MNE strategic responses to institutional complexity : a case of competing ethical values

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MNE Strategic Responses to Institutional Complexity: A Case of

Competing Ethical Values

Msc. in Business Administration – International Management track

Student name Barbora Gajtkova Student ID 10975535

First Supervisor Francesca Ciulli Date of submission 11.03.2016 Version Final

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Statement of Originality

This document is written by Barbora Gajtkova 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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Abstract

This research investigates the MNE’s ethical strategic responses to institutional complexity arising from incompatible ethical values and prescriptions across institutional environments. The goal is to examine how do MNEs with firmly developed ethical values approach the demands for conformity with practices opposing these ethical values. Addressing the limitations of extant research, which has not empirically examined the phenomenon in a long term perspective, this paper has adopted a longitudinal multiple case study. Qualitative archival data was collected and examined for a sample of three in-depth company cases. Subsequent analysis of the data has not yielded the expected support of the working propositions built in the theoretical foundations. The main findings are rather mixed and need to be further studied by a future research.

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Index of Tables

Table 1. Response Strategies to Institutional Processes ... 14

Table 2. Data sources and timeframes ... 25

Table 3. Themes and sub-codes ... 30

Table 4a. Categories-Case 1 ... 33

Table 4b. Case 1 outline and strategic responses ... 33

Table 4c. Categories-Case 2 ... 39

Table 4d. Case 2 outline and strategic responses ... 40

Table 4e. Categories-Case 3 ... 44

Table 4f. Case 3 outline and strategic responses ... 45

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1. Introduction

Multinational enterprises (MNEs) commonly deal with institutional complexity in the current global business environment. This complexity particularly emerges from the necessity to reconcile different institutional requirements they face across countries (Falcounbridge & Muzio, 2015). The culturally, geographically, administratively, but most of all institutionally distant business settings in the host countries prescribe diverse expectations, norms, rules and beliefs that are often remote to home country context (Kostova & Roth, 2002; Marano & Kostova, 2015). In sum, the diversity in institutional prescriptions across the countries, in which an MNE operates, often results in a substantial pressure to simultaneously satisfy the numerous, potentially incompatible demands (Falcounbridge & Muzio, 2015; Kostova & Roth, 2002; Marano & Kostova, 2015).

Several studies in the past have investigated how organizations respond to diverse institutional pressures and what the strategies, developed in business, in order to cope with institutional complexity are (e.g. Greenwood, Diaz, Li, & Lorente, 2010; Greenwood, Raynard, Kodeih, Micelotta, & Lounsbury, 2011; Pache & Santos, 2010; Pache & Santos, 2013). Greenwood et al. (2011) frame the strategic responses of corporations to institutional complexity through studies on how divergent institutional logics refracted through organizational fields are experienced within organizations. Further, Kostova & Roth (2002) highlight the multiplicity of institutional demands in the case of multinational corporations operating in different international business environments. Falcounbridge & Muzio (2015) study the organizational responses within the context of legal sector. This brief overview of academic papers shows that the concept of institutional complexity has motivated the business scholars to research the topic from various viewpoints and in numerous contexts.

Yet, only some scholars have undertaken a business ethics perspective when analysing the institutional complexity (e.g. Filatotchev & Stahl, 2015; Marano & Kostova, 2015, Tan & Wang, 2011). Since we note that the particularly critical issue of ethics in MNEs’ activities, where MNEs, operating in multiple countries may face diverse standards concerning ethics (Hamilton & Knouse, 2001; De George, 1994), has received a limited attention (e.g. Filatotchev & Stahl, 2015; Marano & Kostova, 2015, Surroca et al., 2013), this research is focused on the concept of institutional complexity in a context of business ethics. In relation to ethics in MNEs’ activities, there has been an ongoing debate concerning how multinationals

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employ their ethical principles and corporate social responsibility (CSR) initiatives in different countries with different requirements.

One line of reasoning claims that MNEs, headquartered in developed countries, represent strong ethical values embodied as corporate social responsibility initiatives, codes of conduct and triple bottom lines, and thus spread novel business practices when they enter emerging markets (De George, 1993). According to this literature, MNEs introduce a new mode of socially and environmentally responsible business practices and ethical standards to the developing countries where they operate (De George, 1993). This view can be supported by Gugler & Shi (2009) who found that countries with higher levels of inward foreign direct investment are more likely to incorporate environmental standards. Also Locke and Romis (2007) have shown that MNEs can aid their suppliers in emerging markets to become more socially responsible. Such a cross-border transfer of CSR actions through foreign direct investment and international trade activities signals that MNEs cultivate their firmly built ethical values consistently throughout all of their global markets (De George R. T., 1993; Marano & Kostova, 2015).

Nevertheless, controversial cases of companies like Nike, that built its brand value on powerful ethical principles in the global field of their operations, but took advantage of the loose ethical regulations in Indonesia by exploiting its workers (Arnold, 2003), raise doubts about the optimistic stance towards the MNEs’ cross–border transfer of CSR practices. In keeping with this, Surroca et al. (2013) have found that the increasing pressure for ethical behaviour and socially responsible actions in the home country, causes a transfer of the socially irresponsible practices to the overseas subsidiaries. Hence, companies like Nike show that the MNEs’ approach towards ethical issues is often inconsistent across the countries of their business operations.

As the preceding paragraphs show, ethical practices of multinational corporations can vary from country to country. The requirements for ethically correct practices are often country specific and MNEs adjust their behaviour to the local standards (e.g. Filatotchev & Stahl, 2015; Marano & Kostova, 2015; Surroca et al., 2013). Therefore, it is especially relevant to examine the corporate behaviour through the lens of institutional complexity. In this case, institutional complexity would refer to the heterogeneity of institutional prescriptions in terms of ethical values, beliefs and standards that an MNE encounters during its involvement in international markets (Greenwood et. al., 2011). This study specifically notes that MNEs build their sustainability strategies and missions, comprising ethical commitments, according to their institutional environment of the home country or the global context (Filatotchev & Stahl, 2015;

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Surroca et al., 2013; Tan & Wang, 2011). However, on the contrary, multinationals, by operating in multiple environments, often encounter requirements for ethical practices, which stem from the local institutional environments and are much in conflict with the organization’s core ethical values (Filatotchev & Stahl, 2015; Surroca et al., 2013; Tan & Wang, 2011).

Although a relevant number of studies has examined corporate behaviour in diverse institutional environments (e.g. Greenwood et al. 2011; Kostova & Roth, 2002; Marano & Kostova, 2015; Pache & Santos, 2013), the explicit attention to CSR and ethical aspects within this literature is limited. Indeed, only few conceptual papers have made reference to these issues (e.g. Filatotchev & Stahl, 2015; Marano & Kostova, 2015; Tan & Wang, 2011).

