights abuses transpiring between 1990 and 2013. The CHRD provides this specific type of data. A timespan from 1990 – 2013 provides a sample of 744 abuse allegations that come from 60 countries. I will be focusing on how MNEs responded to these abuse allegations.

All of the observations in this timeframe did not fit the criteria to be tested in this study. Observations that fell short of the necessary criteria were removed from the sample. For

example, abuse allegations in China and Thailand were removed because these countries are not considered to have a relationship with a colonizer according to the data used in this study. To minimize the chance of skewing the results I only considered abuse allegations that took place in former colonies. A colonial relationship between the home and host country of a MNE does not have the opportunity to exist if the MNE operates in a country with no colonial relationships. In order to test the main hypothesis and sub hypotheses all of the observations have to occur in a country where a colonial relationship existed.

After removing the alleged cases of abuse that did not match the criteria, the final

research sample consists of 627 alleged human rights violations occurring in 58 countries. All of the alleged incidents took place from 1990 – 2013. This final set of observations provides the response data for MNEs and the information to identify the MNE’s home and host country. The host country where the alleged human rights violation occurred is used to determine the other important variables in this study.

4.3 Variables

The variables used in this research study were selected to test the previously mentioned main hypothesis and sub hypotheses. It is essential to identify and define the dependent and

independent variables. The main hypothesis and sub hypotheses will be tested using the

following set of variables: MNE response, colonial link, colonial interaction and legal origin. It is important to have a thorough understanding of why these variables were used to conduct this research. The following sections will provide a clear outline and description for each variable used in the study.

4.3.1 Dependent Variables

The dependent variable for this study is called MNE response. It is a variable that describes the behavior of an MNE. This study will examine the response behavior of MNEs at two levels. The first level of examination considers all of the observations in the sample. A value is determined based on if the MNE responded to the alleged human rights violation (1 = yes; 0 = no). This level of inspection will test the main hypothesis previously discussed. A response from a MNE at this level of observation is not necessarily a positive or negative behavior. It is only an indication that the MNE responded and does not give consideration to how the MNE responded.

The second level of exploration assesses the type of response provided by the MNE. The second level of observation is conditional upon the first level. It only applies to the MNEs in the sample that responded to an alleged human rights violation. By adding this conditional second level it ensures that only the relevant observations in the sample are tested when considering the

different types of responses. All of the responses provided by MNEs have been categorized as follows: Acknowledge, Apology, Denial, Justification and Plan for Change.

MNE response is the dependent variable used to test the previously discussed main hypothesis and sub hypotheses. The first level of MNE response focuses on the willingness of the firm to respond to a human rights abuse allegation. The second level examines how the MNEs respond when they choose to engage.

4.3.2 Independent Variables

The independent variables in this study are based on which host country the alleged human rights incident occurred. I have chosen two independent variables to describe a colonial relationship. Colonial link is a binary independent variable defined by the relationship between the home and host country of the accused MNE (1 = yes; 0 = no). It serves as an indication that the host country where the alleged incident took place is a former colony of the MNE’s home country. The home country for each MNE in the sample is determined according to the location of its headquarters or the headquarters of its parent company when applicable. Thus all subsidiary MNEs in the sample use the home country of its parent organization.

The second independent variable is called colonial interaction. The colonial interaction is determined by using the value from the colonial link variable and multiplying it by the number of years the host country was colonized. Thus, if an observation does not have a colonial link this variable will not have any value other than 0.

I used a combination of trusted sources to retrieve the information necessary to determine the colonial link and colonial interaction for all of the observations in the sample. Lange et al. (2006) and the CIA World Factbook provided the necessary data to determine if the host country

of the alleged human rights violation was ever a colony and the length of time colonization took place. If a colonial link exists I also want to consider the length of colonization as a part of the colonial relationship in this research study.

4.3.3 Control Variables

Legal origin is used as a binary control variable in this study. The legal origin for each host country in the sample was determined using the data provided by La Porta et al. (1999). For the purposes of the observations in the sample legal origin is described by one of three categories: English, French or Socialist. Each category of legal origin is represented as an individual binary variable. However, each observation can only have one type of legal origin.

