Conflict resolution between indigenous communities and MNE's : the impact of national governance and the moderating effect of NGO involvement

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Amsterdam Business School

Conflict Resolution between Indigenous Communities

and MNEs: The Impact of National Governance and the

Moderating Effect of NGO Involvement.

University of Amsterdam, Amsterdam Business School Department: Economics and Business

MSc Business Administration – International Management Thesis supervisor: dr. Ilir Haxhi

Second reader: dr. Francesca Ciulli Student: Floris van Alphen Student number: 11430044

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Statement of Originality

This document is written by Floris van Alphen. I declare to take full responsibility for the content of this document. I declare that the text presented in this thesis 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 of the University of Amsterdam is responsible solely for the supervision of completion of the work, not for the content.

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Abstract

Multinational enterprises’ (MNE) practices in indigenous communities have often been a cause of conflict, in part due to the unequal distribution of benefits related to MNE activity. Two main issues are central to this study: first, we examine the effect of national governance on conflict resolution, and second, we investigate the moderating effect of the involvement of non-governmental organizations (NGOs) on the relation between national governance and conflict resolution. We argue that weak national governance results in reduced conflict resolution. Moreover, we propose that NGO involvement negatively moderates this relationship. We perform a statistical analysis on a sample of 420 cases from 59 countries, spread over six continents. Our empirical results show first that while political stability negatively influences only the degree of violence of conflicts; government effectiveness negatively influences both the degree of violence and length of conflicts: however, only in conflicts where no NGOs are involved. Then, NGO involvement negatively moderates the relationship between government effectiveness and the degree of violence of conflicts, as well as the relationship between government effectiveness and the length of conflicts, indicating that NGO involvement can partly compensate for the negative effects of ineffective governance on conflict resolution. The theoretical contribution of this study is twofold. First, our findings support previous qualitative studies in which the relationship between political stability and conflict resolution is examined. Second, our study is one of the first to find empirical evidence for the moderating effect of NGO involvement on the relationship between national governance and conflict resolution and hereby provides support for claims made in previous literature. Our study has important practical implications as it provides useful insights for managers, NGOs, indigenous communities and government officials about the dynamics of conflicts.

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List of figures and tables

Figure 1. Conceptual model ...42

Table 1. Description of variables ...48

Table 2. Linear regression model ...52

Table 3. Logistic regression model ...52

Table 4. Descriptive statistics and correlations ...54

Table 5. Multicollinearity and VIF ...57

Table 6. Linear regression on dependent variable degree of violence ...61

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1. Introduction

In an increasingly globalized world, economic activities of geographically dispersed multinational enterprises (MNEs) face fewer challenges to internationalization due to advances in communication and transportation technologies as well as the reduction of trade barriers (Danskin, Dibrell & Kedia, 2005; Dunning, 1998; Hecock & Jepsen, 2013; Narula & Dunning, 2010; Newell, 2005). The result has been a rapid growth of MNE activity. MNEs are proactively exploiting opportunities abroad, thereby reaping location advantages in large foreign markets. This results in an increase in cooperation between MNEs and national governments, which believe that the FDI could increase prosperity (Calvano, 2008; Jensen, 2003); however, it is not clear whether an increase in MNE activity results in an increase of development in the host country (Hilson, 2012).

As a consequence of the intensified cooperation between MNEs and national governments, the domain of opposition to the activities of MNEs is no longer the host country, but has shifted to the indigenous community (Calvano, 2008). There are several consequences of globalization for indigenous communities. First of all, the search for natural resources leads to an increased invasion of indigenous territories by corporations, which in many cases results in the destruction of indigenous culture and natural habitat (Lertzman & Vredenburg, 2005; Murphy & Arenas, 2010; Sawyer & Gomez, 2008). Second, MNEs, particularly in the biotechnology and pharmaceutical industry, have repeatedly misappropriated indigenous knowledge without sharing a part of the profits with the indigenous community in which the knowledge originated (Murphy & Arenas, 2010). The conflicting interests of MNEs and indigenous communities have often led to disputes between these two parties. On the other hand, a positive aspect of globalization, from an indigenous community’s perspective, is that it has contributed to the empowerment of indigenous peoples, as opportunities to build networks, communicate and collaborate with other indigenous groups and NGOs increased

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(Murphy & Arenas, 2010; Arenas, Sanchez & Murphy, 2013). Several scholars state that the involvement of NGOs influences the dynamics of conflicts between MNEs and indigenous communities (Arenas et al., 2013; Kapelus, 2002; Kourula & Laasonen, 2010), a statement that is examined into greater detail in this study.

Multiple studies emphasize that weak national governance can have a negative effect on the protection of indigenous communities (Frynas, 2010; Garvey & Newell, 2005; Hilson, 2002; Newell, 2005) and increases the likelihood of potential conflicts to occur (Chabal, 2002). However, the precise effect of national governance on the development and dynamics of conflicts between MNEs and indigenous communities is an understudied area. In previous research, the role of the government in conflicts is often ignored or merely viewed from a single case perspective, resulting in incomplete and context-dependent, single-case results. To fill this literature gap, we examine the effect national governance has on conflict resolution based on two indicators; government effectiveness and political stability. Several scholars argue that ineffective governance leads to insufficient monitoring of MNEs and unequal distribution of benefits related to MNE-activity, which in turn may lead to violent and prolonged conflicts (Frynas, 2010; Garvey & Newell, 2005; Ikelegbe, 2005). Likewise, scholars state that political instability leads to more violent and lengthier conflicts, as democratic instruments like conflict resolution and conflict management may not function effectively in countries characterized by political instability (Idemudia & Ite; 2006; Ikelegbe, 2005). In the current study we aim to validate these claims based on a quantitative analysis of conflicts. Consequently, the first research question of this study is as follows:

RQ1: To what extent does national governance (i.e. government effectiveness and political stability) influence the resolution of conflicts (i.e. the length and degree of violence of conflicts) between MNEs and indigenous communities?

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We argue that there is a direct relationship between national governance and the resolution of conflicts. Consistent with Dentchev, Balen and Haezendonck (2015), Frynas (1998), and Murphy and Arenas (2010), we argue that MNEs are more likely to show irresponsible behavior in politically unstable or ineffectively governed countries. This results in more violent conflicts, as indigenous populations are less likely to be consulted about decisions that affect them and therefore might resort to violence to make their voice heard. Moreover, we argue that conflict resolution is less likely when governments are not capable of interfering, ensuing a longer duration of conflicts. In sum, we argue that ineffective governments or governments in politically unstable countries are less capable of monitoring MNEs, creating effective legislation and enforcing regulations, which results in longer and more violent conflicts.