Specifically, Filatotchev & Stahl (2015) take an approach with respect to CSR and find that companies experience tension between global integration and local responsiveness of the CSR strategies because of the increasing diversity in requirements for CSR and ethical standards. Nevertheless, Filatotchev & Stahl (2015)’s work is not as compelling, since their conceptual study is implemented in the context of corporate governance and thus limits the findings to a certain sphere.

Tan & Wang (2011), however, do build a general conceptual framework on strategic behaviour of MNEs operating in multiple institutional environments with heterogeneous requirements for ethical practices. The concepts of responses are based on two measurements. First factor is CSR ingrainedness in an MNE, i.e. the degree to which a company prioritizes CSR in its strategy and integrates CSR into its regular practices. The second determinant is strength of the local ethical values. Tan & Wang (2011) posit that the more CSR is ingrained in a strategy of an MNE, the more resistant the corporation will be to leave its present ethical principles and to conform to ethical beliefs in the host county. And on the contrary, the stronger local ethical pressure, the more complicated it will be for an MNE to preserve its corporate ethical values. An MNE thus experiences much of an ethical dilemma when its strategy is highly CSR oriented and when at the same time its host country exerts strong pressures to adopt a contradicting ethical belief. The response of MNEs to such an ethical dilemma, proposed by Tan & Wang (2011) is the so-called ‘camouflage’, which is a compromise between an adaptation to the local pressure and adhering to the corporate principles.

Yet, the responses of MNEs with strong ethical values to pressures for an adoption of conflicting local ethical principles need to be more accurately explored, as the literature addressing this issue is very limited and the few papers examining the MNE responses are restricted to a specific field (e.g. Falcounbridge & Muzio, 2015; Filatotchev & Stahl, 2015).

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Furthermore, although Tan & Wang (2011) do elaborate on the problem of strategic behaviour of MNEs in response to ethical dilemmas, their proposed concept of camouflage remains restricted to a one single construct that is not complemented by any further research.

In addition, organizational responses to complex ethical dilemmas originating form heterogeneous institutional requirements, have until now been perceived as a singular action (e.g. Filatotchev & Stahl, 2015; Surroca, et al., 2013; Tan & Wang, 2011). The process of change in strategic responses has instead not been taken into consideration. In particular, the studies overlooked series of interactions between a company and its host country environment and a development of various strategic actions over time. Even though Tan & Wang (2011) signal the camouflage strategy, due to its high ethical risks, may be unsustainable and can potentially lead to a replacement by another strategy, their study does not examine the dynamics related to the adoption of the camouflage strategy over time.

Studies acknowledge that the lacking focus on how to effectively resolve the problem of conflicting demands concerning ethics can contribute to corporate scandals (Filatotchev & Stahl, 2015; Surroca, et al., 2013) or lead to suboptimal strategic decisions (Greenwood et al., 2011). It is of high importance to understand this process of since it may have major implications for the social legitimacy of an MNE (Tan & Wang, 2011)

In sum, the academic papers and studies elaborating on organizational behaviour in response to institutional complexity have not sufficiently researched the fields of international business in combination with business ethics. We stress the importance to analyse the ethics in business through the lens of institutional complexity due to the fact that MNEs often face ethical dilemmas arising from heterogeneous institutional environments. More specifically, MNEs’ ethical principles shaped by the institutional environment of the home country or a global context, are often in a conflict with the ethical prescriptions given by the host country institutional environment, and exposes the company to a challenging situation. Organizational responses to institutional complexity with an application to the international business and ethics context are in general not thoroughly explored and empirically supported. The scholars also studied the problem solely in a cross sectional manner, overlooking the aspects of process and change in responses. Hence, this study aims to fill the aforementioned gaps by examining how MNEs with strong ethical principles respond to pressures for conformity to incompatible demands regarding ethics in their host country over time.

In order to explore the changes in responses over time, the study will draw on Oliver’s (1991) framework that presents a systematic typology of organizational responses to institutional processes (i.e. acquiescence, compromise, avoidance, defiance and manipulation).

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A longitudinal approach will be taken utilizing Oliver’s (1991) classification that will map and categorize the interactions between MNEs, with a thoroughly developed ethical orientation, and their host country actors pressuring for adoption of a practice contradicting the ethical approach of the MNE.

The research question will be explored through a multiple case study. The cases of Google conducting business in China, Facebook’s operations in India and the telecommunications giant Vodafone in Egypt sampled with the aim to obtain literal replication (Yin, 2003), represent all MNEs that have been experiencing the challenge of strong idiosyncratic requirements in the host country that contradict their thorough ethical practices. The cases are illustrated through a collection of secondary qualitative data from selected newspaper publications, company annual reports, press releases and other corporate and NGO documentation. The acquired data is further analysed through a thematic coding method explained in the data analysis section of this paper.

This study aims to contribute to the literature in three main ways. First, the study adds new insights by viewing organizational behaviour in a wider time frame and rich contextual background. Secondly, it enriches the institutional complexity literature by extending the Oliver’s (1991) typology of general responses to predict the behaviour of multinational organizations operating in an international business setting and applying the classification to the context of business ethics. Lastly, the results of the study stress complexity of topic and highlight the urgency for a further research.

The paper is designed according to the following structure. The literature review chapter discusses the main ideas from institutional theory. These are followed by a closer review of the institutional complexity in the multinational context that directly relates to terms like globalization and institutional distance. Next, multiple insights on divergent ethics-related institutional demands and organizational responses to institutional complexity, which lead to the research question and working propositions, are presented. The methodology describes the multiple case study design of this study, the cases selected, the data collection and analysis method. The results section analyses the collected data through both, the within-case analysis and the cross-case analysis approach. The discussion chapter explains the results in relation to the working propositions that were formulated and proposes implications for future research. The paper ends with a conclusion about the key findings.

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2. Theoretical foundations and Literature review

This chapter discusses the main concepts and theories that are essential to comprehend the focus of this study. Firstly, the constructs of institutions and institutional complexity are presented and discussed. Next, in order to illustrate the uniqueness of institutional complexity to which MNEs are exposed, the trends in globalization together with the concepts of cross-national distance and institutional distance that drive the complexity experienced by MNEs are described. The later section, 2.4 MNEs and ethics-related institutional complexity, explains in detail the relationship between ethics and institutional complexity. In particular, the section illustrates how MNEs may encounter heterogeneous ethical beliefs across their institutionally distant host countries and thus are exposed to challenging situations of institutional complexity. This is followed by an analysis on why these tensions exist, when they occur, and what the potential responses to them are. Finally, from the literature review the research gaps are identified and the research question is formulated.