5. Results

5.1 Empirical Strategy

Due to the nature of the dependent variable in this study I will not use linear regression to analyze the research sample. I decided to test the data using a logistic regression. This type of regression is a predictive analysis like other types of regressions. However, a logistic regression does not assume a linear relationship between the independent variable and dependent variable. A logistic regression is most appropriate to use when one or more independent variables is being tested on a dichotomous dependent variable (Bonney, 1987). The regression model is used to estimate the probability of the dependent variable (MNE response) based on the independent variables (colonial link and colonial interaction). The odds ratio produced in the output of a logistic regression reflect the marginal impact the independent variables have on the dependent

5.2 Correlation

As previously mentioned, some observations were removed from the original dataset to ensure that each observation in the sample met the same conditions. The final research sample consisted of 627 observations. Before I tested the main hypothesis I examined the correlation between variables. The general standard for the coefficient of correlation (r) is ± 0.80. This means that if r is greater than 0.80 there is a strong positive correlation between two variables. A strong

negative correlation would mean that r is less than -0.80. Table 1 provides an overview of correlation and descriptive statistics for all variables.

Table 1: Descriptive Statistics and Correlation Matrix

Variables M SD 1 2 3 4 5 6 1. MNERes 0.57 0.5 1 2. ColLink 0.07 0.26 0.039** 1 3. ColInt 200.67 104.16 -0.17 -0.156 1 4. LOEng 0.29 0.45 0.148 0.142 -0.563 1 5. LOFre 0.69 0.46 -0.168 -0.135 0.596 -0.937 1 6. LOSoc 0.02 0.15 0.066** -0.002** -0.099 -0.096 -0.224 1

**. Correlation is significant at the 0.05 level (2-tailed)

Nearly all of the relationships have low to moderate levels of correlation. However, there is a strong negative correlation between the following: English legal origin and French legal origin (r = -0.937). A strong correlation typically indicates that two variables are measuring the same thing. In this particular scenario a strong negative relationship makes sense because each of the variables is binary and the majority of observations in the sample have an English or French legal origin. Thus, when an observation does not have a French legal origin it is likely to be English legal origin.

5.3 Logistic Regression

In this section I will test the independent variables to determine if there is an impact on how MNEs respond to alleged human rights violations. One distinction between a logistic regression and linear regression is how the results are interpreted. The odds ratio will be used in place of the coefficient to help describe the effects of each independent variable. The odds ratio represents the constant impact the independent variable will have on the dependent variable. An odds ratio greater than 1 indicates a positive effect and an odds ratio of less than 1 is a negative impact.

5.3.1 Main Hypothesis

I will begin by testing the main hypothesis and presenting the results. The main hypothesis for this study is as follows: a colonial relationship between the home and host country of a MNE affects the likelihood of it responding to an alleged human rights violation. The response by the MNE itself does not indicate whether it is a positive or negative response. It is only an indication that the MNE engaged in responding to the alleged human rights violation.

Table 2: Logistic Regression (Main Hypothesis)

MNERes Odds Ratio SE Z P

ColLink 1.798 1.085 0.97 0.331

ColInt 0.997 0.003 -0.88 0.378

LOEng 1.067 1.318 0.05 0.958

LOFre 0.529 0.650 -0.52 0.604

LOSoc 1.906 2.506 0.43 0.670

0.25. However, there is still valuable information provided by the odds ratio. Colonial link, English legal origin and Socialist legal origin have odds ratios greater than 1. Thus, each of these variables has a positive affect on the likelihood of an MNE responding to an allegation. Colonial interaction and French legal origin have odds ratios less than 1. This means that each of these variables has a negative affect on the likelihood of an MNE responding to an alleged human rights violation.

5.3.2 Sub Hypothesis (1)

In this section I will test to determine if a colonial relationship between the home and host country of a MNE impacts the type of response it offers in reply to an alleged human rights violation. I will begin by testing sub hypothesis (1) and presenting the corresponding results for the different categories of MNE responses. Sub hypothesis (1) is stated as follows: a colonial relationship increases the likelihood of Denial and Justification responses.