The second issue we investigate in this thesis is NGO involvement. Companies are increasingly held responsible for their actions by external stakeholders like NGOs (Arenas et al., 2013; Calvano, 2008; Murphy & Arenas, 2010; Schepers, 2006; Waddock, 2008). These organizations have become more organized and are now operating on a global scale. NGOs demand from MNEs that they act responsibly, show transparency and engage into practices beyond profit maximization (Arenas et al., 2013; Kourula & Laasonen, 2010). In response to concerns voiced by the United Nations, NGOs and international financial institutions, charters and legislation have been introduced to protect and promote the rights of indigenous communities (Sawyer & Gomez, 2008). Murphy and Arenas (2010) propose that weak national governance may result in an increased importance of NGO involvement in conflict situations between MNEs and indigenous communities. Following up on their study, we examine the moderating role of NGO involvement in the relationship between national governance and the resolution of conflicts. The dynamics of NGO involvement in conflict resolution are widely discussed in the literature (Calvano, 2008; Kapelus, 2002; Kolk & Lenfant, 2012; Murphy &

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Arenas, 2010). However, studies combining insights on both NGO involvement in conflicts and national governance indicators are limited. A study from Kolk and Lenfant (2012) does examine the implications of NGO involvement in a weak governance setting but focusses mostly on NGO-business collaborations. We identified a gap in the literature, as research on the moderating role of NGO involvement in the relationship between national governance and conflict resolution seems to be non-existent. We attempt to explore this relationship into greater detail. Therefore, the second research question is as follows:

RQ2: To what extent does NGO involvement moderate the relationship between government effectiveness and conflict resolution (i.e. length and degree of violence of conflicts), as well as the relationship between political stability and conflict resolution?

We argue that NGO involvement moderates the relationship between national governance and conflict resolution. As mentioned earlier, we expect that when government effectiveness and political stability are low, the length and the degree of violence of a conflict increase. However, we conjecture that when NGOs are involved in conflicts, the relationship weakens. NGOs can perform a monitoring function and hold MNEs accountable for their actions. Moreover, they can perform a representative function for indigenous communities and protect their interests (Calvano, 2008; Murphy & Arenas 2010; Newell, 2005). Hence, we argue that NGOs can perform a number of functions an ineffective government or a politically unstable government is unable to perform. We argue that the involvement of NGOs in conflicts may (partially) compensate for the incapability of weak governments to help resolve conflicts and thus to have a negative moderating effect on the relationship.

In the current study, we focus on two main issues. First, we examine the influence of national governance on conflict resolution. And second, we consider the moderating effect of NGO involvement on the aforementioned relationship. In order to answer these research

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questions, we conduct a quantitative research project, in which a dataset of 420 cases is analyzed. The data has been collected over a period of five years and contains cases from 59 countries, across six continents. We conduct a linear regression analysis and a binary logistic regression analysis. Conflict resolution is measured in terms of the degree of violence and the length of a conflict, whereas NGO involvement is measured as any type of involvement of an NGO in a conflict, both pre- and post-entry.

By exploring the proposed relationship into greater detail, this study aims to follow up on the paper of Arenas et al. (2013), who recommend further analysis of the role governments play in conflict resolution. Previous studies on conflicts between MNEs and indigenous communities are mostly qualitative in nature and focus on isolated cases in specific locations (Crawley & Sinclair, 2003; Mutti, Yakovleva, Vazquez-Brust, & Di Marco, 2012; Murphy & Arenas, 2010). Although these studies provide useful insights in specific cases and settings, it is unclear whether the findings are generalizable in different settings. To fill this methodological gap, this thesis studies the dynamics of conflicts between MNEs and indigenous communities from a quantitative perspective. Our study contributes to the literature by providing empirical evidence for the direct relationship between national governance and conflict resolution, which supports earlier qualitative research on this topic (Chabal, 2002; Idemudia & Ite, 2006; Ikelegbe, 2005). Second, our study is one of the first to find empirical evidence for the moderating effect of NGO involvement on the relationship between national governance and conflict resolution. Our findings indicate that NGO involvement has a mitigating role in conflict resolution, supporting studies of Murphy and Arenas (2010) and Kolk and Lenfant (2005). Lastly, our results provide valuable insights to managers, indigenous communities, NGOs and state representatives and can be used to obtain a better understanding of the factors that influence the duration and the degree of violence of conflicts. In turn, this might result in improved conflict resolution between MNEs and indigenous communities.

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The rest of this thesis is structured as follows. In the following chapter, we discuss the contemporary literature on indigenous communities, conflict resolution and the various stakeholders involved. Subsequently, we develop a theoretical framework and propose a set of hypotheses. Then we present the research design, data collection and method. Thereafter, in the data analysis chapter, we report the results. In the discussion we summarize the key findings of this study and compare these to findings from previous literature. Moreover, we elaborate on the theoretical and practical relevance of this thesis. We discuss the limitations of this study and provide avenues for future research. Lastly, we provide concluding remarks.

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2. Literature Review

In this chapter, we provide an overview of previous literature and introduce key concepts. We discuss the contemporary literature on indigenous communities, conflicts between MNEs and indigenous communities, national governance and conflict resolution and NGO involvement in conflict resolution. First, we examine the concept of indigenous communities.

2.1 Indigenous communities

In order to obtain a better understanding of conflicts between MNEs and indigenous communities, it is important to first establish what the concept of indigenous communities entails. One of the most important documents regarding indigenous peoples is the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP, 2008). In this document a list of articles is presented in which the rights of indigenous peoples are established. However, a clear definition of indigenous peoples is missing.

The United Nations have recognized the right to self-identification of indigenous peoples, meaning that people themselves have the right to determine their membership of an indigenous community and thus to identify themselves as indigenous peoples (Ali, 2016;

Stamatopoulou, 1994; Wiessner, 2009). This membership is usually determined by birth, however, Sawyer and Gomez (2008) state that in practice, indigenous peoples are not simply those who claim to have the indigenous identity. They are those who are recognized to have the indigenous identity by groups and communities sharing similar claims (Sawyer & Gomez, 2008). In addition, it is important to acknowledge that the history of colonialism is closely connected with the indigenous identity (Murphy & Arenas, 2010; Sawyer & Gomez; 2008).

The International Labour Organization (ILO) refers to indigenous peoples as “tribal

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them from other sections of the national community, and whose status is regulated wholly or partially by their own customs or traditions or by special laws or regulations” (Indigenous and

Tribal Peoples Convention, 1989 p.2) or “peoples in independent countries who are regarded

as indigenous on account of their descent from the populations which inhabited the country, or a geographical region to which the country belongs, at the time of conquest or colonization or the establishment of present state boundaries and who, irrespective of their legal status, retain some or all of their own social, economic, cultural and political institutions”

(Indigenous and Tribal Peoples Convention, 1989 p.2). Moreover, like the United Nations, the ILO states that “Self-identification as indigenous or tribal shall be regarded as a fundamental

criterion for determining the groups to which the provisions of this Convention apply”

(Indigenous and Tribal Peoples Convention, 1989 p.2). The UN and the ILO thus clearly state that only indigenous peoples can define indigenous peoples. However, in order to create a more comprehensive understanding of the concept, we discuss a selection of articles in which indigenous communities are defined more extensively.

