The position of the indigenous community as a stakeholder in company-community conflict: how do community- and MNE characteristics affect the conflict?

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The position of the indigenous community as a stakeholder in

company-community conflict: how do community- and MNE

characteristics affect the conflict?

Charlotte Louise Rijkse – 10875131

Final Version Master Thesis

Supervisor: Dr. I. Haxhi

Second reader: Francesca Ciulli MSc

University of Amsterdam

MSc in Business Studies - International Management

Faculty of Economics and Business

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Statement of originality

This document is written by Student Charlotte Louise Rijkse 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 contents.

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TABLES AND FIGURES

Figure 1 Conceptual framework 33

Table 1 Linear regression models 41

Table 2 Descriptive statistics 43

Table 3 Correlation matrix 45

Table 4 Multicollinearity statistics for dependent variable length of conflict 46 Table 5 Multicollinearity statistics for dependent variable degree of violence of conflict 46

Table 6 OLS regression results 49

Table 7 Ordinal regression results 51

Table 8 Moderation effect of MNE policy in PROCESS 69

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ABSTRACT

Research on conflicts between indigenous communities and companies typically focuses on the indigenous community perspective. A few previous qualitative studies investigate conflict dynamics in the company-community conflict; however, none of them systematically identifies the determinants of these conflict dynamics in a cross-country perspective. This research aims at addressing that gap in the literature by investigating the effects of national- and company governance on conflict between companies and indigenous communities in a broader context in Africa and South-America. We argue that recognition of the indigenous community by government will positively influence conflict dynamics in the situation in which there is disagreement between the indigenous community and the company, resulting in shorter conflict characterized by a less severe degree of violence. Furthermore, we argue that the MNE policy towards indigenous communities will influence this relationship. In addition, we argue that the effect of recognition and MNE experience in operating in indigenous communities is moderated by the control of corruption of the national government in which the conflict takes place. For a sample of 68 cases from 10 countries our analyses do not reveal any direct effect of the characteristics of national- and MNE governance on conflict dynamics. This result may be driven by the limited number of cases and their high level of heterogeneity. It may also indicate that there might be other issues at stake which determine the duration and intensity of company-community conflict. From a practical viewpoint, the research emphasizes the complexity of the nature of such conflict and emphasizes the need for a combined quantitative as well as qualitative research on conflict dynamics.

Keywords: Indigenous community, MNE, Conflict, Stakeholder Power Inequality, Government Institutions

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1. INTRODUCTION

The role of multinational corporations (MNEs) and their duties towards society is a widely discussed topic (Strike et al., 2006). An essential concept with regard to this role is corporate social responsibility (CSR). Although there does not exist a comprehensive and agreed-upon definition of CSR, in the broad sense it refers to the notion that in addition to their financial motives MNEs have the task of serving and benefiting society. It involves “structural and behavioural factors as well as responsibilities and actions towards shareholders and stakeholders” (Young & Thyil, 2014, p. 1). Especially in the extractive industries MNEs have raised concern in indigenous communities due to their operations, which often take place in countries that are already characterized by political instability and large economic imbalances in society. The resources that MNEs aim at exploiting are often extracted in places that are owned or managed by indigenous communities. The actions of MNEs have the potential of exacerbating the situation and can ignite conflict within communities in which they operate, especially if their operations occur without community consent. The CSR policy of these MNEs and their stance towards indigenous communities is thus important in determining the dynamics of such a situation. At the core of the conflict is how companies respond to the indigenous community and its rights. Neglect of these rights by companies is, according to scholars, the main reason of company-community conflict (Kemp et al., 2011; Ballard & Banks, 2003).

Defining ¨indigenous peoples¨ or indigenous communities is an important part of setting the boundaries for this research. According to the United Nations there is no single definition, however, there are certain characteristics that help define them, one of the most important being self-identification as indigenous. In addition, ¨historical continuity with pre-invasion and/or pre-colonial societies that developed on their territories, distinctiveness and non-dominance¨ are characteristics that help define indigenous peoples (UN Office of the High Commissioner for Human Rights, 2013, p. 2).

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Furthermore, indigenous peoples often have a distinct language, culture and beliefs as well as specific norms and an own political system. In addition, what distinguishes indigenous peoples from modern society is the value they attach to nature and the environment and their different conceptualisation of nature; indigenous peoples view it as being a ¨transcendental ecosystem¨ rather than viewing nature as a division between humans and nonhumans (Viveiros de Castro, 2004 as cited in Acuña, 2015, p. 86). Indigenous communities in the literature are viewed as important stakeholders of a firm, especially in the extractive industries since these to a large extent impact the lands originally inhabited by these communities. Many of the lands inhabited by indigenous peoples are regarded as opportunities for economic growth and business by governments as well as companies, which is why maintaining good relations with these communities is important in order to prevent conflict. As business activities have become more widespread, conflicts between MNEs and indigenous communities have increasingly attracted attention. Previous research has investigated the role of stakeholders extensively and multiple theories have been put forward in identifying stakeholders (Ballard & Banks, 2003; Mitchell et al., 1997). An area that has been researched relatively little within the field of business research is the specific role that the indigenous community and its characteristics play. Our research focuses on the position of the indigenous community as a stakeholder and how a community's characteristics such as its recognition affect conflict dynamics in company-community conflict.

When it comes to the source of conflict between communities and MNEs, these can be numerous. In the case of interaction between indigenous communities and MNEs, a common source of conflict are resources and the fact that indigenous peoples regard themselves as ¨stewards¨ of these resources which does not correspond with the aim of the company (Cullen et al., 2010). What is missing in previous studies is the role of recognition of the indigenous community as previous studies on conflict dynamics leave a gap for a quantitative research on company-community conflict. Numerous qualitative

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studies exist on conflicts between communities and companies, however, the perspective that is taken is usually the community-perspective, outlining the effects of MNE operations on the indigenous community and possible actions that the indigenous community can take in order to improve company-community relations (Calvano, 2008). Considering the attempts made in the literature so far it is of importance to further clarify how the MNE and its policy can affect the conflict. The research question we aim at answering is twofold:

First, does the recognition of the indigenous community by the national government influence conflict dynamics between the MNE and the community? And second, what is the role of MNE's position towards indigenous communities and its experience in operating in indigenous communities when investigating company-community conflict?