2.1 Institutions

Institutional theory has been frequently applied in business research and management studies. Scholars find institutional theory particularly relevant because it provides new insights to numerous problems in business research (Dacin, Kostova, & Roth, 2008). It is a comprehensive mean to study the interaction between a firm and its institutional environment and therefore it has been commonly adopted as a unifying framework to formulate the MNE behaviour (Westney, 1993).

The early findings of institutional theory research, emphasized the ‘taken-for-granted’ nature of institutions (Scott, 1995; Zucker, 1977), which relates to the naturalism with which institutions are accepted within an environment. North (1991: 97) supports this statement with a definition of institutions as “humanly devised constraints that structure political, economic, and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights).” Scott (1995) further finds that institutions can be divided into cultural-cognitive, normative, and regulative pillars. He describes the regulatory aspect of institutions as the prevailing laws and rules that provoke specific types of practices in a country. The cognitive institutions are interpreted as culturally shared understandings closely associated with cultural values and traditions. And the normative component comprises social obligations and expectations about

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appropriate actions modelled on existing dominant practices or norms in a given culture (Scott, 1995).

The ‘taken-for granted’ character of institutions also lead to thoughts on legitimation processes of organizations in the institutional theory. Scholars advocated that institutionalized practices determine the obvious manner in which things are carried out and these practices are viewed as legitimate by organizations that adopt and perpetuate them (Dacin, Goodstein, & Scott, 2002; Meyer & Rowan, 1977; Zucker, 1987). In particular, conformity to institutions as rules and constraints, guarantees organizations social acceptability and endorsement (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Zucker, 1977). Organizations embedded in a certain institutional environment adopt practices that formed by the environments’ institutionalized norms and values (Kostova & Roth, 2002). The employment of these practices is reasoned by organizations’ compliance to institutional pressures stimulated by legitimacy motives (DiMaggio & Powell, 1983; Meyer & Rowan, 1977).

Institutional theorists, furthermore, elaborated on the variety of institutional practices (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Zucker, 1977) and the scope of effects that these practices have on the structural nature of organizations (Meyer, Scott, & Deal, 1983). Meyer & Rowan (1977) have underlined the diversity of institutional processes and the potential incompatibility among them, when they first noted that organizations confront both sociocultural and commercial expectations, which may be mutually conflicting. The point was further highlighted by Scott (1991: 167), who claims that “there is not one but many institutional environments and…some would-be source of rationalized myths may be in competition if not in conflict.” D’Aunno, Sutton and Price (1991: 636) similarly added that “confronting to strong environmental beliefs and rules is difficult for many organizations… because they face fragmented settings in which multiple independent groups and organizations make demands that are, at best, uncoordinated.” This shows that the variety in institutional processes and potential inconsistency among them creates a complex situation for organizations that seek to achieve social approval through satisfying the institutional demands (Pache & Santos, 2010).

2.2 Institutional complexity

The recognition of conflicting institutional processes and their possible consequences on corporations has triggered much interest among scholars in the last decades (e.g. Greenwood et al., 2011; Greenwood et al., 2010; Oliver, 1991). Friedland & Alford (1991) were the first

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to form a foundation of the institutional complexity through their notion of institutional logics. Institutional logics were defined by Friedland & Alford (1991: 248) as: “a set of material practices and symbolic constructions which constitutes its organizing principles and which is available to organizations and individuals to elaborate”. Later, Thornton and Ocasio (2008: 804) refine the definition of institutional logics by defining it as “socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules by which individuals produce and reproduce their material subsistence, organize time and space, and provide meaning to their social reality.” Institutional logics provide explanation on how the underlying differentiated belief systems of the main societal institutional orders (market, state, professions, corporations, family and religion) shape the cognition and behaviour of individuals and organizations (Friedland & Alford, 1991; Tan & Wang, 2011). In this way, society is composed of multiple institutional logics that “are interdependent and yet also contradictory” (Friedland & Alford, 1991: 250). That points to the presence of multiple institutional logics that are much in conflict and hence provide inconsistent expectations.

Once institutional logics have emerged as a new branch in institutional theory, the attention has shifted to competing logics and formed the concept of institutional complexity (Greenwood et al., 2011). Organizations face complexity whenever they confront incompatible prescriptions from multiple institutional logics (Greenwood et al., 2011). In keeping with this, scholars have sought to analyse how companies respond to the conflicting institutional logics they face (e.g. Falcounbridge & Muzio, 2015; Greenwood, et al., 2011; Greenwood et al., 2010; Oliver, 1991). The interest has been steered by an assumption that availability of contradicting institutional logics forms opportunities for organizations to exert some level of strategic choice (Pache & Santos, 2010). The primary drivers for further research, though, have been the suggestions that the prescriptions of various competing logics generate challenging situations and pressures for organizations (Greenwood et al., 2011). Pache & Santos (2010) argue that compliance with competing institutional demands when dealing with institutional complexity is problematic. Organizations experience a dilemma as satisfying one demand may cause a violation of another one and hence potentially result in risking their organizational legitimacy. 2.3 Institutional complexity in the multinational context

This section firstly describes the trends in globalization and the terms of institutional and cross-national distance. The description aids to sufficiently justify the problem of institutional complexity in an international business environment, later in the section.

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2.3.1 Trends in globalization and multinational corporations

A number of researchers have come to a conclusion that globalization is changing the world at a fast pace, leaving great impacts in field of business (e.g. Bishop, Reinke, & Adams, 2011; Garret, 2000; Scherer, Palazzo & Seidl, 2013). Globalization refers to “integration and interdependence among countries resulting from the modern flow of people, trade, finance and ideas from one nation to another” (Bishop et al., 2011: 1).

In the recent decades, fast progress in transportation and telecommunications infrastructure has catalysed the globalization processes, causing a further interdependence in economic activities (Stever, 1972; Wolf, 2014). With the accelerated improvements in transportation and communication, commercial transactions have grown rapidly beyond their national boundaries. As a result, the increasing volume of investments, logistics, transportation, sales and other transactions between two or more countries has served as springboard for the establishment of international business in practice and in academic literature (Daniels, Radebaugh, & Sulivan, 2011; Joshi, 2009).

Currently, international business is rapidly expanding, which can be linked to the foreign direct investment and international trade fuelled by the persisting trends of worldwide interconnectedness, economic interdependence and reduced trade barriers within globalization (Brune & Garrett, 2005; Daniels et al., 2011; Joshi, 2009). The progress of international business has further led to the rise of an increasing number of MNEs, seeking to gain benefits through approach to international markets and production (Buckley & Casson, 2009).

