The influence of stakeholders on the corporate social responsible strategy of multinational enterprises operating in commercial real estate

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Yanti Florentine Rabelink

Multiple case study with reference to Commercial Real Estate

A m s t e r d a m B u s i n e s s S c h o o l 2 5 - 0 3 - 2 0 1 6

The Influence of Stakeholders on Corporate Social Responsibility

Strategies

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THE INFLUENCE OF STAKEHOLDERS ON THE CORPORATE SOCIAL RESPONSIBLE STRATEGY OF MULTINATIONAL ENTERPRISES OPERATING IN COMMERCIAL REAL

ESTATE

Amsterdam Business School

MSc. Business Administration - International Management Master Thesis

Student: Yanti F. Rabelink Student number: 10974466 Date: 25th_{of March 2016}

First supervisor: Mr. D.J.H.M. van den Buuse MSc. Second supervisor: Dr. A.E. Kourula

Statement of originality

This document is written by Yanti F. Rabelink, student of the Amsterdam Business School, 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.

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Abstract

In this research the influence of multiple stakeholders and the influence of location adaption on corporate social responsibility (CSR) of multinational enterprises (MNEs) is investigated with reference to commercial real estate. This industry is highly under theorized, and by relating CSR to real estate, even less research is already conducted. Also is the existing literature about CSR about business that is conducted business to consumer (B2C), while in this industry business is conducted business to business (B2B). This explains the gap in the literature. The conclusion of this research is that real estate companies mainly use CSR as a marketing tool. Due to increased market demand, commercial real estate MNEs are communicating about CSR activities to its stakeholders. However, the engagement of companies for sustainable improvements is absent; this is because the focus of most stakeholders in the commercial real estate industry is attaining the highest possible financial returns. The stakeholders that demand for these high financial returns are the investors, shareholders, customers and the employees. Sustainable innovations implemented by companies are largely influenced by the rules and regulations imposed by the government. In commercial real estate are the employees rather influential stakeholders. Services provided by these MNEs require satisfied employees: which is attained by the high influence of employees on strategic CSR. Next to this, the service offered actually requires high involvement with all its stakeholders, which led to a CSR strategy that is adapted to the local needs. The CSR strategy mainly involves philanthropic CSR activities, subsequently these activities do not influence the whole supply chain. These activities are centrally decided, while, due to the required engagement with multiple stakeholders, the CSR strategy is locally adapted.

Keywords: Corporate Social Responsibility (CSR), Strategic CSR, Multinational Enterprises (MNEs),

Business to Business (B2B), Stakeholder, Organizational Context, Local Strategy, Global Strategy, Commercial Real Estate.

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Preface and Acknowledgements

This master thesis was the beginning of the end of my academic career. Therefore I want this research to potentially be a stepping-stone for my future career in commercial real estate. This is why I chose to analyze corporate social responsibility in relation to the commercial real estate industry. Articles and literature written about sustainability always had my interest as we only have one earth which we should cherish this. The whole society should behave sustainable, since sustainable behavior is crucial for the quality of life of my generation, and even more crucial for the quality of life for future generations. Besides, the courses I followed during my studies about corporate behavior and sustainability I found the most exciting and contributed to a larger interest in this field of research. Subsequently my interest in real estate and passion for sustainability, led to this topic of this thesis. It was a challenging but exiting journey, and I am convinced that my thesis contributes to the existing literature about sustainability and commercial real estate.

When looking back at this journey, I realize that the help of others definitely contributed to the successful completion of this project. First of all, I would like to thank D.J.H.M. van den Buuse MSc. for providing me with his broad range of knowledge, experience, insights, supervision, feedback, and patience. His trust and faith in the successful completion of this project contributed to my intrinsic motivation for perfectly finalizing this thesis. Second, I would like to thank dr. A.E. Kourula for the brainstorm session in the first phase of my thesis. This definitely contributed to a better idea of the direction of my thesis. Finally, I would like to thank my family and friends for their support and their interest in my thesis.

For those who are interested in my research, enjoy!

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List of Tables

Table 1 Working Propositions 27

Table 2 Introducing the five CRE MNEs 35

Table 3 Working proposition Theme I – CBRE 43

Table 4 Working Proposition Theme 2 – CBRE 46

Table 5 Working proposition Theme I – JLL 49

Table 6 Working Proposition Theme 2 – JLL 52

Table 7 Working proposition Theme I – Colliers International 55

Table 8 Working Proposition Theme 2 – Colliers International 58

Table 9 Working proposition Theme I – Savills plc 62

Table 10 Working Proposition Theme 2 – Savills plc 65

Table 11 Working proposition Theme I – Unibail-Rodamco 68

Table 12 Working Proposition Theme 2 – Unibail-Rodamco 71

Table 13 Cross Case Analysis Theme I 75

Table 14 Cross Case Analysis Theme II 76

Table 15 Overview Working Propositions 80

List of Figures

Figure 1 Stakeholder Model (Donaldson & Preston, 1995) 18 Figure 2 Categorizing Stakeholder (Mitchel, Agle & Wood, 1997) 20

List of Abbreviations

B2B Business to Business

B2C Business to Consumer

CR Corporate Responsibility

CRE Commercial Real Estate

CSR Corporate Social Responsibility

DJSI Dow Jones Sustainability Index

EMEA Europe, the Middle East and Africa

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1. Introduction

In the competitive environment Multinational Enterprises (MNEs) are operating in currently, issues of a social nature are bearing on companies to the point that Corporate Social Responsibility (CSR) appears to be the new battle ground for competitive success (Porter & Kramer, 2006). In this study will be analysed how MNEs operating in Commercial Real Estate (CRE) are influenced by multiple stakeholders to implement a CSR strategy. The focus will be on which stakeholders have the largest influence on the CSR strategies of MNEs in CRE, and whether these CSR strategies will either be local responsive or global integrated.

