The role of stakeholders in corporate social responsibility strategies in the aviation industry

The role of stakeholders in corporate social responsibility

strategies in the aviation industry

Student name: Alexander Hunink

Student number: 10655077

MSc in Business Administration

Specialization: International Management

Supervisor: D.J.H.M. van den Buuse

Second supervisor: dr. M. K. Westermann-Behaylo

Submission date: 31-01-2015

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Abstract

This thesis researches the role of stakeholders in establishing or adapting the Corporate Social Responsibility (CSR) strategies of European and American organizations in the aviation industry. The primary goal of this research is to gain insight in this dynamic process to create a better understanding of the influence of stakeholders. Therefore, this research synergizes theories from the fields of CSR and stakeholder management as overarching theoretical lenses. To achieve the goal of this research, an in-depth qualitative multiple case study was conducted on the six largest airlines in Europe and America. The results of this study show that in all cases certain stakeholders can directly influence the CSR strategy. However, there are significant differences in which type of stakeholder is prioritized in the process of establishing or adapting the CSR direction. Furthermore, it showed that an increase in demand of local stakeholders does not always lead to a tailored strategy. The results of this research may offer managers and academic researchers new insights in the role of stakeholders in the context of CSR strategies.

Keywords: Corporate social responsibility (CSR), CSR strategy, stakeholder theory, stakeholder salience, institutional theory, global strategy, local strategy

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Statement of originality

This document is written by Alexander Hunink 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

Looking back on this interesting process of writing a master thesis, I realize such a project could not succeed without the help of others. I would like to sincerely thank my supervisor Daniel van den Buuse. His suggestions, comments and feedback showed to be invaluable for the completion of this thesis. On a personal level, the ongoing support and the pleasant cooperation kept me motivated throughout the entire period and significantly contributed to the development of this research. I would also like to thank my family and friends, who involuntarily and continuously had to listen to my epiphanies concerning the content of this research. All these valuable contributions have been of utmost importance for this project.

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Table of content

2.1 Corporate social responsibility ... 12

2.1.1 The concept of CSR ... 12

2.1.2 CSR typology ... 16

2.1.3 Strategic use of CSR ... 17

2.2 Stakeholder theory ... 18

2.2.1 Concept of stakeholder theory ... 19

2.2.2 Identification of stakeholders ... 20

2.2.3 Stakeholder salience ... 22

2.3 Stakeholders in the global and local CSR context ... 24

2.3.1 Integration of stakeholders into the CSR context ... 25

2.3.2 Global vs local CSR context ... 27

2.4 Concluding remarks ... 30

3. Propositions ... 31

3.1 Stakeholder salience in CSR strategies ... 31

3.2 Local adaptation of CSR strategies to local stakeholders ... 33

4. Research methodology ... 35

4.1 Research design ... 35

4.1.1 Research philosophy, approach & strategy ... 35

4.1.2 Case selection ... 36

4.1.3 Data collection & analysis ... 37

5. Results ... 42

5.1 Within-case analysis ... 42

5.1.1 Within-case analysis Lufthansa ... 42

5.1.2 Within-case analysis Air France-KLM ... 48

5.1.3 Within-case analysis British Airways ... 53

5.1.4 Within-case analysis United Airlines ... 58

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5.1.6 Within-case analysis American Airlines ... 68

5.2 Cross-case analysis ... 73

6. Discussion ... 79

6.1 Stakeholder salience in CSR strategies ... 79

6.2 Local adaptation of CSR strategies of local stakeholders ... 82

7. Conclusion ... 83

7.1 Scientific relevance & managerial implications ... 84

7.2 Limitations & future research... 85

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Index of figures and tables

Figure 2.1 Stakeholder model 20

Figure 2.2 Stakeholder classifications 23

Table 2.1 Global and local CSR 28

Table 3.1 Overview of propositions 34

Table 4.1 Case description 38

Table 5.1 Within-case analysis Lufthansa 44

Table 5.2 Within-case analysis Air France-KLM 49

Table 5.3 Within-case analysis British Airways 54

Table 5.4 Within-case analysis United Airlines 59

Table 5.5 Within-case analysis Delta Air Lines 64

Table 5.6 Within-case analysis American Airlines 69

Table 5.7 Cross-case analysis 78

Table 6.1 Overall result of the working propositions 82

Abbreviations

CPDR Corporate Philanthropic Disaster Response

CSR Corporate Social Responsibility

DJSI Dow Jones Sustainability Index

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1.

Introduction

In the past decades, managers and academics have come to realize that organizations not only serve the necessary financial needs of the shareholders in order to maintain business (Chapple & Moon, 2005; Doh & Guay, 2006; Yuan et al., 2011). The traditional shareholder paradigm rests on meeting shareholders’ interests and rejecting stakeholders without a financial claim on the organization. In a world where organizations increasingly need to contribute to society, should meet their moral obligations towards constituencies, and are perceived to take responsibility for their actions, corporate social responsibility strategies may guide organizations to obtain better performances or to build ‘a reservoir of goodwill’ for when organizations are negatively impacted (Vaughn, 1999). In strategic management, CSR is increasingly relevant for organizations due to the intensely competitive, interconnected and global arena in which many of them operate (Gee & Norton, 2013). However, the concept of CSR and the strategic use of it is still in its infancy, as some prominent scholars consider the maximization of shareholders wealth as the organization’ single social duty whereas others see tremendous economic value in considering and balancing the interests of a variety of stakeholders (Orlitzky et al., 2011).

In the second dogma, which gained in popularity, organizations must become more adept to integrate the social responsibility, ecological sustainability and economic competitiveness into an all-encompassing strategic orientation (Baron, 2001). The relevancy of integrating these facets into the overall organizational strategy resides in the competitive advantages (Samy et al., 2010), which can be obtained through innovative developments (Bonn & Fisher, 2011), differentiation advantages (Galpin & Whittington, 2012) and positive stakeholder perceptions (Martínez & del Bosque, 2014). The greatest challenges for approximately 80% of the organizations worldwide in this process were to identify and prioritize issues, measure performances and develop strategies and policies (Bonn & Fisher, 2011). Despite the organizational deficiencies, the role that stakeholders have in identifying and prioritizing issues for the corporate social responsibility (CSR) is under theorized (de Roeck &

9 Delobbe, 2012). The management of stakeholders and the actions of stakeholders could be a crucial factor in establishing the CSR strategies, which received scant attention in the academic literature (Fassin, 2009; Habisch et al., 2011; Perez-Batres et al., 2012; Reimann et al., 2012).