In defining indigenous peoples, Weaver (2001) expresses a similar view to Sawyer and Gomez (2008). She describes indigenous identity as cultural identity, which is reflected in the values and beliefs of indigenous peoples and in the way they view the world. She acknowledges that there are many different ways in which people can identify themselves, apart from culture. Examples are gender, race, class, region and religion. However, she focuses on culture as the main driver of identification. Weaver (2010) states that there are three facets of identity: The first is self-identification, as self-perception is an important part of one’s identity. As mentioned at the beginning of this chapter, self-identification is proposed by indigenous communities, and acknowledged by the UN and the ILO, as the way to determine who has the indigenous identity (Ali, 2016; Sawyer & Gomez, 2008; Stamatopoulou, 1994; Wiessner, 2009). The second facet Weaver mentions is community identification, for the reason that an identity can only be

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confirmed by other people sharing that identity. An example Weaver (2001) discusses, concerns an all-native basketball tournament in which two different Native American tribes refuse to recognize the other tribe as being Native American. However, they do acknowledge the members of their own team to be Native American and therefore confirm and reinforce the identity of their team members. Lastly, external identification is an important but controversial facet of indigenous identity. External identification concerns the recognition of an indigenous person or community by a person or an institution that does not possess this indigenous identity. External recognition of the Native Americans in the United States has resulted in a set of criteria to determine someone’s identity, which in turn can have an impact on the way indigenous communities view themselves. Weaver (2001) concludes that although these three facets are important, an indigenous identity is not something that can simply be measured. Indigenous identity is a rather intangible concept, that can be better understood as the way in which certain communities think about themselves (Weaver, 2001).

Corntassel (2003) points out the dilemma of constructing a clear definition of indigenous peoples on the one hand and the unlimited right to self-identification for indigenous peoples on the other hand. Since 1977, self-identification has become an accepted international legal practice, after a resolution was passed by the World Council of Indigenous People (WCIP) stating that indigenous peoples are the only ones who could define indigenous peoples. Both the UN and the ILO advocate this right in order to protect indigenous peoples (Corntassel, 2003). Several states, however, have called for a clearer definition of indigenous peoples. Corntassel (2003) presents and examines a number of conceptual frameworks from researchers, intergovernmental organizations, such as the World Bank and the ILO, and indigenous organizations that attempt to define indigenous peoples. He also builds on the ‘peoplehood’ concept introduced by Spicer (1962) and revised by Holm, Pearson and Chavis (2003) in which four factors are most important: Language, religion, sense of solidarity based on territory and

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sacred history (Corntassel, 2003). By combining critical insight from previous models and building upon these existing frameworks, Corntassel (2003) develops a working definition of indigenous peoples that consists of four features: First of all, based on oral and/or written histories, indigenous peoples see themselves as descendants of the first settlers of their ancestral homelands. Second, indigenous peoples may have their own political, social and economic institutions, both formal and informal. These institutions are generally community-based and reflect kinship networks and cultural traditions. Third, indigenous peoples often speak an indigenous language, which is usually not the dominant language in the society, still speak dialects or use indigenous expressions. And last, they distinguish themselves from other societal groups and are a separate community within society. Their ancestral homelands and sacred sites are an important part of their life. These homelands may be threatened, or the indigenous community may already have been expelled from these homelands (Corntassel, 2003). The definition given by Corntassel (2003) does not provide a linear checklist approach to whether people have the indigenous identity or not. However, it does provide some more guidance in defining indigenous peoples than simply stating that whoever identifies oneself as indigenous is indigenous. Since there is a high variety of indigenous communities around the world, it is hard to capture all of these communities within one definition. Consequently, a flexible definitional approach would be the most suitable.

2.2 Conflicts between MNEs and indigenous communities

Colonial rule, state practices and MNE practices have intervened in the lives of indigenous communities and have been crucial in defining the playing field in which indigenous peoples find themselves today. The manner in which land is granted to indigenous communities and the degree to which these communities are recognized are important factors in shaping how they engage with state agencies and MNEs (Sawyer & Gomez, 2008). Studies

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from Bruin and Whiteman (2010) and Kolk and Lenfant (2012) confirm that indigenous peoples suffer serious cultural impacts from the negative consequences to the environment and through societal changes related to natural resource extraction by MNEs. Moreover, the (unequal) distribution of benefits related to MNE activity in a region seems to be one of the main causes of conflict between indigenous communities and MNEs (Idemudia & Ite, 2006; Ikelegbe, 2005; Murphy & Vives, 2013).

As MNEs have increased in size and reach, they control over 65 percent of global trade (Garvey & Newell, 2005). Due to the national liberalization process in many developing countries and the reduced barriers to trade, indigenous communities are interacting with MNEs more frequently than before (Calvano, 2008; Garvey & Newell, 2005; Newell, 2005). Conflicts between these actors can have a damaging effect on both the well-being of communities and on the reputations of MNEs (Murphy & Arenas, 2010). The actions of MNEs can have an impact on a number of issues, such as a community’s access to resources, land rights and environmental concerns (Garvey & Newell, 2005; Hook & Ganguly, 2000). Moreover, substantial power differences exist, as MNEs generally have significantly more capabilities to influence government policies. The social and environmental responsibilities of MNEs, on the other hand, are underdeveloped (Garvey & Newell, 2005).

Correspondingly, Calvano (2008) stresses that power inequality is an important factor that contributes to conflicts between MNEs and indigenous communities. Due to power inequality, indigenous communities have typically had limited influence in the decision-making process of MNEs. Calvano (2008) states that indigenous communities’ interests are scarcely taken into account by MNEs. Unless ignoring a community’s needs has a direct impact on the performance of firms, the wishes of local communities are often neglected. Moreover, the power dimension is especially relevant in the framing of news, as the side with the most resources, typically the MNE, is most likely to ensure that a one-sided representation of events

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dominates the news. Other factors contributing to conflicts are stakeholder perception gaps and cultural context. The stakeholder perception gap encompasses the view both sides have of each other and the differences in ideologies (Calvano, 2008). Conflicts may arise as communities often consider MNEs to be inconsiderate about the protection of the natural environment or the preservation of their culture. MNEs, on the other hand, prioritize economic outcomes, such as the production of low-cost products and the creation of low-wage jobs and perceive these outcomes to also be of greater importance to the local community (Calvano, 2008; Fontana Sastre-Merino & Baca, 2015). Finally, Calvano (2008) emphasizes the importance of cultural sensitivity. By adapting to an indigenous community’s culture, an MNE can increase its organizational legitimacy, resulting in a higher chance of acceptance by the environment in which it operates (Calvano, 2008).