Businesses are the economic engine of the society, and also the making of profits is a social responsibility (Carroll, 1979; Henderson, 2005). However increasing company’s profit is not the only responsibility of corporations, even though some academics argue in favour of this point of view (Friedman, 1970). MNEs are pushed by different stakeholders to identify their role in society and apply ethical and social standards to its businesses (Lichtenstein, Drumwright & Braig, 2004). MNEs need a CSR strategy that not only meets the needs of stakeholders and shareholders, but CSR strategies have to meet the needs of the whole society (Galbreath, 2006). Businesses are increasingly interested in defining their corporate responsible behaviour (Kourula, 2008), as society is increasingly demanding from corporations to implement rules where international policy frameworks continuously lag (Kolk & van Tulder, 2002; Muller, 2006). This means that corporations should develop a proactive CSR strategy that goes beyond the legal framework (Muller, 2006). From a governance perspective, this involves taking part in the development of new forms of voluntary self-regulation, participating in multi-stakeholder initiatives, developing successful cross-sector partnerships and learning how to manage relations with stakeholders (Kourula & Halme, 2008).

Different academics argue that corporations should act upon CSR as if it is part of the core strategy of the MNE, that cannot be separated form one another (Fry, Keim & Meiners, 1982; McWilliamson, Agle & Wood, 2001; Galbreath, 2008; Muller, 2006; Porter & Kramer, 2006). This idea of CSR is also referred to as ‘strategic CSR’, which indicates that business activities should be valuable for the society and the environment as well as for the corporation (Porter & Kramer, 2006). Strategic CSR became more important in the management of corporations (Porter & Kramer, 2006)

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also due to different perspective and various pressures of multiple stakeholders (Clarkson, 1995). Ethical responsibilities are becoming increasingly important (Schwartz & Carroll, 2003) and corporations have an increased power (Kolk & van Tulder, 2002), being the reason why society expects corporations to behave sustainable.

Based upon the stakeholder theory of Donaldson and Preston (1995) different stakeholders of CRE MNEs can be identified. Possible stakeholders of MNEs could be the government, suppliers, employees or customers (Donaldson & Preston, 1995; Clarkson, 1995; Mitchell, Agle & Wood, 1997; Porter & Kramer, 2006). When the stakeholders are identified, the importance of these stakeholders could be determined based upon three attributes: power, urgency and legitimacy (Mitchell et al., 1997). Subsequently, it can be investigated to what extent stakeholders will influence the CSR strategy in a way this strategy will be responding to the local needs or is globally integrated (Muller, 2006). It can be questioned whether global CSR strategies even exist. Some academics argue that CSR strategies can only be local responsive due to cultural differences and difference in demand of stakeholders in the home and the host country (Bartlett & Ghoshal, 1989). As a consequence of to the rapid pace of internationalization, MNEs will most probably face a wider range of possible conflict with its stakeholders (Muller, 2006). Centralized (global) CSR strategies could possibly lead to more conflicts, which will cause divergent pressures of stakeholders across home and host countries (Muller, 2006). On the other hand, decentralized (localized) CSR strategies are more difficult to manage centrally, due to the different local needs worldwide (Muller, 2006). This explains why it is important to identify and understand differences between the home and the host country, to be able to recommend which strategy is most suitable for CRE MNEs.

Stakeholder theory is a well-researched topic in literature, but the relationship between organizations and stakeholders is an under-theorized subject (Greenwood, 2007). Multiple academics wrote about the many accounts of stakeholder activities by which is focused on the attributes of the organizations or the attributes of the stakeholders, rather than on the attributes of the stakeholder engagement (Greenwood, 2007). Attention should be paid more to the relationships corporations must maintain with their stakeholders instead of the attributes or actions corporations should or should not perform in order to meet moral standards (Noland & Phillips, 2010). Although the last couple of years

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more attention has been paid to thinking about the meaning of stakeholder engagement (Johnson-Cramer, Berman & Post, 2003), this is still a gap in the literature. Despite the growing recognition of CSR as an important dimension of strategic decision-making, linking CSR strategies to local responsiveness and global integration is also still under-theorized (Jamili, 2010; Muller, 2006; Paton & Siegel, 2005). The context of this research is the CRE industry, which is an industry that is very much under-theorized, especially when relating this to CSR. Next to this, business in this industry is conducted B2B, while in literature about CSR it can be assumed that this is investigated about corporations that conduct business B2C. Relating CRS strategies and identifying stakeholders with reference to CRE MNEs, is substantially under-theorized. This gap in the literature leads to the following research question:

Which stakeholders will have the largest influence on the CSR strategy of commercial real estate MNEs, to be structured as a strategy that is either local adapted or globally integrated?

This research question will be answered by first discussing suitable theories. In the theoretical framework a description will be given about the CSR concept, the focus on strategic CSR. Next, the different stakeholders affecting MNEs will be identified based upon the stakeholder theory to be able to determine the importance of different stakeholders. In the final part of the theoretical framework the context in which MNEs operate will be discussed, in both the local and the global context. This theoretical framework will be concluded with an overview of the working propositions that will be tested by means of a qualitative research. The research question will be answered based upon a qualitative research with a multiple case study. A qualitative research is most applicable, as CSR is highly context specific and cannot be measured with numbers. Also the focus of this study will be on answering the ‘how’ which can only be concluded based upon text documents concerning CSR activities (Eisenhardt, 1989). In the next section the cases are individually analyzed also a cross-case analysis will be conduct to test the working propositions. Based upon the research a discussion will compare the findings with the literature. This research will be concluded with a conclusion about the most important findings, the scientific relevance and managerial implications, and the limitations and future research.

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2. Theoretical Framework

In this study different theories will be discussed that will create the basis of this research. First, to be able to completely understand the concept of CSR, different definitions of CSR will be discussed. The focus will be on strategic CSR, since multiple academics argue that CSR should be part of the core strategy due to its increased importance and demands of the different stakeholders. By acting upon CSR in a strategic way, not only the environment will benefit, but also the company. In the next section the different stakeholders will be identified, and based upon the urgency, legitimacy and power framework of Mitchell et al. (1997) the different stakeholders will be classified based upon its importance, with reference to the concept of stakeholder engagement. With different theories written in literature of International Management, it will be discussed to what extent the claims of different stakeholders will be either local or global and what is perceived as more important. Also, it will be discussed what the best strategy could be for a corporation in relation to CSR: either centralized or decentralized (Muller, 2006). Different propositions are formulated in the last section and a framework is created to visualize the different propositions and linkages.