However, the conceptualization of stakeholders’ relationship with the organization is often framed as two separate entities, whereas dyadic relationships would be more appropriate (Greenwood, 2007). Within these relationships, some salient stakeholders may have the privileged position to orchestrate a CSR campaign that is driven out of self-interest (Husted & Allen, 2006). The underlying mechanisms for CSR perspectives and ideologies in Europe and the United States are dependent on the prevalent business model (Matten & Moon, 2008). Therefore, salient stakeholders or other stakeholder groups may encounter different treatments in different nations or institutional environments (Sotorrío & Sánchez, 2008). In explaining differences in establishing the CSR strategy, the literature overlooked the region as unit of analysis (Sotorrío & Sánchez, 2008). Aguilera et al. (2007) add to this discussion by noticing differences in engagement pathways to influence the CSR strategies within different geographical regions, and suggest more comprehensive comparative studies. Still, empirical investigation on this subject is limited (Gomes et al., 2010; Jackson & Apostolakou, 2010; Habisch et al., 2011; Yang et al., 2011). Habisch et al. (2011) did explore the relationship between stakeholder dialogue and characteristics of national business systems, but did not specify the individual influence or role of stakeholders to alter the CSR strategy.

Ever since organizations started to expand internationally, they encountered difficulties in addressing the multitude of an efficient, standardized global CSR strategy or a responsive, tailored local CSR strategy (Barkemeyer & Figge, 2014). This process also includes an increase in significant responsibilities to both local and international stakeholders (Zyglidopoulos, 2002). Both stakeholders, with often conflicting concerns or priorities, demand responsiveness on CSR issues, which increases the complexity of the strategies and its associated coordination structures (Logsdon & Wood, 2005). Some scholars (e.g. Aruthaud-Day, 2005; Sherer & Palazzo, 2008) state that the organization will

10 have to manage social issues in all the environments in which it is active. However, the degree to which local and global stakeholders influence the CSR strategy is unexplored territory for academia (Husted & Allen, 2006). Organizations are confronted to respond to local stakeholders and tailor the CSR strategies or to adopt the CSR traditions of the home country (Muller, 2006). This dichotomy is well-addressed for general business strategies, but relatively under theorized for CSR strategies (Muller, 2006; Jamali, 2010).

Therefore, this research addresses the gap in the literature related to the influence of stakeholders on CSR strategies in different institutional environments, in both the global and local context. As the literature does not provided a clear-cut answer to this complex interaction, this research will respond to the request of many scholars to investigated this relationship in multiple industries (e.g. Eesley & Lenox, 2006; McWilliams et al., 2006; Boesso et al., 2014; Dobele et al., 2014). It stretches out to an industry with a substantial environmental impact and many potential conflicting demands to identify which stakeholders influence the CSR strategy. The research question which will be central in this thesis will be:

RQ: How do stakeholders influence the CSR strategy of European and American airlines in both the local and global context?

The aviation industry is characterized by intense regulation, high entry barriers, high capital costs and tendencies towards oligopolies (Lynes & Andrachuk, 2008). It is a highly competitive industry with net profits margins of 1,1%, 1,8%, and 2,6% in 2012, 2013, and 2014 respectively (IATA, 2013a). In 2013, the air transport industry worldwide generated 3,4% of the global GDP (ATAG, 2014) and the fortunes of the industry are moving in the right direction (IATA, 2013a). However, the aviation industry also faces growing environmental and social responsibilities (Kimber, 2007; Lynes & Andrachuk, 2008). The demand for air transportation will make it difficult to stay within internationally agreed emission limits (Bows & Anderson, 2007; Owen et al., 2010). Since the industry’ growth is inherent with many other unresolved issues in which the CSR strategy could play

11 a role, the need to manage and determine the role of the crucial stakeholders is essential. Airlines increasingly engage in CSR programs for several reasons: long-term financial strategy, eco-efficiencies, competitive advantages, good corporate citizenship, image enhancement or a desire to avoid regulatory actions (Lynes & Andrachuk, 2008). However, there is a gap in the literature pertaining the interactions and responses of stakeholders in establishing or adjusting CSR strategies in the aviation industry. By knowing how to assess the role of each stakeholder in the CSR decision-making process, these situations can be better managed and could yield better performances. The contribution of this project will be that managers and organizations can be guided in their quest to optimize the relationship between CSR strategies and the stakeholders.

The remainder of this thesis will be discussed briefly. At start, the literature review provides a detailed overview of existing knowledge on this subject. In this section a discussion and a critical evaluation of this literature is given to justify the research project. This in-depth literature review culminates into the propositions. Subsequently, the appropriate research design will be explained in the methodology section based on these statements. A concise description of the process of data collection will be given. It continues with the result section, where the findings of this research are systematically presented. The discussion section clarifies any deviations in the results from existing literature. Rival explanations are considered and corresponding findings with existing literature will be discussed. The conclusion summarizes key findings of the thesis, the scientific relevance, the managerial implications and the limitations.

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2.

Theoretical framework

This section discusses the theoretical approaches and frameworks that are relevant tools for a thorough analysis of the influence of stakeholders on corporate social responsibility strategies in the aviation industry. Based on academic literature, this section provides an up-to-date representation of the key concepts that are relevant for this research. Theories concerning corporate social responsibility and stakeholder management give the possibility to approach the research topic from multiple perspectives. Subsequently, the theories will be integrated to provide a richer conceptualization of the role of stakeholders on corporate social responsibility strategies.

2.1

Corporate social responsibility

Corporate social responsibility is identified as malleable (Devinney, 2009), elusive (Smith & Langford, 2009) and complex (Aruthaud-Day, 2005; Muller, 2006; Sherer and Palazzo, 2008; Russo & Perrini, 2010). Although there is a myriad of definitions concerning CSR present in the literature, a clear and uniform definition of this social construct still lacks (Gee & Norton, 2013; Idowu, 2014), which is the biggest lacuna of CSR (Taneja et al., 2011). In other words, “the term (CSR) is a brilliant one; it means something, but not always the same thing, to everybody” (Votaw, 1973, p. 11). Dahlsrud (2008) found 37 definitions of the concept, which included at least one of the following dimensions: voluntariness, stakeholders, social, environmental and economic improvement. One universal definition may be achievable even if the concept is impossible to be unbiased (Dahlsrud, 2008). CSR activities can take multiple forms to achieve desired goals, which can be for the organization’ or society’s good (Lantos, 2001). The strategic use of CSR is still in an embryonic stage, as well as the concept of CSR (McWilliams et al., 2006; Orlitzky et al., 2011), suggesting incongruent perceptions of what CSR is and how it can successfully be implemented at organizations.

