Conflicts between indigenous communities and multinational enterprises : the effects of community characteristics on conflict resolution and the moderating influence of NGO involvement and sustainable focus

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Conflicts between indigenous

communities and multinational

enterprises

The effects of community characteristics on conflict resolution and the moderating influence of NGO involvement and sustainability focus

Author: Eva van Solkema Student number: 10384936 Date of submission: 26-01-2018 Version: Final version

MSc. in Business Administration – International Management Track Supervisor: Dr. I. Haxhi

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Statement of originality

This document is written by Eva van Solkema 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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Figures and Tables

Figure 1: Conceptual model...28

Table 1: Regression models...34

Table 2: Descriptive statistics and Correlation matrix...36

Table 3: Tests for multicollinearity...38

Table 4: Results of the logistic regression models to test H1A, H4A and H6A...39

Table 5: Results of the linear regression models to test H1B, H4B and H6B...41

Table 6: Results of the logistic regression models to test H2A, H3A and H5A...42

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Abstract

When multinational enterprises (MNEs) in search of natural resources expand their activities abroad, they have to deal with national governments but also with the indigenous

communities living in the territories rich in natural resources. This interaction often leads to conflict between the MNEs and indigenous communities. These conflicts have negative consequences for both the MNE and the indigenous community. Therefore there is a need for quantitative research into the factors that lead to conflict resolution. In this study, we argue that a higher bargaining power for the community and more cultural embeddedness of the community lead to shorter and less violent conflicts. Furthermore, we argue that NGO involvement and the sustainability focus of the MNE negatively moderate these effects. We test our hypotheses for a sample of 673 conflicts from sixty-seven countries all over the world. Our findings show that first, more bargaining power for the indigenous community leads to a more violent conflict. Second, more cultural embeddedness of the community leads to a less violent conflict. Finally, NGO involvement is a significant positive moderator for bargaining power, but not for cultural embeddedness. This research broadens existing

knowledge about conflicts to the MNE-indigenous community conflict context. Besides, it is one of the first quantitative studies in this field, making it possible to generalize results over multiple contexts. MNEs, NGOs and indigenous communities can use this research to judge situations that may need extra caution because they can lead to longer and more violent conflicts. Furthermore, they can use the results of this research to come up with strategies to resolve the conflict.

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Introduction

Since the late twentieth century, countries that are rich in natural resources have liberalized their foreign investment policies to attract more investors and boost their national economies (Hilson, & Haselip, 2004). The multinational enterprises (MNEs) that invest in these

countries have a lot of power. This in combination with the liberal policies allows them to focus more on profit maximization and less social and environmental value creation (Lyons, 2004). When investing in lands rich in natural resources, MNEs come into contact with indigenous communities that live there, and who feel like they are the owners of these lands (Lertzman & Vredenburg, 2005). These confrontations oftentimes lead to conflicts between the MNEs and the indigenous communities (Calvano, 2008). This is because the MNEs’ focus on profit-maximization leads to a way of managing the lands that differs from the wishes of the communities (Oltremari & Jackson, 2006). This is despite special agreements and guidelines (O’Fairheallaigh, 2012; Whiteman, 2009; Whiteman & Mamen, 2002).

The resolution of these conflicts is important for both the MNEs and the indigenous communities. For MNEs the conflict has a huge negative impact on their reputation and financial performance (Calvano, 2008). The indigenous communities on the other hand are dependent on the land for their identity and culture, and sometimes even for survival (Béteille, 1998; Calvano, 2008; Lertzman & Vredenburg, 2005; Weaver, 2001). The conflicts with the MNE can lead to destruction of the land and even sickness and death of the community members (Foster, 2012). Although it is important to know how to resolve the conflicts, there have not yet been many quantitative studies that make it possible to draw conclusions across conflict contexts. Most researches that have been done are qualitative and focus on single case-studies (e.g. Benyei, Turreira-Garcia, Orta-Martínez & Catró-Sabaté, 2016; Hilson & Haselip, 2004; Kerr, Colton, Johnson, & Wright, 2014; Reade, Todd, Osland, & Osland, 2008; Verbrugge, 2015). This gap in the literature is therefore filled with this research. We look at community characteristics that may influence conflict resolution (i.e. community bargaining power and community cultural embeddedness) and the strategies that both MNEs and indigenous communities can employ to influence these effects (i.e. involving an NGO in the conflict or focusing on sustainability programs).

Because MNEs have more power relative to the community, they have the possibility to make choices without the agreement of all stakeholders (Calvano, 2008). In theories about differences in bargaining power in negotiations, researchers expect that the more power one party in the negotiation has, the more it will be able to influence the outcome of this

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negotiation (Bacharach & Lawler, 1964; Emerson, 1962; Pfeffer & Salancick, 1978). In conflicts between MNEs and indigenous communities, the communities lack the power, legitimacy and urgency to influence the negotiation in such a way that the outcomes are satisfactory for both (Calvano, 2008; Mitchell, Agle, & Wood, 1997). Research shows that when the communities do not agree with the decision, they feel that their only option is to mobilize and target the MNE, making the conflict longer and more violent (O’Faircheallaigh, 2012). Following this, the expectation is that when the indigenous community gets involved in the project more, and therefore gets more bargaining power, this may lead to shorter and less violent conflicts, because both the MNE and the community will agree with the outcomes more. This expectation is not yet tested in the case of conflicts between MNEs and indigenous communities. This research fills this gap in literature by testing if the involvement of the community in the decision making process has an influence on the duration of the conflict and the amount of violence in the conflict.

In addition to the power of the community in the decision making process, the understanding of the community by the MNE is an important factor when trying to make decisions that satisfy both parties. One important factor that may lead to misunderstanding of the indigenous community, is the cultural embeddedness of the community in the culture of the country they reside in (Calvano, 2008; Lotila, 2010). Indigenous communities may have their own values and norms, differing from the ones of the country they live in (Banerjee, 2001). The more culturally isolated the community is, the less the MNE is aware of this culture, which leads to lesser understanding of values and norms and underlying institutions of social exchange (Tihanyi, Griffith, & Russell, 2005). When there are misunderstandings about the culture, it is possible that the MNEs make decisions that do not fit in it. This then likely leads to decisions that the community does not agree with, which may again lead conflicts that are more violent and longer (Calvano, 2008; O’Faircheallaigh, 2012). Based on the literature about national cultural distance, we expect that the more the cultures of two parties are alike, the easier the transactions between them and the more both parties agree with the decisions made (Ghemawat, 2001). When a community’s culture is more embedded in the mainstream culture of the country they live in, this may lead to better understanding of the culture by the MNE and therefore decisions that both parties are satisfied with. The literature about consequences of the cultural distance only focuses on national cultural distance, so it is not sure if these predictions hold up for the cultural distance between MNEs and indigenous communities. This research fills this in research, by testing if the cultural

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embeddedness of the indigenous community has an effect on the duration and the degree of violence of the conflict. Based on previous two subjects, the first research question is:

RQ1: To what extent do the community bargaining power and cultural embeddedness influence the conflict resolution (i.e., duration and degree of violence)?