2.1 Corporate Social Responsibility

As mentioned before, CSR is defined by multiple academics and does not have one consistent definition. The main point of CSR is the concern of how to manage a firm in a way it meets the needs of the present without harming the ability of future generations to meet these future needs (Aguinas & Glavas, 2012). CSR is also defined as actions that appear to further some social good, beyond the interest of the firm, which is required by law (McWilliams & Siegel, 2001). The CSR concept arose mainly due to the responses of customers towards unethical behaviour of companies; responsibilities of which companies did not think these were part of its responsibilities (Porter et al., 2006). CSR represents a commitment by organizations to improve the community’s well being by behaving ethically and contributing to economic development with business practices and contributions of corporate resources (Watts & Holme, 1999; Kottler & Lee, 2005). These CSR commitments are voluntary decided and as McWilliams et al. (2001) concluded; CSR is not only behaving regarding what is required by law, but CSR is going beyond obeying the law.

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The most frequent used definition in literature of CSR (Dahlsrud, 2008) is the definition formulated by the Commission of European Communities (2001, p. 366), which defines CSR the following: “A concept whereby companies integrate social and environmental concerns in their business operation and in their interaction with their stakeholders on a voluntary basis”. Though, this voluntary integration is highly context specific (Aguinis & Glavas, 2012). The organizational context could influence CSR either positive but also negative, since different contexts will have different standards and rules. The demand of stakeholders towards corporations to behave social responsible arose due to the reduced power of the national and international institutions in the recent years; a shift in power from institutions towards the MNEs arose, specifically in developing countries (Banarjee, 2008). An example is Shell operating in Nigeria: Shell generates 75 per cent of the Nigerian government’s revenues and nearly 35 per cent of the country’s GNP (Banerjee, 2008). Shell takes the role of the government in this example, and more MNEs in these developing countries fulfil this role (Banerjee, 2008). In cases like these it can be concluded that it is crucial for these developing countries that the MNEs not only operate for their own revenue, but also behave social responsible. However this example also indicates the dependence of CSR in different contexts, implying that universal codes towards CSR are hard to ensure.

On the other hand, some academics argue in favor of the argument of rapid globalization, whereby is assumed that centrally coordinated strategies are more efficient. The growth in the world trade, significant improvements in telecommunications, the ease of data storage, and the improved infrastructure; all these innovations and improvements contributed to the process of rapid globalization of the last decades (Clark & Mathur, 2003). Rapid globalization led to the often-made comparison of the world with a ‘village’ (Clark & Mathur, 2003), whereby some even argue that an emergent global culture arose due to globalization (Bird & Stevens, 2003). This comparison and perception of a smaller world, whereby countries and cultures are becoming more alike, can be explained with the increased interdependence of countries on one another (Bird & Stevens, 2003). This perception supports a centralized CSR strategy, as this eases conducted business. This interdependence led to a world where corporations increasingly need to contribute to society, need to take responsibility for their actions, and need to meet their moral obligations towards constituencies

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(Vaughn, 1999). Due to these changes the pressure on corporations to behave social responsible increased significantly. Competitiveness intensified next to the interconnectedness of countries, which made CSR even more important, especially in the management of corporations (Gee & Norton, 2013) since more difficulties arose in the management of MNEs globally. Wood (1991) referred to ‘the basic idea’ of CSR, which is that business and society are interwoven rather than distinct entities. Though opposing views suggest that CSR is actually interwoven with the corporate strategy. Porter and Kramer (2006, p.80) stated that: “the prevailing approaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit society”. Different views are on the question whether CSR should be interwoven with the core strategy, or should be a separate strategy. Though the most prevailing view is a CSR strategy interwoven with the core strategy. Kottler and Lee (2005) referred to CSR as a concept that can lead to doing business in a better way, since not only doing good is the right thing to do. ‘Doing good’ refers to the social and exemplary role firms fulfil in society and the duty of firms to protect the interest of the society at large. With ‘doing better’ is referred to the better society and corporation that will be created when CSR strategy is implemented, also most likely this will lead to better financial performances. This definition could be compared with strategic CSR. CSR should be perceived as much more than a cost. CSR is a source of opportunity; the doing better (Kottler & Lee, 2005), it is an innovation and a competitive advantage (Porter et al., 2006) that focuses on managing future generations and herewith the long term. This perception is in line with the idea of strategic CSR. Businesses are increasingly interested in defining their corporate responsible behaviour (Kourula & Halme, 2008), in a strategic way by which this strategy is incorporated with the core strategy (Wood, 1991). This involves, from a governance perspective, taking part in the development of new forms of voluntary self-regulation, participating in multi-stakeholder initiatives, developing successful cross-sector partnerships and learning how to manage relations with the stakeholders (Kourula & Halme, 2008).

Subsequently, it can be questioned whether corporations with a CSR strategy will outperform corporations without a strategy involving CSR financially has been an on-going debate. According to McWilliamson et al. (2001), implementing a CSR strategy will increase the costs of a company

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though, companies with a social responsible aspect inherited in their product will earn larger revenues than firms with no social responsible aspect in their product. This implies that there is no difference in profit rate between two firms that are selling identical products, in a situation where one firm behaves social responsible and the other firm is not behaving social responsible (McWilliamson et al., 2001). However, initiatives regarding CSR will most likely have an underlying motive that will be in favour for the MNE (Lantos, 2001), implying that an additional financial reward will be part of the motive for investing in CSR. It is researched that in the long run behaving social responsible will contribute to the financial performance of MNEs, the investments regarding CSR are justified with the created goodwill among all stakeholders (Lantos, 2001). From here on it is assumed that MNEs with an implemented CSR strategy, will potentially receive higher financial returns than MNEs without a CSR strategy. In addition, examined is that large, diversified companies will more actively apply CSR, due to the increased possibility of creating of economies of scale and scope (McWilliamson et al., 2001).