2.1.1 The concept of CSR

The rising expectations of societies for organizations culminated in an imposed social consciousness of organizations (Lantos, 2001). Subsequently, this led to a corporate ‘’social contract’’ with its

13 stakeholders and society at large (Lantos, 2001). These duties to society are firmly entrenched and embodied in corporate social responsibility initiatives. Early work of Frederick et al. (1992, p. 14) defined CSR as ‘’a principle stating that corporations should be accountable for the effects of any of their actions on their community and environment’’. This definition especially highlights the obligations for the organization and lacks to address the potential business possibilities. The research field concerned with the benefits of CSR is unexplored and little is known about how CSR impacts the relationship with stakeholders (Aguinis & Glavas, 2012). Khoury et al. (1999) formulate CSR as ‘’the overall relationship of the corporation with all of its stakeholders’’, which approaches CSR from a relational perspective. However, this definition is too broad as CSR can more explicitly be defined in terms of actions of the organization, constituencies’ concerns and relationship management.

In this research, corporate social responsibility is defined as (Cheng et al., 2014, p. 1) ‘’the voluntary integration of social and environmental concerns in their companies’ operations and in their interactions with stakeholders’’. However, nowadays one may question how voluntarily these actions actually are since many organizations decide to engage in corporate social responsibility (CSR) activities and not engaging in CSR could be a serious disadvantage (Arvidsson, 2010). These motives may be enforced by the presence of the Global Reporting Initiative (GRI) which is an organ that standardizes CSR information to benchmark and rank CSR initiatives. It mobilizes organizations’ actors to stimulate demand for accountability and increases information disclosure (Nikolaeva & Bicho, 2011). Although the concept of CSR has been characterized as blurry and fuzzy (Geoffrey, 2001), these standardized measures leave minimal room for confusion and increase the credibility of an organization (Du et al., 2010; Nikolaeva & Bicho, 2011). In line with that, organizations may feel coerced to invest in these CSR activities in order to survive (Husted & de Jesus Salazar, 2006).

The pressures to engage in social and environmental issues stem from various stakeholders and are increasingly felt by organizations (Orlitzky et al., 2011). Besides the rising need to address and satisfy the wants and needs of societies, organizations may have other purposes to actively get involved in CSR. The incentives to engage in CSR activities are divergent, like the improvement of

14 corporate image or reputation, financial motives, customer loyalty, or strengthening relationships with customers or other stakeholders (Sen et al., 2006). More engagement of stakeholders is positively related to CSR performance (Bénabou & Tirole, 2010; Eccles et al., 2013), which makes the relationship an interesting field of research since both actors can gain from CSR practices.

Another underlying dimension which pressures organizations in many ways is the institutional environment and the CSR approaches can be seen as a reaction to this (Habisch et al., 2011). From the institutional perspective, organizations comply with the norms, rules, values, incentives and traditions empowered by the formal and informal institutions, which makes the organizational (CSR) behaviour predictable from perceptions of legitimate behaviour (Zucker, 1977; Eisenhardt, 1988). The informal and formal institutions, by definition, make legitimacy of the organization’s behaviour context and history dependent. Institutions, as the ‘’carriers of history’’ (David, 1994), evolve differently due to path dependence and local pressures. Husted & Allen (2006) and van Tulder & Kolk (2001) both evince the influence of institutions on the prioritization of organizational CSR activities. In line with this, institutions force organizations’ processes and structures to become isomorphic within a similar context through uncertainty, pressures from other organizations on which the organization is dependent on, and similar created worldviews through similar education (DiMaggio & Powell, 1983). In general, the mix of formal and informal institutions from the country’s cultural heritage make the institutional environment unique (North, 1990). Regulative, normative and cognitive processes embedded in the institutional environment drive the homogenization of CSR activities across countries (Matten & Moon, 2008).

CSR perspectives and ideologies may be dependent on the prevalent business model (Matten & Moon, 2008). The Anglo-American (or Anglo-Saxon) model and the Continental European (or Rhineland) model are legacies from institutional evolutions. The Anglo-American model suggests that organizations are economic entities with the purpose to maximize shareholder value, with the United States as a proponent for this dogma (Koen, 2005). The Continental European model considers organizations as socially embedded business institutions with a stronger focus on the community and

15 a wider range of stakeholders. This business model can be found in European nations and parts of Asia (Fiss & Zajac, 2004). Stakeholders have a pivotal role in this model, surpassing the importance of the shareholders (Fiss & Zajac, 2004).

In explaining differences in CSR, the literature overlooked the region as unit of analysis (Sotorrío & Sánchez, 2008). Differences in European and American perspectives on CSR originate from a plurality of drivers, such as differences in cultures (Egri et al., 2004), managerial values or perceptions (Schlegelmilch & Robertson, 1995; Maignan & Ralston, 2002; Welford, 2005), corporate governance systems (Useem, 1988) and stakeholders’ configuration`s, pressures and expectations (Brammer & Millington, 2004; Shen, 2004; Kolk, 2005; Marquis et al., 2007). CSR in the United States and Europe evolved differently because of their national business systems (Sison, 2009). Due to the historically grown institutional frameworks in Europe, European organizations have a larger public ownership, more heavily try to integrate the collective interests and have higher cultural reliance on institutions like the unions, employee associations, political parties or the government (Matten & Moon, 2008). Doh & Guay (2006) elaborate that despite CSR in the United States gained earlier use, the European environment demanded societal obligations that went beyond the responsibilities of the financial investors. They also state that there is a ‘’relatively more advanced awareness of and support for CSR in Europe‘’ (2006, p. 49), which suggests differences in expenditures and stakeholder approaches. Stakeholder configuration may play an important role in predicting CSR expenditures, since Whitley (1999) suggests that similar stakeholder networks result in similar giving patterns. Organizations in the same region will address the same social issues intra-regional (Welford, 2005) and the frequency of expenditures tends to be similar as well (Fortanier & Kolk, 2007).

Muller & Whiteman (2009) found a ‘home region effect’ in corporate philanthropic disaster response (CPDR), which illustrated that organizations devote more attention to a disaster in geographical proximity. The pattern of CSR, which holds a more stabilized pattern compared to CPDR could be designed in a similar vein. An organization often perceives itself as universalistic saviours (Ilies, 2012), but can be viewed as a marionette of the stakeholders to propitiate their desires on a

16 regional level. The possibility to explain why organizations engage in particular CSR activities from these perspectives should not be ignored. Especially, studies overlooked how different regions may have geographical factors that influence the CSR expenditures (Muller & Whiteman, 2009). American organizations prefer intra-regional CSR initiatives, as the strategic CSR incentives are inherited from the institutional context and driven by mimetic regional pressures (Kolk, 2005). However, European organizations are less influenced by the home region effect (Muller & Whiteman, 2009).