Similar to Garvey and Newell (2005) and Calvano (2008), Crawley and Sinclair (2003), who focus on conflicts between mining companies and indigenous communities in Australia, state that there is a disbalance of power between MNEs and indigenous communities. To arrive at more ethical practices, power sharing initiatives should be developed. An example of such a power sharing initiative is an advisory structure, in which the MNE is committed to follow up on the outcomes. Furthermore, Crawley and Sinclair (2003) argue that building sustainable, long-term relationships with indigenous communities and two-way learning, cross-cultural training and adaptation between MNEs and indigenous communities can also contribute to more ethical practices. Finally, they state that the assumption that indigenous cultures have value in themselves results in more ethical practices. However, many firms just develop these initiatives for commercial benefit to the firm or for a better public reputation, instead of as a response to a community’s particular needs (Calvano, 2008; Crawley & Sinclair, 2003). Despite the article’s focus on the Australian situation, the criteria mentioned above seem relevant in different settings as well. Lertzman and Vredenburg (2005) build upon Crawly and

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Sinclair’s (2003) ethical analysis of indigenous peoples and MNEs and extend it to the global context. They contend that building bridges between cultures is vital to achieve sustainable development.

Similarly, Murphy and Arenas (2010) stress the importance of cross-cultural collaborations in establishing sustainable and beneficial relationships for both parties. They present a number of case examples, in which different approaches to solve and prevent conflicts between MNEs and indigenous communities are discussed. These approaches include the establishment of a dialogue, the inclusion of respected individuals from indigenous communities as representatives and the development of health and economic opportunities for the community. Most important, however, is the consultation of a community in decisions that affect them (Murphy & Arenas, 2010). Many scholars express a similar view and also stress the vital importance of obtaining community approval and building relationships between parties (Bond, 2014; Crawley & Sinclair, 2003; Fontana et al., 2015; Hilson, 2002; Lertzman & Vredenburg, 2005; Mutti et al., 2012).

Conflicts differ among various dimensions, including duration and intensity (Getz & Oetzel, 2009). In low intensity conflicts, opposition can use peaceful instruments like boycotts and lawsuits. High intensity conflicts, however, may involve property-destruction, injury and even death (Calvano, 2008). The current study uses duration and degree of violence to measure conflict resolution.

2.3 National governance and conflict resolution

Sawyer and Gomez (2008) state that indigenous communities face large problems due to extraction projects that are often endorsed and funded by governments and MNEs. Despite increased legislation regarding indigenous peoples’ rights, many communities find that their

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livelihood and culture are increasingly affected by MNE activity and that their say in decisions that affect them is ignored (Fontana et al., 2015; Sawyer & Gomez, 2008). Therefore, Sawyer and Gomez (2008) argue that governments should comply with and enforce the existing charters and regulations on the rights of indigenous peoples. Similar to Castro and Nielsen (2001), they state that governments should create effective platforms for indigenous communities to ensure that their voices are heard (Sawyer & Gomez, 2008).

Frynas (2010) argues that countries that are well endowed with natural resources experience several negative implications. He labels this the resource curse. Many of these countries have relatively high levels of corruption and low levels of education (Frynas, 2010). Often, the funds generated by resource extraction industries, are used to enrich the elite and to suppress opposition and indigenous community resistance (Hilson, 2012). Moreover, because of their reliance on the extractive industry, governments in resource-rich countries have less incentive to develop non-resource related activities and effective institutions and are less inclined to ensure political stability (Frynas, 2010). Additionally, governments in resource-dependent countries often tend to side with resource extraction companies, instead of standing up for the rights of indigenous communities (Ikelegbe, 2005; Hilson, 2002). The result of an ineffective governance framework is often the unequal distribution of benefits from the extraction industry, which in turn fuels conflicts. Countries with high quality governance, on the other hand, are better able to materialize the benefits of the available resources and to create a stable political environment (Frynas, 2010).

In order to protect indigenous communities, international institutions have established charters in which the rights of indigenous peoples are addressed. The ILO Convention 169 and the UN Declaration have assisted indigenous peoples in retaining their autonomy over areas associated with indigenous communities and in asserting their claims to traditional lands. Both the ILO and the UN state that governments should recognize the right of ownership indigenous

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peoples have over their traditional lands, as well as over the natural resources obtained from these lands. Moreover, in the UN Declaration and in ILO Convention 169, states are urged to obtain consent from indigenous communities, prior to the approval of any natural resource seeking projects on indigenous lands (Murphy & Vives, 2013; Sawyer & Gomez, 2008). The government, typically in charge of resource extraction concessions, can thus be seen as an important external stakeholder that influences conflicts between MNEs and indigenous communities (Calvano, 2008; Sawyer & Gomez, 2008).

According to Steurer (2013), the government is the most important actor in establishing regulations for both MNEs and civil society organizations. Moreover, national governance has an important role in the creation of sustainable development and environmental policies, hereby stimulating MNEs to conduct ethical practices (Steurer, 2013). Chabal (2002), who focuses specifically on governance in Africa, states that democracy results in a higher chance of effective governance and political stability. Furthermore, effective governance results in a reduced possibility for conflicts and a higher degree of development (Chabal, 2002; Frynas, 2010). The outcomes of democracy contribute significantly to the amount of foreign direct investment (FDI) a country is able to attract, according to a study from Jensen (2003).

As mentioned earlier, according to the UN Declaration and ILO 169, governments should involve indigenous communities in the decision-making process about matters that concern them (Murphy & Vives, 2013; Sawyer & Gomez, 2008). Castro and Nielsen (2001) argue that by sharing authority and responsibility with indigenous communities, MNEs and NGOs, governments can increase the responsiveness of the resource management process and ensure that the needs of all stakeholders are taken into account. This process is called co-management. There are several benefits of co-management, including the sharing of knowledge and the facilitation of a dialogue between parties. When there are limited possibilities for local parties to participate in the decision-making process, conflicts may arise. Moreover, conflicts

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may be fueled when indigenous communities participate in co-management projects, but their voices are ignored by other stakeholders. Governments have an important role in alleviating power asymmetry and ensuring the participation of indigenous communities in the decision-making process (Castro & Nielsen, 2001). Newell (2005) agrees with this view and argues that the relationship between MNEs and governments is crucial. Governments should have the resources and capacity to sanction MNE activities and to demand from MNEs that meaningful consultations with indigenous communities take place before the beginning of a project. When state-based processes are weak, indigenous communities are more dependent on the willingness of MNEs to engage the community in decision affecting them (Newell, 2005). Additionally, Hook and Ganguly (2000) state that governments can play a role that is at least as important as the role of MNEs and emphasize that the national governance dimension is often neglected in the literature on MNE – community conflicts.