When the indigenous communities have a low bargaining power, the MNE is able to make choices that the community does not necessarily agree with. The focus of the MNE is then most likely on profit maximization and not on social and environmental value creation, on which the communities are focused (Hilson & Haselip, 2004). When the community gets more power in the negotiation process, it may get the possibility to influence the negotiation in such a way that the focus lies more on social and environmental issues. Furthermore, even when the MNE wants to take the wishes of the communities into account while making decisions, they can still fail because they do not understand exactly what these wishes are (Tihanyi, Griffith, & Russell, 2005). When a community is culturally more isolated, the chance for misunderstandings about the culture is bigger. So, when the community has a higher bargaining power and when it is more culturally embedded, this may lead to decisions both parties agree with, and thus no conflict, or a faster conflict resolution (Calvano, 2008; O’Faircheallaigh, 2012). Next to the factors that contribute to conflicts, it is also important to know what can be done, both by the communities and MNEs, to de-escalate the conflicts.

Nongovernmental organizations (NGOs) have emerged since the 1980s as important actors in the institutional environment (Doh & Teegen, 2002; Teegen, Doh, & Vachani, 2004). They are seen as legitimate stakeholders and frequently intervene in negotiations and bargaining (Doh & Teegen, 2001; Newell, 2005). NGOs are able to have a viable and sustainable influence and solve problems between two parties, but only if they fully and accurately represent the interests of the party they represent (Doh & Teegen, 2002). NGOs have critical competencies and knowledge about the communities, that is otherwise difficult or pricy to obtain for the MNE (Dahan, Doh, & Teegen, 2010; Gray & Stites, 2013; Reficco & Marquez, 2012). The NGO can give the MNE information about the wishes and needs of the communities, thereby shifting the focus from just profit-maximization to social and environmental issues. The more the NGO is involved, the less the community bargaining power may therefore influence the conflict resolution. Furthermore, the MNE can use the knowledge from the NGO to overcome the cultural differences between them and the

community. The more the NGO is involved, the less the cultural embeddedness (or isolation) of the community may therefore affect the conflict resolution (Dahan, Doh, & Teegen, 2010; Gray & Stites, 2013). The current research on the moderating influence of NGOs is mostly

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about negotiations between governments and MNEs, but the effect of NGO involvement on negotiations between MNEs and indigenous communities is understudied. This gap in research is filled, by broadening the cultural distance literature to the context of MNEs and communities. Furthermore, there is a gap in research about the effects of NGO involvement. On the one hand research shows that NGOs have a positive influence on the de-escalation of conflicts (Doh & Guay, 2006). On the other hand there are researchers who are not convinced of the positive influence of NGOs in conflict resolution (Calvano, 2008; Blowfield & Frynas, 2005). This is because NGOs keep increasing their presence on the world stage and make alliances with MNEs (Calvano, 2008). The legitimacy of NGOs from the perception of the communities is therefore questioned, because it is not sure whose interests they are

representing (Blowfield & Frynas, 2005). This research fills this gap by testing if the involvement of NGOs have positive or negative effects. Therefore, the second research question is:

RQ2: To what extent does NGO involvement moderate the relationship between the community bargaining power and cultural isolation, and the conflict resolution? NGOs may bring the MNEs and indigenous communities closer together, because of the specific knowledge and capabilities they have (Dahan, Doh, & Teegen, 2010; Gray & Stites, 2013; Reficco & Marquez, 2012). On the one hand they can make the MNE aware of the needs and wishes of the community and they can try to shift the focus from

profit-maximization to social and environmental concerns. On the other hand they can help the community in negotiating with the MNE, setting priorities and getting the best possible result (Dahan, Doh, & Teegen, 2010). When an NGO is involved in the negotiation, the influence of community bargaining power and of cultural embeddedness of the community on the conflict resolution may thus become less strong. The NGO then may act as a safeguard against

misunderstandings and differences in priorities between the two parties.

One thing MNEs themselves can do to de-escalate conflicts is to focus more on sustainability. MNEs are pressured more and more into sustainable development (Imbun, 2006; Jamali & Sidani, 2011; Vachani, Doh, & Teegen, 2009). The more the MNE is focused on sustainability, the more it will actively try to take the wishes of the communities into account (Lertzman & Vredenburg, 2005). When this happens, the effect of bargaining power of the community on the conflict resolution is not that important, because the community does not need that much influence anymore to lead to outcomes that will satisfy them. The effect of the cultural embeddedness of the community may also be less strong, because the MNE will actively seek to create positive social and environmental value, thereby doing their best to

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understand even the most isolated communities. It is not yet clear if this focus on

sustainability actually leads to the expected positive results. Researchers find that it is not enough to just have a sustainable focus, but companies have to change the entire way they do business (Schaltegger, Hansen, & Ludeke-Freund, 2016). Researchers find that CSR

programs cannot adequately address the issues that MNEs face, are merely “window dressing” to look good for the outside world and do not take into account the traditions and cultures of the communities at all (Blowfield, 2005; Frynas, 2010; Munshi & Kurian, 2005; Slack, 2012; Khan & Lund-Thomsen, 2011). Because the sustainability focus in these researches is measured by the fact if the MNE has a CSR program, and not by the actual actions of the company, it is not yet clear if sustainable actions by MNEs can lead to more aligned priorities and lesser misunderstandings. This gap is filled in this research by testing the effects of a sustainability focus with objective measures. Therefore the third research question is:

RQ3: To what extent does the MNE sustainability focus moderate the relationship between the community bargaining power and cultural isolation, and the conflict resolution?

When MNEs focus on sustainability, the outcomes of decisions are not only driven by profit-maximization motivations, but also by motivations to create social and environmental value, or at least motivations to not have negative impact on the social and environmental context of the company (Schaltegger, Ludeke-Freund, & Hansen, 2016). This then may lead to decisions that the communities also agree with, without them having to influence the decisions to their priorities. The influence of the bargaining power of the community may therefore be weaker when the MNE has a sustainability focus. Furthermore, while trying to create positive effects for the external context of the business, the MNE will most likely do its best to understand the wishes of the community, even for the most isolated communities. The effect of the isolation on the conflict resolution may therefore also become weaker.

To answer the research questions, we use a quantitative approach. We collected

information about conflicts between MNEs and indigenous communities using secondary data from databases and news articles. We coded the information from the sources, following a detailed codebook. The data collection resulted in 673 cases from sixty-seven countries from all over the world and from a wide range of types of companies. We expect to find that a higher bargaining power and a higher cultural embeddedness of the communities leads to a shorter and less violent conflict. Furthermore, we expect that NGO involvement in the

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conflict and the sustainability focus of the MNE lead to weaker effects of the community characteristics on the conflict resolution.