CSR is about minimizing harm. When corporations implement a CSR strategy to promote benefits for society but to benefit financially as well, it is referred to as strategic CSR (Lantos, 2001). This definition and the previous assumption imply that CSR should not be perceived as a separate strategy from the core strategy, but as part of the core strategy. Corporations can benefit financially from CSR and CSR activities align with the organizational goals. Fry et al. (1982) were the first who wrote about a type of strategic CRS: strategic philanthropy. Strategic CSR is described as activities that are good for the society as well as good for the businesses (Porter & Kramer, 2006). Porter and Kramer (2006) developed a framework by which a distinction is made between responsive and strategic CSR. Responsive CSR exists of two elements: acting as a good corporate citizen, attuned to the evolving social concerns of stakeholders, and mitigating business activities. Corporations are seen as good corporate citizen when they specify clear and measurable objectives and track these over time. Stakeholders assume this happens anyway and see this as a ‘standard goal’ of a corporation (Porter & Kramer, 2006). Though if corporations are not behaving as a good citizen their license to operate could be revoked by society (Banerjee, 2008). Strategic CSR moves beyond good corporate citizenship and mitigating harmful value chain impacts to mount a small number of initiatives whose social and business benefits are large and distinctive (Porter & Kramer, 2006). Strategic CSR is about

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transforming value-chain activities to benefit society while reinforcing strategy and about strategic philanthropy that leverages capabilities to improve salient areas of competitive context. Kourula and Halme (2008) made a distinction between three different corporate responsibility (CR) activities: philanthropy, CR integration, and CR innovation. Philanthropic corporate responsibility emphasizes on charity, sponsorships and employee voluntarism, Lantos (2001) referred to this as the marketing tool of a company to enhance the firm’s practice, and genuine philanthropy is proper for corporate responsibilities to practice. CR integration emphasizes on conducting existing business operations more responsible, and CR innovation emphasizes on developing new business models for solving social and environmental problems (Kourula & Halme, 2008). Concluded is that best is when firms invest in all three types of CSR activities. All three activities are strongly intertwined with the corporate strategy; also implying it is best to incorporate the CSR strategy with the core strategy of a corporation (Kourula & Halme, 2008). As defined in the theory it can be assumed that the strategy corporations implement with reference to CSR is always strategically decided, which defines the concept of strategic CSR. To best implement strategic CSR, different stakeholders should be identified as well, as these can influence this strategy. The next section will identify the important stakeholders accordingly.

2.2 Stakeholder Theory

Corporations are pressured by different stakeholders to identify their role in society and apply ethical and social standards to businesses (Lichtenstein et al., 2004). This is due to several factors: the moral obligation of behaving as a good corporate citizen; the sustainability argument by which is meant meeting the needs of the present without comprising the ability of future generations to meet their own needs; the argument of the ‘license to operate’, which refers to the permission of the government, communities, and other stakeholders to be able operate in a country; and finally, the reputation argument, incorporating CSR could create a reservoir of goodwill that could be a benefit for corporations when those are affected by internal or external negativities (Vaughn, 1999; Porter & Kramer, 2006). Based upon these different pressures of stakeholders and the important role they play, it can be concluded that CSR needs to be managed strategically. Because of this reason it is important

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to identify these different stakeholders, as well as the importance of each stakeholder. Since based upon this it can be determined which stakeholder will influence the CSR strategy of MNEs the most.

Companies of different sizes are implementing voluntarily CSR programs to integrate social and environmental concerns in the business operations, and in the interaction with its stakeholders (Aguinis & Glavas, 2012). Corporations should acknowledge and accept that they have multiple relationships with a wide range of stakeholders, with all a different claim in the organization and all these stakeholders should be determined (McWilliamson & Siegel, 2001). As Friedman (1970) described, the only social responsibility of a corporation is to increase the profit of a company to serve its shareholders. By only increasing the profit of a corporation, companies are solely serving its shareholders and not the society as a whole. Shareholders are important stakeholders, but not the only ones (Freeman, 1984; McWilliams & Siegel, 2001; Mitchel et al., 1997; Donaldson & Preston, 1995). However, the CSR pyramid of Caroll (1991) indicates that all the CSR of a corporation rest on the economic responsibilities. This indicates that a corporation should first be profitable to be able to meet all stakeholders’ needs, whereas the economic responsibilities lay within the whole corporation (Caroll, 1991). Freeman (1984, p.46) defined stakeholders as “any group or individual who can affect or is affected by the achievement of the organization objectives”. Even though virtually everyone can be affected or can affect an organization’s decision due to globalization and the technological evolution (Sternberg, 1996; Metcalfe, 1998; Orts & Strudler, 2002), this definition is too broad as too many groups are interpreted as a stakeholder: even terrorists, blackmailers or thieves are assigned as relevant stakeholders (Phillips & Reichart, 2000; Jensen, 2002). Clarkson (1995, p.106) defined stakeholders as “persons or groups that have, or claim, ownership, rights or interests in a corporation and its activities, past, present or future”, this is the relevant definition for this thesis hence will be used for the following paragraphs.

Stakeholder theory aims to explain the nature of relationships between organizations and those persons with a stake in the operation and outcomes of business activity (McWilliamson & Siegel, 2001). Corporations should acknowledge and accept that they have multiple relationships with a wide range of stakeholders, with all a different claim in the corporation (McWilliamson & Siegel, 2001). All these different stakeholders should be determined and acknowledged, to be able to determine the

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pressures of stakeholders on strategic CSR. After defining the different stakeholders, it is important to determine the importance of the stakeholders. Donaldson and Preston (1995) developed the stakeholder model (Figure 1) where different stakeholders influencing the corporation are identified. The stakeholder model displays the different groups that have a claim, here referred to as a ‘stake’, in the corporation. As displayed these stakeholders are according to the Stakeholder Model: the government, investors, political groups, suppliers, trade associations, employees, communities and customers. Customers and the government are already identified as an important stakeholder, because the responses of customers towards unethical behaviour (Porter et al., 2006) and pressures due to rules and regulations formulated by the government (McWilliams & Siegel, 2001) forced corporations to engage in CSR initially. The underlying assumption of this model is that organizations need to acknowledge that they have to interact with the environment (Jonker & Foster, 2002). This environment refers to the different stakeholders, which may have an influence on the behaviour and effectiveness of a corporation (Jonker & Foster, 2002). The stakeholder model is visualized in a certain way, initiating that all the stakeholders have a similar influence on the decisions made by a corporation, because all the stakeholders are displayed similarly. Though, multiple academics investigated this and concluded that, in theory and as well as in practice, stakeholders are prioritized, which indicates that stakeholders cannot be displayed similar (Clarkson, 1995; Du, Bhattacharya & Sen, 2010; Mitchell et al., 1997).

