To what extent do Uncertainty Avoidance and Power Distance affect the way firms interpret and respond to issues raised by their stakeholders through social media?

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Thesis Main report

To what extent do Uncertainty Avoidance and Power Distance affect the way firms interpret and respond to issues raised by their stakeholders through social media?

Keywords: National culture, issue management process, social media, stakeholder theory

Student: Eva Knippenberg 10868984 Date: 29/01/2016

Supervisor: Mrs. Westermann-Behaylo Second reader: Mr. Dirksen

Faculty: Economics & Business

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Statement of originality

This document is written by Student Eva Kristien Knippenberg 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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Acknowledgements

I would sincerely like to thank my thesis supervisor Michelle Westermann-Behaylo for her support, insights and guidance, which made it possible to write this thesis as a final element of my Master of Business Administration at the University of Amsterdam.

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Abstract

National culture has shown to affect how firms deal with issues raised by their stakeholders (Barr & Glynn, 2004; Schneider & De Meyer, 1991). Social media have changed the dynamics of communication by giving power to people to intervene in society and having more of a voice in issues and by reducing hierarchical structures in the home country of a firm. Social media have altered the perception, interpretation and response of managers that have to deal with issues raised by their stakeholders through social media (Aula, 2010; Besiou, Hunter, & Van Wassenhove, 2013; de Bakker, den Hond, King, & Weber, 2013; Huy & Shipilov, 2012; Perrault, Berman, & Westermann-Behaylo, 2014). There is reason to believe that the findings from the existing empirical study of Barr and Glynn (2004) might not hold in the era of today, as the study was conducted in the pre-social media era. The main contribution of this study will be the reconsideration of the existing empirical evidence about national culture and the issue management process in light of the recent developments of the phenomenon social media. Hofstede’s cultural framework is used to research whether national culture, and specifically Uncertainty Avoidance and Power Distance, affects the issue management process of a firm when dealing with issues raised by its stakeholders through social media (Hofstede, 1994). The findings of this research call into question the existing empirical results of Barr and Glynn (2004) indicating that Uncertainty Avoidance is the only significant dimension of Hofstede’s cultural framework to affect the issue management process. The results of this study indicate that both Uncertainty Avoidance and Power Distance could be contributing factors to the way a firm executes the issue management process. Furthermore, Power Distance could perhaps contribute more than Uncertainty Avoidance in the issue management process of a firm when dealing with issues raised by its stakeholders through social media. This study contributes to existing theory about the issue management process, social media and national culture.

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1. Introduction

Firms are built upon the strength of their reputation (Aula, 2010; Badaracco, 1998; Labrecque, vor dem Esche, Mathwick, Novak, & Hofacker, 2013; Leeflang, Verhoef, Dahlström, & Freundt, 2014; Vasi & King, 2012). Protecting that reputation is a strategic issue of the first order. Stakeholders1 can affect the firm’s reputation, and social media2 can strongly reinforce this impact. Many recent studies have shown that stakeholders do use social media to express their feelings about the firm (Asur & Huberman, 2010; Aula, 2010; de Bakker et al., 2013; Huang, Lu, & Wong, 2003; Huy & Shipilov, 2012; Labrecque et al., 2013; Leeflang et al., 2014). It is therefore important to shed light on how firms respond to stakeholder issues raised through social media. Interpreting and responding to stakeholder pressure is explained in the literature as a part of what is called the issue management process (Aula, 2010; Rowley & Moldoveanu, 2003; Schneider & De Meyer, 1991).

The way the issue management process is used is affected by national culture, according to Barr and Glynn (2004) and Schneider and De Meyer (1991), who have shown, referring to Hofstede’s cultural model (1994), that national culture influences the interpretation and response of firms to strategic issues. According to Barry and Glynn (2004) Hofstede’s Uncertainty Avoidance is the only dimension of the cultural framework that is significant and has an effect on the issue management process. Firms with high Uncertainty Avoidance tend to see new issues as a threat and less likely as an opportunity and therefore avoid responding. Firms with low Uncertainty Avoidance tend to see new issues more as opportunities.

1_{A stakeholder is defined as “any group or individual who can affect or is affected by the} achievement of the firms’ objectives” (Rowley, 1997, p. 889).

2_{Social media can be defined as platforms of electronic communication through which users create} online communities to share information, ideas, personal messages, and other content.

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However, social media have changed the way a firm and its consumer communicate (Labrecque et al., 2013; Leeflang et al., 2014). Power has shifted from the firm to the consumer, leading to a firm losing control of the message and having to deal with issues that can be seen as threats or opportunities (de Bakker et al., 2013; Hanna, Rohm, & Crittenden, 2011). Social media have led to a change in power, i.e. stakeholders have more voice in a firm’s strategy and are more powerful due to online networks. Social media have changed the dynamics of communication by giving power to people to intervene in society and having more of a voice in issues and by reducing hierarchical structures in the home country of a firm. The impact of change in the hierarchical settings and control changes the way the issue management process should be executed by firms. This could indicate that Power Distance also plays a role in the issue management process. A firm within a specific national culture, i.e. high Uncertainty Avoidance or Power Distance, might run into problems using its existing strategy when dealing with issues raised through social media.

In this study, Hofstede’s cultural framework (1994), and specifically Uncertainty Avoidance and Power Distance, will be used to test whether, and if so, how national culture affects the issue management process when firms have to deal with issues raised by their stakeholders through social media. The research question is as followed: To what extent do Uncertainty Avoidance and Power Distance affect the way firms interpret and respond to issues raised by their stakeholders through social media?

This study will help managers to understand how the national culture of the home country of a firm affects the way the firm executes the issue management process when dealing with issues raised by its stakeholders through social media and how firms should execute the issue management process accordingly.

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2. Literature review

2.1 Stakeholder issue management

Firms need to meet the expectations of their stakeholders to uphold their reputation. One could argue that this is one of the main management functions. “The stakeholder perspective is built on the notion that firms must pay attention to stakeholders3, because they will act to protect (or enhance) their interests” (Rowley & Moldoveanu, 2003, p. 206). Firms have to respond to multiple influences from stakeholders. “Each firm faces a different set of stakeholders, which aggregates into unique patterns of influences” (Rowley, 1991, p. 908; Rowley, 1997). Stakeholders affect how the firm behaves, via a direct relationship (as a primary stakeholder) or via an indirect relationship (as an indirect stakeholder) with the focal firm (Lenox & Eesley, 2009; Rowley, 1997).