Table 3: Logistic Regression (Sub Hypothesis 1 – Denial)

Denial Odds Ratio SE Z P

ColLink 3.504 2.889 1.52 0.128

ColInt 0.989 0.005 -2.12 0.034

LOEng 2.94E-06 0.001 -0.03 0.980

LOFre 3.96E-06 0.002 -0.02 0.980

LOSoc 5.26E-06 0.003 -0.02 0.981

Table 3 provides the results for responses categorized as Denial. These results indicate that two variables in the regression have some statistical significance. The colonial interaction variable is statistically significant at the level of P < 0.05. The colonial link variable is statistically

significant at the level of P < 0.15. Colonial link is also the only variable in this situation with an odds ratio greater than 1. According to these results, colonial link is the only variable in the logistic regression that has a positive impact on the likelihood a MNE will respond in some form of denial to an alleged human rights abuse.

Table 4: Logistic Regression (Sub Hypothesis 1 – Justification)

Justification Odds Ratio SE Z P

ColLink 0.108 0.190 -1.27 0.205

ColInt 1.014 0.008 1.75 0.080

LOEng 492098.3 6.95E+08 0.01 0.993

LOFre 273357.7 3.86E+08 0.01 0.993

LOSoc 1 (omitted)

The test results regarding MNE responses categorized as Justification can be seen in Table 4. The results also indicate that two variables are of some statistical significance. Colonial link is statistically significant at the level of P < 0.25. Colonial interaction is statistically significant at the level of P < 0.10. In regard to the MNE responses categorized as Justification only colonial link had an odds ratio of less than 1. Colonial link is the only variable in this scenario that has a negative impact on the likelihood of a MNE providing a form of justification when responding to an alleged human rights violation.

5.3.3 Sub Hypothesis (2)

In this section I will present results that were obtained from testing sub hypothesis (2). Sub hypothesis (2) is stated as follows: a colonial relationship decreases the likelihood of

Acknowledge, Apology, and Plan for Change responses. I performed logistic regressions for each of response category mentioned.

Table 5: Logistic Regression (Sub Hypothesis 2 – Acknowledge)

Acknowledge Odds Ratio SE Z P

ColLink 0.601 0.531 -0.58 0.565

ColInt 1.001 0.005 0.24 0.808

LOEng 303781.8 1.99E+08 0.02 0.985

LOFre 294872.4 1.93E+08 0.02 0.985

LOSoc 86035 5.64E+07 -0.02 0.986

Table 5 displays the logistic regression output for MNE responses categorized as Acknowledge. None of the variables in this regression were found to be statistically significant at any level between P < 0.05 and P < 0.25. Furthermore, only one variable has an odds ratio of less than 1. This suggest that the presence of a colonial link reduces the chance of a MNE acknowledging the alleged human rights violation if it responds to the allegation.

Table 6: Logistic Regression (Sub Hypothesis 2 – Apology)

Apology Odds Ratio SE Z P

ColLink 1.740 3.292 0.29 0.770

ColInt 0.996 0.015 -0.30 0.766

LOEng 714002.3 1.30E+09 0.01 0.994

LOFre 121129.8 2.20E+08 0.01 0.995

LOSoc 661618.7 1.20E+09 0.01 0.994

All of the independent variables were statistically insignificant at any level between P < 0.05 and P < 0.25 when I tested for MNE responses categorized as Apology. The results for this logistic

regression can be found in Table 6. When considering the MNE responses categorized as Apology only the colonial interaction variable had an odds ratio of less than 1. This means that colonial interaction is the only variable to have a negative impact on the chance a MNE offers some type of apology when it responds to an alleged human rights incident.