Some academic literature states that the growing international business is resulting into an economic globalization, which can be understood as a full international integration of markets that leads to a global market place (Bishop et al., 2011; Brune & Garrett, 2005; Garrett, 2000). Ghemawat (2003), however, argues that such an event is not happening as the prevailing levels of the cross-border integration in international business are far from complete. According to Ghemawat (2003), the current state can be characterized by a semi globalization where cultural, political, geographic and economic differences across countries do exist and any radical increases in integration are not expected. Furthermore, the variety among countries cannot be neglected since it may have a significant impact on MNEs’ business (Ghemawat, 2001). In other words, the semi-integrated markets do ease MNEs’ expansion to foreign markets on one side, but may also induce risks of under-evaluating the cross-border differences while setting business abroad (Ghemawat, 2001).

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In sum, the current levels of the international market integration and trends of connectividness, international economic dependence and policy liberalization, increasingly draw MNEs to enter the foreign markets (Brune & Garrett, 2005; Daniels, Radebaugh, & Sulivan, 2011; Joshi, 2009). Yet, MNEs should not overestimate the attractiveness of foreign markets and keep in mind the risks of doing business abroad (Ghemawat, 2001). The major hazards are related to barriers caused by the cross-border distance. Cultural, political, administrative or economic differences represent the distance, which, as argued by Ghemawat (2003), still persists between countries, despite the ongoing globalization processes and may complicate the business in the overseas market (Ghemawat, 2001).

2.3.2 Cross-border and institutional distances

Various perspectives have been adopted to study cross-border distance (e.g. Berry, Guillen, & Zhou, 2010; Ghemawat, 2001). When institutional theory standpoint towards cross-border distance is taken, the focus is on institutional contrasts between countries (Kostova, 1999). A key assumption in institutional theory is that “firms are embedded in the country specific institutional arrangements” (Busenitz, Gomez, & Spencer, 2000: 994). Therefore, the institutional research on cross-border distance focuses mainly on how institutional environments, where a company operates, differ from one another (Kostova, 1999). Following Kostova & Zaheer’s (1999: 71) definition, “the differences/similarities between the regulatory, cognitive, and normative institutions of . . . two countries” compose institutional distance.

In general, since MNEs develop their business activities in two or more countries, they usually experience cross-country institutional distance (Ghemawat, 2001; Kostova & Zaheer, 1999). In relation to the previous statements regarding the risks of doing business abroad, the institutional distance commonly comprises the differences between the home country or a global field of MNE’s operations and host country. The larger the distance is, the higher the difficulty of interpreting and appropriately satisfying requirements in the host country, as well as the larger the necessity for adjustments to be made (Kostova & Zaheer, 1999). Thus, it is likely to be difficult for an MNE to gain legitimacy in two institutionally distant countries at the same time (Kostova & Zaheer, 1999; Scherer et al., 2013).

To conclude, the astonishing international business growth that is triggered by the globalization trends, has generated a striking number of MNEs operating across the globe (Brune & Garrett, 2005; Daniels et al., 2011; Garrett, 2000; Joshi, 2009). Foreign markets

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constantly attract international trade and foreign direct investment conducted by MNEs (Buckley & Casson, 2009). Opportunities for multinationals to internationalize to various foreign locations, however, bring disadvantages as well (Ghemawat, 2001). In particular, the presence in multiple countries, means presence in multiple institutional environments (Marano & Kostova, 2015), which possibly are institutionally distant and thus yield the problem of institutional complexity. The institutional distance among locations where MNEs operate, e.g. home and host country, exposes the organizations to a higher pressure to simultaneously conform to requirements of divergent institutional settingsand poses a risk of misunderstanding the local expectations and not achieving legitimacy (Kostova & Zaheer, 1999). MNEs thus face challenges to obtain social acceptance when attempting to satisfy demands of the institutionally distant environments (Kostova & Zaheer, 1999; Scherer et al., 2013). We argue, in keeping with extant literature, that the cross-border diversity in institutional environments presents a problem of institutional complexity (Falcounbridge & Muzio, 2015; Kostova & Roth, 2002; Marano & Kostova, 2015). Altogether, linking institutional theory to international business literature stresses the specific type of institutional complexity that MNEs face.

2.4 MNEs and ethics-related institutional complexity

Among the different types of institutional complexity faced by MNEs, this study focuses on ethics-related institutional complexity. Ethics-related refers to the field of business ethics. To describe business ethics in this paper, the most common definition adopted in the literature as according to Lewis (1985), is used. Lewis (1985: 381) found that “rules, standards, codes, or principles which provide guidelines for morally right behaviour and truthfulness in specific situations” is the definition mostly occurring in the literature, although there is no universal agreement among scholars on what business ethics precisely is.

The necessity for a discussion on ethics in business is often reasoned by the voluminous evidence of unethical corporate practices, which yield unfavourable consequences for society

and corporations (Salehi, Saeidinia, & Aghaei, 2012). Hence, many academic papers examine firms’ practices with regards to controversial issues such as bribery or discrimination, the motives driving the unethical practices and potential strategies to prevent them (e.g. McKinney & Moore, 2008; Quinn, 1988; Salehi et al., 2012). The institutional theory literature provides a useful lens to explore the challenges firms face as regards conflicting ethical demands across countries. MNEs are a common case where business and ethics collide due to the multiplicity

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of MNEs’ international markets, which often imply differing ethical standards (Marano & Kostova, 2015; Surroca et al., 2013).

Salehi et al. (2012) argue that appropriate ethical practices have become essential for organizations to avoid possible lawsuits and other disputes, and to gain social acceptance in their environment. If the aforementioned definition stating that ethics in business comprise ‘rules, standards, codes or principles’ is considered, a parallel with rationale on legitimacy in the institutional theory can be observed. Institutional theorists found that organizations attain legitimacy and social meaning by conformity to institutionalized norms and beliefs (Meyer & Rowan, 1977; Oliver, 1991; Zucker, 1987). Thus, acting in keeping with ethical values of the institutional environment in which organizations operate, represents a way for organizations to gain legitimacy. Furthermore, as the explained in the section 2.1 Institutions organizational practices and values are embedded, and therefore reﬂect, in the institutional environments in which the companies operate (Kostova & Roth, 2002; Marano & Kostova, 2015). Firms will thus adopt ethical values and principles encoded in the institutional environment of its operations.