In contrary to most previous studies on the MNE-indigenous communities relationship, the purpose of this study is explanatory. Previous studies have taken an

exploratory, qualitative or case-study approach. The quantitative approach makes it possible to generalize results over multiple contexts. This research contributes to the existing literature in three ways. First, it deepens the understanding of specific community characteristics that may influence conflict resolution. These characteristics have mostly been researched in an MNE-host government context, but not in an MNE-indigenous community context. Second, this research deepens the understanding of the role NGOs play in conflicts. The current literature again mostly concerns MNE-host government interactions and not MNE-indigenous community interactions. Besides, there is no clear conclusion about the influence of NGOs in conflicts. This research therefore broadens the existing literature on NGO involvement in conflicts. Third, this research adds to the literature about the sustainability focus of MNEs. Based on theories, positive results are expected, but researchers do not always find these positive results. This research complements current literature by testing the sustainability focus in an objective manner. MNEs, NGOs and indigenous communities can use the results of this research to shape current strategies in dealing with conflicts that occur.

The structure of this research is as follows: first, we give an overview of the existing literature. Second, we develop the theoretical framework, hypotheses and the conceptual model. Next, we describe the research method and the operationalization of the dependent, independent, moderator and control variables. After that, we test the hypotheses and draw a conclusion based on the results. The last part of this thesis is for the discussion of theresults, implications and suggestions for future research.

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Literature review

Indigenous communities

There is not one overall definition of the term indigenous communities. Generally it is accepted among scholars that communities are either characterized by a shared geography, meaning that they live in the same location, by regular interaction, meaning that there are certain social relationships, or by identity, meaning that the people in the group feel like they belong in this group based on shared beliefs, values and experiences (Lee & Newby, 1983). Dunham, Freeman and Liedtka (2006) take this a step further and distinguish between communities of place, communities of interest, virtual advocacy groups and communities of practice. Most companies will have to deal with one or all of these types of communities. The indigenous communities fit best within the communities of place concept (Calvano, 2008). In this type of community the physical proximity of the members determines the belonging to the community (Dunham, Freeman, & Liedtka, 2006). Firms have to take into account the effects their behavior has on the people living closest to their operations. While the academic literature deals with communities overall, a true definition of indigenous communities misses. The United Nations (2009) define indigenous communities as follows:

Indigenous communities, peoples and nations are those which, having a historical continuity with pre-invasion and pre-colonial societies that developed on their territories, consider themselves distinct from other sectors of the societies now prevailing on those territories, or parts of them. They form at present non-dominant sectors of society and are determined to preserve, develop and transmit to future generations their ancestral territories, and their ethnic identity, as the basis of their continued existence as peoples, in accordance with their own cultural patterns, social institutions and legal system. (United Nations, 2009, p. 4)

There are more than 370 million indigenous peoples in over ninety countries all around the world (United Nations, 2009). Almost every country on earth has some form of an indigenous community present. Due to globalization, MNEs have easier access to the lands and the resources that are owned by or belong to the indigenous communities.

Internationalization of MNEs is a threat to the communities, their land, traditions and cultures. The communities have to find ways to ensure survival and counter violations of their rights and autonomy (United Nations, 2009). When the interests of MNEs collide with those of the communities in a geographic area, this may lead to conflict (Calvano, 2008).

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13 Conflict between MNEs and indigenous communities

There are a lot of different definitions of conflict. An example is that conflict is “ the process which begins when one party perceives that another has frustrated, or is about to frustrate, some concern of his” (Thomas, 1976, p. 891). Overall all definitions of conflict have more or less the same characteristics, namely: there are at least two independent parties, these parties have incompatible concerns and there is some form of interaction between the parties

(Thomas, 1992). Each party in the conflict is mostly concerned with their own interests and thereby does not take into account the interests of the other party (Odhiambo, 2000).

As mentioned before, when MNEs invest in other countries, the main focus is on profit-maximization. With this focus, the way they manage the land differs from the way the indigenous communities would want it (Oltremari & Jackson, 2006). There are several specific guidelines for investment and indigenous communities, but these guidelines are not legally binding, so MNEs do not often adhere to them (O’Fairheallaigh, 2012; Whiteman, 2009; Whiteman & Mamen, 2002). With the recognition of indigenous rights, more and more MNEs only want to operate on indigenous lands after specific agreements with indigenous communities are reached (O’Faircheallaigh & Ali, 2008). Unfortunately, this is not yet the case for all MNEs. Furthermore, because foreign direct investment is desirable for the (mostly) developing countries where the indigenous communities live in, the governments tend to take the side of the MNE when conflict occurs (Holden, 2005; Sawyer & Gomez, 2012; Tzevelokos, 2010). They often oppress the interests of the indigenous communities and repress opposition from indigenous communities to make the investment process easier for the MNEs.

In the past decades there has been an increase in the amount of conflicts between MNEs and indigenous communities all over the world (Hodge, 2014). A possible explanation for this is that with the recent developments in communication, different communities within a country or even across countries have the possibility to connect and share experiences. This makes them feel confident and empowered, which leads to the fact that they no longer just accept anything the government or an MNE imposes on their grounds (Hodge, 2014). They want to be heard and want to have a significant influence on the projects and activities that are carried out on their territories. When they do not get this influence, this leads to resistance and conflict (Hodge, 2014; Kemp, 2010).

Conflicts can range on different dimensions, like intensity or duration. The intensity of the conflict reflects the amount of violence that is used in the conflict (Pinkey, 2005). This can range from low amounts of violence, like formal opposition and lawsuits, to high amounts

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of violence, like injury and deaths. The Conflict Life Cycle model (Lund, 1996) describes the different phases and ways of dealing with conflict. Even though this model is aimed at state-conflict, it is applicable to multiple types of conflict (Swanström & Weissmann, 2005). The first phase in the model is stable peace where tensions are low. The second phase is unstable peace where there is more tension. The third phase is open conflict, where concrete steps are taken to deal with the conflict. The fourth phase is crisis, where violence is sporadic. The final phase is the war phase where the violence is widespread and intense. The solution for

conflicts increases from discussions to changes in the underlying causes for the conflict, depending on the phase the conflict is in (Wenger & Möckli, 2003).

Another important dimension of conflicts is the duration of it. When the duration of the conflict is short, the MNE does not have to interfere and can keep business as usual going (Getz & Oetzel, 2009). When the conflict lasts longer, the MNE must readdress resources from the business to resolving the conflict, which costs them a lot of time and money (Davis & Franks, 2011). Furthermore, the intensity of the conflict can change over time. When a community starts with peaceful protests, but has the feeling these protests do not have the desired effects, they may feel the need for more violent options in the hopes that this will get the desired results (O’Faircheallaigh, 2012). More violent conflicts ask for more intense resolving strategies from the MNE, which costs them even more time and money (Davis & Franks, 2011; Wenger & Möckli, 2003).