Table 7: Logistic Regression (Sub Hypothesis 2 – Plan for Change)

PlanChange Odds Ratio SE Z P

ColLink 0.208 0.269 -1.21 0.225

ColInt 1.009 0.006 1.50 0.133

LOEng 368769.8 4.01E+08 0.01 0.991

LOFre 437262.1 4.75E+08 0.01 0.990

LOSoc 236056 2.56E+08 0.01 0.991

The final category of MNE responses is Plan for Change. The results for this logistic regression can be seen in Table 7. According to the results of this test there are two variables that have some statistical significance. Colonial link is statistically significant at the level of P < 0.25. Colonial interaction is statistically significant at the level of P < 0.15. However, colonial link has an odds ratio of less than 1 and colonial interaction has an odds ratio greater than 1. This information suggest that a colonial link has a negative impact while colonial interaction has a slightly positive impact on the likelihood a MNE offers any plan for changes when it responds to a human rights abuse allegation.

6. Discussion

The results from the logistic regression tests provide intriguing insights. The research question in this study is the following: does a colonial relationship between the home andhost country of a MNE influence how it responds to an alleged human rights violation? I came up with this research question after identifying a gap in the academic literature. Specifically, I wanted to study if colonial relationships affect how MNEs make managerial decisions when they conduct business in foreign countries. I wanted to further explore the potential impact that colonial relationships have on MNEs at the firm level. The growing coverage from the media on human rights violations (Ruggie, 2013) increases the frequency that MNEs make managerial decisions dealing with human rights issues.

In this section I will discuss the results in further detail. I will begin by interpreting the test results for the main hypothesis and sub hypotheses. Lastly, I will end this section by addressing some limitations of this research study.

6.1 Main Hypothesis

The main hypothesis in this study is the following: a colonial relationship between the home and host country of a MNE affects the likelihood of it responding to an alleged human rights

violation. Colonial relationships have been successfully linked to levels of development in countries outside of Europe (Acemoglu et al., 2000; Acemoglu et al., 2002) and human rights behavior in former colonies (Keith and Ogundele, 2007). I predicted that a colonial relationship would have some type of effect on MNEs in regard to the likelihood of responding to an alleged human rights incident.

The outcomes from the logistic regression did not provide any findings that were

statistically significant. However, there are still some interesting discoveries when you interpret the results for the independent and control variables. Colonial link has an odds ratio greater than 1. Colonial interaction has an odds ratio less than 1. This suggests that in general a colonial link between the home and host country of a MNE increases the likelihood of it responding to an alleged human rights violation. However, if a colonial link is in fact present, a longer colonial interaction decreases the likelihood of the MNE to respond.

This would mean that the length of time a host country was considered a colony

negatively impacts the chance of a MNE responding to an alleged human rights violation when a colonial link exist between the home and host country. Findings like this offer great potential for future research on the subtleties of colonial relationships in business. Additional research could point to the main determinates that have the strongest influences when considering the colonial history between two countries.

The differences between the results for English and French legal origin also present some notable discoveries. When comparing the two variables it shows that each legal system does not have the same impact. The odds ratios indicate that when an alleged human rights incident occurs in a host country with French legal origins MNEs are considerably less likely to respond compared to when incidents take place in host countries with English legal origins. Joireman (2004) found evidence to suggest that countries with English legal origins tend to have a higher rule of law statistic than countries with French legal origin. He found this only to be true when analysis was limited to countries that are former colonies. These findings appear to support his argument when comparing different legal systems.

Overall, the test results in this study did not provide any statistically significant evidence to definitively support the main hypothesis. Conversely, the outcomes did provide multiple insights that imply a colonial relationship might have some type of affect on the likelihood of a MNE responding to a human rights abuse allegation. These results offer researchers a potential starting point to further analyze the possible impact that colonial relationships can have on human rights.

6.2 Sub Hypothesis (1)

I predicted the following outcome for sub hypothesis (1): a colonial relationship increases the likelihood of Denial and Justification responses. In regard to Denial responses both of the independent variables tested for some level of significance. Colonial link was statistically significant at the level of P < 0.15 and colonial interaction was significant at the level of P < 0.05. According to the evidence found in this test a colonial link between the home and host country of a MNE is shown to have a considerable impact on the likelihood of a MNE responding in some form of denial. The colonial link increases the likelihood of denial by approximately 3.5 times. However, when a colonial link is present, a longer colonial interaction between the home and host country slightly decreases the chances of denial. This evidence suggests that the longer a host country was a colony decreases the chance that a MNE will respond in denial to an alleged human rights violation if a colonial link exist between the home and host country.