2.1.2 CSR typology

The literature does not provide a cornucopia of CSR categorization methods. To classify CSR activities, Lantos (2001) distinguished CSR based on their purpose and nature. The purpose can be related to the organization’s good, stakeholder’s good or both and the nature is determined by required or optional initiatives. Based on this classification, CSR can be distinguished into three mutually exclusive types a business can practice: altruistic, ethical and strategic CSR (Lantos, 2001). Altruistic CSR contributes to the common good at the expense of the organization and goes beyond rectifying harms they have caused. It is optional by nature and relatively rare (Smith & Quelch, 1993). Ethical CSR is concerned with fulfilling the mandatory ethical duties of an organization. The ‘’social responsibility’’ of the term CSR in this specific setting refers to the moral responsibility to stakeholders where it might inflict actual or potential inquiry. It tries to correct for the harm it caused or to prevent the potential damage it generates. The strategic CSR faced less scepticism as it aligns the CSR activities with the organizational goals. This ‘’philanthropy aligned with profits motives’’ (Quester & Thompson, 2001, p. 34) do good to the society and to organizations, and is expected to grow in popularity (Lantos, 2001). The social responsibility simultaneously contributes to the financial benefits in the long-term. Thus, CSR investments are justified due to the created goodwill among stakeholders (Lantos, 2001). The initiatives are discretionary by nature, but always have underlying motives and trigger mechanisms favourable for the organization.

Galbreath (2006) proposed four strategies to select CSR activities for organizations; the shareholder strategy, altruistic strategy, reciprocal strategy and the citizenship strategy. The

17 shareholder strategy is focused exclusively on maximizing shareholders returns and driven by pure profit motives. In the altruistic approach, organizations are seen as part of the community which should give something in return to contribute in a positive manner to society. It is a philanthropic gesture for which the organizations do not expect anything in return. Organizations may contribute on a recurrent basis or on an intermittent basis, such as CPDR. Muller & Whiteman (2009) corroborate this work by concluding that CPDR is regional by nature. This confirms that organizations are inclined to direct the CSR budget to regional issues. Another possible explanation is that organizations could reap more benefits from the surrounding regional community or that CSR managers feel more empathetic towards constituents in the home country (Campbell et al., 2012). The third proposed strategy to adopt is the pragmatic reciprocal strategy, which provides an economic benefit for the organization while improving society. In this enlightened form of self-interest, organizations are proactive for CSR activities which are generally linked to the core activities of the organization. For example, CSR projects that are initiated to reduce the fuel emission level have economic benefits for the organization and environmental benefits for the society. This mutual benefit does make the organization’s motives genuine and sincere (Marín et al., 2012). The citizenship strategy tries to manage the often conflicting demands of the constituencies of the organization. Organizations should proactively dialogue with stakeholders and integrate as many findings as possible into CSR related decisions. Margolis & Walsh (2003) conclude that this strategy offers tangible financial benefits as well as intangible rewards, like extraordinary reputations.

2.1.3 Strategic use of CSR

The demands of many stakeholders to engage in CSR practices are increasing, which forces managers to determine how CSR activities can be an effective tool to meet the obvious and latent responsibilities while being economically competitive (Orlitzky et al., 2011). Increasingly, organizations align the CSR initiatives with the overall strategy, which can create a situation of mutual benefits for the stakeholders and the organization. Unilever even replaced the overall business strategy for the CSR strategy, which indicates the rising importance of CSR (Unilever, 2013).

18 The strategic integration of CSR into the overall business strategy has shown to be very effective (Yuan et al., 2011). However, many CSR programs of organizations are diffuse and unfocused, missing the essential connection between the core activities of the organizations (Porter & Kramer, 2006). The rationale behind pursuing a CSR strategy is that it can defend or strengthen the organization’s reputation, be integrated into the broader strategy, be an opportunity to learn, innovate and manage risk and it can be justified by the monetary and non-monetary benefits (Carroll & Shabana, 2010).

The relationship between CSR and financial performance is one of the most highly researched areas (Boesso et al., 2014), but still is the subject of lively controversy (Pedersen, 2006). Less attention is paid to what the preferred CSR strategy is for stakeholders. Whether CSR has a positive or negative influence on the organization’s financial performance, a CSR strategy that is aligned with the preferences of the stakeholders may actually benefit the organization (Michelon et al., 2013). The organization exploits its position when it links the CSR initiatives with the preferences of the stakeholders with the most salience and engages in CSR activities that are most relevant for the overall strategy (Boesso et al., 2014). Studies on stakeholder theory have also confirmed that an appropriate strategic approach to manage stakeholders has a positive impact on financial performances (Freeman, 1984; Jones, 1995; Berman et al., 1999; Barnett, 2007). As financial motivations are perceived to be important from the organization’s point of view, this interaction with involving stakeholders into the CSR decision-making process is a promising avenue for a thesis.

2.2

Stakeholder theory

The body of literature pertaining stakeholder theory is growing for the last 30 years. However, the debate about what kind of entity it is has not ended yet (Parmar et al., 2010). Stakeholder theory is concerned with managing the interests of all the constituencies of a corporation and is a conception of ethics and organizational strategy (Donaldson & Preston, 1995; Freeman et al., 2010). Stakeholder theory is a useful and comprehensive theory to display how the organization is embedded in society and applying this theory leads to more effective management practices (Mitchell et al., 1997). For the organization to be successful, it has to create value for all stakeholders and integrate their interests

19 in the decision-making process (Mitchell et al., 1997; Freeman et al., 2010). The organization has moral and ethical obligations toward all the stakeholders and the organization’s success is dependent on how well the relationships between stakeholders and the organization are managed (Freeman & Phillips, 2002). The integration of stakeholders’ expectations in the overall business strategy explains the organization’s existence, because these constituencies provide the crucial resources and returns on which the organization is dependent on (Donaldson & Preston, 1995; De Roeck & Delobbe, 2012).

2.2.1 Concept of stakeholder theory

The term stakeholder is widely used, but one uniform definition is not maintained throughout the development of stakeholder theory, which leads to inconsistency about what a stakeholder is and who can be addressed as a stakeholder (Starik, 1994). Pioneering work of Freeman (1984, p. 46) defined stakeholders as “any group or individual who can affect or is affected by the achievement of the organization’s objectives”. This definition has suffered from criticism by interpreting many groups as a stakeholder, even terrorist, blackmailers and thieves (Phillips & Reichart, 2000; Jensen, 2002). Virtually everyone ‘’can affect or can be affected’’ by an organization’s decision due to the rising phenomenon called globalization and the technological evolution (Sternberg, 1996; Metcalfe, 1998; Orts & Strudler, 2002). A more nuanced definition can be found in the work of Hill and Jones (1992, p. 133), which stated that stakeholders are "constituents who have a legitimate claim on the firm". Still, this definition consists of ambiguity to clearly separate stakeholders from non-stakeholders. Refinement of this definition was needed and many scholars responded to this request.