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Stakeholders can also be classified as primary or secondary stakeholders according to Clarkson (1995). Primary stakeholders are the most important stakeholders for the survival of a corporation; their continuing participation is crucial for the survival of the corporation. Corporations will seriously be damaged if any primary stakeholder group will withdraw partially or fully from the corporate system (Clarkson, 1995). The corporation has a high level of interdependence with its primary stakeholder groups. These primary stakeholders are shareholders and investors, employees, customers and suppliers together with the public stakeholder group (Clarkson, 1995). The public stakeholder group are the governments and communities to which taxes should be paid to be able to provide infrastructures and markets and those that shape the rules and regulations that should be met and obeyed (Clarkson, 1995), referring to the stakeholder model these stakeholders are the government, communities and political groups (Donaldson & Preston, 1995). The primary stakeholders are the same stakeholders displayed in the stakeholder model of Donaldson and Preston (1995). This could explain why Donaldson and Preston (1995) displayed all the stakeholders similarly in the figure: all the stakeholders displayed are primary stakeholders with an important claim in the survival of the corporation (Clarkson, 1995).

Secondary stakeholders are persons or groups that can have an influence on, or can be affected by, the decisions made by a corporation (Clarkson, 1995). These groups are not crucial for the survival of a corporation, since these groups are not engaged in transactions with corporations. However, their acts and behaviour could harm corporations and influence decisions of corporations as well (Clarkson, 1995). Secondary stakeholders could be the media, activist or even terrorists (Clarkson, 1995). These stakeholders are not covered in the stakeholder model, even though the communication by and through the media could significantly influence the corporation its CSR strategy (Du et al., 2010). This distinction between primary and secondary stakeholders can be compared with stakeholder salience, which indicates the conditions when managers perceive certain groups as valuable stakeholders or not (Mitchell et al., 1997). Here the primary stakeholders are perceived as more important than secondary stakeholders. To evaluate the influence of stakeholders on the CSR strategy and on a company, the importance of different stakeholders can be measured. This will be discussed in the next section.

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2.3 Stakeholder Engagement

Since not all stakeholders can have a substantial influence on a corporation, a classification should be made by which the importance of different stakeholders will be identified. Mitchel et al. (1997) classified stakeholders based upon three attributes: legitimacy, urgency and power. With this classification it can be identified which stakeholders require management attention, and which do not. Power is the ability of those who possess power to bring about the outcomes they desire. Legitimacy helps in identifying the different stakeholders that merit managerial attention; it refers to the socially accepted and expected structures or behaviours. Urgency is the degree to which stakeholder claims call for immediate attention. This only exists when a relationship or claim is of a time-sensitive nature and that relationship or claim is important or critical to the stakeholder. Based upon these three attributes a classification of the different stakeholders can be made, upon the importance of each stakeholder can be determined (Figure 2). This framework is based on three types of stakeholders: latent; expectant and; definitive stakeholders (Mitchell et al., 1997). Starting with latent stakeholders: these possess one of the three attributes of power, legitimacy and urgency; second the expectant stakeholders possess two of these attributes; and finally definitive stakeholders possess all three of the attributes (Mitchell et al., 1997). The more attributes a stakeholder possesses the more influential a stakeholder will be: meaning that this stakeholder will be perceived as very important and valuable to the company. Also will be more responded and attention given to the different claims of the stakeholders that possess the most attributes.

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Based on the three attributes, Mitchell et al. (1997) made a classification to separate seven different stakeholders. The latent stakeholders, which are the dormant, the discretionary and the demanding stakeholders will first be analyzed. The dormant stakeholder possesses power that can be imposed on a firm to enforce certain activities, although these stakeholders have hardly any interaction with the firm and do not have a certain relationship or an urgent claim in the corporation. A dormant stakeholder could be for example an individual with a gun (coercive), those who can command the attention of the news media (symbolic) or those who can spend a lot of money (utilitarian). These stakeholders are not continuously influencing the strategy of a corporation, thus these stakeholders are not taken into account. Although some argue that power is the most important attribute in the relationship (Parent & Deephouse, 2007). The discretionary stakeholders only possess the attribute ‘legitimacy’. Managers are not pressured to engage in an active relationship with these stakeholders, due to the absence of power and urgent claims (Mitchell et al., 1997). However, these stakeholders are most likely involved in the field of CSR, and are related to phenomenon of corporate philanthropy (Carroll, 1991). Third the demanding stakeholder: this stakeholder is compared with “the mosquitoes buzzing in the ears”, these are for example low return customers (Carroll, 1991). This stakeholder only possesses the urgency attribute.

The second stakeholder group are the expectant stakeholders; this group consists of the dominant, dangerous and dependent stakeholder. The dominant stakeholder possesses both the powerful and legitimate attribute and forms the dominant coalition of the enterprise; this could be for example the board of directors (Cyert & March, 1963). This stakeholder receives a lot of managers’ attention, however managers should not relate to them. Second the dependent stakeholder: this stakeholder has an urgent and legitimate claim in the company. This stakeholder depends upon other stakeholders of a company, however this stakeholder has no power to coerce its claims. Finally the dangerous stakeholder; this one is characterized by the attributes urgency and power and is described as coercive and often have an illegitimate status.

Finally the most important stakeholder: the definitive stakeholder. This stakeholder possesses all three attributes: power, urgency and legitimacy. This makes this stakeholder the most important one and explains why managers should maintain a good relationship with this stakeholder (Carroll,

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1991). This categorization model of the different stakeholders is a dynamic model, meaning each of the attributes could change over time and herewith the classification of the stakeholders. But to encounter the differences in demands from stakeholders, firms should have a broad and diversified strategy. Herewith is indicated that a CSR strategy should be diversified to meet the needs of these different stakeholders, as these needs and claims can change over time.

The stakeholder model of Donaldson and Preston (1995) could be connected to the theory of Mitchell et al. (1997), from here on it can be identify what kind of relationship each stakeholder will have with relationship with a corporation. Starting with the government, this stakeholder is a definitive stakeholder (Mitchell et al., 1997; Parent & Deephouse, 2007). To further explain the importance of the government: to be able to operate in a country, a company needs to adhere the local rules and regulations implemented by the government otherwise sanctions could be imposed. Secondly the investors, they are also definitive stakeholders (Ryan & Schneider, 2003). An investment in a company is needed for the inception of a company but also for the survival of a company. Thirdly, political groups, these are highly depending on the power attribute (Donaldson, 1999), which makes this stakeholder a dormant one (Mitchell et al., 1997). Fourth, supporting, motivating, coordinating and educating employees and customers, is necessary to run a business and to maximize profits (Donaldson, 1999). This indicates the importance of employees since without healthy and educated employees a company cannot operate nor grow its business. And without customers a company could not grow or survive. This indicates that customers and employees can be classified as definitive stakeholders as well. Fifth the suppliers, these are identified as definitive stakeholders as well, as this group contributes to the input of a corporation which leads to the output and herewith the additional value perceived by the customers (Donaldson & Preston, 1995). This makes this stakeholder definitive as well. Sixth, trade associations, those have a legitimate and powerful claim in a corporation (Mitchell et al., 1997), indicating that these associations are dominant. Finally, the communities: this stakeholder gives a corporation the ‘licence to operate’ (Vaughn, 1999). This makes communities a dependent stakeholder, since their claim will be legit and urgent (Mitchell et al., 1997). Based upon this classification the importance of the stakeholders can be determined. It is relevant for this study to identify the claims of stakeholders

