Exploring the influence of national governance on conflict resolution between MNEs and indigenous communities : a quantitative analysis on conflict resolution with moderating effects of the extractive industries and soc

Exploring the influence of national governance on conflict resolution

between MNEs and Indigenous communities

A Quantitative Analysis on Conflict Resolution with Moderating Effects of the Extractive Industries and Socio-environmental Conflict

Master Thesis

MSc Business Administration – International Management

Name: Skye Stalling Student number: 10083146 Date: 24-06-2016

Supervisor: Dr. Ilir Haxhi Second reader: Drs. Erik Dirksen

2 Statement of originality

This document is written by Skye Stalling who declares to take full responsibility for the content of this document. I declare that the presented text 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 is responsible solely for the supervision of completion of the work, not for the content.

3

Table of Contents

1. Introduction………...……7

2. Literature review………..…...13

2.4 Conflict in the extractive industries……….19

2.5 National governance………22

3. Theoretical framework………25

3.1 Factors influencing conflict……….25

3.2 Political stability and absence of violence and length of conflict………29

3.3 Regulatory quality and length of conflict………30

3.4 Government effectiveness and degree of violence………..32

3.5 Extractive industries, political stability and length of conflict………34

3.6 Extractive industries, regulatory quality and length of conflict………...35

3.7 Socio-environmental conflict, government effectiveness and degree of violence………...36

4. Data and Methods………...39

4.1 Sample and data collection………..39

4.2 Dependent variables……….40

4.3 Independent variables………..41

4.4 Moderating variables………42

4.5 Control variables………..43

4.6 Method……….44

5. Results and Analysis………...46

5.1 Descriptive statistics………46

4 5.3 Regression analysis………..51

6. Discussion………...57

7. Conclusion………..66

8. References………...70

9. Appendix 1………..74

5

List of Figures and Tables

Figure 1: Conceptual model……….38

Table 1: Regression on Length of Conflict………. 45

Table 2: Regression on Degree of Violence……….46

Table 3: Descriptive Statistics & Correlation………...50

Table 4: Multicollinearity for Length of Conflict………....51

Table 5: Multicollinearity for Degree of Violence………...51

Table 6: Linear regression on dependent variable Length of Conflict……….55

6 Abstract

Harm to traditional practices, ecosystems and livelihoods of Indigenous communities by MNE activity result in conflict. When appeals for greater accountability are negated, conflict continues. The elements of conflict is thus of significant use to both parties yet, rather than conflict resolution, previous research focus the cause and effect of conflicts. In this study we explore the influence of national governance on length of conflict and degree of violence. We also investigate the moderating effects of the extractive industries and socio-environmental conflict on the relationship between national governance and conflict resolution. For a sample of 329 cases across 5 continents, we perform a statistical analysis to test our proposed hypothesis. We argue that national governance positively influences conflict resolution and that the extractive industries and socio-environmental conflict negatively moderate this relationship. The results confirm that national governance positively influences length of conflict and that the extractive industries negatively moderate this relationship. However, national governance does not influence the degree of violence and, socio-environmental conflict positively moderates this relationship, rather than negatively. This study contributes threefold. First, we use a quantitative rather than a qualitative research design. This provides a broader and more in-depth understanding of conflict dynamics worldwide. Second, we explore the moderating effects of the extractive industries and socio-environmental conflict on national governance. Lastly, this study contributes to the practical knowledge needed by managers, government officials, NGOs and Indigenous communities in understanding conflict.

Keywords: Conflict; Indigenous communities; MNE; national governance; extractive industries; socio-environmental conflict

7 The era after the Cold War gave way to the rise of globalization. As borders opened and inter-country conflicts decreased, the global economy grew rapidly. Multinational enterprises, MNEs, expanded their business operations across national borders for natural resources, lower labour costs and increased production – both in scale and scope. With these new possibilities to minimize costs and maximize profits, MNEs started scouting the globe for the best opportunities. International expansion also brought dealings with unfamiliar governments, communities and cultures. At first, underdeveloped countries eagerly participated in the newly global economy. The prospect of development and wealth had great appeal. Open trade policies by governments to attract foreign direct investment (FDI), supported by international economic institutions – such as the WTO, World Bank and IMF – enhanced international economic activity and gave hope to people that were victims of war, colonialism and oppression. Despite the hopeful prospects, globalization had both positive as negative consequences for national economies, and the power of MNEs were greatly underestimated.

Introduction

In the past years, scholars increasingly emphasized the importance of understanding conflict situations that arise from the presence of MNEs in developing countries and their impact on environment and indigenous communities (Carroll, 1999; Danskin, Dibrell & Kedia, 2005; Lertzman & Vredenburg, 2005; Kolk & Lenfant, 2013). Conflicts between MNEs and Indigenous communities vary in content and result in different degrees of violence. Multiple actors are involved in preventing or resolving such conflicts: the host government, the multinational and the Indigenous community (Dentchev, van Balen & Haezendonck, 2015). It is still unclear which of these three actors are most effective in resolving or even preventing these conflicts. The literature is divided: some scholars regard government or Indigenous community as most effective actor (Agrawal & Gibson, 1999), while others, with the emergence of Corporate Social Responsibility (CSR), shifted to the side of MNEs (Calvano, 2008).

As the prosperity of international trade came to attention, thoughts of protectionism waned. Governments steadily opened their borders and cooperation with MNEs intensified significantly (Dunning, 1998). Previously the majority of opposition against foreign MNE activity came from national governments. Now, due to diminishing protectionist regulations,

8 collaboration between national governments and MNEs increases and opposition is left in the hands of local communities (Calvano, 2008). As the MNE is also backed up by international trade organizations, the power balance between MNE and local communities shifted dramatically in favour of the MNE. Hence MNE activity in terms of exploitation of natural resources and labour, environmental negligence and human rights violation often go unnoticed (Kolk & Lenfant, 2013). At first globalization was seen as an opportunity for developing countries to upscale their economic activities and enhance development. However, it only reinforces the unequal distribution of wealth, dividing the developed northern part of the world from the underdeveloped southern part (Richey & Ponte, 2014).

Although MNEs operate on the terrain of the communities, the communities are left with empty pockets while the MNE continue to profit, exploiting land and labour. Globally this resulted in many confrontations between MNEs and local communities, gradually evolving in longstanding conflicts (Danskin, Dibrell & Kedia, 2005). Conflicts between MNEs and indigenous communities differ in content. Most conflicts arise where indigenous communities strive for equal wealth distribution, development initiatives and environmental protection (Hilson, 2012). Yet, it remains unclear which actor is responsible for fulfilling the demands of indigenous communities. This led to ongoing debate between scholars, with the public sector, i.e. the national government, on the one hand and the private sector, i.e. the MNEs, on the other (Campbell, 2012).