The issue management literature states that firms need to operate in dyadic stakeholder relationships. In other words, firms acknowledge that cooperation with their stakeholders is crucial and this interaction has to come from both sides (has to be reciprocal), and has to be more or less ‘face-to-face’. However, due to the rise of social media, firms need to operate less through dyadic stakeholder relationships and be more ‘network-like’ in response to the influence of stakeholder networks (Perrault et al., 2014). Stakeholders are more likely to take action when expected outcomes are not being achieved, due to the strategic behaviour of a firm (Rowley & Moldoveanu, 2003). That activism nowadays often commences and takes place on social media. Stakeholders concerned with an issue become part of an issue-network that can put enormous pressures onto firms (Perrault et al., 2014).

The collective power of the stakeholder network surrounding a firm and the centrality of the firm in the network, influence the degree of resistance of the firm to stakeholder issues

3_{A stakeholder is defined as “any group or individual who can affect or is affected by the} achievement of the firms’ objectives” (Rowley, 1997, p. 889).

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(Bundy & Buchholtz, 2013; Rowley, 1997). The process of stakeholders raising an issue and a firm having to deal with that issue was an already evolving concept and had been indicated more than ten years ago (Kent, Taylor, & White, 2003). The way firms handle information in the era of social media does not differ that profoundly from older ways of interpreting and handling information. In an article by Perrault et al. (2014) a slightly adapted model, already developed in 1990 by Isabella (1990), is (re)introduced to depict the attention-interpretation-response process that firms (have to) go through when dealing with issues arising through social media.

Figure 1 Issue management process model (Perrault et al., 2014, p. 9)

The attention and interpretation phase is an individual process occurring in an organizational context. It is characterized by constant iterative loops. “The loops occur because as the issue evolves, it triggers events that signal to managers that the situation needs to be cognitively redefined, effectively spurring new interpretative tasks and concordant firm responses that are both planned and ad hoc” (Perrault et al., 2014, p. 9).

But as the issue is not yet formalized, managers are unclear of the threat level or opportunity that the issue represents and thus, their primary interpretive task is to assemble disparate pieces of information into a coherent frame of reference. As they do so, managers are likely to engage in selective perception by focusing on corroborating facts that are linked to their cognitive frames of reference built into their system through national culture (Isabella, 1990).

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When the perception and interpretation of issues challenges the prevailing cognitive frames of reference of managers and unconsciously influences their response, it manifests in the tipping point, at which point the firm will have to respond to a constantly growing number of constituents who put pressure onto management to address an issue (Perrault et al., 2014). Attention and interpretation occur cyclically until the firm responds to the issue by, for example, rejecting or capitulating to the stakeholders demands, at which point the issue is usually categorized as resolved and the firm shifts attention to another issue (Perrault et al., 2014). When it comes to social media, the nature and frequency of the attention, interpretation and response and the far-reaching consequences of misinterpretation and/or lack of timely attention are different from before the era of social media.

For a firm to deal with issues by following an issue management process is, however, easier said than done. Firms are inclined to reduce uncertainty and will be inclined to repeat uncertainty reducing methods in ways that have proven to be successful, until it is clear that the old approaches do not work any more (Barr & Glynn, 2004). The issue management of social media requires approaches that seem to refute risk avoidance routines, as the interpretation of an issue as a threat is more likely to occur when the Uncertainty Avoidance of the home country of a firm inclines. Risk avoidance is based on strict danger control and approaches based on hierarchical Power Distance (Barr & Glynn, 2004; Hanna et al., 2011; Hofstede, 1994; Schneider & De Meyer, 1991; Shirky, 2011). “Social media has dramatically altered the circumstances under which issues rise and garner momentum” (Perrault et al., 2014, p. 7). This can complicate adaptation processes for firms immersed in types of cultures, or established in countries characterized by a culture, of Uncertainty Avoidance and/or Power Distance or other possible prominent cultural traits.

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2.2 National culture of the firm

Hofstede (1983; 1985; 1994) is an important scholar when it comes to linking (national) culture with firms, and the way they are organised and managed. National cultures have specific distinct characteristics that impact the responses to challenges of firms and people imbued by those cultures (Hofstede, 1994). National culture is defined as “the collective programming of the mind which distinguishes the members of one group or category of people from those of another” (Hofstede, 1994, p. 4).

National culture has an effect on how firms interpret and respond to strategic issues, because the way in which people perceive their environment and deal with uncertainty and organizational control, influence the way people will behave strategically (Barr & Glynn, 2004; Gleason, Mathur, & Mathur, 2000; Hofstede, 1983; Hofstede, 1985; Hofstede, 1994; Schneider & De Meyer, 1991; Vasi & King, 2012). As national culture influences these perceptions, cultural differences in interpretation and response to strategic issues are the outcome (Barr & Glynn, 2004; Schneider & De Meyer, 1991).

“The culture of the national environment in which an organization operates, affects the management process through the collective mental programming of its members and its managers” (Hofstede 1994, p. 4). The national cultural framework by Hofstede (1994) included at first four dimensions but now has six. The dimensions affect the way people organize (Hofstede, 1994). The six dimensions are (1) Power distance: the acceptance of power difference and hierarchy; (2) Uncertainty avoidance: the desire to control the future; (3) Individualism / Collectivism: the questions whether the self image is defined by I or we; (4) Masculine / Feminine: an inclination of competition and achievement versus an inclination of care or quality of life; (5) Long term orientation: tradition first or pragmatism first; (6) Indulgence / restraint: the degree to which people try to control their desires (Hofstede, 1994).

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In organizational models, Uncertainty Avoidance and Power Distance are the two dimensions that affect both the way in which people organize themselves as well as the way they write about organizing (Hofstede, 1994). For the purpose of this study, i.e. the interaction between the issue management process and social media, the first two dimensions of Hofstede’s cultural framework are the most interesting.