When the MNE gets into a conflict, it is important to know how to deal with it. In a state-conflict the MNE can keep out of the conflict, unless in interferes with business. When companies come into conflict with parties in the host country, or are present in countries where conflict is going on, literature typically offers two options for the MNE (Oetzel, Getz, & Ladek, 2005). These options are to avoid the conflict or to retreat from the country or site where the conflict takes place. When violence is too intense they can suspend business until the conflict is solved (Getz & Oetzel, 2009). However, when the MNE has contributed to the conflict, either directly or indirectly, it has the moral obligation to stay and try to help resolve it (Getz & Ladek, 2004). In the conflict resolution MNEs can play an important role by taking action or supporting action undertaken by others (Bennett, 2002; Oetzel, Getz, & Ladek, 2007). Besides, retreating from a project is very costly for the MNE because of the high investment costs, particularly in resource-extraction projects (Davis & Franks, 2011).

Dealing with the conflict is important for both the MNE and the indigenous

community, because conflicts have negative consequences for both. In many previous cases, indigenous communities had the ability to disrupt or delay projects proposed by MNEs or

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even to force the MNE to abandon the project site (Trebeck, 2007). Besides, managing conflicts costs the MNE a lot of time and money and it can lead to damage to the company’s reputation or even loss of support from the home- or host government (Davis & Franks, 2011; Laplante & Spears, 2008). The negative consequences for the indigenous communities can be: disease or death, contamination of drinking water or fishing water, erosion of traditions and identity, destruction of the land they depend on and even displacement from their own ancestral lands (Foster, 2012). Because of these negative consequences for both parties, it is important to know what exactly the factors are that lead to conflict and what can be done to resolve the conflict, or even de-escalate it so both suffer the least (Calvano, 2008).

Bargaining power of communities

One element that leads to conflict is the stakeholder power inequality, or the low bargaining power of the communities (Calvano, 2008). MNEs take the interests of external stakeholders into account more and more, but the indigenous communities do not get that much attention. One model that can help to explain this is the stakeholder salience model (Mitchell, Agle, & Wood, 1997). In this model the influence of the different stakeholder groups is based on three characteristics; power, legitimacy and urgency. The indigenous communities do not have much power compared to other stakeholders and their claims are not seen as legitimate or urgent. Based on this model, the importance of the indigenous communities is not high enough to be able to influence the decisions of the MNE (Calvano, 2008).

Another theory that explains the effects of bargaining power is the Bargaining Theory (Bacharach & Lawler, 1964). In this model there are two variables that affect the power in a relationship. The first are the stakes, meaning the dependence on the relationship and its outcomes. The second is the choice of alternative options. A party has a low bargaining power when the stakes are higher and the choice of alternatives is lower. When looking at the

relationship between indigenous communities and MNEs, the indigenous communities have the lowest bargaining power, because they are dependent on the actions of MNEs and the outcomes of these actions and they do not have much choice for alternative options. The same thing is concluded based on the Resource Dependence Theory (Pfeffer & Salancick, 1978). In this theory it is expected that control over or possession of critical resources leads to power in a relationship. Because MNEs have the control over the resources, they have more power compared to the indigenous communities.

Power-Dependence theory describes how the relations between two parties with differing degrees of power play out (Emerson, 1962). Power is defined here as the resistance

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which can be overcome. The less power one party has in comparison with the other, the less they can resist against the choices that the more powerful party makes. The more powerful party can assert two types of power of the less powerful party (Yu, Kilgour, Hipel, & Zhao, 2015). The first is direct power, where they can directly influence the behavior of the other party and the second is indirect power, whereby circumstances are changed in such a way that the less powerful party has to be submissive and adjust to these circumstances. When there is no agreement between the two parties, because one has more bargaining power, this is proven to lead to conflicts, like strikes as a result of disagreements in labor negotiations between companies and their employees (Sieberg, Clark, Holt, Nordstrom, & Reed, 2013).

The stakeholders that do get the attention of the MNEs are the ones which are seen as legitimate, who can exert direct power on the company and whose claims are urgent

(Mitchell, Agle, & Wood, 1997). These stakeholders are the ones that are critical for the survival of the firm, like employees, suppliers and the host country’s government (Hart & Sharma, 2004). This focus leaves out threats that other “fringe” groups – e.g. the poor, weak, non-powerful, non-legitimate, non-urgent, indigenous groups – can have. In researches about the complaints of indigenous communities it becomes clear that the underlying reason for dissatisfaction of communities with MNEs in fifty percent of the cases resides in the fact that the MNE did not get consent from the community before starting the project, or did not even conduct consultations with the communities (Laplante & Spears, 2008). When the

communities are not satisfied, this may again lead to conflict (Calvano, 2008). The focus on only the “important” stakeholders leads to the fact that the MNE can only deal with threats from the communities after they emerge (Hart & Sharma, 2004).

A way to deal with the dissatisfaction of the communities is a formal negotiation between the parties that are involved in the conflict (Oetzel, Getz, & Ladek, 2005). With these types of strategies, positive relations are formed between the parties, which helps in resolving the conflict faster. Besides, research finds that proactive engagement and collaboration between two parties leads to faster conflict resolution (Jamali & Mirshak, 2010). Cooperation between two parties in a conflicts leads to less tensions and more trust and understanding (Tung, 1998). In cases of state-community conflict, it proved successful to let the community co-manage operations, to make sure that their wishes were not overlooked (Castro & Nielsen, 2001). It thus seems that when communities get the option to have an influence on the

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17 Cultural isolation of communities

Another thing that can lead to conflict is the cultural isolation of the communities (Calvano, 2008; Lotila, 2010). With colonization, the cultures of indigenous communities were

influenced. Many indigenous communities adapted to the foreign cultures either by choice or by force (Montenegro & Stephens, 2006). The more exposed populations suffered the most from colonization, but there are also communities that lived in the environments that were isolated or difficult to reach, that were able to keep their cultures the same without influences from the outside (Montenegro & Stephens, 2006). This leads to communities that range from totally isolated to totally embedded in the mainstream culture of the country they reside in (Baruzzi, Barros, Rodrigues, Souza, & Pagliaro, 2001).

Culture is an important concept, because it is the underlying factor that influences formal institutions like formal rules, governance of the rules and the way resources are allocated (Williamson, 2000). The more different the cultures of two interacting parties are, the more difficult it is for those two parties to interact with each other (Ghemawat, 2001). This is because they do not understand each other’s norms and values and the underlying forces of the social exchange (Tihanyi, Griffith, & Russell, 2005). When one of the parties in the interaction makes a decision, without understanding the point of view of the other party, the chance is higher that the choice will not satisfy both parties.