The role of national governments in terms of development is broadly discussed. Government has the ability and power to formulate, implement, integrate and enforce regulations – socially, economically and politically – that business and civil society must abide by (Steurer, 2013). Conflicts between MNEs and indigenous communities reflect the absence of regulations or a lack of faith in regulations that enforce development (Lynch, 2011). Development is divided into three main categories: economic, human and

9 environmental. The lack of economic development leads to income inequality and unequal wealth distribution, which often evolves into conflict (Kolk & Lenfant, 2013). The lack of human development is regularly illustrated by violations of human rights. Violations by MNEs are often the cause of conflict with indigenous communities (Park, Chidlow & Choi, 2014). The absence of environmental development is exemplified by environmental pollution by MNEs, commonly seen as the root of conflict (Gamu, 2015). Scholars, such as Steurer (2013), see government as the strongest player in enhancing development and implementing regulations for MNEs. The quality, effectiveness and stability of national governance could therefore be seen as a way to resolve or even prevent conflicts between MNEs and indigenous communities.

Although the role of government in development theory is widely discussed in literature, a direct link between national governance and conflict resolution between MNEs and indigenous communities is missing. Considering this gap, the following research question examines the effect of national governance on MNE-community conflict resolution:

RQ(1):How does national governance influence the conflict between MNEs and Indigenous communities?

Some scholars argue that the power balance between government and MNEs shifted in favour of MNEs, often the case in developing countries. This suggests that MNE activity has a significant increasing influence on the host country’s development, both positively as negatively (Oetzel & Doh, 2009). The impact of MNE activity on development gained more attention throughout the years of rising globalization. One of globalization’s main characteristics is the access to information and knowledge. The rise of the Internet and Social Media gave Indigenous communities the opportunity to publically share insights of MNE activity on their grounds and its devastating impact on their livelihoods (Lertzman & Vredenburg, 2005; Calvano, 2008). As the impact of MNE operations on societies and

10 environments comes to light to the broader public, MNEs are urged to account for their actions. The implementation of Corporate Social Responsibility (CSR) becomes a mandatory aspect of MNEs’ business strategy and shows that it has positive effects on society and environment (Carroll, 1999). Yet, most studies show that CSR is merely a short-term solution and basically serves as a mask to cover up the negative impacts of MNE activity (Slack, 2012). The negative impacts on the social, economic and natural environment are, according to Hilson (2012), the severest when MNEs are involved in resource extraction.

Developing countries are often rich with natural resources and are dependent on the revenues gained by the extraction, processing and transportation of resources. The dependency on natural resources is described as the ‘Resource Curse’ (James, 2015; Smith, 2015). The denomination of ‘curse’ comes from its contradicting character, as natural resources are positively connected to development of the now advanced economies, while negatively connected to development for the now developing countries (Ackah-Baidoo, 2012; Bebbington et al., 2008). Governments of developing countries are willing to untie its regulations in order to attract FDI and therefore give MNEs free play in terms of business operations. The activities in the extractive industries are known for causing environmental spills, pollution and contamination, while also affecting traditional livelihoods of Indigenous communities (Lertzman & Vredenburg, 2005; Hilson, 2002). The conflicts that arise from the presence of MNEs in the extractive industries in areas of Indigenous communities are based on socio-environmental violations, as both social and environmental well-being is crucial for the survival of Indigenous communities (Bunker, 1984).

The role of the extractive industries in conflict studies is frequently discussed in the literature. However, not much attention is given to its moderating role in MNE-community conflict resolution. Further, the literature pays much attention to the type of conflict, i.e. social conflict or environmental conflict, but do not consider type of conflict as a moderator

11 in conflict resolution. Studies done on MNE-community conflict primarily focus on the extractive industries as the cause of conflict, and the socio-environmental violations as the effect of conflict. Both cause and effect are studied as separate constructs, but none have examined the moderating role of these constructs on national government’s role in conflict resolution. Taking this gap into consideration, we address the following research question:

RQ(2): What is the moderating effect of the extractive industries and socio-environmental conflict on the relationship between national governance and conflict between MNEs and Indigenous communities?

The urge for more accountability, responsibility and sustainability by MNEs – coming from communities, governments, institutions, NGOs and academics – led to changing business strategies and business models. Corporate Social Responsibility, CSR, was seen as a tool to increase transparency and responsibility in the activities of MNEs, but provided a skew and short-term solution, not influencing the conflicts between Indigenous communities and MNEs (Hilson, 2012; Jenkins, 2004). A better understanding of conflict resolution is crucial for both firm and community, as the effects of conflict are negative for both sides. MNEs are exposed to financial risks and bad reputation (Franks et al., 2014), while Indigenous communities see their livelihoods destroyed and their culture abolished (Igoe, 2006; O’Faircheallaigh, 2013). As Steurer (2013) mentions, national government has a key role in formulating and implementing regulations for civil and business society. Therefore, if national governments positively influence conflict resolution, developing countries and international institutions know where to focus on. If the extractive industries and socio-environmental conflicts negatively influence national governments’ ability to resolve conflict, stricter regulations for MNEs in the extractive industries are needed to prevent or resolve conflicts.

12 governance, extractive industries and socio-environmental conflicts on conflict resolution, using a sample of 329 cases spread over 50 countries in North and South America, Africa, Asia and Oceania. National governance is measured in political stability and absence of violence, regulatory quality and government effectiveness, while conflict resolution is measured in length of conflict and degree of violence. The study argues that national governance has a positive influence on conflict resolution and that this relationship is negatively moderated by extractive industries and socio-environmental conflict.

The findings of this research contribute in multiple ways to the field of international business studies, and in particular to conflict resolution between MNEs and indigenous communities. Firstly, it provides insight in the balance between national- and corporate governance in terms of power, and how this influences conflicts between MNEs and indigenous communities. Secondly, it examines the effect of extractive industries and socio-environmental conflict and the relationship between MNEs and indigenous communities. Thirdly, it takes an in-depth look into how extractive industries and socio-environmental conflicts influence conflict severity. The research also shows the practical benefits of national governance on the enhancement of a country’s development. Finally, with previous research on MNE and indigenous community conflict merely based on qualitative case studies, all outcomes were case-specific, with complex and detailed outcomes. In this case, the research is done quantitatively, leaving room for generalization over multiple case studies and the possibility of examining patterns between conflict situations.