According to Hofstede (1994), UA is related to the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these. In countries with high UA, people show more nervous energy and in countries with low UA, people are more easy-going. In countries with high UA, unknown issues are seen as threats and dangerous, whereas in countries with low UA, these issues would be seen as curious and possible opportunities (Barr & Glynn, 2004; Hofstede, 1994). Countries with high UA are less likely to adopt issues raised by the public due to lack of controllability (Barr & Glynn, 2004). Firms whose home country scores high on UA avoid issues and see them as threats, not opportunities. Firms whose home country scores low on UA see such issues as curious and as possible opportunities. This is related to the fact that individuals from high UA cultures are significantly more sensitive to controllability in perceiving strategic issues, because UA reflects a culture’s concern with predictability (Barr & Glynn, 2004).

PD is a second dimension mentioned by Hofstede (1994). PD refers to “the extent to which the members of a society accept that power in institutions and organizations is distributed unequally” (Hofstede, 1985, p. 347). PD relates to the autocracy and the willingness of the people involved to tolerate differences in power (Gleason et al., 2000).

A culture with low PD places greater value on equality and interpersonal trust (Dahlstrom & Nygaard, 1996). PD in firms is related to the degree of centralization of authority and the degree of autocratic leadership.

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PD is embedded in the mind of a person and their surroundings. In societies in which power tends to be distributed unequally, people accept that power remains distributed unequally because the situation satisfies the psychological need for dependence of the people without power (Hofstede, 1985). When a firm is located in a home country with high PD, the communication between superiors and subordinates is only to be initiated by the superior (Huang et al., 2003). A firm, located in a home country with high PD, that starts doing business in a host country with low PD, might stumble upon difficulties regarding stakeholder issues that arise due to the high perception of power equality between members in the host country. Issues can also arise when stakeholders from a home country with low PD start a petition aimed at a firm located in a high PD home or host country (Hofstede, 1983; Hofstede, 1985). The lack of controllability with issues arising is intrinsic to social media. Social media have the ability to create and strengthen civil society and the public sphere (Shirky, 2011). There is reason to believe that the findings of the well executed empirical study of Barr and Glynn (2004) might not hold for the era of today due to recent developments of the phenomenon social media. This will be addressed more in the following section (Barr & Glynn, 2004: Labrecque et al., 2013: Leeflang et al., 2014).

2.3 Social media

Social media are a way of interacting with others by sending, receiving and processing information through social networking, content production, distribution of services and websites organized by the collective of users, videos, photos and blogs.

Social media are described in this study as the dynamic and interactive applications of the Web 2.0 i.e. Facebook, Twitter and Instagram.

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The studies of de Bakker et al. (2013) and Vasi and King (2012) show that stakeholder activism, through social media such as Facebook, as well as Twitter and Instagram but also online petition websites, is an important factor for firms to be aware of and able to deal with in order to sustain its current reputation and performance.

Social media have become increasingly popular, because “distinguishing characteristics of social media are that they connect readily available networks of people and they do so immediately” (Perrault et al., 2014, p. 36). Social media are increasingly important sources of competitive advantage in business (Aula, 2010). Perrault et al. (2014) argue that “social media represent one of the primary vehicles through which issues are brought to managers’ attention and social media act as a filter altering managers’ perception, interpretation and response to those issues” (p. 3).

The rise of social media has led to both opportunities that enhance the reputation of a firm and to threats of a firm falling victim to a social media attack and the power of social media (Aula, 2010; Labrecque et al., 2013; Leeflang et al., 2014). Social media have changed the way people interact. Studies of social movements and organizations argue that information on social media is shared through easily accessible channels open for everyone to read and react upon (Asur & Huberman, 2010; Aula, 2010; Diani, 2000; Labrecque et al., 2013; Leeflang et al., 2014). According to Asur and Huberman (2010) social media have exploded and people create, content, share, bookmark and network continuously, because according to Shirky (2011) social media are largely considered ubiquitous. This means that individuals are able to publish their thoughts through social media free of charge and in very little time. By producing their own information and thoughts about an issue, stakeholders gain greater influence on the framing and agenda setting of their issue and influence the way firms are positioned in the minds of other stakeholders (Besiou, Hunter, & Van Wassenhove, 2013; Perrault et al., 2014).

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Social media have the ability to rapidly change society and rapidly set new trends, because of its ease of use, speed and reach. Social media can be seen as a form of collective wisdom, which can be described as a shared level of knowledge that is not accessible by individuals alone (Ainsworth, 2010; Asur & Huberman, 2010). Asur and Huberman (2010) argue that “social media express a collective wisdom which can yield an extremely powerful and accurate indicator of future outcomes, when properly tapped into” (p. 499).

Social media have encouraged loosely connected stakeholders and uncoordinated groups to become empowered to engage in collective action and to confront firms about their strategies (Labrecque et al., 2013; Perrault et al., 2014; Shirky, 2011). Stakeholders that traditionally had little to no voice in a firm’s practices, have a voice now, due to the rise of social media (Perrault et al., 2014).

According to Perrault et al. (2014), the interconnectedness that social media enable throughout a stakeholder network is more relevant than ever because it impacts the firms’ responsiveness to stakeholder issues. Social media have altered the perceptions, interpretation and response of managers that have to deal with issues arising in their firms (Aula, 2010; de Bakker et al., 2013; Besiou et al., 2013; Huy & Shipilov, 2012). Existing hierarchies and strategies formed by the national culture of the home country of a firm, might not hold when dealing with social media, as social media operate across invisible borders, letting anyone who wants to say anything broadcast it worldwide through a viral network. Firms have little influence over these messages (Labrecque et al., 2013; Leeflang et al., 2014).

Furthermore, social media have become the way to create a name for a business. However, social media have also the power to diminish that name and reputation within seconds (Aula, 2010).

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Online petitions are influential tools for stakeholders to impact firms as these pre-established networks of interest combine the multi-directionality of social media to enable efficient communication between stakeholders through increased speed and level of information diffusion (Perrault et al., 2014).

Currently online petitions are a primary tool for stakeholders, because in order to trigger a response from a firm, it is critical for stakeholders concerned about an issue to recruit others, this is easily achievable through use of online petition platforms (den Hond & de Bakker, 2007). Stakeholders are able to bring pressure on firms in ways that are novel, because of the network effects inherent in social media. This novelty changes the issue management process of managers when dealing with issues raised by stakeholders through social media (Perrault et al., 2014). Firms no longer have the power to implement their strategy without potentially facing consequences that might lead to losing face.