In most countries, government policies and legal frameworks have been put into place, in order to protect the rights of indigenous communities and to determine the responsibilities of companies. However, the degree to which a government enforces these policies is influenced by its ability and willingness to implement sanctions. The effectiveness of a government may thus be a critical indicator of the extent to which indigenous communities are actually protected by the existing regulations (Garvey & Newell, 2005; Newell 2005). Moreover, where government oversight is weak, MNEs may use their power to obtain unfair advantages over indigenous communities by circumventing democratic processes and by influencing national governments (Murphy & Arenas, 2010). Whether the government plays a positive or negative role depends on whether it represents the interests of the community or the elites (Calvano, 2008). Indigenous communities often feel that governments do not respond adequately to their concerns and in turn perceive violent conflict to be the only way to make their voice heard (Bebbington & Bury, 2009). Ikelegbe (2005) states that ineffective governance leads to an

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increase in conflicts and to indigenous communities being put in disadvantageous positions through the unequal distribution of benefits and costs related to MNE activity. When indigenous communities do carry the environmental and social costs of resource extraction, but do not share in the benefits of these activities, conflicts are prone to happen. Additionally, Ikelegbe (2005) argues that in response to state repression and corporate violence in politically unstable regions such as the Niger Delta, various forms of violence and theft characterize conflicts. Moreover, both state-actors as well as MNEs might exploit opportunities that emerge from disorder and violence and thus profit from political instability (Ikelegbe, 2005). Similarly, Idemudia and Ite (2006) state that democratic instruments like conflict resolution and conflict management may not function effectively in countries characterized by political instability. They examine the case of Nigeria and state that political instability and the country’s high proportion of military-controlled governments lead to more violent conflicts.

From the literature it becomes clear that national governments have an important mediating role in conflicts between MNEs and indigenous communities (Calvano, 2008; Castro & Nielsen, 2001; Garvey & Newell, 2005; Newell, 2005; Sawyer & Gomez, 2008) However, there is little research that focuses specifically on the role of national governance in conflicts between MNEs and indigenous communities. Most studies claim that weak governance results in increased conflict (Garvey & Newell, 2005; Hilson, 2002; Ikelegbe, 2005; Newell, 2005), but provide little empirical evidence to back up this statement. The research that does exist on this topic is mostly qualitative in nature and evidence is often anecdotal or focused on one or a small number of cases. Empirically based studies seem to be missing. By examining the direct effects of national governance on conflict resolution, this thesis aims to fill this gap.

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2.4 NGO involvement and conflict resolution

Before looking into the role NGOs can play in the resolution of conflicts, a brief overview of the characteristics of NGOs is provided. NGOs can be defined as “social, cultural,

legal, and environmental advocacy and/or operational groups that have goals that are primarily noncommercial” (Kourula & Laasonen, 2010 p. 36). In the literature, NGOs are also

referred to as civil society actors, local community actors and social movement actors (Kourula & Laasonen, 2010). Schepers (2006) states that NGOs are not related to the state or any transnational government-related organization, such as the United Nations or World Trade Organization. Furthermore, NGOs are typically non-profit organizations that are self-governing and are voluntary both in membership as well as activity. NGOs are formed in the pursuit of a specific set of ideals, which can include all sorts of issues, such as human rights or environmental issues (Schepers, 2006). Since the 1980s, the power and influence of NGOs has grown. By promoting ethical and socially responsible business practices, NGO activism has been responsible for major changes in the behavior and governance of MNEs (Doh & Guay, 2006).

A large number of indigenous communities enter into conflict with MNEs (Kapelus, 2002; Murphy & Arenas, 2010). According to Kapelus (2002), who focuses specifically on companies in the mining industry, opposition against companies in the extraction industry is becoming increasingly globalized. Moreover, many new NGOs have been established, who have taken an interest in working together with local communities to support them in conflicts with resource extraction companies (Imbun, 2007; Kapelus, 2002). Like Kapelus (2002) and Arenas et al. (2013), Kourula & Laasonen (2010) state that an increasing number of NGOs and opposition groups against MNEs are focused on the international environment. The global organization of these groups benefits indigenous communities greatly. Reports from NGOs on negotiations between MNEs and indigenous communities ensure indigenous communities in

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other parts of the world that they receive a fair price for their allotment of mining rights (Kapelus, 2002). Moreover, NGOs have increased pressure on MNEs to act as a good corporate citizen, which, according to Imbun (2007), Kapelus (2002) and Arenas et al. (2013) has led to an increase in efforts and resources spent on corporate social responsibility (CSR). Despite this increase in spending on CSR practices, the ways in which many MNEs in the extractive industry develop and maintain their operations are still disputed (Sawyer & Gomez, 2008).

Not only local stakeholders, but also MNEs involve NGOs in conflicts, as they often see them as more legitimate stakeholders than indigenous communities, mainly because of their institutional power (Calvano, 2008). Indigenous communities, on the other hand, often seek assistance of NGOs as their involvement makes the voice of the community more likely to be heard (Calvano, 2008; Newell, 2005). NGOs have multiple ways in which they can influence project or MNE performance and therefore have a significant source of power (Arenas et al., 2013; Hilson, 2012). There are a number of roles NGOs can fulfil, including leading boycotts and protest activities, advocacy and lobbying, documenting cases, monitoring MNEs, initiating lawsuits and bringing cases under the attention of the media (Calvano, 2008; Sawyer & Gomez, 2008). By involving external stakeholders like NGOs, indigenous communities are able to utilize resources they do not possess themselves (Calvano, 2008).

Correspondingly, Murphy and Arenas (2010) state that third parties can have an important role in conflicts between MNEs and indigenous communities. As the interests of indigenous communities and companies in the extraction industry often directly oppose each other, cross-sectoral collaborations are hard to facilitate. Important factors in establishing a relationship between these actors are the creation of trust and the facilitation of a dialogue. By inviting government agencies and NGOs to consultation meetings with indigenous communities, more credibility is given to the process (Murphy & Arenas, 2010). Moreover, when significant power asymmetry exists, as is typically the case between MNEs and

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indigenous communities, NGOs can play an instrumental role (Calvano, 2008; Murphy & Arenas, 2010). Consequently, Murphy and Arenas (2010) state that collaborations between MNEs and indigenous communities tend to be more successful when respected, independent third-party organizations are involved as facilitators. Not only for indigenous communities, but also for MNEs, as they might receive a better return on their investment (Murphy & Arenas, 2010). However, NGO involvement also entails certain risks. When NGOs are funded by the MNE opposing the indigenous community or when the NGO is more concerned with pursuing its own objectives rather than the communities’ objectives, its involvement in a conflict might distort the interest of the indigenous communities (Calvano, 2008; Murphy & Arenas, 2010).