We start by discussing previous research on the topics of Indigenous communities, extractive industries, MNE-community conflict and national governance. Consequently, we develop a theoretical framework, followed by several hypotheses and a conceptual framework. Then we present our research design, including the dependent, independent, moderating and control variables, as well as data collection and method for the analysis, after

13 which the data analysis and discussion is presented. Finally, we derive key conclusions and evaluate the contribution of this research to theory and practice.

2. Literature review

2.1 Indigenous communities

A universal definition of Indigenous communities is absent throughout literature. Indigenous community is a concept that is involved in multiple fields of study, and therefore revolves around diverse interpretations. Yet, as Calvano (2008) argues, the main characteristics of Indigenous communities – namely geography, social interaction and identity – are agreed on by the majority of scholars. For example, Igoe (2006) interprets Indigenous communities in terms of territory, rituals and beliefs, and independence – whereas Lynch (2011) argues that Indigenous communities’ ‘heart’ lie in self-identification through ancestral lands, practice of religion and the protection of their livelihoods and culture. However, from a business perspective, Indigenous communities are also key stakeholders, as their lands are imposed upon by MNEs, especially those firms in the extractive industries (Igoe, 2006; Lertzman & Vredenburg, 2005). Indigenous communities have a record of historical resistance to outside suppression – such as colonialism and state formation, and external pressures from the global economy. Resistance is necessary in order to remain connected to their ancestral lands and their cultural traditions (Igoe, 2006).

Two of the main characteristics of Indigenous communities are identity and geography (Calvano, 2008). Identity and geography are interconnected, and therefore cannot be explained isolated from each other. Lynch (2011) argues that the identity of Indigenous communities is categorized by the sense of ‘belonging’. ‘Belonging’ doesn’t just involve ownership and control of land; it also involves livelihood, culture and religious practices (Lynch, 2011). Community identity is often seen as a collective identity, as members of a

14 community identify themselves through strong linkages in terms of territory, traditions and a shared history (Weaver, 2001; Whiteman & Cooper, 2000). Moreover, the collective identity of a community is determined by the relation a community has with its neighbouring communities. Weaver (2001) refers to this as a way of identity regulation where Indigenous Peoples strongly set criteria for membership within communities. Identity regulation therefore forms a boundary of ‘sharing’. The criteria of membership hinges on multiple things, for example a shared historical past, beliefs and land, but also more practical criteria such as the ecological approach to land management (Whiteman & Cooper, 2000).

As mentioned earlier, Indigenous communities have a historical record of resistance against outside forces (Igoe, 2006). Group identity plays a key role when threatened (Bruijn & Whiteman, 2010). The use of group identity against threats, according to Bruijn & Whiteman (2010), is used in a threefold of ways. Firstly, it is used as an instrument to rebalance power relations when a particular group senses harm to itself by another group. Secondly, it is used as a strong and powerful source to protect itself from external commercial pressures. Thirdly, group identity is used to fit into current global perceptions of Indigenous communities, giving them the ability to reach global awareness and gain understanding and support for their issues (Bruijn & Whiteman, 2010). Unfortunately, as Lynch (2011) argues, ‘being indigenous’ often lacks national acceptance, and therefore community identity is a vulnerable tool to use in times of resistance against external pressures.

Group identity of Indigenous communities is contradictive of those in industrial resource extraction (Lertzman & Vredenburg, 2005). The often resource-rich ancestral lands of Indigenous communities are particularly interesting to MNEs in the extractive industries, making interaction between firms and communities inevitable (Calvano, 2008). Communities in close proximity to industry sites have a historical antagonistic attitude towards the firms

15 operating on their grounds. According to Hilson (2002), Indigenous communities are among the poorest of the population, as they solely engage in local economic activities, including fishery, forestry and small-scale agriculture. Living simple lives in small communities and without exposure to global society make them extremely vulnerable to the negative impacts of development (Hilson, 2002). Despite calls for improvements in ethical and environmental performances of MNEs, business activities continue to have a negative impact on the lands and lives of the Indigenous peoples, which eventually lead to conflict.

2.2 MNE-Community conflict

Scholars throughout the literature underline the importance of comprehending conflict situations that arise from the presence of MNEs in developing countries and its consequences on environment and Indigenous communities (Carroll, 1999; Danskin, Dibrell & Kedia, 2005; Lertzman & Vredenburg, 2005; Kolk, 2013). Multiple actors are involved in preventing or resolving such conflicts, including government, MNEs and Indigenous communities (Dentchev, van Balen & Haezendonck, 2015). However, the responsibility behind conflict is often directed at the MNE. The cry for more accountability, responsibility and sustainability in terms of MNE activities, does not only come from Indigenous communities. It involves a broad spectrum of actors – activists, governments, NGOs and consumers (Hilson, 2012; Calvano, 2008; Rahim, 2002). In order to understand MNEs’ involvement in conflict, the concept of conflict must first be understood.

Rahim (2002) defines conflict as “an interactive process manifested in incompatibility, disagreement, or dissonance within or between social entities, i.e. individuals, groups, organizations, etc.”, implying that conflict is based on incompatible preferences, goals or values, and not just activities (Rahim, 2002). The origin of conflict is often attributed to fundamental tendencies such as economic stagnation, unequal distribution of wealth or economic power, governmental corruption or deep-rooted social differences,

16 based on ethnicity, culture or identity (Getz & Oetzel, 2010). Furthermore, according to Getz & Oetzel (2010), conflict has multiple dimensions on which it can be understood, including duration and intensity. Pondy (1967) states that conflict is a dynamic process that unfolds over time, rather than being a discrete event. A conflict that is spread over a longer time period more frequently experiences a higher degree of violence (Pondy, 1967). According to Getz & Oetzel (2010), violent conflict is best described as “the organized and sustained use of physical force that results in injury or death to persons or damage or destruction to property.” The conflict between MNEs and community can have multiple reasons, but is is always caused when interests of MNEs and Indigenous communities clash in a particular geographic area (Calvano, 2008).