Civil society actors and social movements alter the conditions in which firms act (Aula, 2010). Social media are a powerful tool to affect a firms’ reputation because according to Badaracco (1998) “the individual enjoys unprecedented access to information and a newfound advantage in the sphere of public influence, while technology diminishes the ability of corporations, politicians and governments to control or define a public image” (p. 265). Social media have become the coordinating tools for political movements worldwide (Shirky, 2011).

The use of social media tools does not have a single preordained outcome. Social media ignores existing hierarchical structures and affects hierarchical structures worldwide, because it operates across invisible borders. Social media have the ability to strengthen civil society and can create a strong public sphere. “

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For instance, viral text messaging can result in the rapid organization of a massive group such as a ‘flash mob’ without the need or time for managerial control, enabling large and loose groups to take credible, coordinated action of the sort that was traditionally the purview of formal organizations” (Perrault et al., 2014, p. 10).

An interesting observation is that stakeholders had traditionally little or no voice in regard to a firm’s practices, and now stakeholders achieve more power of speech inside and outside the firm. The rising influence of stakeholders indicates that PD could become more important in the issue management process as hierarchies tend to shift from formal to informal. That might result in problems arising in high PD and high UA countries (Hanna et al., 2011; Shirky, 2011).

Control and hierarchical structures are altered through social media, as social media give power to the stakeholders. By creating an easy accessible network for the public to coordinate massive and rapid responses that influence the reputation of firms, issues raised through social media may no longer be manageable by the previous known ways of the issue management process (Aula, 2010; Hanna et al., 2011; Korac-Kakabadse & Kouzmin, 1999; Shirky, 2011; Vasi & King, 2012).

Social media that structurally embed firms into easily accessible interconnected networks of stakeholders enable the exponential growth of an issue network (Perrault et al., 2014). Issues that would have traditionally been uncovered in the course of environmental scanning or by accident might appear with greater importance in regards to power (i.e. PD) and uncertainty (i.e. UA), elevating their potential strategic or critical impact on the firm.

Firms can have a hard time discerning which issues raise threats and which issues have strategic importance and are considered opportunities (Barr & Glynn, 2004: Isabella, 1990). Social media issues shift the issue management process from what was traditionally understood as routine strategic management to crisis management.

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“While social media gives firms less time to formulate an appropriate response to an issue, it also means that almost every issue needs to be addressed in such a way that it is perceived to have strategic, or even critical implications” (Perrault et al., 2014, p. 35).

The speed and outreach of social media, and their incredible capacity to attract new participants and spread information, generates an unpredictable dynamic of their own, and requires a complete new style of issue management (Aula, 2010; Perrault et al., 2014). 2.3.1 Social media and Uncertainty Avoidance

Social media further complicate the issue management process that is influenced by the national culture of a firm’s home country, since social media give the stakeholder more voice, and give the voice of a stakeholder more weight. Due to the altered conditions in the present era of social media and the shift of power from the firm to the stakeholder, it can be suggested that differences in the national culture of a firm’s home country might have an affect on how the issue management process of a firm in a home country is organised. The power to shape and contain information has moved away from the firm and thus has enlarged uncertainty and changed the strategic requirements to deal with issues communicated through social media.

The study of Barr and Glynn (2004) has addressed how national culture, and specifically UA seems to be significant to affect the issue management process. According to Barr and Glynn (2004) UA is the only significant dimension in Hofstede’s cultural framework. People or cultures with high UA, also tend to mistake new issues for threats, not as opportunities. The importance of Barr & Glynn’s (2004) finding is that lack of controllability seems to be intrinsic to social media.

Firms that have a problem with lack of controllability seem to be in a disadvantageous position to handle rising issues adequately, by developing the right issue management strategy.

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It implies that a strategy dealing with social media issues is and must be culturally and probably country dependent. Social media leads to a loss of control for firms and an increase in control for stakeholders. Countries with highly controlled hierarchies, i.e. high UA, have difficulties dealing with this increased loss of control, which might lead to different execution of the issue management process, than countries with low UA (Barr & Glynn, 2004).

The study of Barr and Glynn (2004) fails to mention whether these findings still hold today since power has shifted from the firm to the stakeholders through powerful social media. Social media have changed the dynamics of communication by giving power to people to intervene in society by having more of a voice in issues and by reducing hierarchical structures in the home country of a firm (Aula, 2010; Labrecque et al., 2013). It might therefore be that, in the present era of social media, PD is also significant in the issue management process when dealing with issues arising through social media.

2.3.2 Social media and Power Distance

According to Labrecque et al. (2013) “power is a key human concern that constantly influences behaviour and constitutes a fundamental component of social systems and hierarchies” (p. 258). Power is embedded in human nature and shapes human behaviour in nearly every situation (Giddens & Dallmayr, 1982; Nietzsche, Colli, & Montinari, 1989).

In the light of the rise of social media, the network-based power has contributed largely to how firms are seen today by their stakeholders. Network-based power focuses on the change of content through network actions designed to build personal reputation and influence markets through the distribution, adjusting, and enhancement of digital content (Labrecque et al., 2013).

Barr and Glynn’s (2004) proposition that there is no theoretical ground to link other dimensions of Hofstede’s model to controllability might no longer hold.

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It could be argued that PD, defined as the degree to which individuals in a country and perhaps in a firm from that country are inclined to handle power differences, will play a rather important role when it comes to accepting opinions of stakeholders. Certainly when these opinions are brought forward on (pseudo)- anonymous and hierarchy-neglecting platforms such as Twitter, Facebook or online petitions.