We aim at investigating the role of the MNE and its policy towards indigenous peoples in the conflict. More particularly, we explore how the MNE policy towards indigenous peoples moderates the length of the conflict. The purpose of the research is to bring attention to the position of the indigenous community and the effect this has on conflict dynamics. By investigating the position of the community it aims to provide better understanding of how company-community conflict could be prevented or provided a solution for, from the perspective of national governments and MNEs.

Our study focuses on company-community conflict on two continents, which are Africa and South-America. In Africa, the countries involved are Kenya, Tanzania, Uganda, South-Africa and Nigeria. In South-America, these are Colombia, Ecuador, Guatemala, Mexico and Peru. Although Africa has been the subject of much discussion around indigenous peoples and their treatment, it was not until the 1990s that Africa became part of the movement supporting indigenous peoples’ organizations. During

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the year of 2000 the African Commission of the Peoples and Human Rights established a working group with the aim of identifying indigenous groups and which were important with regard to the approach by the United Nations in laying out their rights as indigenous peoples (Bellier & Préaud, 2011). The countries selected are all inhabited by various indigenous communities but their respective national governments differ in the extent to which they recognize these communities and their status, which is what makes these nations an interesting research topic.

By investigating the effects of governance structures and recognition on company-community conflicts, our analyses make three main contributions to the IB literature. First, what effect does governance at the formal level, such as rules and regulations have on the conflict? Getting a clear overview of these effects can broaden the view on mechanisms of governance and how they relate to company-community conflict. Given the increasing level of globalization, corporate practices in indigenous communities will most likely gain attention in the future. Second, this thesis could extend the view held by current literature; whereas indigenous communities themselves have the potential of benefiting from cooperating with MNEs, the traditional view of the MNE interfering with indigenous communities is too narrow. As Danskin et al. (2005) state, the roles that cooperation and conflict play shall become more important due to globalization. Finally, from a management perspective it is valuable to know which form of governance is more likely to influence conflict based on case studies of MNEs in indigenous communities. While an increasing amount of companies pays increasing attention to CSR - especially in the extractive industries - the amount of conflicts between host communities and MNEs is in reality multiplying (Laplante & Spears, 2008) which is why this research is timely and hopes to benefit practice by investigating the effect of governance on this relationship.

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The research is organized as follows. The next chapter aims at discussing previous literature on the topic of company-community conflict and the role of the indigenous community, after which the hypotheses based on the literature are presented. The method for the statistical analysis will then be explained, as well as the results and a discussion and conclusion of the findings of the research.

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2. LITERATURE REVIEW

Several theories discuss the role of the stakeholder in the company-community conflict. In this section, the different concepts regarding the position of the indigenous community as a stakeholder are discussed, based on the stakeholder salience theory as provided by Mitchell et al. (1997). Mitchell et al. have proposed a stakeholder identification and salience model centring around three main components of stakeholders, which are power, legitimacy and urgency, with salience being defined as ¨the degree to which managers give priority to competing stakeholder claims¨ (p. 854). The authors argue that the more of these attributes a stakeholder possesses, the more pressing it is for managers to operate in accordance with these stakeholders' aims and values. The literature review discusses these characteristics in more detail. First, the concept of governance is discussed, after which conflict dynamics and the role of recognition of the indigenous community are discussed.

2.1 Governance

The MNE and its operations are affected by the state or government and the local community in which it operates. Governance involves ¨evolving processes, relationships, institutions and structures by which a group of people, community or society organise themselves collectively to achieve things that matter to them¨ (Hunt et al., 2008 as cited in Tsey et al., 2012, p. 163). Governance operates at multiple levels, involving multiple actors. A stance towards conflict between corporations and indigenous communities that has been much discussed in the literature is that conflict seems to arise because there is a lack of ‘good governance’ (Acuña, 2015). But what exactly constitutes good governance? Overall, it is characterized by good leadership and a clear hierarchical structure based on culturally accepted values and what is normatively agreed on as right and appropriate within a community (Tsey et al., 2012). The literature on governance and conflict states that in absence of well-functioning formal state institutions and when such a clear hierarchical structure is lacking, as is the case in some countries in Africa which

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do not have a clear governance structure and system (Kolk and Lenfant, 2013), we can witness a positive trend with regard to the development of hybrid forms of governance, meaning a combination of structures. Individuals tend to have a higher tendency of relying on governance that has its roots in indigenous practices when there is an absence of a well-functioning state system (Tull, 2003). Then there are the indigenous communities which generally have a hierarchical system of their own as many indigenous communities have their own practices and governance structure. The structure of governance systems differs and the literature generally refers to two types of governance; formal and informal. Formal governance refers to rules, contracts and regulations that are clearly structured, for example regulation with regard to MNE operations in extractive industries or recognition of rights of indigenous peoples (Bellier and Préaud, 2011). Informal governance on the other hand puts emphasis on the social aspect. Kemp et al. (2011) investigate company-community conflict in mining and state that ¨mining companies are under increasing pressure from a range of parties, including local communities, civil society groups, non-government organizations (NGOs), global institutions, financiers, socially responsible investment funds, shareholders, government agencies, and other stakeholders¨ (p. 93). Literature has given increasing importance to the cooperation between the MNE and its stakeholders, but when it comes to CSR practices a lot still remains unclear. One such an example is Uganda, where public awareness of the issue is evident, but what exactly constitutes CSR and how far it should reach with regard to the interaction with indigenous communities is not sufficiently defined yet (Amooti Bagire et al., 2011, as cited in Kolk and Lenfant, 2013, p. 43).

The community that is of interest to this research is the indigenous community. There are characteristics that are shared among these communities, but because they exist all over the world in various forms there is still a high level of diversity between indigenous communities. Governance in such communities, although there exist various forms of governance depending on the community, is

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generally twofold, according to Santoyo (2006, p. 1). There is (1) the ¨internal prong, which refers to conflicts and concerns that affect social control and regulation, relations with nature, spirituality and the sacred, material and spiritual control of territories, as well as strategies for survival and the future.¨ In addition there is (2) the external prong, which refers to the way in which the indigenous community tends to present itself towards society as a whole. It typically includes, among others, ¨the creation and maintenance of intermediation and contact systems (organizations or representatives) for dialogue and negotiation with societies and national governments, democratic representation and participation (in legislative or executive domains)¨ as well as agreements concerning natural resources and their territory.