The origin of conflict between MNEs and Indigenous communities differ per case. The United Nations (2012) identify six main drivers for conflict. Firstly, MNEs’ poor engagement of communities and stakeholders. Exclusion or marginalization of Indigenous communities by MNEs in the dialogue often escalates into conflict (Calvano, 2008). Secondly, inadequate benefit-sharing by the MNEs towards the Indigenous communities. Unequal wealth distribution often leads to conflict, as Indigenous communities carry most of the risks, while not receiving the benefits (Hilson, 2012). Thirdly, the excessive impact of MNEs’ activities on society, economy and the environment. This driver is mentioned as most common by multiple scholars. The impact on local economies, environment and communities is a key trigger of conflicts (Calvano, 2008; Lertzman & Vredenburg, 2005; O’Faircheallaigh, 2013; Gamu, 2015). Fourthly, mismanagement of funds and financing war. Corruption and diversion of funds for personal gains instead of national or community interests is described as a driver of conflict. As is the use of funds to finance conflicts or wars (Kolk & Lenfant, 2013). Fifthly, inadequate institutional and legal frameworks. A lack of institutional and legal frameworks often result in more mismanagement and corruption, and

17 therefore contribute to the likeliness of a conflict to start (Chabal, 2002). Sixthly and finally, the unwillingness to address the natural resource question in peace agreements. Often, conflict is the result of resource extraction by MNEs. Negligence in addressing the issues concerning extraction of natural resources during peace agreements could reignite the conflict (Arenas, Sanchez & Murphy, 2013).

Although MNEs from all industries could potentially be in conflict with Indigenous communities, the MNEs from the extractive industries tend to be more in conflict with Indigenous communities than MNEs from other industries (Gamu, 2015). As Hilson (2012) states, “few industrial activities have as large an environmental footprint and are capable of wielding as much influence on the well-being of a society as a large-scale mine or oil and gas project” (Hilson, 2012).

2.3 Extractive industries

Since the oil boom in the 1970s mineral prices rose and promoted an outbreak of mineral extracting activity around the world. Untouched regions such as the Asia-Pacific area witnessed a major increase in Foreign Direct Investment (FDI) in the extractive industries, while mineral extraction in Africa and Latin America skyrocketed (Ballard & Banks, 2003). The extractive industries were promoted as the bedrock of development for rural and remote areas in developing countries, including Indigenous communities (Campbell, 2009; Sawyer & Gomez, 2012). Moreover, extractive industries would benefit local communities as it involved new opportunities for employment and higher wages. A comparative advantage arose for rural areas, as resource extraction sites were relocated from industrial centres to outskirt regions (Crownson, 2009). The linkage of development and the extractive industries originates from the historical role of mining, where it served as the foundation of the industrial revolution in the now advanced economies (Davis, 1995; Aragon & Rud, 2009; O’Faircheallaigh, 2013). However, many scholars suggest the opposite, claiming that often

18 the existence of natural resources has a negative impact on the country’s development, society and environment (Ackah-Baidoo, 2012; Bebbington et al., 2008; Lertzman & Vredenburg, 2005; Gamu, 2015). The ‘Resource Curse’ as it is called is widely studied and has a contradicting character towards the liberal economic theory that suggests that extractive industries are drivers for development (Ackah-Baidoo, 2012).

Before elaborating more on the ‘Resource Curse’ and the consequences of the extractive industries on countries’ development, society and environment, a brief explanation is required of what the extractive industries involve. According to Gamu (2015) extractive industries can be divided into two main categories based on the scale and the method of resource extraction: industrial mining (IM) and artisanal and small-scale mining (ASM). Industrial mining is defined as a capital-intensive mode of resource exploitation, where small amounts of high-skilled and semi-skilled labor are necessary in order to extract, transport and process minerals (Gamu, 2015). Industrial mining mostly attracts big and wealthy corporations, driven by expectations of long-term returns on investment. Artisanal and small-scale mining, however, involves & capital, labour-intensive modes of resource extraction – including high value minerals such as diamonds and gold (Gamu, 2015). ASM is seen as poverty-driven, based on short-term goals or strategic attempts to create long-term diversification (Gamu, 2015). Although the extractive industries have the ability to be beneficial to a country’s welfare, they often showed the opposite effect on social, environmental and economic well-being of society (Bebbington et al., 2008).

The phenomenon of a country’s slow growth and minor development while rich of natural resources is referred to as the ‘Resource Curse’ (Ackah-Baidoo, 2012; James, 2015; Smith, 2015). The concept is subject to multiple interpretations and explanations, but across the literature a couple of similarities are identified. Most discussed is the explanation of the ‘Resource Curse’ through another phenomenon, namely the ‘Dutch Disease’, named after the

19 drop in the tradable sector due to the discovery of natural gas in the Netherlands (James, 2015). The potential wealth gain due to minerals could lead to over-consumption and investments that might be appropriate during periods of prosperity, but cannot be accounted for in times of downswings (Bebbington et al., 2008; James, 2015; Gylfason, 2001). Moreover, the availability of natural resources results in a decrease of other types of industries, resulting in an economy which, for its majority, is resource-dependent. As final remark on the impact of resource dependency on the economy, Bebbington et al. (2008) argue that the extractive industries lack in the development of links with local suppliers, resulting in lower employment rates. The ‘Resource Curse’ not only influences the economy of a country, it also has its influences on socio-political and institutional relationships. A resource-dependent country has a concentration of ownership and power which are often in hands of foreign MNEs (Bebbington et al., 2008). This has two main implications. A concentration of ownership and power leads to unequal wealth distribution and an increase in corruption. While, foreign ownership with socio-political and institutional relationships based on corruption, result in negligence of sustainability and inclusive development (James, 2015; Gamu; 2015). Both implications are the foundation of conflict.

2.4 Conflict in the extractive industries

The impact of business activities in the extractive industries on Indigenous communities has been well documented (O’Faircheallaigh, 2013; Hilson, 2002; Franks et al., 2014; Garvin, 2009). Bebbington et al. (2008) describes the extractive industries as ‘contentious’: “it has so often delivered adverse social, environmental and economic effects for the many, but significant gains only for the few”. Conflicts between MNEs in the extractive industries and Indigenous communities often involve socio-environmental struggles due to the transforming character of natural resource extraction in terms of control of space and territory, access to land and water, the abidance of human rights and the

20 distribution of wealth (Bebbington et al., 2008). The marginalization of Indigenous peoples in economic, social and environmental terms by the extractive industries has resulted in high resistance against natural resource extraction and the companies responsible for it. The high severity of conflict in the extractive industries is a result of continuous marginalization and destruction of livelihoods as Indigenous communities heavily rely on their traditional lands and resources which serve as the bedrock for their economic, cultural and environmental survival (Bunker, 1984; O’Faircheallaigh, 2013). Throughout the literature there is a common tendency in describing conflict in the extractive industries which is based on three dimensions: economic, social and environmental. Although all dimensions overlap, Garvin (2009) believes it is important to try and distinguish them in order to fully comprehend the conflicts between MNEs in the extractive industries and Indigenous communities.