Social media have the ability to reduce Power Distance in the home country of a firm, when the firm accepts the power of social media to intervene in culture and reduce hierarchical structures. The acceptance will then result in an opportunity for the management of a firm to create a long-term relationship with its stakeholders, when the shift of formal to informal hierarchies is used effectively (Huy & Shipilov, 2012). But there is a flip side in which social media use can expose shortcomings of an organization and even magnify them, which affects a firms’ reputation (Huy & Shipilov, 2012). Cultural values influence an individuals’ behavioural intention to use the Internet, in particular, when Power Distance in a country is high. For example, when Power Distance in the home country of a firm is high, email is being used less in firms because inequality between subordinates and superiors is assumed. Superiors are less accessible to subordinates, because it is accepted that formal hierarchies are present in the firm, which restricts communication from a subordinate to a superior without prior arrangement (Huang et al., 2003). The use of email implies an equal relationship between the sender and receiver and high PD countries have a problem with that. Dealing with social media that have changed the dynamics of communication can be difficult for firms used to working in environments with high PD.

2.4 Research gap

Previous research has shown the emerging power of social media and the potential affect on a firms’ reputation. In particular, literature has addressed how firms have to deal with increased pressures of stakeholders through social media.

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Social media are being used as a tool to have more voice within a firm, but also to influence the reputation of a firm (Asur & Huberman, 2010; de Bakker et al., 2013; Besiou et al., 2013; Diani, 2000).

Despite growing recognition of the importance of cultural influences on the issue management process (Barr & Glynn, 2004), there is a lack of related empirical research about how national culture, specifically UA and PD, affects the issue management process of firms dealing with issues raised by their stakeholders through social media. Petitions that are raised through social media platforms could potentially form strategic issues for firms when the issue “catches fire” and increases the buzz worldwide (Aula, 2010; Perrault et al., 2014; Rehbein, Waddock, & Graves, 2004).

No studies have yet examined the link between issues raised by stakeholders through social media and the national culture of the home country of a firm. The study of Barr and Glynn (2004) has addressed how national culture, and specifically UA, seems to be significant to affect the issue management process, but these findings might not hold as social media was introduced in 2006 after the study was published and changed the dynamics of communication (Perrault et al., 2014). The conditions between firms and their stakeholders have changed accordingly, and in this study it is suggested that social media have altered the way the national culture of a firm’s home country affects the way firms execute the issue management process. This is why this study will look into whether UA is still significant in the issue management process when dealing with social media. Consequently, this study will look into how PD might become more important in the issue management process when dealing with issues raised through social media, and it will attempt to add to the existing theory about social media, national culture and the issue management process.

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How firms with different national cultural values formulate different responses is important to know, to manage the impact of social media on potential reputational risk of the firm. This lack of empirical research on the topic does not only reflect a gap in our understanding of the relationship between social movements and firms, but it fundamentally shows a lack of theorization in social media and the issue management process (Lenox & Eesley, 2009; Taylor, Kent, & White, 2001; Vasi & King, 2012). This study begins to address this gap by asking the following empirical question: To what extent do Uncertainty Avoidance and Power Distance affect the way firms interpret and respond to issues raised by their stakeholders through social media?

The main contribution of this study will be the reconsideration of the existing empirical evidence about national culture and the issue management process in light of the recent developments of the phenomenon social media. The findings are highly relevant for contemporary firm managers, for whom reputation management is crucial and for those who cannot afford to ignore social media.

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3. Theoretical framework

As mentioned before, social media have contributed largely to the impact the external environment has on a firms’ reputation (Diani, 2000; Hofstede, 1983; Labrecque et al., 2013; Rowley, 1997; Schneider & De Meyer, 1991). National culture has an effect on how firms interpret and respond to strategic issues, because perceptions of environmental uncertainty and organizational control influence strategic behaviour. As national culture influences these perceptions, cultural differences in interpretation and response to strategic issues are the result (Barr & Glynn, 2004; Hofstede, 1994; Schneider & De Meyer, 1991).

In the issue management process, firms will have to pay attention to, interpret and respond to issues. Due to the fact that the attention and interpretation phase is a continuous, iterative loop in which the attention and interpretation are difficult to point out a part from each other, in this study the focus will lay on the interpretation and response part of the issue management process (Isabella, 1990; Perrault et al., 2014). Interpretation in this research indicates a firm undertaking the process of making sense of the phenomenon of the online petition. Response in this research indicates the nature of the response of a firm being either entrenchment of the current policies and refusal to make a change versus a response with a kind of accommodation.

Barr and Glynn (2004) found that the degree of UA, of a person or culture, correlates with the inclination to see threats and control them. The higher the UA is, the higher the susceptibility for threats, the lower the sensitivity for opportunities, and the stronger the need for control. These findings are interesting, since risk management is about uncertainty management, i.e. uncertainty reduction, by spotting danger, turning them into calculable hazard (risks), and/or controlling or avoiding them.

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Cultures, i.e. people and firms with a high inclination to avoid uncertainty will most probably be inclined to see more threats and put more effort into controlling or avoiding them. Firms that are located in a home country with high UA are highly controlled countries and avoid uncertainty (Barr & Glynn, 2004).

It could be argued then, that when issues arise through social media, firms that are located in a home country with low UA are more likely to interpret and respond with a kind of accommodation to the issue. This results in the following propositions:

P1a When Uncertainty Avoidance of the firm’s home country is low, a firm is more likely to interpret issues arising through social media than a firm of a home country with high Uncertainty Avoidance.

P1b When Uncertainty Avoidance of the firm’s home country is high, a firm is more likely to respond to an issue arising through social media by entrenching its current policies and refusing change than a firm of a home country with low Uncertainty Avoidance.

P1c When Uncertainty Avoidance of the firm’s home country is low, a firm is more likely to respond to an issue arising through social media with a kind of accommodation than a firm of a home country with high Uncertainty Avoidance.

PD is another dimension that Hofstede (1983) mentions. The notion refers to “the extent to which the members of a society accept that power in institutions and organizations is distributed unequally” (p. 347). PD affects the structuring and functioning of firms, and influences the way a firm applies the issue management process (Hofstede, 1983; Hofstede, 1985; Hofstede, 1994; Lenox & Eesley, 2009; Vasi & King, 2012). Huang et al. (2003) have found that, in firms with high PD (or with people in charge who esteem a higher power distance), email is less likely to be used as an internal communication means, since email tends to ignore or diminish social hierarchies or social cues.

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This neglect of social hierarchies or cues is even more visible in social media such as Twitter or Facebook, partly because these media are less oriented at collaboration as email, but most probably mainly, because of their flattening network-like structure. This suggests that top executives of a firm might not be accustomed and/or willing to deal with stakeholder issues arising externally through social media.