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2.4 Local and Global CSR Strategies

Claims of stakeholders could lead to a CSR strategy that either will be structured locally or globally. In this study it is relevant to identify how these strategies are structured, and how stakeholders influence this. Global dispersion of MNEs and herewith regional or global strategies is already researched by different academics (Bartlett & Ghoshal, 1989; Donaldson & Dunfee, 1999; Rugman & Verbeke, 2004). An MNE has its activities dispersed all over the globe. This dispersion influences the behaviour of an MNE in comparison with a firm that solely operates in a local context (Kostova & Zaheer, 1999). This is why the stakeholder perspective is an often-used approach in explaining the link between the corporation and the context or society it is operating in (Bartlett & Ghoshal, 1989). By identifying and analysing different stakeholders and their claims in the MNE, the reasons why MNEs behave in a certain way can be better explained. According to Bartlett and Ghoshal (1989) the extent and nature of social activities of MNEs is depending on, and influenced by, the extent to which these MNEs are globally dispersed. MNEs choose to either export and apply the strategy from the home country to the subsidiary and adapt to the local needs, or MNEs have to develop a new social strategy (Donaldson & Dunfee, 1999).

The distinction between either a local or a global CSR strategy can be based on the practices of subsidiaries in the host country (Muller, 2006). Based on the local responsiveness and the global integration matrix, it can be determined what type of strategy an MNE is applying when operating in and internationalizing to other countries (Bartlett & Ghoshal, 1989). A strategy is called global, or centralized, when a subsidiary located in a host country, adopts practices from the parent company located in the home country. This strategy involves a successful transmission of CSR practices throughout the corporation worldwide, though it might lack ownership and legitimacy at the local level (Muller, 2006). On the other hand, a localized CSR strategy, also referred to as a decentralized strategy, is responsive to the needs in a host country. This strategy is perceived as more difficult to manage than a centralized strategy, since it requires a good local management as it is adapted to the local needs (Muller, 2006). This could imply that a subsidiary of an MNE operating in a country with lower CSR standards, will adjust to these lower standards the host country, rather than the higher standards which are required in the home country (Muller, 2006). Muller (2006) concluded that the

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subsidiaries operating in a country with lower CSR standards, but with a tight control of the parent company turned out to be the least proactive in terms of CSR. On the other hand, an autonomous subsidiary located in a country with lower CSR standard will equal the overall performance regarding CSR since it equals to the higher standards of the home country: this means a higher performance of this subsidiary. This means that a decentralized strategy will lead to subsidiaries with a more proactive CSR strategy. This is explained with the vision of the parent company towards CSR that is copied by autonomous subsidiaries; it appeared to be not due to the responsive attitude of these subsidiaries (Muller, 2006). Subsidiaries can still be linked to the corporate vision since these subsidiaries are still integrated using informal control mechanisms (Watson & Weaver, 2003) and also the commitment of top management is essential (Weaver, 1999).

2.4 Concluding Remarks

It can be concluded that strategic CSR is an important aspect of firms’ existence and herewith structure nowadays. Many companies find it important to describe its role in the society and its ethical standards (Lichtenstein et al. 2004). The CSR strategy of corporations should be evolved as part of the main corporate core strategy of the corporation. CSR is often seen as a homogeneous code organized centrally in the different countries a corporation operates. Though is it questionable whether it actually is possible to apply similar standards all over the world, since different regulations and expectations of companies in different countries influence this strategy. Behaving and acting sustainably is becoming increasingly important in Western countries, while in developing countries sustainability is perceived as less important, which can be explained with the exemplary role of MNEs in these countries (Banerjee, 2008). Also research has shown that the more developed a country is, and herewith the higher the customer is educated, the more its customers tend to choose a product based upon on CSR and boycott products that are perceived as unethical (Kubenka & Myskova, 2009). This explains the increased importance of implementing strategic CSR. It will be an extension of the literature to investigate whether the same counts for corporations that are operating B2B instead of B2C. In the next section the working propositions will be formulized in relation to commercial real estate based upon the previous literature.

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3. Propositions and conceptual model

In this section six working propositions will be introduced which are derived from the theoretical framework. Based on the working propositions, the research question will be answered. By analyzing these propositions this study will investigate which stakeholders have a substantial influence on the CSR strategy of MNEs in relation to the commercial real estate industry. Furthermore it will be researched whether the CSR strategy should be either local responsive or global integrated due to different influences of stakeholders. These working propositions are structured on the two central themes related to strategic CSR in the literature review: “The influence of stakeholders on strategic CSR” and “The influence of location adaption of strategic CSR”.

3.1 Theme I: The influence of Stakeholders on Strategic CSR

Corporations are put under pressured by different stakeholders to identify its role in society and apply ethical and social standards to its business operations (Lichtenstein et al., 2004). Corporations should acknowledge and accept that these have multiple relationships with a wide range of stakeholders, with all a different claim in the business (McWilliamson & Siegel, 2001). It is important that corporations interact with these different stakeholders (Jonker & Foster, 2002). This is why it is important to identify the different stakeholders and determine the relationship of stakeholders with a corporation. The formulation of rules and regulations by the government with reference to CSR (McWilliams & Siegel, 2001) is one of the most important drivers for corporations to implement strategic CSR. This indicates the importance of this stakeholder group, which is also identified in the stakeholder model of Donaldson and Preston (1995), next to the other seven important stakeholders. The stakeholders identified by Donaldson and Preston (1995) are similarly to the primary stakeholders identified by Clarkson (1995), this again indicates the importance of the government, which leads to the following working proposition:

WP 1: It is expected that the government will have a substantial influence on strategic CSR of MNEs operating in commercial real estate.