The economic dimension of conflict has been partially explained by the previously described ‘Resource Curse’. The availability of natural resources in a country – especially developing countries – transforms the economy into a resource-dependent state, negatively influencing the development of other potentially profitable industries (Hilson, 2002). The dispute over land, where local forms of agriculture are obliged to make place for extraction sites, is among the main drivers for conflict as a result of the ‘Resource Curse’ (James, 2015; Smith, 2015). However, next to the ‘Resource Curse’, there are other drivers for conflict in the economic dimension. Firstly, Bebbington et al. (2008) state that the extractive industries involve alarming labour conditions which often result in conflict. Another driver for conflict is unsustainable patterns of development and growth (Bebbington et al., 2008). The unequal distribution of revenues obtained by the extractive industries is a further major driver for conflict between MNEs and Indigenous communities, as stated by many scholars (Acuna, 2015; Bebbington et al., 2008; Hilson, 2002; O’Faircheallaigh, 2013; Franks et al., 2014). Finally, Garvin (2009) argues that due to the extractive industries, the cost of living has

21 increased significantly. The displacement of agriculture by resource extraction sites led to in a growing demand of local food, supplies and housing, while the compensation for the Indigenous communities proved to be inadequate (Garvin, 2009).

The social dimension of conflict has been discussed widely by different scholars. As Hilson (2002) attests one of the main issues that result from the extractive industries – the most difficult issue to determine – is the social and cultural impact of natural resource extraction on the Indigenous communities. Multiple social and cultural impacts are seen as drivers for conflict between MNEs in the extractive industries and Indigenous communities. Firstly, the loss of governance over own territories and space is among the key drivers of conflict in the social dimension (Hilson, 2002; Bebbington et al., 2008). Violations in property rights by extractive industries over traditional lands often result in the resistance among Indigenous communities as land serves as a tool for cultural survival (Bunker, 1984; Hilson, 2002). A second driver of conflict in the social dimension is the disruption of social norms and values of Indigenous communities (Garvin, 2009). This can be illustrated by a decrease in the community feeling, less traditional respect for the elderly, weaker family ties and a rise in inadmissible criminal behaviour, including theft, prostitution and a higher availability of alcohol and drugs (Garvin, 2009). Another major driver of conflict in the social dimension is the violation of cultural rights by the extractive industries (Hilson, 2002; O’Faircheallaigh, 2013). Among these rights are the right to control traditional knowledge, the right to practice different religions, the right to access sacred sites and the right to speak Indigenous languages (Hilson, 2002).

The third and final dimension of conflict between the extractive industries and Indigenous communities is the environmental dimension. The negative impact of resource extraction on the environment is widely agreed upon by scholars in the literature. The extraction and processing of minerals can severely damage the environment and cause

22 irreversible harm to landscapes (Castro & Nielson, 2001). A few drivers of conflict in the environmental dimension are recognized in the literature. Garvin (2009) argues that resource extraction activities result in increased pollution, influencing the quality of water, air, sound and land, with lower environmental quality and an increase in disease as consequence (Garvin, 2009). To complement this view, Hilson (2002) specifically mentions land contamination as a main driver of conflict in the environmental dimension. The effects of natural resource extraction – leaching of heavy metals, collapses of dams and chemical spillages – cause the greatest destruction of ecosystems and therefore trigger conflict (Hilson, 2002). Then there is the impact of extractive industries on wildlife and water availability (Haalboom, 2012). The extractive industries are contended to have a negative effect on communities’ water resources and adversely affect wildlife populations – crucial for survival for the Indigenous peoples (Haalboom, 2012).

The three dimensions of conflict between the extractive industries and Indigenous communities give a broader understanding in the causes and results of conflict. However, some scholars attest that the impact of the natural resource extraction activities would be less severe when government intervention, regulatory frameworks and effective support schemes are stricter and more complete (Hilson, 2002; Acuna; 2015; Franks et al., 2014; Campbell, 2012).

2.5 National governance

Strong government is of great importance in enhancing development. Government is the leading player in determining regulations for civil society and the business environment as it is argued that government is a driver in establishing ethical norms that society has to comply with (Steurer, 2013; Dentchev, van Balen & Haezendonck, 2015). The way authority in a country is implemented by national institutions is seen as ‘national governance’, which entails three major aspects (Kaufmann, Kraay & Mastruzzi, 1999). The first is the process of

23 how national governments are formed, which describes the country’s degree of democracy. Chabal (2002) argues that the higher the degree of democracy, the more political stability is involved, which ultimately results in a higher degree of development. Secondly national governance is determined by governments’ ability to formulate and implement regulations that should benefit civil society in terms of economic and human development. Chabal (2002) states that the bedrock of development lies in the power of governments to implement regulations and investments in an effective way. Lastly, national governance inclines the amount of trust from civil society in national institutions and its regulations (Kaufmann, Kraay & Mastruzzi, 1999).

National governance took on a new challenge since the rise of globalization and the collapse of communism throughout the world as it caused the rise of economic opportunities in transition economies (Danskin, Dibrell & Kedia, 2005). These economic possibilities pathed the way to an increase in FDI by MNEs, which in turn led to more interaction between national governments and MNEs (Danskin, Dibrell & Kedia, 2005). The 1970s, argued to be the first years of true globalization, led to hostile confrontations between national governments and MNEs. Dunning (1998) argues that these confrontations were caused by MNEs’ greed for resource appropriation, their monopoly power, their labour practices, their tax evasion behavior and their effects on the environment. Following from the earlier discussed ‘Resource Curse’, the influx of FDI resulted in an increased economic dependence and an inadmissible corrosion of the country’s sovereignty (Dunning, 1998). The next decade saw codes of conduct being formulated for both governments and MNEs. But already in the 1990s these codes underwent significant changes as a result of new political and economic shifts in the global economy (Dunning, 1998). Due to technological advances, global economic activity rose to new levels, with new opportunities, not only for developed nations, but especially for the developing countries. An era of liberalization with regards to inbound

24 FDI altered the nature of government-MNE relationships. In order to achieve economic goals, governments needed to resemble an image of possibilities for MNEs in terms of production and market access (Dunning, 1998). By making use of the willingness of governments to attract FDI, MNEs could expect tax benefits, subsidies, permits and fewer regulations for their business activities (Dentchev, van Balen & Haezendonck, 2015). Yet, a positive relationship between FDI and development has not always been the outcome, particularly in developing countries. As mentioned earlier, MNEs’ activities on foreign ground have proven to mostly benefit the firm, rather than the host country and its communities. Specifically the MNEs in extractive industries exploit the opportunity of less regulation, and as discussed earlier, the exploitation of natural resources is often the reason of conflict between MNEs and Indigenous communities (Calvano, 2008; Hilson, 2012; Lertzman & Vredenburg, 2005).