Barr and Glynn (2004) state that PD is not that important in the issue management process. This is at first sight an understandable finding, since PD is about the acceptance of hierarchal relationships, and not about UA, at least not directly. However, the impact of PD could become far more important in the case of interpretation and management of the impact of social media, since one of the main characteristics of these electronic media, as already mentioned above, is their tendency to neglect or efface hierarchical relationships. It could for instance turn out that firms combining a culture of high PD with a culture of high UA, are incapable of developing an effective social media strategy, even if they see the threat of not doing so. This results in the following propositions:

P2a When Power Distance of the firm’s home country is low, a firm is more likely to interpret issues arising through social media than a firm of a home country with high Power Distance.

P2b When Power Distance of the firm’s home country is high, a firm is more likely to respond to an issue arising through social media by entrenching its current policies and refusing change than a firm of a home country with low Power Distance.

P2c When Power Distance of the firm’s home country is low, a firm is more likely to respond to an issue arising through social media with a kind of accommodation than a firm of a home country with high Power Distance.

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Barr and Glynn (2004) already suggested that only UA is significant in the issue management process, so countries with high UA and low PD have already been investigated and thus will not be further researched in this study. It could be said, that firms in countries with low UA and high PD might also respond with a kind of accommodation when dealing with issues raised through social media, because PD becomes more important in the issue management process when social media is involved. This results in the following propositions:

P3 Firms with a home country that scores low on Uncertainty Avoidance and high on Power Distance are more likely to respond with a kind of accommodation to issues arising through social media than firms with a home country that scores high on Uncertainty Avoidance and high on Power Distance.

3.1 Conceptual framework

The theoretical framework that will be used to frame this study is as followed:

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4. Methodology

This section will discuss the methods adopted in this thesis by, firstly explaining the research design. Then the selection of the cases will be explained. This will be followed by a description of the data collection, along with a brief explanation of how the data collected will be analysed.

4.1 Research design

This thesis will follow an interpretive research philosophy whereby data analysis will lead to theory building (Saunders & Lewis, 2012). Given the nature of the research question that is about a contemporary set of events of which the investigator has little or no control, a qualitative method will be used (Yin, 2014). This thesis builds upon existing theories and observation of strategies, which is quantitatively difficult to assess (Yin, 2014).

The research will be conducted in a multiple case study design, as a case design is suited when existing theory is inadequate in the researched area (Eisenhardt, 1989). The unit of analysis will be firms that have had to deal with issues raised by their stakeholders through social media. In this research, firms will be investigated in a real-life context without a clear, single set of outcomes and thus this research is exploratory by nature (Yin, 2014). This research will exist out of embedded multiple case studies in which exploration of differences within and between cases is conducted (Yin, 2014).

The firms selected for the case studies are derived from the website www.change.org. The website provides a database of online petitions signed by people who want firms to change their strategy. In this research, six different online petitions are selected by deliberately choosing firms that originate from home countries with different scores on UA and PD in Hofstede’s cultural framework (1985). It is expected that the firms execute the issue management process differently, because of the differences in the national culture of the home country which affect the issue management process (Hofstede, 1985).

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This thesis will connect previous literature with a cross-case analysis to research whether the national culture of the home country of the firms affects the issue management process when dealing with issues raised by stakeholders through social media. The goal is to replicate findings across cases and draw comparisons. Cases will be chosen carefully so that the researcher can predict contrasting results based on a theory, which results in theoretical replication (Yin, 2014). By incorporating propositions, the feasibility of answering the research question is increased (Baxter & Jack, 2008). These propositions later guide the data collection and discussion. A conceptual framework is formulated to provide a scope for the research and structure for the final report. The conceptual framework includes all themes emerging from the data analysis and displays the relationships between the constructs (Baxter & Jack, 2008). The conceptual framework is illustrated on page 25.

4.2 Case selection

The research will be conducted as a multiple case design using extreme sampling. The research will consist in a cross-case analysis of six cases. The cases are deliberately chosen to be petitions linked to firms that have home countries with a national culture that scores either low on UA and high on PD, low on UA and low on PD or high on UA and high on PD (Hofstede, 1985; Yin, 2014). As mentioned above, Barr and Glynn (2004) already suggested that UA is the only dimension of Hofstede’s cultural framework to be significant in the issue management process, so countries with high UA and low PD will therefore not be further researched in this study. In the cultural framework of Hofstede, shown on the next page, the location of the countries in regards to their score on UA and PD is given (Hofstede, 1985)4.

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Figure 3 Hofstede’s model (1985)

As shown in the figure, countries score on both dimensions in a particular way and end up in one of the four squares of the cultural framework. In this study, a deliberate choice for the particular six cases is guided by the location of the home country of a firm placed in box 1, 2 or 4 of the framework. Box 1 indicates countries with low PD and low UA, box 2 indicates countries with high PD and low UA, and box 4 indicates countries with high PD and high UA.

The firms that are chosen are named in an online petition on www.change.org. The online petitions are signed by 400+ people, and have either resulted in a victory, i.e. response of the firm in favour of the petitioners with a kind of accommodation or have not resulted in a victory, i.e. response of the firm by entrenching its current policies and refusing to make a change. The following firms have been chosen as cases for this thesis.

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Firm Parent company Home country Box Hofstede’s cultural framework Score UA/PD Petition topic Start date petition Victory date Ben & Jerry’s Unilever Netherlands/ United Kingdom 1 Low UA/ Low PD Non dairy ice creams 07/10/ 2014 10/06/ 2015

Old Navy Gap Inc. United States 1 Low UA/ Low PD Fair pricing strategy 04/11/ 2014 21/11/ 2014 China Southern Airlines

n/a China 2 High

PD/Low UA Stop cruel primate shipments 10/09/ 2013 21/03/ 2014 Wersut Seguni Indonesia n/a Indonesia (central Java) 2 High PD/Low UA Stop travelling dolphin shows 09/07/ 2015 n/a Air France

n/a France 4 High PD/

High UA Prohibit shipping animals for laboratory tests 17/02/ 2013 n/a Moët Hennessy Louis Vuitton Moët Hennessy France 4 High PD/ High UA Daughter company Sephora 11/08/ 2015 n/a

Figure 4 Case Selection

The selected firms are appropriate to be used in this research, as they are all linked to recent online petitions. There is sufficient media coverage on other related websites, social media or traditional media regarding the online petitions to execute qualitative research. It is important that the cases are all recent as qualitative data focuses on contemporary events. Additionally, necessary data to analyse the cases is easily accessible in sources such as articles on related websites, newspapers and other social media channels as Facebook, Twitter and YouTube (Yin, 2014).