The problem arises, when a firm attempts to achieve legitimacy in two divergent institutional environments with contrasting ethical beliefs. This especially regards multinational companies placed in the institutional environments of divergent countries. Since institutions are culturally embedded and anthropologically developed in a given region or country (North, 1991), ethical values can be considered as country-specific as well (Tan & Wang, 2011). In addition, due to the national idiosyncrasies, there is no universal ethical belief (De George, 1994). This means that some values that are legitimate in one country may be considered unethical in other (Tan & Wang, 2011). Therefore, MNEs may face institutional complexity in terms of ethical beliefs, which creates a challenge for companies setting their business in more than one country. An MNE in a host country may be exposed to a different institutional environment that comprises opposing ethical beliefs from the ones imparted by the MNEs’ home country or their global field of operations (Asgary & Miltschow, 2002). Thus, the ethical expectations towards the locally settled subsidiary can be different to those in the thoroughly applied in the whole MNE. The company can develop its ethical principles based on the institutional environment of its home country but institutional environment of the host country prescribes a contradicting set of ethical values. MNEs are thus often under pressure to simultaneously meet opposing demands in order to gain social acceptance in both environments (Tan & Wang, 2011).

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2.5 Organizational responses to institutional complexity

A large body literature has examined the corporate behaviour in response to the complex institutional pressures. Nevertheless, responses of MNEs to ethics-related institutional complexity in an international context have been rather little addressed in this literature (e.g. Filatotchev & Stahl, 2015; Tan & Wang, 2011).

Filatotchev & Stahl (2015), as one of the few, take a CSR standpoint of view on the problem of balancing the pressures in the home and host country. They propose that, in order to be globally consistent and locally responsive at the same time, the best solution for a company is to apply a transnational approach. That is a compromising strategy between implementation of the same CSR guidelines across all cultural environments in which the MNE operates and an approach that is exclusively tailored according to the stakeholders’ requirements in the host country (Filatotchev & Stahl, 2015). Nevertheless, their concept has been developed within a specific context, namely the corporate governance, and thus the findings are restrained to a limited sphere. Furthermore, Filatotchev & Stahl (2015)’s hypothetical solution of the ‘transnational strategy’ has not been empirically tested.

Another attempt to address organizational responses to ethics-related institutional complexity across countries was made by Tan & Wang (2011). Their study adopts the institutional logics’ lens to examine MNEs’ ethical behaviour. More specifically, Tan & Wang (2011) build a conceptual framework of MNE strategic responses to multiple ethical requirements that may or may not be incompatible. The strategic response, Tan & Wang (2011) predict that an MNE will adopt to the situation this paper examines- a situation when the host country idiosyncratic ethical beliefs are in conflict with the strong ethical values embedded within an MNE- is the camouflage strategy. Camouflage is a compromise between adhering to the corporate principles and adaptation to the local pressure. It is a strategy that, if the ethical beliefs are viewed as different institutional logics, blends components of one logic into the other over time (Tan & Wang, 2011). Companies exercising camouflage are empowered to sustain logic consistency within the organization and to stay locally competitive at the same time. Thus, they may potentially sustain legitimacy both on the global and local level. Yet, as acknowledged by Tan and Wang (2011: 382), “a camouflage strategy involves more complicated challenges to organizations and high ethical risks”; this causes a camouflage strategy to “be unsustainable if the ethical risks become too high” (Tan and Wang, 2011: 382). The fact that a camouflage strategy may be highly risky and not sustainable in the long-term,

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increases the likelihood that a firm either will not adopt this strategy as first choice or it will replace this strategy with another, more sustainable one. Yet, Tan & Wang (2011) constrain the MNE behaviour, when its highly prioritized ethical practices are conflicting the local ethical demands, to a single construct only and do not examine its long-term viability and potential replacement over time. In addition, Tan & Wang’s (2011) statement regarding the adoption of a camouflage strategy is supported by examples but it is not complemented by any empirical research.

Contrary to Tan & Wang (2011) that offer one type of response to a specific situation in institutional complexity, Oliver (1991) proposes a general typology of organizational responses to institutional pressures. In her work the following strategic responses are identified: acquiescence, compromise, avoidance, defiance, and manipulation. To each response, different tactics through which the response can be achieved are associated. An overview of the strategies and tactics is summarized in Table 1 with a detailed description below.

Response Strategies Tactics Description

Acquiescence Habit, Imitate, Comply Accommodation of institutional demands

Compromise Balance, Pacify, Bargain An attempt for a partial conformity with the institutional demands

Avoidance Conceal, Buffer, Escape An attempt to preclude the necessity for compliance with the institutional demands

Defiance Dismiss, Challenge, Attack Explicit denial of at least one of the institutional demands

Manipulation Co-opt, Influence, Control Active attempt for change in the content of the institutional demands

Note. Adapted from When worlds collide: The internal dynamics of organizational responses to conflicting institutional demands, p.463, by Pache & Santos, 2010, Academy of Management Review.

Acquiescence relates to organization’s acceptance of arrangements demanded by actors from the external institutional environment. Acquiescence may emerge from a habit (i.e., the unconscious obedience to implicit standards), from the aware or unaware reproduction of institutional models, or from the voluntary conformity with institutional expectations (Oliver, 1991). Compromise relates to the pursuit of a partial compliance with all institutional prescriptions. Organizations can attempt to offset the competing demands through the agreement of a compromise. They as well may comply only to the essential institutional demands and allocate resources to mitigate the resisted institutional actors (Oliver, 1991). Table 1. Response Strategies to Institutional Pressures

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Avoidance relates to the effort by organizations to circumvent the necessity to comply with the institutional expectations. Tactics involved in avoidance, include masking nonconformity behind an impression of acquiescence through symbolic conformity or through a withdrawal from the domain where the institutional tensions are present (Oliver, 1991). Defiance, which is a more active strategy, relates to the definite and clear denial of at least one of the institutional requirements in an effort to eliminate the source of conflict. Defiance might be performed through rejecting or neglecting institutional demands (Oliver, 1991). At last but not least, manipulation relates to the active effort to change the content of institutional prescriptions and to manipulate the institutional actors. In manipulation, Oliver (1991) stressed the following tactics: co-opting the sources of the institutional pressures to balance out the institutional conflict, altering the content of institutional prescriptions through aggressive lobbying, or manipulating the source of pressure.

The adoption of Oliver’s (1991) typology of responses by a number of studies (e.g. Pache & Santos, 2010; Scott, 1995; Suchman, 1995) highlights its significance. However, the global context that companies nowadays operate in, has been neglected in Oliver’s (1991) classification. Therefore, if Oliver’s (1991) classification is extended to complexity arising from the cross-country distance, it plays a crucial role in the examination of MNEs’ responses to institutional complexity.