With regard to resources, governance is especially relevant in resource-rich countries as they in literature are described as having the so-called ¨resource-curse¨ which in short aims at explaining that the disadvantages of a nation having lots of natural resources outweigh the advantages. According to Frynas (2010) this curse comes with three negative effects, these being impact on the economy, impact on governance and impact on conflict. Impact on the economy would result in lower growth rates because of large inflows generated through extractive industries export, which in turn makes it more difficult for the country to earn money through exporting manufacturing goods and agricultural products. With impact on governance, the author refers to the negative consequences of a dependency on income generated by the extractive industries which makes corruption more likely than in countries which rely less on extractive industries. Finally, impact on conflict means that there is less of an urgency for the government to ensure economic stability because the corporations active in the industry can ensure infrastructure for themselves and actually benefit the nation in terms of trade, which in turn can lead to opposition from the local community as is observed in indigenous communities. In countries that are rich in minerals, exchanges regarding the use of these resources are usually between the

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nation-state and the corporations instead of between the nation-nation-state and the inhabitants of the land that holds the minerals - a situation in which the corporation has preference over the inhabitants and thus a situation in which conflict is a possibility.

2.2 Conflict dynamics

As Calvano (2008) confirms in her research, conflict between communities and companies is not an extensively researched phenomenon and therefore literature on group conflict is used as a guide to get an understanding of how conflict evolves. Conflict between indigenous communities and MNEs is complex for a number of reasons. This research holds that there is a relation between governance and conflict between the MNE and the indigenous community. But what exactly constitutes conflict? According to the literature, it is a dynamic process, something which ¨evolves over time¨ as opposed to being static (Pondy, 1967 as cited in Calvano, 2008). The cases used for this research mainly involve companies active in certain industries, as most of them either have operations in the oil and gas sector, mining, hydro-electric power generation and agriculture. These fields are particularly vulnerable to community opposition as the firm operations require drastic change of land and often come with an environmental impact which is opposed by the community, and as a result a situation of conflict comes into existence. According to Laplante and Spears (2008) projects in the extractive industries are especially prone to receiving criticism from communities since they are complex, long and require large investments.

The literature has paid attention to cross-cultural conflicts between MNEs and indigenous communities and the difficulties these conflicts raise for management because of the differing goals held by the corporation and local communities (Hamilton III & Knouse, 2001). In addition, Pearson and Chatterjee (2010) confirm the difficulties management faces when the home country and the country in

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which the MNE is operating differ to a large degree in terms of culture and governance. Calvano (2008) lists the cultural context as a main component of company-community conflict. Overall, the relation between MNEs and indigenous communities is illustrated as complex and multidimensional. Corporate relations with indigenous communities are increasingly discussed with regard to MNEs operating in extractive industries, which can be contributed to the growing search for fossil fuels that are non-renewable and make MNEs increasingly cross borders in search for new areas to explore and extract resources from. An example of such an area is the south of the Ecuadorian Amazon, an area in which the indigenous people inhabiting the land are strongly opposed to any resource extraction (Lertzman and Vredenburg, 2005). While some of these conflicts turn violent, many of them centre around the control of territory, resources, defending rights and discontent with the way in which resources are managed (Bebbington et al., 2008).

While the abovementioned cases illustrate opposition towards MNE activity in an indigenous community, these are too limiting in drawing a complete picture of the complex relationship between MNEs and indigenous communities. Most cases focus on the difficulties for the indigenous community or the state while some take the MNE-perspective, however, few investigate the issue from a governance-perspective. Murphy and Arenas (2010) highlight a different aspect of the company-community relationship which are the benefits that can be enjoyed for indigenous communities through corporate relations, an area of research which is interesting but outside the scope of this research. One of these benefits is the possibility of increased cooperation with MNEs and participation of the indigenous community through links with the business and more visibility globally. The question arises whether this holds true for all cases as most indigenous cases discussed in the literature still view MNE operations as inflicting their rights. As discussed above, foreign direct investment can bring benefits as well as unwanted consequences for indigenous peoples, however, what is commonly seen - especially in

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less developed countries - is that economic activity prevails over the rights of local communities (Foster, 2012), which brings us to the role of the national government and other state-actors. An important aspect with regard to company-community conflict is the role of the state as well as activities undertaken by NGOs and IGOs. Especially in the extractive industries, numerous projects have been set up to link the non-profit sector to development. An example of such a project is the REDD+ project, which is a United Nations collaborative programme and stands for ¨reducing emissions from deforestation and forest degradation¨. It is aimed at reducing the amount of greenhouse gas emissions from foresting. While the aim of the project is improving forestry governance and contributing to a better environment, local communities are sometimes neglected and do not have a say in such projects. Whereas these communities might themselves have taken steps towards more sustainable ways of foresting, projects such as REDD+ can cause ¨land grabbing¨ by corporations and further diminish the role of indigenous communities in decision making when it comes to resources (Mustalahti et al., 2012). Such projects also highlight the importance of the relation between the national government, corporations and communities in the role of governance, which the following paragraph will further discuss.

2.3 Recognition

According to Calvano (2008) stakeholder inequality is at the core of conflict between indigenous communities and corporations. One of the ways of overcoming this inequality is through recognition of the indigenous community as a stakeholder. What constitutes recognition and why does it influence the company-community conflict? The countries selected for this research are on the African and South-American continent and have varying degrees of recognition of indigenous communities. Recognition in the context of this research refers to recognition of indigenous communities as indigenous and enjoying certain rights. The extent to which recognition of the indigenous community is present reveals

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information about the level of community autonomy. This research makes use of five classifications of recognition, with the first being no recognition at all. The remaining four categories are cultural

recognition, which is the case with indigenous communities in for example Uganda, limited recognition of rules, meaning that communities can issue some minor rules (like marriages for example, recognized

as valid by the national government), partial recognition of rules or right of consultation and lastly,

almost full recognition of community rules by government with autonomy or right of consent.