Several scholars throughout the literature have linked national governance with conflict situations between Indigenous communities and MNEs. Hilson (2002) argues that conflicts are severest when proper national governance is absent, while Acuna (2015) asserts that all socio-environmental conflicts can be explained by inadequacies in the political system. One of those inadequacies is corruption, as stated by Bebbington et al. (2008). The lack of transparency and corruption in the appropriation and use of state revenue is a common driver in conflicts around mineral wealth (Collier & Hoeffler, 2005; Ross, 2008; Bebbington et al., 2008; Smith, Shepherd & Dorward 2012). However, as Calvano (2008) argues, it is difficult to confirm whether government plays either a positive or a negative role in conflict resolution between MNEs and Indigenous communities. The role of government in conflict situations is dependent on several factors, and therefore in need of further research.

25 3. Theoretical framework

3.1 Factors influencing conflict

Over the years conflicts between MNEs in the extractive industries and Indigenous communities have taken their toll. The quest for natural resources impact the environmental, socio-cultural and economic well-being of the Indigenous communities on the one hand, and on the other the financial results and brand reputation of the MNEs (Franks et al., 2014). Conflict costs and risks have proven harmful to all parties. Crucial therefore, is a better understanding of conflict resolution and prevention (Calvano, 2008).

Many attempts towards a better understanding of the dynamics of MNE-community conflict exist. Firstly, a number of scholars focus the role of Corporate Social Responsibility (CSR) on MNE-community conflict (Mutti et al., 2012; Campbell, 2012; Haalboom, 2012). The assumption of CSR as a tool for conflict resolution or prevention has diverging interpretations. As Haalboom (2012) states after a study of CSR in a mining conflict in Suriname: “the implementation of CSR is a complex, messy, and far from straightforward matter; in other words, the rhetoric of CSR is worlds away from the complex reality of navigating relations surrounding extractive industry operations.” Hence, the use of CSR as a tool to better grasp conflict dynamics is questionable. Secondly, in addition to the research on CSR in MNE-community conflict, some scholars involve national governance in designing and implementing CSR policies (Kolk & Tulder, 2010; Haufler, 2010; Dentchev, Van Balen & Haezendonck, 2015). One of the studies indicates that governmental initiatives towards CSR policies show its ability to influence sustainability activities of MNEs (Dentchev, van Balen & Haezendonck, 2015). As mentioned earlier however, the use of CSR for understanding conflict dynamics in general is questionable, as is the involvement of national governments. Finally, many studies examine the conflict between MNEs and Indigenous communities in the extractive industries (Ballard & Banks, 2003; Bruijn & Whiteman, 2010;

26 Weaver, 2001; Gamu, 2015; Lertzman & Vredenburg, 2005). These industries prove to be harmful to the social and natural environment and many conflicts revolve around the violations of these elements (Franks et al., 2014; Hilson, 2012; Bebbington et al., 2008).

Previous research offer great insight in conflicts between Indigenous communities and MNEs. Executed on different dimensions and outcomes of conflict, as well as the actors involved, these studies provide a great foundation for further research in the dynamics of conflict. However, there are few general limitations. All studies are based on qualitative methods, with all outcomes case-specific. This leaves no room for generalization over multiple conflicts across different regions of the globe. In this case we use a quantitative research design. Previous research gives much attention to the indirect influence of national governance in conflict. As a result the role of national governments remains vague. We explore the direct role of national governance in conflict resolution. Most studies also probe MNEs in the extractive industries only as drivers of conflict – not their influence on the resolution thereof. The role of the extractive industries and its impact on national governance to resolve conflicts is a key aspect of this research. Finally, no study analyses the role of socio-environmental conflict as a determinant of conflict resolution and the role of national governance therein. We do and so this study provides a broader picture of conflict dynamics. For a deeper and wider understanding of conflict dynamics, we examine the influence of national governance with industry type and type of conflict as the moderating effect. Kaufmann, Kraay & Mastruzzi (1999) argue that national governance is based on three pillars – the way government is formed, the way it formulates and implements regulations and the way society trusts the government’s ability to do so. According to Getz & Oetzel (2010), severity of conflict is determined by several factors, but most importantly determined by the length of conflict and degree of violence. The origin of conflict between MNEs and Indigenous communities often lies with six drivers: (1) poor engagement of communities and

27 stakeholders, (2) inadequate benefit sharing of MNEs towards communities, (3) excessive impact on economy, society and environment, (4) mismanagement of funds and financing wars, (5) inadequate institutional and legal frameworks and (6) unwillingness to address the natural resource question in peace agreements (United Nations, 2012).

Many studies confirm that one of these drivers acts as root of conflict between MNEs and Indigenous communities (Ballard & Banks, 2003; Acuna, 2015; Campbell, 2012; Gamu, 2015; Hilson, 2012; Calvano, 2008; Lertzman & Vredenburg, 2005). Much research argues that absence of institutional frameworks, government regulation and political instability spurs conflict - both in length and severity (Hilson, 2002; Acuna, 2015; Steurer, 2013; Dentchev, van Balen & Haezendonck, 2015). Several studies suggest that governments are able to influence MNE behaviour. Therefore it is fair to attest that national governance plays a central role in explaining conflict dynamics between MNEs and Indigenous communities. As governments can implement regulations that serve community interest and limit the negative consequences of MNE activity, there is less reason to start or maintain conflict (Kolk & Tulder, 2010; Haufler, 2010). Combining these findings, we state that stronger national governance positively influences conflict resolution, i.e. shorter and less violent conflicts. The activities of the extractive industries are especially harmful to Indigenous communities. They negatively impact ancestral lands, culture and natural resources vital for survival (Bunker, 1984; O’Faircheallaigh, 2013). Hilson (2002) argues that no other industry has more disputes over land than the extractive industries which often result in conflict. The ‘Resource Curse’ notes that the concentration of ownership and power lies in the hands of government officials and foreign firms – resulting in unequal wealth distribution and corruption (James, 2015; Smith, 2015; Bebbington et al., 2008). It also diminishes national governance’s use to Indigenous communities. Revenue obtained from resource extraction is higher than that of local farming. Hence governments are more likely to grasp the opportunity

28 of higher state income than the representation of community interest (Acuna, 2015; Wiig & Kolstad, 2010). These shortcomings in the political system as a result of the presence of natural resources lead to discontent among Indigenous communities and increase the likeliness of conflict appearance. Therefore we contend that the extractive industries negatively moderate the influence of national governance on conflict resolution.