Miles (2011) found 435 different definitions for this concept, which raise questions about whether the same concept is meant. Furthermore, some criticizers (e.g. Freeman et al., 2010) state that there is too much ambiguity in the definition of the term stakeholder for it ever to be admitted to the status of theory. Although much disagreement exists over this concept, stakeholder theory developed in a nuanced way and is often used in combination with other theories, like network theory (Rowley, 1997) or resource-dependency theory (Frooman, 1999). According to Rowley (1997) the organization does not respond to only one single stakeholder, but to the aggregated demand of

20 all stakeholders. The considered relationships go beyond the dyadic stakeholder-organization relationship and also focus on the relationships the stakeholders have with each other. Resource-dependency theory in stakeholder management proposes that the behaviour can be explained by the mutual dependency on each other’s resources. Each actor may obey the other’s claim, since the resources are crucial for its own existence and give leverage over the other party (Frooman, 1999).

2.2.2 Identification of stakeholders

The shareholders, employees, suppliers, customers and the community are typical stakeholders for an organization (Atkinson et al., 1997). To these constituencies the organization has an ethical responsibility which varies across the type of stakeholder. Stakeholders can be categorized into internal stakeholders and external stakeholders (Donaldson & Preston, 1995; Eesley & Lenox, 2006).

Figure 2.1 depicts how internal and external stakeholders are interconnected with an organization. The internal stakeholders are seen from the organization’s perspective and represent the employees and the shareholders (Donaldson & Preston, 1995). They are directly involved or affected by management innovation (Beringer et al., 2012). The external stakeholders (e.g. governments, suppliers, trade associations, political groups, customers and communities) are not contractually bonded with the organization, but the organization has incentives to meet their demands as they can exert substantial pressure and impact the organization (Eesley & Lenox, 2006). This model faced criticism by Rowley & Moldoveanu (2003) for the absence of stakeholder-stakeholder relationships and stakeholder-stakeholder group formations.

21 In a similar vein, stakeholders can be viewed as primary or secondary stakeholders, making the primary stakeholders more closely involved in the organization and without whose support an organization cannot exist (Clarkson, 1995a). Secondary stakeholders are those who are affected by the organization yet not engaged in the transactions of the organization (Castka & Prajogo, 2013). Yet another approach to differentiate stakeholders is based on cooperative of collaborative characteristics. Besides these distinctions, the literature also classifies stakeholders into voluntary and involuntary classes (Clarkson, 1995b), and strategic or moral classes (Goodpaster, 1991). The ambiguity of the definition of stakeholders, as well as the wide range of stakeholders’ typologies corroborates the finding that the construct lacks a theoretical foundation (Argandoña, 1998). Interchanging these concepts leads to confusion and inaccurate constructs, conclusions and theories. Notwithstanding the abundance of typologies, stakeholders affect the organization’s performance directly or indirectly.

The shareholders are the most important stakeholder of an organization and their demands form the primary objectives of the organization (Atkinson et al., 1997). The organization has moral and financial obligations toward these stakeholders. Shareholders can perform pressure if these obligations are not met and can directly influence the organization’s strategy. However, even this ancient fundamental principle in economies may be questioned nowadays, as scholars (e.g. Tomas & Hult, 2011) bring the customers into the position of most important stakeholder. Emendation of stakeholder models is highly recommended, as they evolve over time. The secondary objectives of the organization are concerned with the relationship with the other stakeholders and gaining their resources (Atkinson et al., 1997). The secondary stakeholders can supply the organization with the critical resources and they expect that their interests will be satisfied in exchange (Hill & Jones, 1992). This research area has come to attention to scholars, but as Argandoña (1998, p. 1098), stated there is ‘’a lack of any normative rationale or criteria for identifying who the stakeholders are or for allocating the rights corresponding to each one’’. A suitable approach to manage stakeholders is hard as scholars define stakeholders differently and thus identify another spectrum of stakeholders.

22 Depending on the identified network, the strategy can change and lead to different results. Stakeholder identification plays a significant role and should have more attention as well as the responses and actions of stakeholders (Rowley & Moldoveanu, 2003; Eesley & Lenox, 2006; Laplume et al., 2008; Fassin, 2012).

Donaldson and Preston (1995) identify stakeholders through interest in the organization. The organization must have any corresponding functional interest in the stakeholder as well. In that sense, stakeholder’s interest is of intrinsic value. In other words, each stakeholder involves or participates out of self-interest and has no further interest in other stakeholders (Donaldson & Preston, 1995). This method has considerable overlap with agency theory, which states that different cooperating parties have different goals and try to maximize their own value (Eisenhardt, 1989a).

2.2.3 Stakeholder salience

Mitchell et al. (1997) made a significant contribution to the academic literature by identifying stakeholders based on possessing one or more of the three relationship attributes: legitimacy, power and urgency. The legitimacy of the organization is based upon a claim, which can be in the form of a contract, moral right, legal title or right, exchange, risk-status or a moral interest as a consequence of the organization’s actions. The stakeholder’s power indicates to what extent the entity is able to influence the organization’s behaviour. Urgency refers to the degree the claim of the stakeholders calls for or requires immediate response. Put together, these three facets represent stakeholder salience, which is defined by Mitchell et al. (1997, p. 878) as ‘’the degree to which managers give priority to competing stakeholder claims’’.

Based on these three attributes stakeholders can be categorized (Figure 2.2). Eight typologies are identified with each a different set of attributes. Mitchell et al. (1997) conceptualization proposed that stakeholder salience is positively related to the cumulative number of attributes. Latent stakeholders possess only one attribute and include dormant, discretionary and demanding stakeholders. Dominant, dangerous and dependent stakeholders possess two attributes and

23 constitute expectant stakeholders. Definitive stakeholders possess all of the three attributes and non-stakeholders or potential stakeholders lack any attributes, indicating low salience.

Figure 2.2 Stakeholder classifications (Mitchell et al., 1997)

Stakeholder salience can help explain to whom and to what extent organizations pay attention or should pay attention. The degree of salience can change over time (Jawahar & McLaughlin, 2001) and can fluctuate between managers within the same organization, as it constitutes a managerial perception of reality constructed over time (Mitchell et al., 1997). Stakeholders have the potential to satisfy the critical needs of an organization, but the priority of the stakeholder is dependent on the value their resources can bring. This strategy overlaps with resource-dependency theory, which state that the extent to which an organization is dependent upon a stakeholder depends on a particular resource the organization is in need of. When organizations are viewed as one entity in a life-cycle stage, they seemingly strive for different stakeholder management philosophies as critical resources vary over time. Young organizations or organizations struggling for survival devote more attention to stakeholders that can grant them their critical resources, whereas mature organizations deal with most stakeholders in a proactive manner by adopting a risk-adverse strategy (Jawahar & McLaughlin, 2001).