Another reason for the selection of these firms is the difference in national culture (i.e. score on UA and PD) of the home countries. The home countries, which are the Netherlands and the United Kingdom, the United States, France, Indonesia and China, score differently on Uncertainty Avoidance and Power Distance.

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The international presence of Ben & Jerry’s, Gap Inc., Air France, Moët Hennessy, China Southern Airlines and the national presence of Wersut Seguni in Indonesia, suggests that the firms are leading firms in the market making them vulnerable to issues arising through social media. This could affect a firms’ reputation, if individuals are opposed to the firms’ strategy and thus raise awareness through use of an online petition. It is important that the firms execute their issue management process effectively, to avoid chaos and negative publicity that could damage the corporate identity. However, research has not shed light on whether, and if so how, the national culture of the home country of a firm affects the issue management process when dealing with issues raised by their stakeholders through social media.

By comparing contrasting firms, the results of the qualitative research can be used to test whether the national culture of the home country of the firms affects the issue management process. The time-period in which the research will be conducted is limited to a snapshot time lapse that will cover any information available between February 2013 and December 2015.

4.3 Data collection

Further data will be gathered online through petition information, newspaper articles and semi-structured interviews with staff members of Ben & Jerry’s and Moët Hennessy. The interviewees are responsible for the execution of the issue management process when dealing with issues raised by their stakeholders through social media. The interviews will be semi-structured, with questions that are the same for both firms. The focus of the interview questions will lay on the reasoning of the firms to show interest in the online petitions, the decision to (not) change their strategy and the role of the national culture of the home country of the firm in the issue management process. Due to privacy reasons, interviews cannot be held with the other four firms.

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Ben & Jerry’s and Moët Hennessy will therefore be the primary sources in this research. The interviews are conducted in Dutch and translated into English by the writer of this study.

4.4 Data analysis

By using an analytic strategy of relying on theoretical propositions that are derived from previous literature, the case study analysis will be guided consistently (Yin, 2014). In order to ensure the validity and reliability of the results, various actions will be undertaken. To ensure construct validity, convergent evidence will be developed through data triangulation using multiple sources of data (i.e. semi-structured interviews, news coverage and additional information on the web) to check if the correct information is gathered to answer the research question (Yin, 2014). Furthermore, only interviewees that are responsible for the issue management process are being interviewed.

Additionally, explanations will be provided in relation to patterns that emerge from the data in order to ensure construct validity (Yin, 2014). The program Nvivo will be used to execute thematic analysis of the interviews. Common patterns are identified to be able to analyse the results by using replication logic (Yin, 2014). A combination of the deductive and the inductive approach will be used to code the data. Starter (deductive) codes are used to guide the coding in Nvivo, but at the same time new emerging codes (inductive) are used when needed. The starter codes are highlighted in red, and the added codes are highlighted in blue. The codes for the interviews and the coding guide for the cross-case analysis can be found in Appendix 2. Using a coding guide ensures consistency throughout the content analysis of each separate case and the cross-case analysis. By adopting a comparative analysis, using a cross-case analysis, the research question can be answered (Yin, 2014).

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The findings from the case studies will be compared to the predicted patterns formulated as the propositions. If the patterns appear to be similar, than the results strengthen the internal validity of the research (Yin, 2014).

To ensure reliability, interviews will be recorded and field notes will be made in line with the case study protocol5. A case study database is maintained, so a chain of evidence is available and all processes could be repeated (Yin, 2014).

The interviews with Ben & Jerry’s and Moët Hennessy can be found in Appendix 4 – 7, including the Nvivo results linked to the coding guides used for the analysis.

5. Results

In this section, the results will be displayed for each firm individually, followed by a cross-case analysis that explores the similarities and differences in the issue management process adopted by the firms.

5.1 Ben and Jerry’s

The first case that will be explored concerns the firm Ben & Jerry’s. Ben & Jerry’s is an ice cream producer that was founded in the Netherlands/United Kingdom with a dual ownership structure and is a wholly owned subsidiary of the Unilever concern.

On the 7th of October 2014, Ben & Jerry’s was petitioned by a couple from the United States. The online petition is aimed at Ben & Jerry’s to support action against climate change by offering non-dairy ice cream (Fog & Reed, 2014). The petitioners are asking for a vegan version of ice cream, as animal agriculture is the single largest contributor to global warming.

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“Given that the company is known for its progressive social stance, lots of people have questioned why it still hasn’t hopped on the vegan train. After all, Ben & Jerry’s product mission is (according to its website): To make, distribute and sell the finest quality all natural ice cream and euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment. Given the impact of animal agriculture on the environment, it’s about time the company recognized the need to evolve into a new, sustainable business model.” (Sentenac, 2015)

The firm noticed the petition immediately after it was launched online. An external agency is hired by the firm to follow social media on a daily basis and reply as soon as possible to social media messages.

“So if an issue arises, the external agency.. will notice the issue first.. and respond as soon as possible when something is posted by our customers online. We deal with a 100% response rate.” (Interview Ben & Jerry’s, November 4, 2015)

At first, Ben & Jerry’s did not feel that the petition needed further action than replying to the comments, as it was only a limited amount of people signing the petition. The comments were based upon the guidelines from the headquarters and the fixed answers to frequently asked questions of customers. If an issue becomes more important, because more people are saying something about the issue, then the management will determine how to take further action.

“It needs to be serious and not just one person saying something online.” (Interview Ben & Jerry’s, November 4, 2015)

Since 2013, the vision of Ben & Jerry’s is based on a sustainable environment with respect for nature and the future (“Ben Jerry”, 2015).