The test for MNE responses categorized as Justification also produced variables that are statistically significant. Colonial link was significant at the level of P < 0.25 and colonial interaction was significant at the level of P < 0.10. According to this evidence a colonial link

decreases the likelihood of justification responses for MNEs. However, if a colonial link does exist, the likelihood of a MNE responding in a form of justification slightly increases the longer the amount of time the host country was a colony.

These test provide evidence that somewhat support sub hypothesis (1). The results do not suggest that a colonial relationship has a positive affect on Justification responses. They do however suggest that a colonial relationship has a positive affect on responses categorized as Denial. Additionally, a colonial relationship was found to have a statistically significant impact on both categories of responses. In sub hypothesis (1) the only category of MNE responses in which a colonial relationship increased its likelihood was Denial.

6.3 Sub Hypothesis (2)

I predicted the following outcome for sub hypothesis (2): a colonial relationship decreases the likelihood of Acknowledge, Apology, and Plan for Change responses. The strongest test results were found in the Plan for Change category of responses. Both of the independent variables tested at some level of significance. Colonial link was statistically significant at the level of P < 0.25 and colonial interaction was significant at the level of P < 0.15. This evidence suggests that a colonial relationship has a negative impact on MNE responses categorized as Plan for Change. According to the results, if a colonial link is present it decreases the likelihood of a MNE

offering any plans for changes when it responds to an alleged human rights violation. If a colonial link does exist then the longer the host country was a colony slightly increases the chance of a MNE offering plans for change when they respond to an alleged human rights incident.

Evidence also suggests that a colonial relationship has a negative impact on the MNE responses categorized as Acknowledge. The test for this category of responses did not produce any variables that were statistically significant. There are still some noteworthy outcomes when following interpretation of the results. The odds ratio indicates that a colonial link between the home and host country of a MNE decreases the chances of the firm acknowledging an alleged human rights violation when it provides a response. If a colonial link is present, the likelihood of the MNE acknowledging an alleged human rights incident marginally increases the longer the host country was a colony. In regard to the MNE response categories Plan for Change and Acknowledge, it appears as if colonial interaction can be beneficial for a host country the longer the host country was a colony. These types of results offer researchers an opportunity to further investigate the potential effects associated with the amount of time colonization took place in a given country.

The test results for the Apology response category indicate that a colonial relationship has a positive affect on the likelihood of a MNE offering an apology if it responds to an alleged human rights violation. However, none of the variables were found to be statistically significant in this category of MNE responses. The odds ratio reveals that a colonial link increases the likelihood of a MNE apologizing if it responds to an alleged human rights incident. The research suggests that if a colonial link is present then the likelihood of a MNE apologizing slightly decreases the longer the host country was a colony.

According to the research in this study the evidence gives partial support for sub hypothesis (2). A colonial relationship was found to have a negative affect on Plan for Change and Acknowledge responses. These results are consistent with the sub hypothesis (2) prediction. The affects of a colonial relationship on the Plan for Change category were found to be

statistically significant. The results for the Apology category of responses did not support sub hypothesis (2). The evidence found that a colonial relationship has a positive affect on MNE responses categorized as Apology.

6.4 Limitations

There are some limitations related to this study. One limitation to this research is the difficulty of measuring the length of colonization. This was key information used to determine the

independent variables colonial link and colonial interaction. Pinpointing a single start or end date of colonialism is challenging for many countries. The process of colonization was commonly informal and gradual (Lange et al., 2006). This can be argued for both the onset and the conclusion of colonization. Additionally, there are examples of countries that have been colonized by two or more colonizers simultaneously. Thus, the values provided for colonial interaction and colonial link must be considered as approximations due the nature of past events.

Another limitation in this study is the amount of variables used to explore the situation. There are many layers of context to consider when examining how MNEs respond to human rights violations. This study could benefit from including more variables to help provide a richer explanation of the problems that exist in this specific context.