The culture of indigenous communities is very important. Research shows that it is mainly cultural and environmental issues that lead to conflict or intensify conflicts, instead of economic or political issues (Acuña, 2015; Bruijn & Whiteman, 2010). Furthermore, culture is an important underlying concept of the identity of the indigenous communities (Bruijn & Whiteman, 2010). Research shows that the higher the cultural differences between two

groups, the more difficult it is for them to adapt to each other (Hultman, Robson, & Katsikeas, 2009). Besides, when two groups have different cultures and therefore different wants and needs, this causes friction and possibly violent conflict (Shenkar, 2001).

In addition to the possibility of misunderstandings, cultural isolation may lead to conflict because of two other reasons. The first is that the most isolated cultures are not used to Western policies. With the investment of mostly Western MNEs, the traditional livelihoods that the communities were able to keep because of their isolation is in danger (Bruijn & Whiteman, 2010). People that are from an isolated culture and come into contact with more mainstream cultures, have a bigger chance of adapting to this new mainstream culture, which is called acculturation (Ward, Stuart, & Kus, 2010). Acculturation leads to identity-conflict, which then leads to a negative feeling of general well-being (Kwan & Hilson, 2009). An

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example of this is that the indigenous peoples of the Machiguenga in Peru, who were very isolated with little or no contact with the outside world, were introduced to money after the investment of Shell on their lands. Some of the families became dependent on money, which angered others in the community, because their traditional culture was lost (Bruijn &

Whiteman, 2010). The indigenous communities lay the cause of these acculturation

consequences with the MNE. When the MNE does nothing to counter this acculturation, this leads to the communities feeling the need for action against the MNE (Bruijn & Whiteman, 2010; Calvano, 2008).

The second additional reason that cultural isolation may lead to conflict is that certain dimensions of culture may lead to different types of dealing with the conflict (Oetzel, Getz, & Ladek, 2001). When the MNE is not aware of these dimensions in the isolated communities, it is difficult to deal with them, which can lead to friction and therefore more violent and longer conflicts (Oetzel, Getz, & Ladek, 2001). One dimension that has influence on how someone deals with conflict is the individualism/collectivism, as proposed by Hofstede (1983). This dimensions reflects how much people within the culture see themselves as an individual or as a part of a group and it reflects which goals are more important, those of the individual or those of the group (Hofstede, 1983). When there is conflict within a group that is more individualistic, the people are likely to be competitive, when there is conflict within a group that is more collectivistic, the people are likely to be cooperative (Chen, Chao, Xie, & Tjosvold, 2017). When there is conflict between two groups, collectivistic groups are more likely to be competitive, because they want the best outcomes for the group and have the feeling that the other group is standing in the way of this. When there is conflict between two parties and one group is more individualistic, this will likely lead to more cooperation, because some individuals in the group may think that the other group may help them in achieving their personal goals (Chen et al., 2017). An example is that there were a few families in the aforementioned Machiguenga group, who did not challenge the MNE, but acculturated, used money and Westernized (Bruijn & Whiteman, 2010). They cooperated to get the best possible result. A second cultural dimension that may influence how groups deal with conflict is the power distance, which is the extent to which groups accept and expect that power is unequally distributed (Hofstede, 1983). People who live in cultures that rank high in power distance, accept hierarchy and sanctions or rewards based on their status in the society. Cultures that rank low in power distance feel like everyone should have equal rights and power should be distributed equally (Oetzel, Getz, & Ladek, 2001). Cultures high in power distance will most likely avoid conflicts, or try to integrate the wants and needs of both

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opposing parties, while cultures low in power distance will most likely use aggressive strategies and try to “win” the conflict. When the communities are more isolated and have little or no contact with the outside world it is harder for the MNE to figure out these dimensions of culture and how the community will most likely react in the face of conflict. This will most likely lead to misunderstandings and unpredictable ways of dealing with the conflict. When a community is more embedded in the mainstream culture of the country they live in, it is easier to figure this culture out and to come up with strategies to deal with this group.

NGO involvement

An often used strategy to try to resolve conflicts, is to involve a non-governmental

organization (NGO). NGOs are “formal (professionalized) independent societal organizations whose primary aim is to promote common goals at the national or international level”

(Martens, 2002, p. 282). There are three types of NGOs (Teegen, Doh, & Vachani, 2004). The first are advocacy NGOs, who represent groups that do not have the access or the voice to defend their own interests. The second are operational NGOs, who provide services and goods to groups that have unfulfilled needs. The third are hybrid NGOs, who do both

(Teegen, Doh, & Vachani, 2004). NGOs exist in all shapes and sizes, and range in geographic scope and topical coverage (Doh & Teegen, 2002).

NGOs play an important role in filling institutional voids, where MNEs and governments have not managed to fulfill the needs that customers or groups of people in society have (Teegen, Doh, & Vacahani, 2004). NGOs take the role of the voice of society by critiquing businesses or governments (Doh & Teegen, 2002). Based on the Stakeholder Salience Model (Mitchell, Agle, & Wood, 1997) it is expected that NGOs in comparison to indigenous communities are more salient, have more power, and their claims are more urgent (Guay, Doh, & Sinclair, 2004). This view is strengthened, because they have more resources and are connected to global networks and are therefore seen as more legitimate (Newell, 2005). When there is a conflict, the other parties will most likely listen to the NGO sooner than to the indigenous community. Besides, the NGOs have unique experience with and knowledge of the indigenous communities, because of their proximity to them (Brinkerhoff, Smith, & Teegen, 2003). Furthermore, they are trusted more than companies or government, because of the clear focus on social welfare and the fact that they are not influenced by market-pressures (Leonard, 2002). Because both the MNE and the indigenous communities

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want to work with them, they are often deployed in negotiations (Guay, Doh, & Sinclair, 2004).

The strategies NGOs perform in this intermediary role range from dialogues with MNEs to boycotts and divestments, to trying to make formal legislation to force the MNE to behave in a certain way (Winston, 2002). The NGO has the ability to bridge between and bond two partners in the negotiation process (Teegen, 2003). The role of the NGO can vary in every negotiation (Guay, Doh, & Sinclair, 2004). It can range from advocating change, to consulting on decisions, to the role as company shareholder. Some NGOs like Sierra Club and Friends of the Earth take on multiple roles. NGOs have shown to be able to promote real changes in the way MNEs operate, which leads to a more positive social and environmental impact (Arenas, Sanchez, & Murphy, 2013). Besides, they are able to give provide the fringe groups access and voice to defend their interests and with this they can also promote positive social and environmental impact, or at least mitigate the negative impact (Doh & Guay, 2004; Vachani & Smith, 2004).