Conflicts between MNEs and Indigenous communities have multiple drivers, as stated by the United Nations (2012). Yet, multiple studies suggest that most conflicts are driven by socio-environmental reasons (Garvin, 2009; Franks et al., 2014; Haalboom, 2012). Bebbington et al. (2008) reckon they are rather “socio-environmental struggles over the control of space, the governance of territory, access to land and water resources, the defence of human and citizenship rights, and dissatisfaction over the distribution of mineral rents”. But government’s ability to formulate and implement regulations for the socio-environmental environment - especially in developing countries - is limited. The liberalization of inbound FDI policies overshadows the necessity of upholding socio-environmental regulations (Danskin, Dibrell & Kedia, 2005). Conflicts that occur in the social and environmental dimensions are therefore often outside of government control. Another issue for national governments with socio-environmental conflict is determining the width and depth of the impact on Indigenous communities. Consequences of conflicts that occur in the economic dimension are easier to unravel and solve than those in the socio-environmental dimension (Hilson 2002; Lertzman & Vredenburg, 2005; Franks et al., 2014). The difficulty of understanding these conflicts limits the government’s ability to decrease the severity thereof. Thus this study argues that socio-environmental conflicts negatively moderate the influence of national governance on conflict resolution.

In the following section we specifically discuss all factors influencing conflict resolution. Firstly the direct influence of national governance on conflict resolution, using

29 three components for national governance presented by the Worldwide Governance Indicators (WGI) – political stability and absence of violence, regulatory quality and government effectiveness. Then, we consider conflict resolution using two elements; length of conflict and degree of violence. Finally we deliberate the two moderators, extractive industries and socio-environmental conflict, in terms of their influence on conflict resolution.

3.2 Political stability and absence of violence and length of conflict

The WGI of political stability and absence of violence serves as an indicator for the circumstances a government operates in, and specifically focuses the way government was elected. Moreover, it acts as a benchmark for the degree of violence and crimes in a country in general. Tull (2003) argues that a country under unstable political circumstances has a significant impact on conflict appearance. Military coups and civil wars are the direct result of political instability in developing countries (Fearon & Laitin, 2003). As no government is in place to solve the issue these conflicts are defined by their long duration. Acuna (2015) asserts that a lack of transparency and inappropriate management of violence – both products of inadequate institutional governance – explains the length of conflict (Acuna, 2015). Garvey & Newell (2005) further argue that corruption in the appointment of politicians is negatively associated with conflict. The concentration of power is connected with direct financial benefits to officials, and therefore the representation of the elite class rather than the majority of society. Tackling corruption takes time hence the conflicts are longer (Garvey & Newell, 2005).

MNEs often benefit from unstable political circumstances. It gives firms the opportunity to exploit land and labour while less restricted by regulations. The effect of business activities on social and natural environment goes unnoticed, while the MNE continues to earn profits. The impact of this kind of MNE behaviour particularly affects the Indigenous communities. With no government to go to, the only way to stop the MNEs is via

30 conflict. A stable government is necessary to resemble and protect the interests of the Indigenous communities. Removing the ‘protected’ status of MNEs - granted by paying royalties to corrupt government officials - ensures that MNEs respect the livelihoods of Indigenous communities. Unequal wealth distribution and the continuous gains of small elites and MNEs at the cost of Indigenous communities are preventable - particularly in democratic and stable regimes. They no longer will be key drivers of conflict. Further, an absence of violence under politically stable circumstances grants Indigenous communities the opportunity to sustain their traditional practices, cultures and lands. With no fear of losing their livelihoods, communities have no reason to start or maintain in conflict.

This study argues that political stability and absence of violence positively influences length of conflict. Lynch (2011) examines unstable political circumstances and their effect on Indigenous communities in Kenya. She states that representation of community interests is necessary to prevent conflict between MNEs and Indigenous communities. The instability of the government and violations of Indigenous rights by MNEs are drivers of conflict in Kenya. Moreover, it withholds the ability of the Kenyan government to promote development. Building on the findings of these previous studies, we predict that:

H1: A higher degree of political stability and absence of violence positively influences the length of conflict, i.e. shorter conflicts

3.3 Regulatory quality and length of conflict

Regulatory quality serves as an indicator for capturing the perceptions of governments in formulating and implementing regulations that promote private sector development. It also functions as gauge for home-based firms and includes regulations for MNEs. Considering liberalization of economies, less government control has proven to be a conflict driver (Hilson, 2002). Liberal economic theory suggests that lower degrees of government

31 intervention results in higher levels of development and growth. The uncontrolled in- and outbound of FDI promote industrial development, resulting in higher employment rates and higher wages, and therefore increases the well-being of society (O’Faircheallaigh, 2013). However, the relationship between low degrees of government control and high levels of development applies to advanced rather than developing economies (Aragon & Rud, 2009; Davis, 1995). Government control proves to be necessary to protect the rights of Indigenous communities and the appreciation of development (Steurer, 2013). The formulation and implementation of strict regulations for MNEs is successful in conflict resolution. The protection of community interests via regulations, result in less and shorter conflicts as the Indigenous communities are backed by their national government (Calvano, 2008).

The more freedom MNEs enjoy in terms of their activities in developing countries, the more negligence Indigenous communities face. Damages to the ancestral lands and ecosystems of Indigenous communities – necessary to sustain their livelihoods – are main reasons to ignite conflict, which continues when there are low levels of regulatory quality by national governments. The implementation of regulations affects MNE practices and civil society in several ways, where ‘hard’ regulation is conceived as the ultimate tool to ensure obedience of rules. As violations are easily noticed and acted upon by government it positively influences the length of conflict. Further, the quality of regulations determines to which extent Indigenous communities have to fight for their rights. The more the communities’ rights are safeguarded by regulations, the less likely the Indigenous communities maintain conflict.

We contend that regulatory quality positively influences length of conflict. In their study, Dentchev, van Balen & Haezendonck (2015) argue that taxes, subsidies, performance reporting, permits and charges have a positive impact on development. Enhancement of development is crucial to Indigenous communities and therefore removes the reasons to start

32 or maintain a conflict with MNEs. Regulations for MNEs to implement strict CSR policies also benefit the community. Dentchev, Van Balen & Haezendonck (2015) argue that respect for traditional livelihoods is a crucial aspect of the proposed CSR policies: if implemented correctly, Indigenous communities do not uphold conflict any longer. Thus, building on the findings of these previous studies, we predict that:

H2: A higher degree of regulatory quality positively influences the length of conflict, i.e. shorter conflicts

3.4 Government effectiveness and degree of violence

The WGI of government effectiveness serves as an indicator that captures the ability of government to formulate and implement public and civil services. Government effectiveness can also be regarded a measurement of how government implements regulations and make use of government investments to enhance a country’s development. Calvano (2008) argues that government’s incentives to serve society and communities result in higher state protection of community interests and therefore cause fewer conflicts with lower levels of violence. Moreover, effective support schemes in favour of Indigenous communities show a significant positive influence on the severity of conflict (Hilson, 2002). Bebbington et al. (2008) complement these findings: investments made by governments to attract inbound FDI at the expense of traditional economies and other potential profitable industries result in more conflicts with a higher degree of violence. Gamu (2015) concludes that underperformance by government - in terms of enhancing economic development through all industry sectors - eventually leads to higher economic risks at the expense of society and Indigenous communities (2015).