7. Conclusion

This thesis was conducted in an effort to answer the following research question: does a colonial relationship between the home andhost country of a MNE influence how it responds to an alleged human rights violation? I have thoroughly examined the academic literature on these

helped me identify and test a multilayered hypothesis. Through this method of scientific discovery I can now provide an informed answer to the general research question.

The results of this research study show strong indication that a colonial relationship between the home and host country of a MNE influences how it responds to an alleged human rights violation. This influence has shown to be both negative and positive depending on the context of the response. For example, evidence suggests that a colonial relationship has a positive affect on MNEs responses categorized as Denial and a negative affect on MNE responses categorized as Plan for Change.

This study found evidence from multiple tests that implies a colonial relationship

between the home and host country of a MNE can affect the behavior of a MNE at the firm level. New research on this linkage could possibly help scholars understand why this is happening. Additional research could also potentially highlight other areas of concern in which a colonial relationship may have an impact. Hopefully managers can use some of this information to craft effective strategies to assist MNEs in dealing with human rights issues in the field of

international business.

Acknowledgment

I would like to thank Dr. Michelle Westermann-Behaylo for her exceptional professionalism and honesty while supervising me throughout this entire process. Her dedication and enthusiasm for higher education was great motivation while completing this thesis. I have to also thank my loving mother for always showing me unconditional love while allowing me to grow and learn from my own experiences. Lastly, I must thank my beautiful wife for her undying support and inspiring me to achieve something that I did not think I was capable of achieving, I love you.

Appendices

APPENDIX A: List of host countries represented in the research sample

Angola Cote d'Ivoire Madagascar Paraguay

Argentina Cuba Malawi Peru

Bangladesh Dominican Republic Malaysia Philippines

Belize Ecuador Mali Sierra Leone

Bolivia El Salvador Mauritania South Africa

Botswana Eritrea Mauritius South Korea

Brazil Ghana Mexico Sudan

Cambodia Guatemala Mozambique Tanzania

Cameroon Guinea Myanmar Uganda

Chad Guyana Namibia Venezuela

Chile Haiti Nicaragua Vietnam

Colombia Honduras Niger Zambia

Congo (DR) India Nigeria Zimbabwe

Congo (Rep) Indonesia Pakistan

Costa Rica Kenya Panama

APPENDIX B: Independent variables according to host country

Host Country Colonial Link Colonial Interaction Legal Origin

Angola Portugal 400 French

Argentina Spain 236 French

Bangladesh UK 215 English

Belize UK 183 English

Bolivia Spain 287 French

Botswana UK 81 English

Brazil Portugal 322 French

Cambodia France 66 Socialist

Cameroon France 41 French

Chad France 60 French

Chile Spain 269 French

Colombia Spain 274 French

Congo (DR) Belgium 52 French

Congo (Rep) France 78 French

Costa Rica Spain 297 French

Cote d'Ivoire France 67 French

Cuba Spain 388 Socialist

Dominican Republic Spain 328 French

Ecuador Spain 288 French

El Salvador Spain 297 French

Guinea France 64 French

Guyana UK 152 English

Haiti France 179 French

Honduras Spain 297 French

India UK 190 English

Indonesia Netherlands 145 French

Kenya UK 97 English

Madagascar France 64 French

Malawi UK 73 English

Malaysia UK 171 English

Mali France 68 French

Mauritania France 57 French

Mauritius UK 158 French

Mexico Spain 289 French

Mozambique Portugal 477 French

Myanmar UK 122 Socialist

Namibia South Africa 106 English

Nicaragua Spain 298 French

Niger France 38 French

Nigeria UK 99 English

Pakistan UK 90 English

Panama Colombia 82 French

Paraguay Spain 274 French

Peru Spain 288 French

Philippines USA 50 French

Sierra Leone UK 174 English

South Africa UK 115 English

South Korea Japan 40 German

Sudan UK 58 English

Tanzania UK 46 English

Uganda UK 69 English

Venezuela Spain 283 French

Vietnam France 58 Socialist

Zambia UK 74 English

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