2.6 Research question and working propositions

The review of the literature in the previous sections has illustrated that with the increasing volume of international business transactions (Daniels et al., 2011; Joshi, 2009), the number of multinational corporations that operate in institutionally distant countries rises too (Berry et al. 2010; Kostova & Zaheer, 1999). Consistent with justification in the section 2.4 MNEs and ethics-related institutional complexity, institutional complexity may also concern ethical beliefs. For MNEs, such institutional distance implies heterogeneity in expectations for ethical standards throughout its countries of operations. MNEs may thus encounter a pressure to conform to both, the firmly set company ethical standards developed globally or in the home country, and the conflicting host country idiosyncratic ethical prescriptions (Filatotchev & Stahl, 2015; Surroca et al., 2013; Tan & Wang, 2011). And since the strategic choices of MNEs under the pressure to simultaneously meet divergent requirements concerning ethics often lead to corporate scandals (Filatotchev & Stahl, 2015; Surroca et al., 2013), it is essential to closely examine the MNE ethical behaviour in response to these pressures.

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In general, institutional theory literature has broadly covered the topic of organizational responses to conflicting institutional requirements. However, it has not sufficiently examined the responses to the ethics-related institutional complexity with respect to international business setting where organizations operate (e.g. Greenwood et al., 2011; Greenwood et al., 2010; Oliver, 1991; Pache & Santos, 2013; Pache & Santos, 2010). The few studies, concentrating on conceptualization of responses of MNEs to the institutional complexity with reference to ethics, have failed to support their theoretical contribution with an empirical research (e.g. Filatotchev & Stahl, 2015; Tan & Wang, 2011). For example, Filatotchev & Stahl’s (2015) concept of the ‘transnational solution’, solely tailored to the context of corporate governance is illustrated by examples but remains unproved by empirical evidence. Furthermore, up to this point, the academic on literature organizational responses did not address the responses from a process perspective, thus overlooking the of a process and change in strategies over time. Particularly, Tang & Wang’s (2011) paper signals that the camouflage strategy, which is a response to the case researched in this paper, may be unsustainable in a long term and can potentially lead to a replacement by another strategy, yet the study does not examine the dynamics related to the adoption of the camouflage strategy over time.

Therefore, it is crucial to conduct an empirical study exploring the following question: How does a MNE with strong ethical principles respond to the incompatibility of these

principles with ethics-related demands in their host country over time?

This paper intends to address the research question through 3 working propositions developed in the following paragraphs. The propositions draw on Oliver’s (1991) typology of strategic responses to institutional pressures, which are applied to the multinational context and to institutional prescriptions regarding ethics. Oliver’s framework allows to systematically categorize the responses that are examined.

The first proposition is based on Tan & Wang’s (2011) prediction of the camouflage strategy, which is assumed to be adopted by an MNE with strongly ethical-oriented corporate strategy when it encounters pressures for contradicting ethical prescriptions in the host country. It is the only concept of an MNE response to the ethics-related institutional complexity relevant to our research question found in the literature. Thus, the camouflage represents a concept to be tested and provides a springboard to draw the answers to the research question from. The camouflage, as introduced by Tan & Wang (2011), has much in common with Oliver’s (1991) concept of compromise. In the compromise strategy, an organization is attempting to accommodate, at least partially, all the institutional demands through negotiating a compromise among the institutional expectations. Similarly, camouflage illustrates that a company aims to

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blend in parts of the host country institutional logic into its core logic to compromise between the need to adapt to the host country pressure and its company ideology.

The indication of the compromise being the first response adopted by an MNE can be supported by the Pache & Santos’s (2010) argument from the institutional theory claiming that satisfying one institutional prescription may cause a violation of another one and hence potentially result in organizations losing its social legitimacy. In this case compromise is a good agreement, when both, the corporate ethical principles and the host country demands would be satisfied and thus the legitimacy would be attained on both sides. This paper, therefore, hypothesizes that the compromise will be the first approached strategy by MNEs encountering an ethical conflict described above.

Proposition 1: The first response adopted when an MNE with strong ethical principles first encounters local prescriptions conflicting these principles is compromise.

The hypothesis of the compromise as a response adopted when an MNE with strong ethical principles encounters local prescriptions conflicting these principles, also forms the second and third proposition. Due to the longitudinal character of this research, the compromise strategy is meant to be explored in a wider timeframe. Tan & Wang (2011) already assume in their conceptual paper that strategic responses evolve over time. Specifically, they suggest camouflage implicates high ethical risks for an MNE and may be unsustainable in a longer perspective. In keeping with the arguments presented above, the camouflage response, categorized by Tan & Wang (2011) is classified as the compromise strategy in Oliver’s (1991) typology. The indication for unsustainability of the strategy can be supported by a reasoning in line with the arguments presented for the first proposition. Although the compromise grants an MNE a partial social legitimacy in both institutional environments, a full legitimacy was not achieved and thus the situation is not sustainable for the MNE. The second proposition hence suggests:

Proposition 2: The compromise strategy is not sustainable for an MNE over a long period of time.

In accordance with the aim to fill the literature gap through capturing the process of change in strategic responses and with a reference to the second proposition, the third proposition hypothesizes a replacement of the compromise strategy by another strategy, if it is regarded as unsustainable.

Proposition 3: If the compromise strategy is deemed unsustainable and yields too many ethical risks for an MNE, it will be replaced by another strategy.

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3. Methodology

This chapter presents how the design and execution of this research was approached. Method defines how the research question, is studied (Van der Velde, Jansen, & Anderson, 2004). It refers to the choices made when planning and executing the study, that is, during preparation of the study, information gathering and data analysis. Most importantly, method is the baseline for the validity or trustworthiness of the study and ultimately the results drawn from the study (Keating 1995).

Within this chapter, the section on research design at first briefly describes the utilized research philosophy and later justifies the qualitative research approach, employed by adopting a multiple case study. The research design is followed by a section on the case selection with a short description of the cases, which proceeds to data collection and analysis through thematic coding.

3.1 Research design

To present the perspective through which this study is viewed and conducted, the research philosophy will be justified prior to the explanation of the research design. The term research philosophy relates to the way in which the world is perceived by a researcher. It generally forms the research strategy and the methods chosen in the strategy (Saunders, Lewis, & Thornhill, 2007). One of the commonly used schools in the research philosophy is positivism (Burrell & Morgan, 1979). According to this philosophy, reality is a fact, which is observable, quantifiable and can be logically reasoned (Saunders et al., 2007; Warneryd, 1985). However, mostly statistical analysis profit from the quantifiable observations attained from the positivist approach (Saunders et al., 2007). In social sciences, positivism is criticized considering that reality cannot be always observed as a mere fact (Saunders et al., 2007).