Another advantage of NGOs in the society, is that they have the possibility to help govern the activities of other actors (Teegen, Doh, & Vachani, 2004). To try to protect the rights of indigenous communities all around the world, the UN adopted the Declaration on The Rights of Indigenous Peoples (Stavenhagen, 2009). Besides, the International Labour Organization made the Covention 169 on the rights of indigenous and tribal peoples. These guidelines are increasingly being implemented, but there is still a large gap between the legislation and practice (Stavenhagen, 2009). There is no explicit accountability of MNEs under current laws (Winston, 2002). MNEs have oftentimes exploited public and collective goods because of this (Teegen, 2003). NGOs play an important role here, because they are able to establish codes and assess compliance to these codes (Teegen, 2003; Teegen, Doh, & Vacahani, 2004).

Involvement of an NGO in the negotiation process does not only benefit the

community, but it can also benefit the MNE. This is because the NGO has information about the community, that is difficult or costly to obtain for the MNE (Gray & Stites, 2013; Reficco & Marquez, 2012). This information helps the MNE to operate without problems in the current environment, but it also helps the MNE when it wants to enter into similar areas (Hart & Sharma 2004; Murphy & Dixon, 2012). Furthermore, this information is important for MNEs when their intentions are set on positive social and environmental impacts. This is because research shows that current programs of MNEs for community development were not able to integrate expectations from the community and are criticized because they are not able

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to really address the issues that the communities face, or the root of the problem the

communities have (Eweje, 2007; Manteaw, 2008; Idemudia & Ite, 2006). Because the NGOs have an extensive knowledge of the contexts and problems the communities face, they can teach the MNEs how to operate (Den Hond, De Bakker, & Doh, 2015; Kolk & Lenfant, 2012).

Because of the knowledge of the NGO and the ability of the NGO to lead to positive social and environmental outcomes, the influence of the bargaining power of the community itself is likely of less importance for the conflict resolution. This is because the NGO can bargain on behalf of them and even the communities with the smallest bargaining power can get outcomes that they agree with. Besides, the NGO can transfer the knowledge about the culture of the community and how to deal with this culture to the MNE. The MNE can use this to come up with strategies to deal with them, which helps in conflict resolution.

Sustainability focus of the MNE

Another way to resolve conflicts may be the sustainability focus of the MNE. When the MNE focuses on sustainability, it tries to create the greatest positive or least negative effects for the environment and stakeholders (Lertzman & Vredenburg, 2005). More specifically,

“sustainable development is development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987, p. 8). This means that the company does not only focus on financial value, but also on environmental and social value creation with their business model (Bocken, Short, Rana, & Evans, 2014). When an MNE has a sustainable business model, it focuses on capturing economic value, while at the same time trying to create positive or mitigate negative social and environmental consequences of the business (Schaltegger, Ludeke-Freund, & Hansen, 2016). The focus of sustainability is on humans and human well-being (Moldan, Janouskova, & Hak, 2012). Furthermore, the focus is on long-term effects and on future generations, instead of on short-term gains. When

companies are economically sustainable, this means that they use their cashflow to keep producing high returns for shareholders (Dyllick & Hockerts, 2002). The environmental and social sustainability are the dimensions that affect the relation between the MNE and the community the most (Lertzman & Vredenburg, 2005).

Environmental sustainability is when the company tries to improve the welfare of humans by protecting the sources for human needs and by making sure that the waste of the company is not too high (Goodland, 1995). Furthermore, the company then uses natural

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resources at a lower rate than the natural reproduction of these resources or the development rate of substitutes for it, and that they use the resources that humans depend on in a

responsible manner (Dyllikc & Hockerts, 2002). When the company focuses on

environmental sustainability, it will do its best to create as much positive and as little negative value for the environment as possible (Schaltegger, Hansen, & Ludeke-Freund, 2016). This way of handling the environment is also what the indigenous communities want most (Lertzman & Vredenburg, 2005). Because of this, they may not need as much bargaining power to influence the decision so that the outcome is to their wishes and because of this, the isolation of the communities does not matter that much, because the MNE will do its best to use the environment in a way that does not harm the community.

There is not a clear-cut definition of social sustainability, but all definitions contain more or less the same elements (Moldan, Janouskova, & Hak, 2012). The dealing of the MNE have to make it possible to maintain the cohesion of the community and the ability of the community to work towards common goals (Gilbert, Stevenson, Girardeet, & Stren, 1996). Besides, the social identities, relationships and social institutions have to be able to continue into the future (Black, 2004). Overall, the company should try to add value to the

communities in which it operates (Dyllikc & Hockerts, 2012). This way of dealing with the social environment of the community is also how the communities would like to see it (Lertzman & Vredenburg, 2005). Because the decisions will most likely be more in line with the wishes of the community, they will not need that much bargaining power to influence the decisions and therefore the bargaining power will be less important for conflict resolution. Besides, the MNE will do its best to meet the social needs of the community it is dealing with, which most likely makes the cultural isolation of the community less important for conflict resolution.

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Theoretical framework

The influence of bargaining power on conflict resolution

Based on the theories about bargaining power, the party with the most bargaining power has the ability to have the most influence in the negotiation process (Emerson, 1962; Whiteman, 2009). A reason for dissatisfaction of indigenous communities with MNEs is half of the time the fact that the MNE uses its power to make decisions that mostly reflect their own wishes, namely economic value creation, without taking into account the wishes of the community, namely social and environmental value creation (Laplante & Spears, 2008). The

dissatisfaction often leads to conflicts (Calvano, 2008). Research on state-community conflicts finds that active participation in the conflict and active communication with the community are an effective technique in conflict resolution (Wolf, Deitelhoff, & Engert, 2007). Cooperation leads to a faster conflict resolution (Jamali & Mirshak, 2010), and more agreement on the actions to be taken (Eisenhardt & Martin, 2000). The satisfaction leads to less (violent) conflicts (O’Faircheallaigh, 2012).

The current literature mostly concerns conflicts between the government of a country and the indigenous communities living in that country. Because MNEs are large and have a lot of influence, they are comparable with national governments. Therefore, we expect that these effects are comparable for conflicts between MNEs and indigenous communities. When an indigenous community has more bargaining power, this means that they have more

influence on the outcomes of the negotiation process. They can then steer the focus of the MNE more towards social and environmental issues. The outcomes of the negotiations and the decisions on the value-adding actions to be taken will then be more in line with the wishes the indigenous communities. When the communities feel that they are taken seriously, the amount of violence and the duration of the conflict will likely be less.

An example of a successful program where there was conflict between the state and indigenous communities, which was solved by increasing the bargaining power of the

communities, is the Joint Forest Management program in India (Sundar, 2000). The forests in India were before owned by the state. This led to resistance of the indigenous communities living in the country, who felt that they were the rightful owners of the forests. Agreements were signed between the indigenous communities and the state that the communities were now the main beneficiaries of the forests and the communities were consulted about management decisions. This led to less conflicts, because the communities felt that their

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wishes were heard and taken into account. Based on the prior, the next hypothesis is formulated:

H1: The higher the bargaining power of the community (a) the shorter the duration of the conflict and (b) the lower the degree of violence in the conflict.