The following paragraph shall discuss in greater detail cooperation between national governments and indigenous communities and how it relates to recognition. At the international level, considerable progress has been made with regard to the recognition of indigenous communities. This is for example illustrated by the rise in NGOs aimed at giving these communities a voice, which is discussed in the next paragraph. The ratification of The United Nations Declaration on the Rights of Indigenous Peoples by an increasing number of countries meant a step forward towards recognition of indigenous peoples. The UNDRIP came into existence in 2007 and although it is not legally binding (Foster, 2012), it means progress is made in recognizing indigenous peoples' rights. At the national level however, there is still need for improvement. Why is recognition important for the indigenous community? The concepts of indigenous governance and corporate governance have been introduced as well as the main common causes for conflict between indigenous communities and MNEs. The level of recognition of indigenous communities as stakeholders and members of society differs across countries. This is important when it comes to conflict dynamics as indigenous communities in for example East Africa have thus far been denied governance and thus been denied power, as there is limited recognition of their rights and rules when it comes to for example rights to land. Cooperation between the indigenous community and the national government on matters such as land use and resources can drastically affect communities, as can a lack thereof. This is illustrated by Nelles and Alcantara (2014) in their research on cooperation

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between Aboriginal governments and the local government. We can see a range of benefits emanating from good government-community relationships, such as shared resource management (or co-management) and joint initiatives aimed at benefiting both parties. The authors have developed a model, distinguishing between formal and informal cooperation between the parties, with informal cooperation referring to cooperation without ¨formal mechanisms¨ such as legal rules (p. 601). Although both types can benefit the community, for this research the focus is on formal cooperation and community autonomy with regard to regulations and the recognition of rights of the indigenous community.

International recognition of indigenous' rights has become more widespread recently, however, this research argues that national recognition is meaningful with regard to actual implementation of rights, as the following case will illustrate. An example of development towards recognizing communities is the landmark case of the Endorois, which meant a step forward for indigenous communities in Africa. In this case, the Endorois, an indigenous community in Kenya, brought their case against the Kenyan government to the African Commission on Human and People's Rights through CEMIRIDE (Center for Minority Rights Development) and Minority Rights Group International. The issue at stake was the eviction of the Endorois from their ancestral lands surrounding Lake Bogoria in Kenya in the 1970s. What makes this a special case is the fact that it is the first case in the country which recognizes indigenous rights. More specifically, the commission found that the government had violated the African Charter on Human and Peoples' Rights and more precisely the following articles:

¨their right to religious practice (Article 8), right to property (Article 14), right to freely take part in the cultural life of his/her community (Article 17), right of all peoples to freely dispose of their wealth and

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Although the ruling of the court granted the community long-awaited recognition, in practice the decision might not be as far-reaching as was hoped for by the community since the Commission lacks the measures to ensure that the state, in this case Kenya, acts in compliance with the decision (Lynch, 2012). The court decision illustrates the importance of recognition at the national level precisely because of this reason. Eventually, the Commission will still need to rely on the will of the national government to act in accordance with its decisions. In addition to legal recognition, government-community relations also matter because they give an indication as to what the level of power of an indigenous community is. No recognition of a community by the government is expected to diminish the power of the community and this has an influence on the position of the community in the interaction with companies (Calvano, 2008). Using the model provided by Mitchell et al. (1997) we can assess the position of the indigenous community as a stakeholder. Using the three concepts of power, legitimacy and urgency, we can argue that the more attributes a community has, the more attention the manager of the MNE would give to the conflict. Following this logic, a community that enjoys recognition would be a more powerful stakeholder, which would increase the chances of its voice being heard in a company-community conflict, by the national government as well as the corporation. An example of a community which has traditionally not been heard are the Maasai in Tanzania. During the 1990s, Tanzania opened up as an economy and welcomed a large number of MNEs from abroad looking to invest in Tanzania. The Maasai who originally inhabited the land saw it being taken over by wildlife organizations, hunting companies and the like. The scope of this research is too limited to discuss African politics in greater detail, however, it is important to note that most African countries are run by small, ¨elite minorities¨ and not the ¨national majorities¨ which represent most poorer Africans (Igoe, 2006, p. 404). This as a result makes it difficult for indigenous communities to secure their rights, often facing displacement. What has proven to be vital in the interaction between communities, the national government and companies is the perception of justice that the community has regarding decision

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making. Laplante and Spears (2008) investigated what communities consider important when it comes to foreign investment in their surroundings, and although the economic benefits would matter, above all the communities value fairness and a perception of justice, or as the authors put it, ¨visible, tangible forms of recognition¨ (p. 78). Franks (2009) has done research on conflicts between mining and acknowledges the role that engagement of the community plays in reducing the intensity of the company-community conflict. What is at stake in most conflicts, the author argues, is the loss of (perceived) control of the community in deciding what happens to their land and livelihood, and thus how they shape their future. As Laplante and Spears (2008) conclude, communities need agreements with either companies or governments in order to be able to exert control over their future.

2.4 The MNE

At the MNE level the policy of the company is a form of recognition of indigenous peoples as stakeholders. The literature on MNEs and their CSR practices is extensive. Going through the literature, the notion that CSR is used mainly to increase profit for the firm prevails, although this is not always the case. The level of commitment to an MNE’s CSR policy might vary depending on the company and community involved, overall CSR might not play that large of a role in decreasing length of company-community conflict. The literature however does discuss the experience of MNEs in operating in indigenous communities as a beneficial factor in working towards solving conflict. Calvano (2008) states that in cases in which indigenous communities feel powerless as a result of the perception that their rights are not taken into account, communities resort to violent ways of responding to the MNE such as blockades and other violence. According to the author, who puts forward three components of conflict, which are stakeholder power inequality, stakeholder perception gaps and cultural context, the latter “may impact the organizational legitimacy of MNCs in the eyes of local communities” (p. 799). In other words, a company not taking into account the specific culture of communities will not be seen as

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legitimate and will decrease its chances of successfully cooperating with these communities. The concept of cultural sensitivity thus matters to operating in indigenous communities. Institutional theory says that whether an organization is seen as legitimate depends on, among other things, the process by which the view that the environment has of the MNE has been constructed. When we apply this to the complex situation of conflict with indigenous communities, it requires the MNE to be sensitive to the community. It should be noted that literature on cultural differences mainly discusses culture at the national level, ignoring differences within a country which is especially important considering that indigenous communities have a distinct culture, the so-called “micro culture” which the MNE should take into account.