“Ben & Jerry’s has a social mission which is translated to social media expenditures that we as a firm want to put online for our customers consistently every month.”(Interview Ben & Jerry’s, November 4, 2015)

As the petition was based upon the social mission of Ben & Jerry’s, the company interpreted the issue as becoming increasingly important to be dealt with. Agriculture is one of the biggest climate changing factors in the world, so not addressing the matter while the buzz increased around the issue would have put the firms’ reputation in danger.

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“As we have a big petition going on ourselves in partnership with Avaaz, we do want customers to believe our shared values and mission, and such a petition would interfere with this and also our idea to decrease climate change.” (Interview Ben & Jerry’s, November 4, 2015)

“As it is aimed on the agriculture and climate change, which is something Ben & Jerry’s is always trying to reduce by being as sustainably as possible, it was a petition aimed at the social mission of the company and thus the credibility of the company to provide in the stated mission.” (Interview Ben & Jerry’s, November 4, 2015)

“As we are organizing online petitions now ourselves as well as in cooperation with Avaaz at Ben & Jerry’s to make the world more aware of the climate change and to demonstrate the signatures in December at the climate change top in Paris, it is important to have one clear mission, and this non-dairy ice cream would be a good step in the right direction.” (Interview Ben & Jerry’s, November 4, 2015)

In interpreting this issue, the decision to respond to an issue is lead by the question whether the matter raised through social media is damaging for the firms’ reputation or not, which is measured by the impact of the matter raised on the social mission and shared values of Ben & Jerry’s.

Ben & Jerry’s is situated in box 1 of Hofstede’s cultural framework, indicating a national culture of the home country of the firm scoring low on PD and low on UA (Hofstede, 1985). With scores that are low on UA and low on PD, according to Hofstede (1985) and Barr and Glynn (2004) Ben & Jerry’s will see an issue raised by its stakeholders not as a threat, but as a potential opportunity. Low UA indicates that Ben & Jerry’s does not see an issue as a threat immediately, as it might give new insights into how something can change a strategy for the better, which was the way the firm saw the issue in this case.

As the buzz increased over time on social media, the firm did interpret the issue as important, thus the firm also accepted that the opinion of its stakeholders was important which might indicate that low PD could be a contributing factor in the issue management process as well as low UA.

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“At the beginning, it was just a person who mentioned something. And as the discussion about agriculture and Ben & Jerry’s has already been mentioned, Ben & Jerry’s will always respond but not always change something when only a few people are saying something. With this issue, it became clear that it had to do with sustainability and thus it is important to take into account as it could hurt the brand image.” (Interview Ben & Jerry’s, November 4, 2015)

Due to the intervening character of social media, Ben & Jerry’s was confronted with this issue through several media channels. The online petition was mentioned online on more than twenty websites6, in several online news articles7 and social media channels like Facebook and Twitter8_{. For example, One green planet placed an article which had been liked} on Facebook more than 39.000 times and had been retweeted over more than 200 times (Dolmage, 2015).

“Yes, so in this case the decision to raise it to a higher level, was when the issue was spoken of by different people consistently over a period of time. And then as the time passed, it became clear, by mentioning the issue across borders to the other countries, that it is an international issue and that it needed to be dealt with.” (Interview Ben & Jerry’s, November 4, 2015)

The buzz increased over time with more social media attention and petition signatures.

“If word comes around of a topic that is internationally spoken of online by our customers, it will be taken into a meeting globally. In this case, it became important for Ben & Jerry’s to take into account whether or not the firm should agree with the customer.” (Interview Ben & Jerry’s, November 4, 2015)

Ben & Jerry’s acknowledges that its stakeholders are important for the firm and acknowledges the importance of their opinion. This interpretation of the issue resulted in the issue taken up with the highest management of the firm to decide whether or not to respond in favour of the petitioners.

6_{http://demanddairyfree.com}_{provides a link to more than 20 websites that have communicated online} about the petition.

7

In the English newspaper Metro, Huffington Post and the Telegraph (Caster, 2015; Saffron, 2015; Satran, 2015).

8_{Senator Cory Brooker has tweeted to encourage people to sign the petition online on 23/11/2014 and} all the social media coverage about the petition has been shared on Facebook, liked and retweeted.

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“Customers do not have power, we will listen but we will not change our strategy. Global will decide in the end, not the customers. We can adjust social media expenditures locally, but the rest is decided by the management. Customers are not equal, but important.” (Interview Ben & Jerry’s, November 4, 2015)

The increase of social media attention to the issue led to the adaptation of the firm to execute the issue management process differently than the initial strategy, by paying more attention to the issue and discussing it in the highest decision-making body of the firm.

“Yes, everything that happens in the market, will come back to us through customer opinions online and retailers. Our social media is really the most important thing for us to stay a well-known brand. And thus issues raised online by our customers, stakeholders, are really important. Social media is our reputation’s first and premier channel to create and build the brand. So the impact of social media is high on our performance and reputation.” (Interview Ben & Jerry’s, November 4, 2015)

The increased media attention and petition signatures resulted in the CEO of Ben & Jerry’s, Mr. Greenfield, stating the following:

“In the US there are [dairy-free] alternatives from smaller companies, but Ben & Jerry’s will be the first mainstream company that will do that and will also do it in a really delicious way.” (Caster, 2015)

The petition led to an official press release on the corporate website stating the following:

“The answer is, we've been working on this for quite a while, and want to make sure these flavors live up to what Ben & Jerry's is known for: enormous chunks, delicious swirls and a commitment to values-led ingredient sourcing. Our Flavor Gurus have been hard at work to ensure they do, which includes lots of taste testing! Sorry, but that’s all we can share for now. They say good things come to those who wait, but in the meantime sign up below to get the latest updates on this project and details on when these non-dairy flavors will be coming to a freezer near you.” (“Non-dairy stating”, 2015)

“We’re working on it”! Ben & Jerry’s is giving its customers what they want, but fans will have to be patient, since the ice-cream will come on the market not sooner than spring next year.” (“Ben Jerry’s teases”, 2015)

The firm also acknowledges that culture plays an important role in how social media is used by firms as well as stakeholders. The main headquarters are located in the United States and have the same national culture in terms of UA and PD as the office in the Netherlands/United Kingdom.