The influence of cultural embeddedness on conflict resolution

MNEs have started to take the culture of the country they invest in more into account (Calvano, 2008). The problem with existing measures of cultural distance, is that they are measured on a national level (Drogendijk & Slangen, 2006). An underlying assumption of these measures is that the culture is homogenous in a country and that there are no variations within a country. However, the communities may have their own values and norms, differing from the ones of the country they live in (Banerjee, 2001). When the MNE takes into account the culture of the host country, they still do not understand the culture of the communities residing within that country (Calvano, 2008). Research shows that in several cases where organizations worked with isolated indigenous communities, this did not lead to positive outcomes, because of misunderstandings between them (Maldonado et al., 2013; Veland et al., 2013). Besides, it seems that MNEs do not understand the specific knowledge indigenous communities have that is unique to their culture and that they use to make decisions about everything they do in their lives (Owiny, Mehta, & Maretzki, 2014).

The more isolated the culture of the community is, the harder it is for the MNE to know and understand this culture. The culture is really important for the indigenous communities, because it is a part of their identity. Because specific information about the culture and identity of the isolated communities is difficult and costly to collect, the MNE may choose not to allocate a lot of resources to do this. This may lead to problems with proper understanding of the wants and needs of this community and therefore choices that do not adhere to these wants and needs. When the community is more embedded in the culture of the country they live in, this culture is more easily observable and the research into this culture is less costly and difficult. The MNE can easily investigate and take it into account while making decisions. Furthermore, the different dimensions of the culture that lead to different strategies for dealing with the conflict make this even more difficult. When the MNE is not aware of the culture of the community they do not know which strategy to pursue when they come into conflict. When the community wants to cooperate and the MNE has a more competitive strategy, this may lead to more violence and a longer time before a conclusion is reached, and the other way around. When the community is more integrated into the

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mainstream culture of the country, it is easier to predict what kind of strategy the community most likely will use and to come up with a fitting counter strategy, which leads to quicker conflict resolution and less violence because of mutual understanding.

An example where the isolation of a community led to more violence and longer conflict, is the case where Shell International developed the Camisea Project to drill for oil on the lands of the Machiguenga indigenous peoples in Peru (Bruijn & Whiteman, 2010). The Machiguenga are an isolated community, who mostly depend on the lands they live on for survival, by fishing and hunting. When Shell invested in the oil drilling on their lands, they did try to include the community by having public hearings, but the decisions they eventually took about the projects were not in line with what the community wanted. Their main concern was respect for the flora and fauna. Shell did not and could not completely adhere to these concerns, which led to a fierce opposition from the community from the beginning onwards (Bruijn & Whiteman, 2010). The isolated nature of the community hereby led to

misunderstandings and a difference in the aspirations of the community and the MNE and therefore a longer and more violent conflict. Based on this, the next hypothesis is formulated: H2: The higher the cultural embeddedness of the community (a) the shorter the duration of the conflict and (b) the lower the degree of violence in the conflict.

The influence of NGO involvement

For the resolution of conflicts in general it is important to introduce a third party that can dehumanize the issue and can create an opportunity for both parties to have an objective and rational view on the situation (Ralph, Welch, Norris, & Irwin, 2013). In the strategies that are mentioned in the Conflict Life Cycle Theory (Lund, 1996) one recurring theme is the

introduction of a third party that can mediate between the two parties. In conflicts between MNEs and indigenous communities NGOs can serve as a third, mediating, party. NGOs have been successful in getting MNEs to make changes in governance and corporate behavior and have been able to make MNEs behave more ethically and socially responsible (Doh &

Teegen, 2003; Guay, Doh, & Sinclair, 2004). On the other hand there are researchers that find that the involvement of NGOs is not as positive as expected. Winston (2002), for example, concludes from his research that NGOs do not have the power to change corporate behavior unless they are also able to change the perceptions of other important stakeholders like consumers and governments. Furthermore, NGOs keep making alliances with MNEs because MNEs can give them financial resources and a better reputation (Den Hond, De Bakker, & Doh, 2015). This can then lead to a lower perception of legitimacy and objectivity of NGOs,

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because the communities get the idea that NGOs are mostly concerned with the wishes of the MNE (Blowfield & Frynas, 2005).

Because the legitimacy and objectivity of the NGO only influences the decision to involve an NGO in the negotiation process, but not necessarily the outcomes of this involvement, these negative perceptions probably do not influence the conflict resolution. NGO involvement is likely to weaken the effects that the community bargaining power and cultural embeddedness of the community have on the conflict resolution. This is because the NGO has a focus on social and environmental impact, and have been successful before in changing behavior of MNEs. When they interfere in the negotiation process and they get the MNE to act responsibly, the communities do not need their bargaining power to influence the decision, because the NGO has represented their wishes. For all types of communities this is likely to lead to outcomes that the community agrees with, and therefore there is probably less of a difference between the communities with small and large bargaining power. Furthermore, the NGO has specific knowledge about the community because of the proximity. They can provide the MNE with this knowledge, which the MNE can use to make choices that are in line with the culture of the community. The NGO is likely to have knowledge about even the most isolated communities. Therefore, when an NGO is involved in the negotiation process, the difference between satisfaction with the outcome of communities that are more or less embedded in the mainstream culture is likely smaller.

Doh and Guay (2006) discuss three examples of cases where NGOs were effective in changing company behavior and policies. The first is the case for prohibition of Genetically Modified Food in the EU. NGOs have been successful in changing public opinion about the subject and thereby made the issue more salient. The higher salience of the issue led to a change in EU and national policies and even the pull out of some MNEs out of the EU food-sector. The second example is the case of access to HIV/AIDS medicine, where NGOs were successful in changing the views of a big MNE (GSK). They thereby changed the behavior and goals of the MNE. The third example is the case where NGOs were successful in

changing the policies of the EU regarding climate change. In all cases the NGOs increased the salience of the issue, thereby changing the behavior of MNEs and the legislations from

governments. This then leads to behavior that is most likely more in line with the wishes of the communities, making the bargaining power less necessary and the effect of cultural embeddedness less important. Based on the prior, the next two hypotheses are formulated: H3: The higher the involvement of NGOs, the weaker the effect of community bargaining power on (a) the duration of the conflict and (b) the degree of violence in the conflict.

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H4: The higher the involvement of NGOs, the weaker the effect of cultural embeddedness of the community on (a) the duration of the conflict and (b) the degree of violence in the conflict.