Due to the reason that positivism fails to provide a sufficient mean to research organizational behaviour, where the causalities and motivations cannot be quantified or replicated, this essay will adopt the ‘interpretative’ philosophy. In comparison to positivism, which in order to draw law-like generalisations reduces reality to simplest elements, the interpretative philosophy, enables the researcher to comprehend and interpret the world around him by executing qualitative holistic and in depth investigations on a small sample (Saunders et al., 2007). Hence, the “how” issues in the research question can be answered. Moreover, in studies on organizational behaviour the researcher cannot stay independent of the subjects

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examined, through the interpretivist approach he enters the social world of the subjects and infers subjective meanings to the phenomena (Saunders et al., 2007)

The justification of the philosophy approach serves as a basis for the research design. Research design “is the logical sequence that connects the empirical data to a study’s initial research question, and ultimately to its conclusions” (Yin, 2003:19). This applies to the case of both quantitative and qualitative research (Van der Velde et al., 2004). To identify causal links between two or more matters, quantitative research is usually the suitable mean to deliver the results (Eisenhardt, 1989). On the contrary, qualitative research is a pertinent tool to establish the motivations and perceptions of a certain phenomenon (Van der Velde et al., 2004). Therefore, to examine the MNE responses to ethical conflicts, the qualitative research method is used in this exploratory study. The exploratory character refers to findings of novel insights and to assessing the phenomenon in a new light (Saunders et al., 2007). In this particular research, it refers to the evaluation of the strategic responses over time and a delivery of new insights to the interactions between a company and its host country institutional environment. A commonly used strategy in an exploratory research is a case study (Baxter & Jack, 2008). A case study has numerous advantages. The strategy promises rich understanding of the context (Saunders et al., 2007) and leads to unique and testable outcome (Eisenhardt, 1989). Although, it is criticized for its low statistical generalizability, a case study enables the research to go into depth and detail of a studied object (Yin, 2003). The advantage of providing deeper insights into the ways in which organizations interact with their environment (Van der Velde et al., 2004), makes the case study a suitable strategy to explore the research question. Another rationale for adopting a case study for the research on MNE strategic responses is the relevance of the case study to the “how?” type of research questions (Saunders et al., 2007; Yin, 2003).

Gummesson (1991) and Balogun et al. (2003) further point out that if the aim in a research is to understand in depth the mechanisms of relationships and their change over time, there is no need to study a large number of case organizations. Due to the time-consuming character of case studies, it is generally not possible to carry out an in-depth analysis of more than one or a very limited number of cases (Balogun et al. 2003, Gummesson 1991). Concentrating on a single or a few cases enables the researcher to be close to the research question and to concentrate on context and detail of the case (Balogun et al. 2003). Some scholars argue that focusing on a limited number of cases has certain limitations in terms of generalising the findings to a wider scope (Eisenhardt 1989). Yet, the target is not to find cases that represent and confirm set connections, but in few unique cases to increase the understanding of a complex system of relationships among organizational responses, global

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and local ethical beliefs, and institutional complexity. On these occasions, there is a persuasive power in a small number of cases (Siggelkow 2007). The aim is to look for theoretical generalisations, and not statistical generalisations (Saunders et al., 2007). Therefore, this case study examines 3 selected cases of MNEs as units of analysis. The MNEs are analysed as holistic cases because they are treated as whole organizations and no relevant subunits can be identified (Saunders et al., 2007; Yin, 2003). The literal sampling ensures that cases are selected according to unified criteria that yield similar results. Thus, the external validity of the study is established (Yin, 2003).

Since this research deals with a dynamic change and interactions between MNEs and their institutional environment, the subjects cannot be studied at a single point of time (Pettigrew, 1997). By investigating the phenomenon in a longitudinal manner, the development of MNE responses to ethical conflicts over a long-term can be addressed. As Saunders et al. (2007) argue, the main advantage of a longitudinal study is the capacity to research a development or a change. In addition, even with time constraints in the real time, the advantage of a longitudinal study is that it provides a possibility to gain valuable insights into a long-term development (Saunders et al., 2007).

3.2 Case selection

The particular cases selected in a case study research serve as a basis for a research and significantly influence the findings (Baxter & Jack, 2008; Yin, 2003). In case selection, the attention should be aimed at identifying theoretically useful cases (Eisenhardt 1989). This research uses several selection criteria in order to ensure that the units of analysis are sufficient for the research question. Firstly, the organization under the examination should be an MNE operating in multiple countries. The second criterion to be fulfilled are the strong idiosyncratic ethical principles that an MNE employs. Thirdly, one of the host countries, where the MNE operates, should pose pressures for conformity with ethical principles that are in conflict with those principles applied by the MNE.

Based on the criteria given above, three organizations were identified. Among the selected firms is an US based multinational technology company providing internet specialized products and services - Google Inc.. The technology giant, founded in 1998 (Google Inc., n.d.a), has earned a great success, experienced a rapid growth and currently its search engine is the no.1 visited website in the world (Alexa Internet Inc.). More than 50 internet services and products are provided by the organization, including web search tools, online

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advertising services, communication and publishing mediums, desktop applications, mobile phones and operating systems (Google Inc., n.d.d). Google Inc. has been aiming to meet the highest standards in the area of ethical business conduct (Google Inc., n.d.c). Its mission: "providing our users unbiased access to information, focusing on their needs and giving them the best products and services that we can" (Google Inc., n.d.b; Google Inc., n.d.c) together with the well-known slogan reflecting this mission: "Don't be evil" (Google Inc., n.d.c; Google Inc., 2006) have both been proving firm’s high ethical ambitions. Furthermore, Google Inc. has promised to advance privacy and freedom of expression for their users throughout the globe (Google Inc., 2006; Google Inc., n.d.c). Company’s security procedures have been strictly limiting access to users’ personal information and set measures to protect user data from unauthorized access (Google Inc., n.d.c).

The number of successful acquisitions, partnerships and internationalizations have certainly contributed to the fast-paced company expansion (Finkle, 2012; Google Inc., 2006). Perhaps one of the largest projects was launching a search engine operating from servers in Mainland China, in 2006 (Kim & Douai, 2012; Land, 2010). People’s Republic of China, however, is a communist society following an ideology of individual’s best interests being indistinguishable from the society’s best interests and thus limiting freedom of individual’s speech (Emmons, 2001; Kim & Douai, 2012). Even though the western cultures accept freedom of speech as one of the most important values necessary for a democratic society that respects human rights (Kim & Douai, 2012), Chinese authorities restrict free circulation of ideas and tightly monitor the internet and media content (Emmons, 2001). Google’s strong global stance for freedom of expression and privacy rights protection encoded in the Code of Conduct, together with the company entrance to the Chinese market where internet independence is restricted, validates this case to be appropriate for this study.