Crawley and Sinclair (2003) discuss cultural literacy, which is ‘‘two-way learning and adaptation” (as cited in Lertzman and Vredenburg, 2005, p. 251) and includes the skill of pursuing respectful relationships in cases in which the cultures of two parties differ. The goal is to establish effective relations with the community, which requires learning and experience. Schusler et al. (2003) discuss the notion of social learning in the context of natural resource co management. As most companies that operate on land inhabited by indigenous communities are active in resource extraction, social learning is vital for these companies if the goal is to manage the resources in cooperation with indigenous communities, which is one way of working towards conflict resolution. Establishing collaborative relationships with communities can benefit both the MNE as well as the community as it decreases the possibility of conflict. In addition to the possible violence that can accompany the conflict, conflict can also lead to significant financial costs for the two parties. Davis and Franks (2011) address these costs in their research on MNEs in the extractive industries and conclude that conflict can lead to financial costs in multiple ways. It hinders early completion of projects, can lead to reputational damage and lost productivity as the project has to be delayed in case of opposition. Especially in extractive industries, the

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reputation of an MNE is crucial as it for a large extent is reliant on communities' consent. Displaying behaviour that could be faced with opposition from communities can be detrimental to a company's reputation (Foster, 2012) and could lead to the company eventually being taken to court or shamed publicly by NGOs that aim at securing indigenous peoples' rights. The research furthermore concludes that the most overlooked type of cost for companies is staff time spent on managing the conflict. The cost analysis made by the authors is meant to increase understanding of how companies can learn to prevent or manage conflict. It is therefore in the interest of the community as well as the MNE to avoid conflict at all costs, or in case of conflict, to work towards resolution.

2.5 Quality of the national institutions

The role of the national government of the country in which the indigenous community is located can play an important role in the development of company-community conflict. This is especially the case in countries in which the quality of national institutions is low, as corruption and an ineffective government can ignite conflict between the government and the indigenous community as well. Ikelegbe (2005) has researched conflict dynamics in the oil-rich Niger delta in Nigeria and his research yielded the following results. When there is access to resources in an economy that is politically stable and corrupt, the opportunity for government officials to engage in illegal operations is large and can exacerbate conflict that originally started between a company and community, making it longer and possibly more violent. In addition, government actors could profit from existing violence by plundering and stealing, again increasing the intensity of the conflict. Economies benefit from the economic activity that MNEs bring. This is an explanation for why the national government can favour the presence of MNEs rather than the presence of indigenous communities. The interests that the government has in MNE operations then prevails the rights of indigenous peoples. Ite (2004) confirms the abovementioned and confirms in his research the existence of the resource curse phenomenon. The author investigated

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CSR practices of MNEs active in Nigeria and although there were plenty of development initiatives undertaken by companies in the area, the high level of corruption in the country led to misallocation of resources and unequal distribution of money generated through oil found in the Niger Delta. CSR initiatives undertaken by companies such as Shell do not have the desired effects of improving community wellbeing and in light of inequality thus have the potential of aggravating the violence, diminishing the role of CSR and putting the community in a position in which it has no power as long as the presence of MNEs is preferred over that of indigenous communities due to economic reasons. The author concludes with stating the importance of good governance (meaning a stable political situation, transparency and absence of corruption) as a condition for poverty reduction mechanisms, community development projects and CSR to truly benefit communities and other marginalized groups in society. All in all, the literature thus confirms the role of the national government, its level of corruption control and the link with violence in countries which are rich in resources and thus attractive for foreign direct investment.

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3. HYPOTHESES

Previous studies have highlighted the importance of MNE characteristics such as CSR and cultural learning in interacting with stakeholders, in this case indigenous communities. This has an impact on the dynamics of the relationship between the two parties and affects whether conflict is likely to place. If conflict cannot be prevented, it influences the dynamics of the conflict and whether or not the two parties can come to an agreement. A third party, the national government, is an important stakeholder in the situation. Lack of quality institutions, a high level of corruption and a government that is unwilling to recognize the rights of indigenous communities is likely to lead to violence, either between government forces and communities or it leads to an exacerbation of already existing violence between communities and security guards or company representatives (Ballard & Banks, 2003). The hypotheses concerning these so-called ¨resource wars¨ are presented below. As quoted by Berkes (2009, p. 24): ¨any discussion of control and access to resources [...] requires an introduction to the three major ‘players’ in the sector: state, community and capital (multinational corporations)¨. The characteristics of these three main stakeholders will be explained as well as the effects they are predicted to have on conflict dynamics.

3.1 Hypothesis 1

Previous literature on the concept of conflict between stakeholders, in this case the MNE and the indigenous community, highlights the concept of power and power inequality. Conflict arises when, in a situation in which two or more parties compete for the same resources, a party feels as if it cannot exercise control over the situation. Linking this to company-community conflict, communities are mainly concerned with having the ability to exercise control in the conflict situation as they are often the marginalized party (Ballard & Banks, 2003). The extent to which this is possible largely depends on the role of the national government, as this is the entity which can grant a community autonomy. If

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recognition of the indigenous community by the national government is present and the community is granted autonomy, communities would have a greater sense of power. It is expected that when there is no sufficient level of recognition, this puts the community in a position in which there is no balance between the company and community. This asymmetric power relation has the potential of worsening conflict. Indigenous communities, whose existence is not or only to a little extent recognized, are not always able to retain their governance over resources such as forests for example and thus the level of power that is enjoyed by the national government and corporations is not the same when compared to the power of indigenous communities. The level of recognition of the community is hypothesized to be an indicator of the length of the conflict between the multinational corporation and the MNE. In this research, the power of indigenous communities is expected to be larger when the indigenous community is recognized and thus has a higher (potential) level of collaboration with the national government as well as corporations. Such collaboration would indicate a higher level of power and recognition of the indigenous community. The reasoning behind this hypothesis is that the community would be in the position of being a more powerful stakeholder when it is recognized. Taking the perspective from the MNE, there would be more urgency for the MNE to be on good terms with this particular stakeholder (Mitchell et al., 1997).