The degree of violence used in conflict between MNEs and Indigenous communities depends on two things; the intensity of violations by MNEs and the extent to which the

33 community is supported by their government. Government effectiveness in using its resources to promote development determines the likeliness of MNE business activities being severely disruptive. The construction of dams, ports, pipelines and roads by foreign MNEs often neglect the livelihoods of Indigenous communities. Huge is the impact of such projects on their surroundings. If the interests of the communities are not taken into account - while they have to bear the destructive consequences - the conflict that ensues comes with a high degree of violence. When national governments are responsible for the constructions however, the possibility of the Indigenous communities being completely neglected is smaller. The degree to which governments effectively invest in development is decisive in predicting conflict. The more influence governments have in, for example, the construction of infrastructure, the less likely the interests of Indigenous communities are overlooked. This decreases the necessity of using violence.

We state that government effectiveness positively influences the degree of violence, i.e. less violence. Foster (2012) conducts a study on the relationship between FDI, development and Indigenous rights. He argues that the protection of Indigenous rights by governments is crucial for the development of a country. The attraction of FDI needs to be controlled in order to sustain the livelihoods of Indigenous communities. The only actor that can truly protect the interests of the communities, and therefore influence the degree of violence, is the government. Building on the findings of these previous studies, we predict that:

H3: A higher degree of government effectiveness positively influences the degree of violence, i.e. less violent conflicts

34 3.5 Extractive industries, political stability and length of conflict

The extractive industries prove to benefit only a handful of people, while threatening existing, viable livelihoods. The effects of natural resource extraction damage the ancestral lands of Indigenous communities, the populations of wildlife and completely destroy ecosystems (Sovacool, 2010; Haalboom, 2012; Franks et al., 2014). The profound transformation of environments by resource extraction highlights the relationship between the extractive industries and broader civil conflict (Franks et al., 2014). Further, natural resource conflicts are characterized by the uprooting of communities and the undermining of livelihoods, with severe and long conflicts as result (Castro & Nielsen, 2001). The ‘Resource Curse’ limits national governments in resolving conflicts (James, 2015; Smith, 2015). The presence of the extractive industries not only causes conflicts between MNEs and Indigenous communities, they destabilize governments and cause wars (Ballard, 2003). In general, the attraction of natural resource wealth leads to an increase of violence, theft, corruption and conflict. No industry has such negative impacts on society as the extractive industries

(Calvano, 2008)

Natural resource availability in developing countries often lead to a resource-dependent economy. As government income heavily relies on the extraction, processing and transportation of natural resources, the MNEs involved hold powerful positions in the decision making process of governments. Moreover, as the extractive industries become the primary generator of revenue and wealth, the positions held by those who benefit from these business activities become extremely attractive. This results in hostile takeovers of those who are in power, which in general are government officials. The destabilization of the political structure has a negative effect on conflict resolution. Governments are made up of people who solely represent their own interests, rather than the interests of society. An unstable and corrupt government is not willing or capable of protecting the livelihoods of Indigenous

35 communities, nor are the MNEs operating in this industry. Conflicts that develop as a result of this will not be able to be resolved quickly, as all actors are focused on themselves rather than on the Indigenous communities.

Taking this into consideration, we argue that the extractive industries negatively moderate the relationship between political stability and absence of violence, and length of conflict. One of the studies on this topic is that of Hilson (2002). He argues that the concentration of ownership and power caused by the extractive industries, increases unequal wealth distribution and corruption, which in turn leads to conflict (Hilson, 2002). Moreover, this not only influences the likeliness of conflict to occur but also the length of conflict. Building on the findings of these previous studies, we predict that:

H4: The extractive industries negatively moderate the influence of political stability and absence of violence on the length of conflict, i.e. longer conflicts

3.6 Extractive industries, regulatory quality and length of conflict

The influence of the extractive industries on the relationship between regulatory quality and length of conflict follows the same reasoning of the influence on the relationship between political stability and absence of violence, and length of conflict. Known for its adverse effects on society, the extractive industries also determine the regulatory quality of national governments (Hilson, 2002; Hilson, 2012; Bebbington et al., 2008). The marginalization of Indigenous communities by MNEs is well documented, while the limitations of national governments to formulate and implement regulations come to light in the ‘Resource Curse’ (Acuna, 2015; James, 2015; Smith, 2015). Many disputes over land eventually are won by natural resource extraction firms, as they provide the main government income due to resource dependency (Hilson, 2002). Hence, the regulations concerning the protection of the social and natural environment are abolished in order to attract MNEs in the

36 extraction industry, at the cost of the Indigenous communities (Beresford, 2010).

Length of conflict increases when Indigenous communities cannot count on their government to implement strict regulations that protects their ancestral lands, their traditional practices and cultures, and their ecosystems. Conflict between MNEs and Indigenous communities are longer in duration when no actor is capable of supporting the interests of the community. Regulations in favour of the MNE only increase the length of conflict. Now communities not only have to confront the MNE, but also the policy makers in the government. The extractive industries manage to put government and community against each other, rather than side by side.

Keeping this in mind, we state that the extractive industries negatively moderate the relationship between regulatory quality and length of conflict. Wiig & Kolstad (2010) describes the interaction between MNEs in the extractive industries and the national government of Angola. They argue that the obedience of regulations by MNEs are only in place when licences and contracts are to be gained (Wiig & Kolstad, 2010). Afterwards, the country falls in the ‘Resource Curse’ where regulations for MNEs in the extractive industries are circumvented and society bear the consequences. Building on the findings of these previous studies, we predict that:

H5: The extractive industries negatively moderate the influence of regulatory quality on the length of conflict, i.e. longer conflicts

3.7 Socio-environmental conflict, government effectiveness and degree of violence

Among all the drivers of conflict between MNEs in the extractive industries and Indigenous communities, socio-environmental conflicts have the severest degree of violence, several studies argue (Garvin, 2009; Franks et al., 2014; Bebbington et al., 2008; Jenkins, 2004; Haalboom, 2012). The social dimension of conflict is categorized by the disruption of