Similarly, Garvey and Newell (2005) state that there are both benefits and risks of NGO involvement in community campaigns against MNEs. One of the benefits mentioned in their article is that MNEs are vulnerable to negative international publicity and therefore may respond to the demands of influential NGOs. Moreover, a benefit of NGO involvement in conflicts between MNEs and indigenous communities is that NGOs can perform a representational function in these settings. However, in some cases, this has posed risks as well. There have been issues of NGOs bargaining on the behalf of a local community, where the NGO represented only a part of the local population and did not take into account the part of the community that took a different standpoint in the conflict. Another risk of NGO involvement is a reduced responsiveness of MNEs to community campaigns (Garvey & Newell, 2005).

One of the recommendations for future research, provided by Arenas et al. (2013), is to examine the role governments can have as third parties in the relationship between MNEs and local communities. By examining the effect of national governance on conflict resolution, this study aims to follow up on their article. Another recommendation for future research Arenas et al. (2013) provided, was to conduct more quantitative research on the role of third parties in

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the relationship between MNEs and indigenous communities. There seems to be a lack of quantitative research in this field, as the majority of research hitherto has taken a qualitative approach. This thesis aims to fill this gap. Lastly, Murphy and Arenas (2010) propose that in situations where weak national governments are in place, NGO involvement assumes increased importance. By examining the moderating role of NGO involvement on the relationship between national governance and conflict resolution, we aim to explore this relationship into greater detail and to empirically test this assumption.

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3. Theoretical Framework

In this section we discuss the theoretical framework used to answer the research questions. Based on the theory, we formulate a number of hypotheses. Subsequently, we develop a conceptual model in which the hypotheses are displayed.

Several studies emphasize the importance of equally weighing the interests of the stakeholders involved and engaging all parties in the decision-making process (Calvano, 2008; Castro & Nielsen, 2001; Fontana et al., 2015; Lockwood, 2010; Murphy & Arenas, 2010). MNEs should have significant knowledge and understanding of other stakeholders and in order to create successful strategies, managers should have a detailed understanding of the values, customs and expectations of indigenous communities they are dealing with (Fontana et al., 2015). Cooperation between stakeholders towards building sustainable relationships is vital for resolving conflicts (Bond, 2014). MNEs that manage the relationships with their stakeholders appropriately can reduce both the length and the degree of violence of conflicts. In the international business literature, stakeholder theory is a relevant theory when it comes to discussing conflicts between MNEs and indigenous communities. Moreover, as the main focus of this thesis lies on the role governments and NGOs have with regard to conflict resolution, stakeholder theory is an appropriate theory to analyze the dynamics of the relations between the different actors.

The idea that companies have stakeholders is an important element of the management literature (Donaldson & Preston, 1995). Jensen (2001) argues that stakeholder theory is the contender of value maximization theory. The most importance difference is that the interest of all stakeholders have to be taken into account, instead of just shareholders’ interest (Banerjee, 2000; Doh & Guay, 2006; Jensen, 2001; Mutti et al., 2012). The stakeholder theory consists of three mutually supportive aspects, namely, descriptive, instrumental and normative aspects.

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The descriptive aspect holds that the stakeholder theory presents a model defining what the corporation is; a collection of cooperative and competitive interests, which possess intrinsic value. The stakeholder model is instrumental, as it is a framework for examining the links between stakeholder management and corporate performance. The main proposition of the model is that corporations practicing stakeholder management will achieve relatively high-performance scores in terms of growth, profitability and stability. Finally, the basis of the stakeholder theory is normative, and two main ideas of this aspect can be identified.

“Stakeholders are persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity” (Donaldson & Preston, 1995 p. 67). They can be identified by

their interest in the organization, regardless of whether the organization has any interest in them. Stakeholders’ interests have intrinsic value and they should be considered for their own sake, not to advance the interests of any other group. Stakeholder management requires concurrent attention to the interest of all relevant stakeholders, both in the establishment of general policies and organizational structures, as well as in specific cases (Donaldson & Preston, 1995). It is important to note that, according to Donaldson and Preston (1995), not only managers and corporations, but all actors that are able to influence corporate policies should pay attention to the legitimate interest of all stakeholders. Accordingly, NGOs and governments can influence the way in which stakeholders are engaged in matters that affect them.

As Calvano (2008) argues, interests of indigenous communities are scarcely taken into consideration by MNEs, which often results in conflicts. In this thesis, we focus on establishing a link between a number of stakeholders that are involved in MNE - community conflicts. Comprehension of the relationship between national governance and conflicts between MNEs and indigenous communities may enhance conflict resolution and provide insights into methods governments can use to positively influence conflict resolution. Moreover, we provide

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insights into the consequences of the involvement of NGOs, another important stakeholder, in conflicts.

The core argument of our study is that national governance influences conflict resolution between MNEs and indigenous communities. Many scholars agree that actions of national governments play an important role in the way conflicts originate and evolve (Calvano, 2008; Castro & Nielsen, 2001; Dentchev et al., 2015, Murphy & Arenas, 2010). Governments perform a number of functions that influence conflicts, such as engaging various stakeholders in decision-making processes (Castro & Nielsen, 2001), distributing concessions (Calvano, 2008), monitoring MNEs (Murphy & Arenas, 2010), establishing regulations and formulating policies (Steurer, 2013), enforcing existing regulations, and imposing sanctions (Newell, 2005;

Sawyer & Gomez, 2008). In line with the predominant view in the literature, we contend that conflict resolution is less likely when state-based processes are weak. Here, our main argument is that indigenous communities are less likely to be protected by the state and that MNEs might be more inclined to conduct irresponsible behavior, resulting in reduced probability for conflict resolution. In order to test this statement, we examine national governance in terms of government effectiveness and political stability. We capture conflict resolution in terms of duration and degree of violence of conflicts. Additionally, we argue that NGO involvement moderates the relationship between national governance and conflict resolution. In other words, we expect that conflicts are more likely to be resolved when NGOs are involved, due to their ability to perform functions weak governments are unable to perform. In the following part, the hypotheses development, we elaborate more on this argument. The variables used in our study are elaborated upon in the method chapter.