Linking the aforementioned stakeholder salience model of power, legitimacy and urgency by Mitchell et al. (1997) to the role of the indigenous community as a stakeholder, one can argue that a community which has recognition by the national government possesses more power than a community which is marginalized. The article discusses the concept of resource power, which is what makes a particular stakeholder of importance to the manager of a company. A community with autonomy is in a more powerful position than one without, since it is recognized by the national government as having certain rights. In addition to power, a higher degree of community autonomy would equal legitimacy,

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which is the second component of the model, since the community is recognized as an entity legitimately making a claim to for example land or other natural resources and because its rights are defined and recognized. With regard to the third component of the model, urgency, the following is relevant in the case of the indigenous community. Urgency is described as ¨the degree to which stakeholder claims call for immediate attention¨ (p. 864). What urgency does is grabbing attention. If one links this to claims of indigenous communities to land and resources, the position of a community with more autonomy would mean it has more salience, making the community more likely to be in the position of being a primary rather than a secondary stakeholder. From the perspective of the manager of the company, the stakeholder salience model provides a guideline as to which stakeholders managers are likely to give priority to in case of conflicting interests. Linking this model to the length of the conflict, one can argue the following. Taking the manager's perspective, a longer conflict would equal more costs since such a conflict can delay or hamper the proposed company operations. It is therefore also in the interest of the firm to resolve conflict in a timely manner. An example from previous studies on the consequences of the absence of recognition is provided by Taylor (1994, as cited in Coulthard, 2007, p. 442) who argues that identities are not solely shaped by recognition, but also by the absence of it. Nonrecognition can cause harm and can be used as a method of oppression if an individual or group is imprisoned in a ¨reduced mode of being¨, as is the case with indigenous communities. Granting communities autonomy through for example self-government institutions can reduce asymmetrical power relations and make the indigenous community a more powerful stakeholder in company-community conflict. Based on the aforementioned literature, hypothesis 1 proposes that:

H1: The higher the level of recognition of the indigenous community by the national government, the shorter the company-community conflict.

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3.2 Hypothesis 2

Hypothesis 2 puts forward the concepts of social learning and experience and their relation to the MNE, the community and the likelihood of reaching conflict resolution or developing a solution to co-managing the resources which are often at stake in the conflict. We put the experience of the MNE forward as a predictor of the length of the conflict. Previous literature on the concept of conflict resolution emphasizes the importance of relationship building in establishing peace and reaching a solution in a conflict situation (Furlong, 2005). Furthermore, following the reasoning of Asawo (2011, p. 82) who states that ¨an important strategy that can be adopted to shore up corporate image and douse the tension that characterizes company-community conflict is to enhance an organization’s communication competence¨ we acknowledge the importance of communication in working towards conflict resolution. With an increased amount of interaction with indigenous communities, the chances of the MNE having experienced the learning process of working towards establishing cooperative relationships with indigenous communities are higher. The process of social learning, important with regard to co-management of resources around which the conflict centres, can aid in establishing conflict resolution. Research by Berkes (2009) highlights how important it is for both parties to engage in learning and knowledge generation in relation to managing resources. The author concludes by saying that the key to effective resource management lies in joint problem solving. This occurs by both parties sharing ¨experiences and ideas¨ (p. 1699). In other words, the experience and learning process of the MNE is likely to affect the development of conflict.

Research by Castro and Nielsen (2001) makes the link between co-management and culture, stating that western devised programmes of co-management are often unsuccessful if implemented in indigenous communities precisely because of the fact that both parties do not fully agree on the rules and reasoning behind the programme as it can clash with beliefs held by one of the parties, mostly the

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indigenous community. Chapeskie (1995, as cited in Castro and Nielsen, 2001) prefers to use the word co-existence rather than co-management, however, learning to “co-exist” requires knowledge, skill and experience. Besides the conditions that need to be met for both parties in order to “co-exist”, such as mutual agreement on rules, there are other factors that come into play when interacting with indigenous communities. For example, there might be the possibility that a large part of the community is illiterate, making communication difficult. Communication style of both parties tends to be different, with indigenous communities believing in the importance of sharing stories as a way of dialogue, which is in contrast with official business meetings as they are known to MNEs. Moreover, even the location in which meetings are held differs between the two parties, as indigenous communities are used to making decisions on the land instead of in a more “formal” setting (Whiteman, 2009). In other words, there are cultural as well as political barriers that need to be overcome in order for the MNE and the community to be able to co-exist on good terms, however, these can be overcome by improving communication channels between the parties. In addition, Berkes (2009) highlights the path-dependency of co-management, which is an important concept with regard to our hypothesis. The author states that the success of co-management is largely dependent on the history of the case; it is a process in which the dedication of both parties is essential. Development is likely to take time, which is why the author states that the length of time that is needed can be substantial, and can in times it can take decades in order for co-management to be successful. Therefore, following the literature, we hypothesize that:

H2: The more experience an MNE has in operating in indigenous communities (based on the number of years since its first operation in an indigenous community started), the shorter the company-community conflict.

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3.3 Hypothesis 3

Hypothesis 3 addresses the relationship between recognition and the degree of violence of the conflict. Previous literature on the concept has linked the position of the indigenous community and its level of power to the forms of protest which are likely to be used by the community (Laplante & Spears, 2008). From the perspective of the indigenous community, a community can either resort to using ¨weapons of the weak¨, meaning violent ways of showing discontent, or it can engage in dialogue with the MNE, directly, or via third-party actors. In addition, there is the possibility of using the legal system in order to reach an agreement. The concept that is of importance in this case is recognition, or community autonomy. A community characterized by autonomy is in a different position as a stakeholder than a marginalized community. Concerning the degree of violence, from a community perspective, the use of the legal system instead of more violent manners of conflict resolution would indicate trust in the quality of national institutions. If domestic recognition of the indigenous community is present and one can rely on domestic mechanisms in order to ensure that indigenous rights are recognized and enforced, chances of the indigenous party resorting to violence would be smaller. If there is a lack of perception of justice and fairness when it comes to participation in decision making, the community is more likely to ¨resort to forms of protests that are detrimental to all stakeholders¨ (Laplante & Spears, 2008, p. 78).