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In the stakeholder model (Donaldson & Preston, 1995), shareholders are not identified, while on the other hand Clarkson (1995) identified them as primary stakeholders. Some academics argue that shareholders are the only stakeholders corporations should serve, since the initial purpose of a corporation is to make profit (Friedman, 1970). Carroll (1991) argued that the economic responsibilities of corporations are also highly important for the CSR activities since all the responsibilities are relying on the economic responsibilities. This means that a corporation first needs to make profit before it can align with the different needs of stakeholders. Hence, only when profits are made, a corporation can fulfil the needs of the shareholders (Friedman, 1970; Carroll, 1990). This reliance of CSR investments on economic success is similar to the idea of CSR in CRE; without financial returns most likely investments on CSR will be limited (Warren-Myers, 2012). It can be concluded that shareholders are very important stakeholder of corporations, since without fulfilling shareholders their needs corporations will most probably not invest in CSR. This leads to the following working proposition:

WP 2: It is expected that shareholders will have a substantial influence on the strategic CSR of MNEs operating in commercial real estate.

After identifying the stakeholders, the relationship of the stakeholder with the corporation should be analyzed, since not all stakeholders will have a similar influence on a corporation (Mitchel et al., 1997). The importance of each stakeholder can be determined by three attributes: legitimacy, urgency and power (Mitchel et al., 1997). Since definitive stakeholders possess all three attributes it can be concluded that these are the most important stakeholders for a corporation. Based on the framework of Mitchell et al. (1997) the following stakeholders are defined as definitive stakeholders: the government, investors, customers, employees and suppliers (Donaldson & Preston, 1995; Mitchel et al., 1997; Donaldson, 1999). It can be expected that these five groups will have a substantial influence on strategic CSR. For example: due to the responses of customers towards unethical behaviour, corporations had to implement a CSR strategy initially (Porter et al., 2006). This theory leads to the following working proposition:

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WP3: It is expected that definitive stakeholders will have a substantial influence on strategic CSR with reference to MNEs operating in commercial real estate.

3.2 Theme II: The Influence of Local Adaption of Strategic CSR

The distinction made between either a local or a global CSR strategy is derived from the practices of subsidiaries in the host countries (Muller, 2006). A strategy is called globally integrated, or centralized, when a subsidiary located in the host country adopts practices from the parent company located in the home country (Rugman & Verbeke, 2004). This strategy involves a successful transmission of CSR practices throughout the corporation worldwide, though it might lack ownership and legitimacy at the local level (Muller, 2006). The context an MNE operates in will probably influence the social and environmental concerns a corporation voluntarily will adapt in its business operations (Aguinis & Glavas, 2012). Due to the difficulty of managing local strategies (Muller, 2006) the following proposition is formulated:

WP4: It is expected that due to the complexity of operating global, MNEs operating in commercial real estate will implement a globally integrated CSR strategy.

The opposite strategy of the previous proposition is a CSR strategy that is locally adapted, or also called decentralized. A strategy is called locally adapted when a subsidiary adapts to the local needs of the host country (Rugman & Verbeke, 2004). Some argue that a decentralized strategy will lead to subsidiaries with a more proactive CSR strategy (Muller, 2006), since an autonomous subsidiary located in a country with lower CSR standard will equal the overall performance regarding CSR, which are the higher standards of the home country. Though a decentralized strategy could also adapt to the lower standards in a country. A decentralized strategy is most often referred to as a strategy that is difficult to manage due to the global dispersion of MNEs and the rapid internationalization (Muller, 2006). This is also due to the different international contexts that could have different effects on

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strategic CSR, which could be either positive or negative. These theories lead to the following working proposition:

WP5: It is expected that due to the rapid pace of internationalization, MNEs operating in commercial real estate will face difficulties implementing a local responsive CSR strategy.

The dispersion of MNE activities over the globe influences the behaviour of an MNE in comparison with a company that solely operates in a local context (Kostova & Zaheer, 1999). This is why the stakeholder perspective is an often-used approach for explaining the link between the corporation and the context or society it is operating in (Bartlett & Ghoshal, 1989). By identifying and analyzing different stakeholders and their claims in the MNE, the reasons why MNEs behave in a certain way can be better explained. According to Bartlett and Ghoshal (1989) the extent and nature of social activities of MNEs is depending on, and influenced by, the extent to which these MNEs are globally dispersed. The interaction of stakeholders with the MNE can influence the strategy of a MNE as well. Since real estate corporations highly interact with local clients and partners it should be analyzed whether this influences CSR strategy as well. This leads to the following working proposition:

WP6: It is expected that MNEs will adapt a local responsive CSR strategy when MNEs regularly interact with their local stakeholders.

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Table 1: Working Propositions

Theme I: The degree of influence of stakeholders on strategic CSR

WP1 It is expected that the government will have a substantial influence on strategic CSR of MNEs operating in commercial real estate.

WP2 It is expected that shareholders will have a substantial influence on the strategic CSR of MNEs operating in commercial real estate

WP3 It is expected that definitive stakeholders will have a substantial influence on strategic CSR with reference to MNEs operating in commercial real estate.

Theme II: The degree of influence of location adaption of strategic CSR

WP4 It is expected that due to the complexity of operating global, MNEs operating in commercial real estate will implement a globally integrated CSR strategy.

WP5 It is expected that due to the rapid pace of internationalization, MNEs operating in commercial real estate will face difficulties implementing a local responsive CSR strategy.

WP6 It is expected that MNEs will adapt a local responsive CSR strategy when MNEs

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4. Research methodology

In this chapter, the research methodology and design of this study will be discussed. Before explaining the case selection criteria and the data analysis method, it is important to understand the philosophical assumptions of ontology and epistemology. After understanding these assumptions, the industry will be discussed. Subsequently, the research design of this study will be explained, which is a qualitative research by means of a multiple case study. Also the case selection criteria, data collection methods and the type of analysis will be discussed.