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3.1 Government effectiveness and conflict resolution

Government effectiveness includes the quality of policy formulation, the implementation of policies and the credibility of the government in enforcing such policies (Kaufmann, Kraay & Mastruzzi, 2011). Dentchev et al. (2015) state that corporate misconduct happens more in countries with weak governments. Conflict resolution is difficult when government intervention is minimal, regulatory frameworks are incomplete, and few effective support programs are in place for indigenous communities (Hilson, 2002). When effective government mechanisms are in place, MNEs tend to comply better with existing regulations and tend to demonstrate more responsible behavior (Dentchev et al., 2015). Similarly, Ikelegbe (2005) states that countries with weak governments tend to have higher corruption rates and a relatively unfair distribution of wealth and natural resources. Ineffective governments are likely to ignore and disempower indigenous communities in the distribution of resources, which often results in conflicts between stakeholders (Idemudia & Ite, 2006; Ikelegbe, 2005). Moreover, Ikelegbe (2005) states that the ineffective governance of conflicts results in an increase in violence. Likewise, Oetzel, Getz and Ladek (2007) argue that countries with governments that are unable or unwilling to provide basic state services to their own population are more prone to violent conflicts. Additionally, Getz and Oetzel (2009), who studied intra-state conflicts, argue that when the government of a host country is ineffective, conflicts tend to last longer.

Previous research indicates that weak governments are insufficiently capable of managing conflicts between MNEs and indigenous communities (Dentchev et al., 2015; Garvey & Newell, 2005; Getz & Oetzel, 2009; Ikelegbe, 2005; Murphy & Arenas, 2010). Moreover, MNEs might be more inclined to ignore the voice of the indigenous community, when a government is not effectively monitoring the MNEs activities or enforcing existing regulations (Dentchev et al, 2015; Hilson, 2012; Ikelegbe, 2005). In line with this view, we expect that the effectiveness of a national government is a critical indicator of the dynamics of

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a conflict. Linking stakeholder theory to government effectiveness, we contend that ineffective governments may not pay enough attention to all legitimate stakeholders in a conflict, resulting in an increased probability for conflict. We argue that effective governance leads to better and more peaceful relationships with indigenous communities, as governments can act as facilitators of a dialogue or enforce regulations protecting the interest of indigenous communities. As a result, the communities’ say in decisions that affect them is less likely to be ignored. We expect this to reduce the likelihood of indigenous communities resorting to violence, as conflicts can be resolved through a dialogue or by adhering to government regulations. On the other hand, when governments operate ineffectively, policies protecting the interests of indigenous communities are less likely to be implemented and enforced. Due to the power imbalance, indigenous communities are often unable to resolve conflicts with MNEs without government interference. Therefore, we expect conflicts to last longer in countries with ineffective governments.

A striking case in which the government did not take into account all stakeholders involved, is the case of Goldcorp in Guatemala (Murphy & Arenas, 2010). Goldcorp is one of the largest gold producers in the world and is the owner of the disputed Marlin Mine in western Guatemala. This area is populated almost entirely by Mayan indigenous communities. Goldcorp obtained a license from the Guatemalan government, which was criticized for ignoring the statute of obtaining consent of local indigenous communities, as required by the ILO 169 Convention (Murphy & Arenas, 2010; Murphy & Vives, 2013). Despite various efforts from Goldcorp’s side to provide opportunities for local communities, members of some of the indigenous communities strongly opposed Goldcorp’s operations. These communities voted in favor of stopping mining operations in a local referendum and have made claims that the mining operations caused water pollution. Goldcorp ignored concerns raised, denied the legitimacy of local referenda and maintained its operations. Goldcorp did try to manage the

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involved stakeholders; however, this was only done for the purpose of gaining a license to operate (Murphy & Arenas, 2010). The lack of obtaining consent of the community was not only Goldcorp’s fault, but can also be attributed to ineffective governance by the Guatemalan state (Murphy & Arenas, 2010; Murphy & Vives, 2013). Opposition against the mining operations has taken several forms, including peaceful protests, roadblocks and physical damage. The conflict between Goldcorp and indigenous communities has escalated into violence on more than one occasion and has even resulted in the death of an indigenous farmer (MICLA, 2017). This case raises serious concerns for the protection of indigenous communities’ rights, as the government chose to neglect international conventions such as ILO 169 (Murphy & Arenas, 2010). By not consulting with local communities before granting extraction permits and little effective investigation of human rights abuses, the Guatemalan government fueled the conflict between Goldcorp and the indigenous community. After more than 10 years of protests, and calls from NGOs and indigenous communities to close the mine, the government announced in 2016 that the mine would be closed within a year (Malcolm Garcia, 2016). Despite international regulations, the conflict lasted over a decade, which can be partly attributed to the ineffective governance of the Guatemalan government. In line with the reviewed literature and the above-mentioned example, we propose the following hypotheses:

H1a: Government effectiveness will have a negative influence on the degree of violence of a conflict (i.e. lower degree of violence of a conflict).

H1b: Government effectiveness will have a negative influence on the length of a conflict (i.e. shorter duration of a conflict).

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3.2 Political stability and conflict resolution

Political stability can be defined as ‘perceptions of the likelihood that the government

will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism’ (Kaufmann et al., 2011 p. 4). Fontana et al. (2015) state that

political instability can have an influence on conflicts between MNEs and indigenous communities. Corrupt governments and underdeveloped regulatory frameworks may fuel conflicts. Most scholars argue that politically unstable countries are less capable of considering the interests of all stakeholders (Getz & Oetzel, 2009; Frynas, 1998; Frynas, 2010; Ikelegbe, 2005). Governments may neglect the formulation of natural resource or environmental policies when dealing with intra-country conflicts. Moreover, when policy-makers are replaced frequently, extensive regulatory frameworks might not develop sufficiently (Frynas, 1998). Omotola (2010) states that political parties in an unstable political environment fail to deliver public goods and are not capable of managing social conflicts. MNEs can profit from this instability (Frynas, 1998; Hilson, 2012). According to Chabal (2002), political stability is also connected to the way governments are elected. Democracy makes good governance more likely and reduces the likelihood of conflicts, whereas an unstable political environment could increase the intensity of conflicts (Chabal, 2002). Idemudia and Ite (2006) share this view and state that political instability leads local communities to express their dissatisfaction through violence.