The role of the government is furthermore of importance in this situation. What is seen in conflicts in East African countries such as Kenya, Tanzania and Uganda is that violent clashes between government actors (police, mining security) and communities are common. The conflict, instead of being limited to a conflict between the community and the company, becomes a conflict with the government. Another example of such a situation documented in previous studies is the conflict that occurred in Peru in 2009, which was a conflict between the national government and local communities. What triggered

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the conflict was the fact that the government gave permission to increase mining and oil activity in the Amazon, a decision which was heavily protested by the communities since the autonomy of the community was not granted or taken into account (Foster, 2012). The interest that the government had in more economic activity prevailed over locals' rights, which is more likely to happen in case a community does not have a certain level of autonomy. Perceptions of justice thus affect the way in which the community will make itself heard (Whiteman, 2009). The concept of procedural justice, which entails having the “institutional space to voice [one’s] opinion in a meaningful way within decision-making processes” (p. 108) plays a role in how conflict evolves over time. This is dependent on the balance of power between the MNE and the community, which is more symmetrical in cases in which the community has autonomy.

In economies of repression in which there is no official way for the community to realize its rights, such as in the oil-rich Niger Delta in Nigeria, violence is more likely to occur (Watts, 2004). In reality, the author states, most of the violence will occur between government forces and members of the indigenous community as the government is the target of anger and discontent. The increasing amount of ethnic youth movements accompanies the increasing amount of violence observed in communities which are not granted autonomy, such as the Ogoni people in Nigeria. Previous studies conform how recognition and autonomy thus affect the intensity of the conflict as, and therefore we propose that:

H3: The higher the level of recognition of the indigenous community by the national government, the less severe the degree of violence of the company-community conflict.

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3.4 Hypothesis 4

Hypothesis 4 links the experience of the MNE in operating in indigenous communities to the degree of violence of the conflict. The degree of violence of the conflict, in addition to being dependent on the recognition and position of the community, is also dependent on the MNE. More specifically, the experience an MNE has in working together with indigenous communities can decide whether the conflict will be characterized by a high level of violence or whether it will be kept relatively peaceful. The concept of importance here is cultural understanding and learning in order to prevent discontent from eradicating and turning violent.

Previous literature by Kemp et al. (2011) puts forward the most common drivers of resource conflicts and recognizes the difficulty of translating CSR policies into on-the-ground practice. This requires learning and an understanding of how to interact with indigenous communities. Laplante and Spears (2008) state that participation in decision-making should reduce the most common reason for indigenous communities to resort to measures of violence. In order to enable such participation in an effective way, communication has to be clear to both parties. As stated earlier, due to cultural differences between the two parties, building a trustful relationship between both takes time. Lertzman and Vredenburg (2005) confirm that cultural literacy is a skill that can be learned and which can give direction to successful interaction between MNEs and indigenous communities.

Additionally, from an MNE perspective, conflict is a costly matter. It can have financial consequences as well as cause reputational damage. The latter is especially damaging for MNEs active in the extractive industries, since the MNE is in need of a certain level of goodwill in order to be able to operate and co-exist with indigenous communities. The use of violence, whether used by the indigenous community or by company representatives, is detrimental to further development of the conflict. The

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community’s need to resort to violence in case the MNE is aware of what to pay attention to in engaging with indigenous communities is likely to decrease. An example from previous studies is provided by Laplante and Spears (2008) who recall a nationwide “anti-mining sentiment” (p. 103) in Peru in 2005, following a series of violent conflicts aimed at the operations of mining companies in the area. The protests “placed at least U.S. $ 1.1 billion of existing investments at risk” (p.103) which is an example of the damage that can be done to MNEs following discontent of the community. It is therefore vital for MNEs to engage in learning in order to try and prevent such conflict from happening. The experience of the MNE thus affects the degree of violence and intensity of the conflict and therefore we propose that:

H4: The more experience an MNE has in operating in indigenous communities (based on the number of years since its first operation in an indigenous community started), the less severe the degree of violence of the company-community conflict.

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3.5 Moderating effect of MNE policy

With regard to corporate governance and the role of corporations in the wider society frequently used perspectives are stakeholder theory and shareholder theory. Shareholder theory as the name implies has a focus on the corporation’s shareholders, wealth and profit maximization. It aims at maintaining good relationships with all individuals or groups that have a share in the corporation, arguing that managers solely have a responsibility to fulfil towards shareholders. On the other hand there is stakeholder theory which refers to the responsibilities of corporations towards all their

stakeholders. According to this theory, the firm is a complex set of stakeholders that each have a specific

role in the system as well as specific rights. Stakeholder theory holds that it is the duty of the MNE to ensure good, stable relations with all in order to ensure its existence and good firm performance (Freeman et al., 2010).

One way of empowering communities involved in a conflict is through the MNE and its policy towards indigenous peoples. Regarding the MNE and its corporate social responsibility, the stakeholders can be divided into voluntary and involuntary stakeholders, with indigenous communities falling into the latter category as they mostly do not voluntarily choose to deal with a corporation but instead are often forced to do so due to companies undertaking projects in areas near or on land inhabited by indigenous communities (McCartin, 2013). This is especially what makes the issue of MNE relations with indigenous communities a pressing one as they involuntarily have to interact with MNEs, in which case conflict can be difficult to avoid. The perception of stakeholder power inequality is at the core of conflict and is said to be one of the main reasons why indigenous communities feel discontent when it comes to the role they play in the web of stakeholders of corporations (Calvano, 2008). When a company has a clearly stated policy towards indigenous communities, it is expected that the effect of national recognition on conflict dynamics will become smaller. The reasoning behind this hypothesis is based on research

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performed by Crawley and Sinclair (2003) who investigated the stance of mining companies in Australia towards indigenous communities. The initiatives undertaken by mining companies positively mean more interaction with indigenous communities, but only when they are aimed at sharing power with the indigenous community do they lead to positive change and more ethical mining operations. Their research furthermore finds that the most successful companies were the companies that went a step beyond meeting the ¨basic requirements¨ (p. 364). While this could be a good enough incentive for companies to aim at doing more for indigenous communities, this research hypothesizes that when companies value cooperation with indigenous communities and the consent of the community with regard to the company's operations, the recognition by the national government of the community has less of an effect on the conflict dynamics.