Addressing the issues of primary stakeholders is considered an obligation to secure a flow of critical resources towards the organization to prosper. The theory provided by Mitchell et al. (1997)

24 and Jawahar & McLaughin (2001) demonstrate which stakeholder relationship is prioritized and how managers respond to them the way they do. On the other hand, stakeholders can influence the actions of organizations by adopting a persuasive strategy. Frooman (1999) proposed several stakeholder strategies depending on the mutual dependency. The basic tenet is that an entity’s need for a resource provides an opportunity for another to control it. To control the resources, a stakeholder may adapt a withholding or usage strategy. A withholding strategy is one where stakeholders may initiate the discontinuation of a resource to the organization with the purpose to alter the organization’s behaviour. A usage strategy does not restrict the organization for using the resource, but attaches conditions to the use of the resources. Besides the strategy, there are direct and indirect pathways to influence, which can be used for both proposed strategies (Elijido-Ten & Kloot, 2010). A direct pathway is one where the stakeholders manipulate the resource flow directly. Indirect pathways are those where a stakeholder without direct relationship with the organization works in concordance with another stakeholder, like trade unions and employees.

This moved the discussion away from neoclassic theory that this interaction was unidirectional and initiated by the organization. An organization can be viewed as a network of stakeholders in which the stakeholders surround the organization and all the stakeholders are interconnected with the organization. Appropriate management of this network can itself be a sustainable competitive advantage (Harrison et al., 2010). To create as much value as possible from this interrelated network, more fine-grained conceptual models need to be developed (Parmar et al., 2010). Integrating theories into the stakeholder theory is an interesting topic for future research.

2.3

Stakeholders in the global and local CSR context

The most extensive typology of organizations is presumably the Integration-Responsiveness framework of Bartlett & Ghoshal (1989). This framework gives guidance in the strategy based on pressures for global integration and pressures for local responsiveness. Global integration strategies are characterized by a centralized decision-making process aimed for efficiency and standardization, whereas local responsiveness strategies typically have decentralized coordination mechanisms and

25 allow for customization and adaption to local preferences. Although the issues of the global and local strategies received substantial systematic attention in the literature, the relation with CSR could count on a relatively small amount of attention (Jamali, 2010). Muller (2006) applied this widely accepted model on CSR strategies and found implications for both constructs. Furthermore, Muller (2006) stresses the crucial impact of the geographical location, which may account for discrepancies in CSR traditions.

2.3.1 Integration of stakeholders into the CSR context

Stakeholders have a significant impact on the CSR strategy of an organization (Muller, 2006; Aguilera et al., 2007; Parmar et al., 2010; Perez-Batres et al., 2012; Trapp, 2014). Adding the notion that more organizations try to integrate the CSR strategy into the overall business strategy (Galbreath, 2009; Jenkins, 2009; Yuan et al., 2011), makes the stakeholders even more influential in the organization. How stakeholders perceive CSR activities of organizations is vital, but yet understudied (Costa & Menichini, 2013). Following the dichotomy in reciprocity theory, stakeholders will either punish or reward corporations based on the evaluation of the moral obligations to the individual stakeholder (Graafland, 2002; Peloza & Papania, 2008). It can be beneficial to engage in CSR activities that non-financial stakeholders perceive as important, as they can withdraw their crucial support from an organization (McWilliams et al., 2006). Involving stakeholders in the decision-making process of CSR strategies is a relatively new field of research, which could generate a deeper understanding of the role of stakeholders and their influence on this process (Trapp, 2014). However, non-stakeholders appear to be noteworthy influencers in the decision-making process of CSR strategies (Trapp, 2014).

Trapp (2014) further elaborated that organizations fall short of the theoretical ideal of integrating the stakeholders directly in the CSR strategic decision-making process. CSR managers would adopt a listening role rather than exchanging ideas (Trapp, 2014), suggesting that this incongruence is due to lower perceptions of control. Involving an abundance of stakeholders increases the complexity due to divergent and often conflicting demands (Voinov & Bousquet, 2010).

26 Organizations ultimately have limitations to the extent they are willing to or able to address the concerns of salient stakeholders and non-salient stakeholders (Barkemeyer & Figge, 2014).

Nevertheless, the literature lacks to describe how different groups of stakeholders exert pressure and to what extent they do so (Castka & Prajogo, 2013). Logsdon & Wood (2004) analysed incentives for organizational actors and identified two distinct motives what catalyses them to engage in imposed CSR initiatives: instrumental motives and moral motives. Instrumental motives are driven by self-interest and self-fulfilment of organizational actors, and can be expressed by exerting pressure- for instance, by consumers to create healthier products. The motives driven by morality rely on personal-based values and ethical standards, which go beyond economic self-enrichment or self-fulfilment. These moral motives to pressure organizations to initiate CSR activities stem from particularly salient deontic motives of social actors, which are accelerated by the drive to correct for the imbalances in wealth among others.

Aguilera et al.’s (2007) multidisciplinary conceptualization of how social actors may push organizations to engage in CSR expended this dichotomy with relational motives. Relational motives recognize the relationships between the organization and the communities in which the organization is embedded and it pursues social cohesion. A second contribution of this study is the multileveled unit of analysis. Aguilera et al. (2007) addressed the CSR initiatives at an individual, organization, national and transnational level. It posited that stakeholders’ motives to place pressure on organizations to engage in CSR vary within different national business systems and different geographical regions. Besides this call for comprehensive comparative studies, it encourages to complement the stakeholder’s network the organization is embedded in. Still, empirical investigation on stakeholders’ pressures on CSR activities in different national business systems is limited (Gomes et al., 2010; Jackson & Apostolakou, 2010; Habisch et al., 2011; Yang et al., 2011). Sen & Cowley (2013) showed that the stakeholder theory is far from a superior paradigm. Contrary to what many scholars concluded, the study found evidence that stakeholders low in salience are prioritized over stakeholders with relatively high salience.