4.1 Philosophical assumptions

4.1.1 Ontology

Ontology is a philosophical assumption that is concerned with the “nature of reality” (Locke, Silverman & Spirduso, 2004). This assumption takes into consideration how reality is constructed from either the objective or the subjective perspective of ontology. The objective perspective of ontology analyzes social phenomena independently from other social actors, in which they exist by themselves without any intermediate. On the other hand, with the subjective ontology, social reality is shaped by the way we interpret and explain reality, all social phenomena can be linked and influenced by different social actors (Saunders, Lewis & Thornhill, 2009). In this study it is best to analyze how reality is constructed by applying the subjective perspective. As in this study will be examined how different stakeholders influence the CSR strategy in a local and global context, which is dependent on social actors and not on the independent “general concept” of CSR. To be able to analyze decisions concerning CSR strategies and activities of different stakeholders opinions and views of individual social actors are involved. The subjectivist approach allows observing, comparing and analyzing the different views and decisions of stakeholders concerning the CSR strategies of five CRE MNEs.

4.1.2 Epistemology

After having decided how reality will be interpreted, it needs to be considered to what extent individuals are able to produce trustworthy knowledge about the complex world we live in. Epistemology concerns what constitutes acceptable knowledge, and how this is considered in the field

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of a specific study. The origin, nature, validity and limits of human knowledge will be investigated with the epistemological philosophy (Krijnen & Kee, 2007). The epistemological philosophy contains two controversial perspectives: the positivism perspective and the interpretivism perspective (Saunders et al., 2009). To be able to reach the research objective of this study the interpretivism perspective will be adapted. With the interpretivism perspective the purpose is to understand the subjective meaning of actions, which will be reached by interpreting social science. The interpretivism perspective is the opposite of the positivism one, since this perspective claims that social science is based on humans as social actors, implying that complex social science actions cannot be interpreted with natural sciences as the positivism perspective argues (Saunder et al., 2007). With the interpretivist epistemology is assumed that the social reality is the product of processes by which humans together negotiate about the meanings of actions and situations (Locke, Silverman, & Spirduso, 2004). To be able to answer the research question it is necessary to answer the ‘why’ and the “how” questions regarding strategic CSR in relation to different stakeholders, here referred to as social actors.

4.3 Research design

In this section will be explained what the structure is of this research: how this research will be conducted and how it will be analyzed (Van der Velde, Jansen & Anderson, 2004). In this study a qualitative research will be conducted: focused on words. Since qualitative research goes beyond linking concepts and explains why relationships exist the way they do, a qualitative research is the best suitable research design for this research (Marshall, Lincoln & Austin, 1991). The aim of this study is to determine motivations, perceptions and/or beliefs in certain phenomena, which can only be analyzed with qualitative research (Eisenhardt, 1989). Moreover, qualitative research is the most appropriate research design because CSR cannot be measured with numerical data, as it heavily depends on its context. The focus of this study will be on answering the ‘how’ which best can be concluded based on text documents concerning CSR activities of the largest MNEs in CRE (Eisenhardt, 1989). Before introducing the research design, the CRE industry will be introduced and it will be explained why it is relevant to link this with the concept of strategic CSR.

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4.3.1 Commercial Real Estate

Real estate is a heterogeneous industry comprising developers and maintenance professionals as well as residential and commercial property managers and investors (Dow Jones Sustainability Report: Stockland, 2015). In this study the focus will be on CRE, which concerns buildings solely used for a business purposes. CRE can be divided into four different markets: offices market, retail market, multi-housing market and the industrial market (Wheaton, 1999). The focus of this study will be in specific on CRE MNEs with a large stake in the office market. Buildings are responsible for about one third of global greenhouse gas emissions, this explains why climate change and energy efficiency are of great importance for the real estate industry (Dow Jones Sustainability Report: Stockland, 2015). Next to the large stake office buildings have on the green house gasses, business is conducted B2B, which gives an additional dimension to the importance of CSR. In B2B CSR is perceived less important, due to the lack of contact with the direct customer and the lack of business sophistication (Kubenka & Myskova, 2009). CRE MNEs could be seen as a mediator between the investor and the customer, whereby the customer, in case of the office market, is another corporation. CRE MNEs should influence the investor since this is an opportunity for these businesses to learn how to improve the current situation in the environment significantly, which could lead to global changes throughout the whole supply chain (Kubenka & Myskova, 2009). Investors should also be influenced because the fact that investors are in the CRE business to maximize returns on capital based upon the economic theory, meaning that without financial performance justification and viability of the required investment, most likely investments on CSR will be limited (Warren-Myers, 2012). However, the importance of increasing the level of sustainability in the CRE stock is primary for reducing the negative impact of the built environment on our planet (Warren-Myers, 2012). This is why real estate is a relevant and interesting industry to investigate with reference to the influence of stakeholders on CSR, since these businesses are very much solely profit driven while the implementation of CSR strategies in this industry are of significant importance. In this industry the highest possible returns are of utmost important role in the CRE business (Wheaton, 1999). Being the reason why low energy buildings that use innovative materials are very interesting, since these reduce the impact of volatile energy prices and herewith the cost of management and ownership of a property; and a reduction in

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operating costs (Petterson & Gammill, 2010). This led to an increase in demand for commercial ‘green buildings’, which is positive input for the businesses doing these deals in CRE, since a new business opportunity is created. With these green buildings ‘green leases’ will be made, which are leases between a landlord and a tenant of a commercial building which provides obligations on both parties to minimize adverse environmental impact in areas such as energy, water and waste. Besides this, over the last couple of years social responsibility and integration gained importance in this industry. Companies are enforced by communities to be transparent and justify the corporate behavior, which is why these MNEs are communicating in the annual- and CSR reports what changed with reference to sustainability are posted by these corporates in CRE.

4.2.2 Multiple-case study

Case study research can be conducted by adopting either a single-case or multiple-case design (Yin, 1994). To answer the research question a multiple-case design will be adopted to gain a better understanding of the CSR strategies of commercial real estate globally. A multiple-case design is preferred over a single-case design when possible, as the analytical conclusions arising independently from multiple cases are considered more compelling, thereby enhancing the overall robustness of the study (Yin, 1994). A multiple-case study is chosen because it allows for theory building through an in-depth exploration of qualitative data, which will show the uniqueness and complexity of the problem (Simons, 2009). With a multiple-case design it is possible to analyze within a single setting, but also across multiple settings (Darke, Shanks & Broadbent, 1998; Baxter & Jack, 2008). With identifying similarities across cases, a literal replication could be constructed, since by identifying contradicting outcomes between cases a theoretical replication will be constructed (Yin, 1994). Multiple-case studies can strengthen research findings in the same way as multiple experiments strengthen experimental research findings, although statistical generalization to a population can not be the goal of case study research, as cases are not sampling units (Darke et al., 1998).