This research classifies companies' policy towards indigenous communities into three categories, with the first being no mention of community consent or specific policy. These include the companies without an official website or mention of cooperation with indigenous communities. The second category includes vague statements such as ¨supports consultation¨, but without explicit

mention of consent. The last category includes strong statements like ¨supports prior and informed consent¨. Recognition of the indigenous community as being an important stakeholder would in the case

of a strongly stated policy towards indigenous peoples by the MNE have less of an effect on the conflict. Because of this reasoning, the stated policy of an MNE is added as moderator to the relation between recognition of the community and conflict length.

3.6 Moderating effect of a country’s level of control of corruption

The more experience an MNE has, the more it has been exposed to learning opportunities for cultural sensitivity. However, in case of a low level of control of corruption, this effect is expected to be

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less as corruption changes the power balance between the national government, the MNE and the indigenous community. Corruption is an important concept with regard to the relationship between the national government, the community and the MNE because of the role it can play in shifting the balance of power between the stakeholders. Foreign direct investment in countries which are characterized by a low level of economic development brings economic opportunities for the ones in power. What corruption changes in the scenario is that it worsens the position of the indigenous community.

Ikelegbe (2005) concludes that economies that are corrupt will often favour the presence of MNEs in the country at the expense of the well being and rights of the indigenous communities. In case of a high level of corruption, although the community might be recognized, a low level of control of corruption can cause the conflict to continue because of the loss of trust in the national government. As the author states, when there is a national government that is deemed ineffective, conflict is likely to last longer. An unstable political situation and absence of a well-functioning government can thus exacerbate violence and diminish the role and good intentions of the MNE. In addition, this would also devalue any autonomy granted by the government, since actual implementation of community rights is not guaranteed.

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3.7 Framework

The framework below presents a visualization of the proposed hypotheses.

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4. RESEARCH DESIGN

This section discusses the research design, method and sample used for the analysis. Furthermore, it discusses the variables and how we dealt with missing data and recoding of variables.

4.1 Sample

The sample of the research is 71 cases of conflict between multinational corporations and indigenous communities in East Africa in Kenya, Uganda and Tanzania, in South-Africa and Nigeria and in Colombia, Ecuador, Guatemala, Mexico and Peru. Three cases were found to have missing values, bringing the total sample of cases for the analysis from 71 to 68. When checking for frequencies, no errors were found so the remaining cases could be used for the analysis.

Data was gathered through third party reports from independent groups who research indigenous communities and reports from NGO groups and the United Nations. In addition, we made use of media sources such as newspaper articles. All data are secondary data and the sample was selected on the basis of availability and whether it was obtained in a reliable source. The designated time frame of the research ranges from the 1960s to 2014. As many cases of conflict are ongoing, the end date of the research was 2014 for the sake of analysis. If there was a conflict in the designated geographic area within the designated time frame, the conflict was selected for analysis and coded along the variables proposed below. We classify conflict as "any relationship between opposing forces whether marked by violence or not" (Deloges and Gauthier, 1997, p. 4 as cited in Castro and Nielsen, 2001). In the research the opposing forces are thus the indigenous communities and MNEs.

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4.2 Variables

By reading reports and sources, cases were selected that meet the abovementioned criteria. The dependent variables are the conflict characteristics which give information about the length of the conflict. The independent variables are grouped into community characteristics and MNE characteristics, which give information as to what the autonomy of the community is and what the experience of the MNE is with operating in indigenous communities.

Dependent variable

The dependent variable in this study is conflict dynamics. Specifically, the length of the conflict and the degree of violence of the conflict are used. In order to ensure that there were no counter indicative items, the variables were recoded as to present the correct order of what they are intended to measure. The dependent variable of conflict length was coded in number of months, with ongoing cases coded until December 2014 which is the time frame of the research. We consider a conflict to have ended in case a settlement was reached, whether through legal action or without the involvement of the legal system.

The degree of violence ranges from low intensity, medium intensity to high intensity violence, including deaths. Calvano (2008) classifies the intensity of the conflict as an important characteristic concerning the nature of the conflict. The degree of violence variable is a categorical variable.

Independent variables

The independent variables in this research are recognition of the indigenous community by its national government (degree of community autonomy) and MNE experience in operating in indigenous communities. The first, recognition, gives information as to what the degree of community autonomy is.

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We use the variable as a scale variable. This research makes use of five classifications of recognition, with the first being no recognition at all. The remaining four categories are cultural recognition, which is the case with indigenous communities in for example Uganda, limited recognition of rules, meaning that communities can issue some minor rules (like marriages for example, recognized as valid by the national government), partial recognition of rules or right of consultation and lastly, almost full recognition of community rules by government with autonomy or right of consent. The variable was categorical but was used as a continuous variable in order to run the analysis. As Rhemtulla et al. (2012) state in their research, when a variable has more than five categories, it is acceptable to treat such a variable as continuous and thus a scale measurement was used.

The second variable, MNE experience, is an MNE characteristic expected to affect the length and intensity of the conflict. MNE experience refers to the numbers of months since the first project of an MNE affecting an indigenous community started. Davis and Franks (2011) discuss the importance of learning and experience of the MNE as a predictor of conflict and conclude that learning how to interact with indigenous communities is vital to preventing or adequately managing conflict.

Moderating variables

As moderating variables we add the MNE as well as the quality of national institutions of the country in which the MNE is operating. More specifically, we use the MNE policy towards indigenous peoples, which is grouped into three categories and gives information about how the MNE portrays itself with regard to how it values indigenous peoples and takes into account their consent in MNE operations that affect the community. Moreover, we use the level of control of corruption of the country in which the MNE is operating as a moderating effect on the relationship between recognition and MNE experience and the degree of violence of the conflict. It is hypothesized that in case there is

The position of the indigenous community as a stakeholder in company-community conflict: how do community- and MNE characteristics affect the conflict?