27 The fallacy of stakeholder theory and stakeholder salience is the simplification of reality by generalizing the size of the organization, sector or national context. Theoretically, it also lacks to notice that the relationship between the constituency and the organization is or can be distorted by the addition of other constituencies (Williamson, 1993; Rowley, 1997). Russo & Perrini (2010) and Sen & Cowley (2013) corroborated the simplification of reality by explaining the characteristics of stakeholder theory and its mismatch with SME. However, stakeholder theory is still perceived to address the CSR approaches of large organizations best (Park & Ghauri, 2014). Large organizations have the tendency to use more resources to act responsible and can address the demands of multiple stakeholders simultaneously. However, the external financial structures make larger organizations more devoted to monitoring the actions of shareholders and behaving in a manner favourable for this constituency, justifying the use of the stakeholder model. On the other hand, internally financed SMEs exploit their relationship with customers and the local community rather than the investors or shareholders. It may seem clear that stakeholder theory by itself is a contextual model, which did not account for variations in organizational sizes. It raises questions about the validity of the theory, as it is also unclear to what extent it can be used across sectors, institutional environments or development phases of a nation or organization.

2.3.2 Global vs local CSR context

As with corporate strategies, organizations face difficulties in addressing the multitude of global or local CSR practices (Barkemeyer & Figge, 2014). The borrowed typology of Prahalad & Doz (1987) and Bartlett & Ghosal (1989) classifies organizations in terms of local responsiveness and global integration and can be applied to operations in the field of CSR (Muller, 2006). In each environment in which the organization is operative, they will have to manage social issues (Aruthaud-Day, 2005; Sherer & Palazzo, 2008). This leads to significant responsibilities to both local stakeholders and international stakeholders (Zyglidopoulos, 2002). To address this responsibility a global or local CSR strategy could be followed (Table 2.1). By global CSR, the integration of a consistent CSR approach throughout the entire organization worldwide is meant. Local CSR approaches are characterized by

28 decentralized decision-making and are tailored to the host country context. Ideally, organizations retain global efficiency while enhancing local responsiveness. This typology is called transnational CSR and is relatively uncommon among organization (Husted & Allen, 2006; Barkemeyer & Figge, 2014). Drivers for global CSR activities are integration pressures exerted by multiple stakeholders, social issues on a global scale and the tendency to economize in CSR provisions (Husted & Allen, 2006). The advantages of a global CSR campaign are related to efficiency, an upward harmonization of international CSR standards, and to consistency in policies (Husted & Allen, 2006; Muller, 2006).

Unfortunately, this structure is accompanied by a lack of ownership, insensitivity to local demands and reaching host country minimal requirements for CSR practices (Christmann, 2004; Husted & Allen, 2006; Muller, 2006). This latter can backfire for organizations as CSR programs which vary in geographical focus lead to comparisons and ultimately to egocentric tendencies or dissatisfaction (Russell & Russell, 2010).

Barkemeyer & Figge (2014) noticed that there is a shift in global consistency for CSR practices of organizations due to ‘’the headquartering effect’’. This effect confines the strategy determination to the organization’s headquarter and positively discriminates the primary stakeholders of the headquarter at the expense of non (or host country) stakeholders. Earlier work of Levy & Kolk (2002) also found evidence for a centralized strategy formation in the home context and suggest that these are globally disseminated. Husted & Allen (2006) claim that organizations with a transnational or

29 multi-domestic business structure to a large degree follow local CSR activities compared to global organizations. Global CSR issues are equally addressed by all organizations, regardless of the internal structure (Husted & Allen, 2006). Jamali (2010) also raised the discussion by adding another variable, which is the nation’s developing stage. His findings conclude that the dominant global CSR strategies are diffused to developing countries. Contrary to this doctrine, Kolk & van Tulder (2004) perceived the local responsiveness as a dominant strategy across a range of organizations and industries. These strategies on a local level can be better suited for social issues as it can tailor to local preferences and cultures (Muller, 2006). The regulatory environment and the local NGOs may also stimulate a local strategy (Galbreath, 2006). Russell & Russell (2010) empirically test the consumers’ response to local CSR initiatives and found strong support to implement local CSR strategies due to higher personal relevance and direct benefits for the consumers. Disadvantages of local CSR strategies are a lack of ownership, internal tensions, fragmentation and the need for more coordination and control mechanisms (Muller, 2006; Jamali, 2010). Subsidiaries can adapt the protocols of the parent organization in a global CSR strategy or can adapt a local CSR strategy to adjust the CSR practices to the host country context. Proactive CSR approaches in autonomous subsidiaries show considerable overlap with the CSR approaches of the home country, despite the unrelated ties (Muller, 2006). Muller (2006) further elaborate on host countries with lower CSR standards. Surprisingly, in host countries with lower local CSR standards, decentralized decision-making structures are related to higher CSR performance locally (Muller, 2006). This suggests that the demands of local stakeholders are translated into the tailored CSR activities, which indirectly lead to better CSR performances.

The mixture of the findings from earlier work point to a necessary purification of the variables involved and supplementing influential variables. This thesis suggests that earlier research is contaminated and overgeneralized the findings. Organizations would preferably carry out CSR practices on a global level due to the related advantages. However, some social issues are only locally present, making a global strategy not suited.

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2.4

Concluding remarks

This chapter highlighted prominent theories in the field of CSR, stakeholder management and the coordination of CSR strategies in the global and local context. The scope of this research is limited to how stakeholders have an influence on the CSR strategy and the theories contributed to a deeper understanding of this phenomenon. With regard to CSR, the literature review was primarily focused on definitions and models, incentives to engage in CSR, the strategic use of CSR and differences in ideologies and perceptions. Research that links CSR and institutional theory is scarce, but can fruitfully add to our knowledge of CSR (Bondy et al., 2012). The institutional environment constructed variety in CSR ideologies among stakeholders and organizations. As a consequence, organizations in Europe and the United States may address different social issues, but intra-regional demands converge into a similar set of prioritized social issues.

The specific set of stakeholders may also vary, as well as the salience of similar stakeholders in different regions. Stakeholder salience is believed to have a positive relationship with the influence on organizational decision-making, but fairly recent research (Sen & Cowley, 2013) proved otherwise. The synergy and integration of stakeholder theory and cross-regional analysis may extend our knowledge pertaining stakeholder influences on CSR strategies. To cope with the local and global demands of the stakeholders and inherent the complexity, organizations may feel obliged to break down the global CSR strategy into the local CSR strategy to fit the local preferences. The extent to which stakeholders impact the choice of CSR practices in the local and global context is in its infancy (Park et al., 2014). To assess this topic, this research synthesizes insights from the local and global CSR debate and stakeholder theory. To identify and specify the scope of the research, the next chapter discusses the key researches that support the propositions.

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3.

Propositions

This section is devoted to the propositions in this research. Therefore, it integrates research from the theoretical framework to formulate expectations from existing literature. The propositions are created to disapprove or confirm the assumptions made in the literature pertaining stakeholder salience in CSR strategies and the local adaptation of CSR strategies to local stakeholders demand.