Similar to Chabal (2002), Jensen (2003) states that a stable democracy could lead to more stable policies. This may be an advantage for multinationals as clear policies may lead to improved cooperation between the state and the MNE (Jensen, 2003). However, in line with Frynas (2010) and Ikelegbe (2005), we argue that MNEs might also benefit from unstable political environments, as in these settings governments may be less capable of strictly monitoring MNEs and enforcing existing regulations. A stable political environment could be

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favorable for indigenous communities, as stable governments are more sensitive to external pressure from intergovernmental organizations or NGOs and may thus be more likely to comply with and enforce existing regulations that are put in place to protect indigenous communities. We argue that in countries with low political stability, conflicts last longer and are more violent in nature. There are several reasons for this argument. First, we contend that governments that deal with violent intra-country conflicts or governments that face the risk of being overthrown, might not see MNE-community conflicts as their most urgent issue. Moreover, in countries that frequently change governments or often replace government officials, MNEs might profit from political disorder and ignore regulations protecting indigenous communities, as there is no strong government in place to enforce the rule of law and protect indigenous groups. In line with Omotola (2010), we contend that the governments in politically unstable countries are not capable of managing conflicts adequately. Without government interference in disputes between MNEs and indigenous communities, indigenous communities might try to take matters in their own hands. We expect these conflicts to escalate more often and to be more violent in nature. Additionally, we argue that conflict resolution is less likely when the government is not willing or able to interfere. Consequently, adopting the view Getz and Oetzel (2009) expressed, we expect conflicts in politically unstable countries to last longer.

An example of a country that can be classified as politically unstable is Nigeria (Frynas, 1998; Idemudia & Ite, 2006; Ikelegbe, 2005; Omotola, 2010). In the past 50 years alone, it has endured six military coups, a civil war and two assassinations of heads of state. Moreover, it has had to deal with terrorist groups such as Boko Haram (Ngm.nationalgeographic.com, 2013). There have been numerous violent conflicts between indigenous communities and oil companies in Nigeria (Ikelegbe, 2005). Idemudia and Ite (2006) state that local communities have experienced more negative consequences of oil production than benefits. One of the

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reasons put forward in their article is the instability of Nigeria’s government and the persistent violence in the region. As a consequence of the unfair distribution of benefits of oil related activities, local communities have mobilized against Shell and other oil companies in numerous ways, including violent protests, blockades, property damage, public campaigns and court cases, both in Nigeria as well as in the Netherlands (Environmental Justice Atlas, 2016). Effective management of natural resources is difficult in Nigeria, where responsible government officials are replaced frequently (Frynas, 1998). This example illustrates that political instability may fuel conflicts between MNEs and indigenous communities. The Nigerian government is not able to formulate coherent policies and enforce its own laws, and often seems to take the side of the oil companies versus that of the local community (Garvey & Newell, 2005; Ikelegbe, 2005). As a consequence, indigenous communities cannot rely on the country’s institutions and are forced to resort other tactics of protest, such as blockades, property damage and violence. The government does not seem to be capable of interfering in conflicts between MNEs and communities, witnessed by the fact that there are numerous violent conflicts in Nigeria that have been going on for decades. Accordingly, we propose the following hypotheses:

H2a: Political stability will have a negative influence on the degree of violence of a conflict (i.e. lower degree of violence of a conflict).

H2b: Political stability will have a negative influence on the length of a conflict (i.e. shorter duration of a conflict).

3.3 NGO involvement and conflict resolution

As became clear from the literature review, scholars do not fully agree on the implications of NGO involvement in conflict situations. Most scholars stress that NGO

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involvement can play a positive role in the resolution of conflicts (Arenas et al., 2013; Calvano, 2008; Garvey & Newell, 2005; Kapelus, 2002; Murphy & Arenas, 2010). Benefits of NGO involvement include monitoring of MNEs, fulfilling a representative function for indigenous communities and bringing issues under the attention of media and other organizations (Calvano, 2008; Sawyer & Gomez, 2008). However, some scholars also state that NGO involvement can have a negative effect on conflict resolution, as in some cases the interests of the community are misrepresented (Calvano, 2008; Garvey & Newell, 2005; Murphy & Arenas, 2010). According to Kolk and Lenfant (2012), NGOs can contribute to the establishment of cross-sectoral collaborations and help solve societal issues. Moreover, the authors state that when governments are ineffective, the need to fill a regulatory gap might increase and the role of NGOs to reduce conflict and instability might assume increased importance.

We agree with the predominant view in the literature that NGO involvement can have a positive impact on conflict resolution. We also acknowledge that there may be cases in which the involvement of an NGO can have an adverse effect. However, we contend that in most cases the benefits of NGO involvement outweigh the possible costs. In line with the stakeholder theory, we argue that each party with a stake in the MNEs activities should be considered prior to making a decision. When indigenous communities are not consulted about decisions affecting them, this often results in conflicts (Murphy & Arenas, 2010; Murphy & Vives, 2013; Newell, 2005). NGOs can play an important role by bridging cultural differences, raising attention to unethical practices, monitoring MNEs and acting as facilitator of a dialogue between stakeholders (Calvano, 2008; Kolk & Lenfant, 2012; Murphy & Arenas, 2010). According to the theory, governments often fail to protect the interests of indigenous communities in an adequate manner in ineffectively governed countries (Castro & Nielsen, 2001; Frynas, 2010; Newell, 2005; Steurer, 2013). We argue that NGOs can alleviate the

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negative effects of government ineffectiveness on conflict resolution, as they can fulfil a number of functions these governments fail to perform. We contend that the ability of NGOs to act as a facilitator of dialogue, can prevent stakeholders to resort to violence. Moreover, we argue that by generating media attention and putting pressure on MNEs, NGO involvement may lead to reduced violence and shortened duration of conflicts, as MNEs will be more prone to protect their reputation and find a solution for conflicts. Finally, NGOs can pressure governments to formulate policies and to enforce regulations. In sum, we expect the involvement of NGOs to partly compensate for a lack of good governance and, as a consequence, to lead to an increased resolution of conflicts.

A notable example of a country that scores rather low on government effectiveness is Bolivia (Documents.worldbank.org, 2015). Arenas et al. (2013) provide an example of how the involvement of an NGO, Intermon Oxfam (IO), influenced the dynamics of a conflict between a large multinational, Repsol YPF, and several indigenous communities. Multiple NGOs have stood up for the rights of indigenous communities and have pressured companies in the resource extraction industry to act as a good corporate citizen. In the case of Repsol, IO has played a key role by publishing reports on the distribution of benefits over citizens, local governments and the multinational. Moreover, it has facilitated a bilateral dialogue in order to change Repsol’s practices towards indigenous communities in Latin America. When the results of this dialogue were not sufficient, IO began a public campaign, in which it denounced Repsol’s conduct toward indigenous communities and accused the company of violating indigenous peoples’ rights. IO pointed out the environmental and socio-cultural damages of Repsol’s operations in Bolivia and recommended new policies and procedures for dealing with indigenous communities. Moreover, at Repsol’s annual shareholders meeting, IO made a large impact by demanding the adoption of an indigenous community relations policy that respects rights stated in the ILO 169 convention and presented a petition to the CEO of Repsol. As a

Conflict resolution between indigenous communities and MNE's : the impact of national governance and the moderating effect of NGO involvement

Amsterdam Business School