The second organization analysed, is a world leading telecommunications group, Vodafone Group Plc (Vodafone Group Plc, 2015; Vodafone Group Plc, n.d.b). With a significant presence in Europe, Middle East, Africa and Asia Pacific, the organization provides a wide range of services from mobile telephony to digital television, internet services and fixed line (Vodafone Group Plc, 2015). Vodafone Group Plc was chosen for its strong ethical values. The company has stated that customers’ right to privacy and freedom of expression are critical in preserving customer trust and therefore the company assures to protect customer information and to respect their rights (Vodafone Group Plc, 2011c). Vodafone Group Plc’s global commitment is clear from the Annual Report 2015 (2015: 31), which declares: “Wherever we

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operate, we work to ensure that we do not infringe human rights through our operations or business relationships.”

In accordance with the organizational strategic goal to expand its global service footprint through an ambitious series of mergers and acquisitions, Vodafone Group Plc has entered the Egyptian telecom market in 1998 as a co-owner of the MisrFone Group (Vodafone Group Plc, n.d. a). Despite the fact that Vodafone Egypt became the largest mobile phone company in Egypt (Vodafone Group Plc, n.d. a), it could not predict certain risks related to the Egyptian market, namely the political instability during the Egyptian revolution of 2011. Beginning in 2010, a wave of revolutionary demonstrations, protests, riots, and civil wars spread across the area of Africa and the Middle East (Amar & Prashad, 2013; Choudhary, Hendrix, Lee, Palsetia, & Liao, 2012). Dissatisfaction with legal and political issues, including a lack of free elections and freedom of speech, government corruption, authoritarianism, and economic issues such as high unemployment, inflation, and low wages created conditions of widespread unrest in many Arab nations, including Egypt (Amar & Prashad, 2013; Choudhary et al., 2012). A string of revolutionary events along with protests demanding a resignation of the president - Hosni Mubarak, became known as the Egyptian Revolution of 2011 (Amar & Prashad, 2013; Ismail, 2011). A hallmark of riots and demonstrations was successful due utilization of social media and telecommunication outlets that helped citizens organize and communicate (Ismail, 2011). By taking advantage of the capabilities offered by telecommunications technology and social media, protesters were able to strengthen their ability to oppose the government (Dainotti, et al., 2014; Ismail, 2011). The ruling Mubarak regime attempted to limit internet access and mobile network through a request to telecommunication firms to close down their services. The regime believed that diminishing communications would prevent the anti-government protests from growing by limiting protesters’ ability to organize and gain support from the general population (Choudhary et al., 2012; Dainotti, et al., 2014). Such a step represents the host country pressures to conform to local contradicting demands concerning ethics. Through the shut-down orders to large telecommunications companies and internet service providers the government tried to control the flow of information and therefore, government’s requirements were conflicting Vodafone Group Plc’s global commitments concerning human rights. Such a conflict in ethical values guiding the organizational practices and the government makes this case useful for this research.

Third case undergoing the study is an online networking service Facebook. Facebook Inc., the mother company of the Facebook service, was founded in 2004 and besides Facebook

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provides other social networking services such as Instagram, Messenger and WhatsApp (Facebook Inc., n.d.a; Facebook Inc., n.d.c; Facebook Inc., n.d.d). Facebook’s mission “to give people the power to share and make the world more open and connected. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them” has been shaping the nature of the products, which allow users to connect and share information through mobile devices and personal computers (Facebook Inc., n.d.a). Facebook provides space for sharing opinions, ideas, photos and videos, and to engage in other activities (Facebook Inc., n.d.a; Facebook Inc., n.d.d). The company has been adhering to several core rules and standards which also provide a rationale for choosing this firm as a case for the research. Principles guiding Facebook, Inc.’s services have been driven by strong ethical commitments such as promotion of openness and transparency through giving individuals greater power to share and connect (Facebook Inc., n.d.b). These guidelines clearly demonstrate the value assigned by the organization to freedom of expression and to individuals’ rights in social media. Facebook has informed: “People should have the freedom to share whatever information they want, in any medium and any format, and have the right to connect online with anyone - any person, organization or service - as long as they both consent to the connection” (Facebook Inc., n.d.b). In addition, the company has advanced that all individuals, advertisers, developers, organizations and other entities should have an equal access to information and its distribution within the Facebook Service (Facebook Inc., n.d.b). Facebook, Inc., as a successful international company, also operates in India, where it has millions of daily users (Facebook Inc., n.d.a). Even though Facebook, Inc. has globally promoted equality and freedom in usage of their services (Facebook Inc., n.d.b), the Constitution of India guarantees freedom of expression but induces restrictions on media content with an aim to maintain the national and religious harmony (India restricts free speech online, 2011) and thus exposed Facebook, Inc. to an opposing set of ethical principles than the organizational practices are. India’s constitution even admits “reasonable restrictions” on free speech, nevertheless, the government has repeatedly stretched the definition to censor books, films and other material on controversial topics such as politics and religion (Rajkhowa, 2015). According to the Information Technology Rules 2011, issued by India’s Department of Information Technology, objectionable media content includes anything that threatens the unity, security or sovereignty of India (India restricts free speech online, 2011). Furthermore, these rules enable authorities and citizens to request that websites and service providers remove

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content and thus to restrict speech on the internet (India restricts free speech online, 2011; Rajkhowa, 2015).

In conclusion, all of the three company cases described above, meet the criteria required for an examination, through the strong ethical principles embedded in the MNEs’ codes of conduct and business practices, and through the host country demands conflicting these principles. The corporate ethical principles have been employed and shaped by the institutional environment of the companies’ home countries and their global operational context. All three companies originate from western countries, where the advancement for human rights and ethics of privacy and freedom of speech is very strong. Governments as actors in the host country institutional environment operate with an opposing set of ethical beliefs to MNEs’ principles. These ethical beliefs shape the government’s expectation towards the companies in the cases.

3.3 Data Collection

The aim of data collection is to collect rich data, which is content based (Van der Velde et al., 2004). The longitudinal approach employed, may involve various methods of data collection (Dawson, 1997). The collection method through secondary data, refers to assembling widely available data, ready to be used for analysis (Van der Velde et al., 2004). The secondary data sources for this research do not comprise individual interviews as the central focus is on strategic behaviour of MNEs as a whole. Materials produced for public consumption best present sources of information about the key actors’ actions (Reay & Hinings, 2005). These documents are advantageous by a capacity to reflect views, statements and results of negotiations (Reay & Hinings, 2005). Furthermore, given the time constraints for the research, collection via archival data makes the longitudinal study viable, whereas interviews would not be feasible in this case

The data is acquired from various sources: corporate documentation (annual and sustainability reports, news releases, web sites), NGO news releases, international newspaper publications and selected local newspaper articles. All mentioned data types deliver important pieces of information and offer a balanced overview.

Several reasons support the utilization of archival data in this paper. First, the extensive attention of media to each of the cases has produced a large quantity of publically accessible news reports. Particularly advantageous are newspaper articles, which commonly contain

MNE strategic responses to institutional complexity : a case of competing ethical values