3.1

Stakeholder salience in CSR strategies

Stakeholder salience provides a richer contextualization in describing the necessity to address particular stakeholder’ interests (Scholl, 2004). Salient stakeholders have the ability to exert pressures on the focal organization in order to alter its behaviour (Mitchell et al., 1997; Russell & Russell, 2010; Trapp, 2014). This phenomenon is indifferent for organizations in the United States and Europe (Donaldson & Preston, 1995; Matten & Moon, 2008). Shareholders are often cited as most salient stakeholder (Neill & Stovall, 2005) and its presence for the organization´s existence is crucial. A concern for the financial investors may arise in the form of monetary loses, but also in an inappropriate selection of CSR issues (Peloza & Papania, 2008; Boesso et al., 2014). Salient stakeholders may insist organizational involvement for divergent motives, and inappropriate responses according to salient stakeholders may seriously harm the organization (Neville et al., 2011). These demanding stakeholders may even control which social issues must be placed higher on the agenda of CSR managers. Especially, social issues with specific strategic advantages or social issues which could impact the financial situation may require more coerced attention. Recapitalizing, salient stakeholders may directly influence the addressed issues for the organization.

Proposition 1: Salient stakeholders are expected to have a direct influence on the prioritization of social issues in the CSR campaign for both European and American organizations.

In this research, institutional theory and stakeholder theory may manifest a synergetic character and provide a deeper understanding by taking the region into consideration. European organizations have had embedded relationships with a relatively larger set of stakeholders compared

32 to American counterparts (Matten & Moon, 2008). The multitude of stakeholders result in an increase in potential conflicting demands (Voinov & Bousquet, 2010) and this would not per se lead to a strategy that is aligned with the demands of the salient stakeholder. Fiss & Zajac (2004) found that shareholders play a less important role than other constituencies in Germany, which typically holds a Continental European business model. As shareholders value maximization is the primary objective of the organization in the Anglo-American business model (Koen, 2005), it is conceivable that stakeholders high in salience would be prioritized in the United States in formulating the CSR strategy. The scope of organizational duties tends to be limited to the minimum set by law (Sison, 2009). The ideologies among American managers fosters short-term goals and individualism, while European managers are encouraged to strive for collectivism and solidarity (Koen, 2005; Matten & Moon, 2008). The web of consulted stakeholders is perceived to be larger for European organizations, as there is a long history of involvement by other interest groups (Doh & Guay, 2006).

Proposition 2a: European organizations are not expected to prioritize stakeholders according to the salience on the organization for CSR strategies.

Proposition 2b: American organizations are expected to prioritize stakeholders according to the salience on the organization for CSR strategies.

The ideologies inherited from the path-dependent institutions set the scene for organizations and demarcate the CSR activities that are considered appropriate due to stakeholders’ demand (Kolk, 2005; Husted & Allen, 2006). For the following proposition, it is assumed that stakeholder salience would play a smaller role in European organizations. Within Europe, the involvement of the government, the financial structure and the education system exhibit similarities and may demand certain CSR activities (Matten & Moon, 2008). Fiss & Zajac (2004) postulated that European organizations would have a stronger focus on the community and have a wider range of stakeholders than the American counterparts. To comply with the seemingly larger amount of demands of the stakeholders, European organizations would be more likely to integrate those into the CSR strategy.

33 Proposition 3a: European organizations are expected to integrate demands of a large set of stakeholders in establishing a CSR strategy.

Proposition 3b: American organizations are expected to integrate demands of a small set of stakeholders in establishing a CSR strategy.

3.2

Local adaptation of CSR strategies to local stakeholders

The degree to which organizations should stimulate the development of locally formed CSR strategies in consultation with local stakeholders or create a consistent and centralized global strategies is subject of controversial debate (Jamali, 2010; Barkemeyer & Figge, 2014). International and domestic stakeholders with often conflicting demands pressure organizations to respond to global and local issues, which increases the complexity of CSR strategies and its associated coordination structures (Zyglidopoulos, 2002; Logsdon & Wood, 2005; Muller, 2006). Integrating the demands of these domestic and international interconnected networks suggest a twofold of approaches to establish CSR strategies. Operating in a global network with a diversity of stakeholders set in host countries would be a time-consuming process and would reveal many conflicting demands for which consensus is hard to reach. The involved complexity increases with the amount of stakeholders with a legitimate claim on the organization (Muller, 2006). Organization can cope with these demands by segmenting CSR strategies to align the preferences of a narrower stakeholder set (Jamali, 2010). On the other hand, less involvement of host-country, home-country or international stakeholders would hinder the identification of local preferences and would stimulate global CSR strategies. Issues addressed by the local stakeholders’ network will arise as crucial objectives for which the CSR strategy should accommodate for (Logsdon & Wood, 2005). This concession toward the growing demands of local stakeholders is found in European and American organizations (Husted & Allen, 2006). The headquartering effect indicates that the various stakeholders with local ties to the organization are often positively discriminated when CSR strategies are established (Barkemeyer & Figge, 2014).

34 Proposition 4: Both European and American organizations are expected to pursue local CSR strategies when the local stakeholders’ demand intensifies.

In sum, this section introduced the propositions that are supportive for the overall research question. The propositions concerning the second theme proposed that the degree of involvement of local stakeholders could have predictive power in establishing a local CSR strategy. Stakeholder salience could explain why some issues have a more central role in CSR strategies. To determine if organizations do prioritize these salient stakeholders, this research differentiates European and American organizations. It extends existing literature on this topic by postulating that European organizations are to a larger extent involved in CSR activities due to its greater support for CSR activities and its more advanced awareness. To determine if European organizations involve more stakeholders in this process by means of integrating more demands, the next chapter is devoted to the selection and description of the cases. Additionally, it explains the structure of the research and the data collection and data analysis process. The propositions are tabulated in the following table.

Table 3.1 Overview of propositions

Stakeholder salience in CSR strategies

P1 Salient stakeholders are expected to have a direct influence on the prioritization of social issues in the CSR campaign for both European and American organizations.

P2a European organizations are not expected to prioritize stakeholders according to the salience on the organization for CSR strategies.

P2b American organizations are expected to prioritize stakeholders according to the salience on the organization for CSR strategies.

P3a European organizations are expected to integrate demands of a large set of stakeholders in establishing a CSR strategy.

P3b American organizations are expected to integrate demands of a small set of stakeholders in establishing a CSR strategy.

Local adaptation of CSR strategies to local stakeholders

P4 Both European and American organizations are expected to pursue local CSR strategies when the local stakeholders’ demand intensifies.