The influence of sustainability focus

MNEs that have a sustainability focus, try to create social, environmental and economic value, while at the same time trying to mitigate the negative social and environmental impacts of the business (Schaltegger, Hansen, & Lüdeke-Freund, 2016). Indigenous communities depend greatly on the lands they live in, not only for food and living, but also on a spiritual level (Lertzman & Vredenburg, 2005). When MNEs do not take into account that the

communities depend on the land that they work with, this can lead to dissatisfied communities and therefore conflict (Lertzman & Vredenburg, 2005). Furthermore, when MNEs do not take into account the social practices like culture and traditions, this can also lead to choice that leave the communities dissatisfied. On the other hand research finds that the current CSR programs of MNEs cannot live up to the expectations based on the theoretical models (Blowfield & Frynas, 2005). Researchers argue that companies use CSR programs as a form of “greenwashing” and to look good and get a better reputation, while they do not actually perform sustainably (Munshi & Kurian, 2005; Frynas, 2010). Another critique is that current CSR programs are based mostly on a Western worldview, while the view of actions that are needed to be taken is different from the view of the communities (Khan & Lund-Thomsen, 2011). Furthermore, companies claim that they are committed to sustainable principles, but they do not implement it, because it is not integrated in the business strategy (Slack, 2012).

The more the MNEs focus on sustainability and therefore the more they focus on increasing positive and decreasing negative outcomes of their actions, the more they are likely to listen to the communities and involve the communities in the choices that they make. Because this focus is more similar to the focus of the communities, they do not need a lot of bargaining power anymore to influence the decision. Because the focus is more similar, the outcomes of the decision making process will be more to the liking of the communities, and the less likely that the communities feel like they need to mobilize to get their way.

Furthermore, the more the MNE is focused on sustainability, the more they will do their best to understand the cultures of even the most isolated communities. This will then lead to negotiation strategies and decisions that will be more in line with all cultures. Therefore the difference between the effects of a more or less embedded culture will be weaker, because the MNE will do their best to understand both types of cultures.

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An example of this is the case where the First Nations in Clayoquot Sound Canada were in conflict with the forestry companies operating on their grounds (Lertzman & Vredenburg, 2005). The First Nations set up roadblocks, occupations and demonstrations against the forestry companies. This critics led to an independent panel to pressure the companies to more sustainable behavior. Because of the panel the company behaved more environmentally and socially sustainable. This led to satisfaction of the First Nations and therefore a quicker conflict resolution. Based on the prior, the next two hypotheses are formulated (for an overview of all hypotheses, see Figure 1):

H5: The higher the sustainability focus of the MNE, the weaker the effect of community bargaining power on (a) the duration of the conflict and (b) the degree of violence in the conflict.

H6: The higher the sustainability focus of the MNE, the weaker the effect of cultural embeddedness of the community on (a) the duration of the conflict and (b) the degree of violence in the conflict.

Conceptual model

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Method

Sample and data collection

This research is explanatory, meaning that the objective is to establish causal relationships between the independent variables cultural embeddedness and bargaining power and the dependent variables severity and duration of conflicts. Furthermore, the causal relationships of the moderating variables NGO involvement and sustainability focus of the MNE on the aforementioned effects will be established. To increase the internal validity of this research, several control variables are taken into account, namely: the experience of the MNE with a specific community, the institutional strength of the host country and the concentration of power within the community.

To get a representative sample, we collected cross-sectional data from secondary sources. Data-collection was from the perspective of the firm. The secondary sources are all sources that describe a conflict between an MNE and an indigenous community. The sample that resulted from this data collection consists of 706 cases. The countries in which the

conflicts take place range from developed countries (like Australia and the USA), to emerging countries (like Brazil and South Africa), to developing countries (like Ethiopia and Nigeria). MNEs involved in the conflicts described in this sample range from well-known big

companies (like Royal Dutch Shell and Walmart) to lesser known and relatively smaller companies (like Vale and Petroecuador). Because this sample is very broad, it leads to a better external validity, because the results can be generalized to a broad range of conflicts with different types of countries and companies.

Independent variables

The first independent variable is the bargaining power of the communities. Based on the Bargaining Theory, Resource Dependence Theory and Power-Dependence theory, we expect that when the community has a higher bargaining power, this means that they are included in negotiations about the project more (Bacharach & Lawler, 1964; Emerson, 1962; Pfeffer & Salancick, 1978). We thus measured the bargaining power of the community by looking at how much they were involved in the project. When there were discussions or agreements between the MNE and the community, or when the community was involved in managing the MNE’s project, this was coded as “involvement” (1). When there was no involvement of the community by the MNE, this was coded as “no involvement”(0).

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The second independent variable is the cultural embeddedness of the communities. There are communities that are embedded in broader ethnic groups, communities that are connected to the broader groups but still isolated, and there are communities that are isolated and have their own culture and language (Banerjee, 2001). We therefore measure cultural embeddedness by looking at the degree of embeddedness in broader ethnic groups, with coding ranging from (1) highly isolated (different language and not connected to a broader ethnic group), to (2) connected to broader ethnic group but isolated within the group, to (3) embedded within a broader mainstream ethnic group.

Dependent variables

The dependent variables are both components of the overall conflict resolution concept. The first dependent variable is the duration of the conflict. The length of the conflict represents the amount of months the conflict lasted (Calvano, 2008). At the time of data-analysis a lot of the conflicts in the sample are still ongoing. Because it is not possible to predict how long the conflicts will last, it would not be possible to use these in the analyses. Therefore the ‘end’ of all ongoing conflicts is set at September 2017, the month of data collection. After that, we calculated the median of the conflict length and based on that, conducted a new variable. The conflicts with a length from zero to eighty-four months count as “short” conflicts, while conflicts that last more than eighty-four months count as “long” conflicts. In this way all the conflicts that are ongoing can still be taken into account in the analyses.

The second dependent variable is the degree of violence in the conflict between the MNE and the indigenous communities. The measurement of this variable is based on the Conflict Life Cycle Model, which describes the severity of conflicts (Lund, 1996). In this model the intensity of conflicts ranges from stable peace, where the tension between the two parties is low. The type of conflict that fits into this category are peaceful negotiations. The second level in unstable peace, where the conflict becomes bigger, but there is still no open violence. The type of conflict that fits in this category is peaceful protests. The third level is open conflict, where both parties need to do something about it. The type of conflict that fits in here is the court action. The fourth level is the crisis phase, where the intensity is even worse and there are some violent outbursts. The type of conflict that fits in here is the low-level violence and intimidation tactics. In the fifth low-level the violence is intense and

widespread. Because this is still a broad category, three types of conflicts are distinguished in this level. The first is high-level violence including physical damage but no kidnapping or deaths, the second is high-level violence including kidnapping but no deaths and the third is

Conflicts between indigenous communities and multinational enterprises : the effects of community characteristics on conflict resolution and the moderating influence of NGO involvement and sustainable focus