• No results found

Business & human rights : the effect of firms’ accumulation and deployment of firm-specific political resources on corporate human rights abuses in African extractive industries

N/A
N/A
Protected

Academic year: 2021

Share "Business & human rights : the effect of firms’ accumulation and deployment of firm-specific political resources on corporate human rights abuses in African extractive industries"

Copied!
84
0
0

Bezig met laden.... (Bekijk nu de volledige tekst)

Hele tekst

(1)

Business & Human Rights

The Effect of Firms’ Accumulation and Deployment of Firm-specific

Political Resources on Corporate Human Rights Abuses in African

Extractive Industries

(Ozongwe, 2016) Author: Kristin Stensland

Student number: 11088575

Supervisor: dr M.K Westermann-Behaylo Second reader:

Date of Submission: Friday 24th of June 2016

MSc Business Administration – International Management University of Amsterdam – Amsterdam Business School

(2)

Statement of originality

This document is written by Student Kristin Stensland 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.

(3)

Abstract:

In response to the increased academic attention for human rights as a business issue, this paper aims to investigate the relationship between firm-specific political resources and corporate human rights abuses. This study distinguishes itself from prevailing literature in the field as it introduces the underexplored role of firm-specific political resources in relation to the human rights performance of firms. Based on literary evidence it is anticipated that a firm’s accumulation and deployment of political resources in a host country will increase the likelihood of committing corporate human rights abuses. Furthermore, it is expected that this anticipated relationship will be moderated by the host country’s level of institutional advancement. This study focuses on the three most prominently argued political resources of firms, namely, the firm’s financial, reputational and relational political resources. Through an investigation of the firm-specific political resources of 83 multinationals operating in the African extractive industry, a quantitative study is undertaken to investigate this relationship. A hierarchical binary logistic regression analysis is conducted to examine the direct relationship between political resources and human rights, as well as the moderated relationship. The results of this analysis suggest that the firm’s political reputational resource has a significant effect on the corporate human rights performance of the firm. No significant moderating effect of the host country’s level of institutional advancement is found. This research offers a novel approach by investigating political resources of firms quantitatively, and calls for increased focus on firms’ political resources as a human rights issue.

________________________________________________________________________________ Keywords: International business, human rights, political resources, host country, institutional advancement, extractive industries.

(4)

Acknowledgements

The completion of this thesis could not have been possible without the participation and support of numerous people. First and foremost, I want to thank my supervisor Michelle Westermann-Behaylo

for her guidance and continuous enthusiasm for my research.

Secondly, I want to acknowledge my proofreaders Per Stensland, Ewoud Baarsma, Bernard Jansen, Lieke Kooij and Lucas Hergl Magalhaes. Thank you sincerely for taking the time out of your

schedule to help me complete my thesis.

(5)

List of abbreviations:

BHRRC Business & Human Rights Resource Center

CAA Corporate Abuse Allegation

CEO Chief Executive Officer

CHRD Corporations & Human Rights Database

CPA Corporate Political Activity

CSO Civil Society Organization

DF Degrees of Freedom

FDI Foreign Direct Investment

IB International Business

IBGR International Business - Government Relations

MD Mahalanobis Distance

MNE Multinational Enterprise

NGO Non-Governmental Organization

SRSG Special Representative of the Secretary General

STDV Standard Deviation

UDHR Universal Declaration of Human Rights

UN United Nations

VIF Value Inflation Factor

WW2 World War 2

(6)

TABLE OF CONTENTS

1. INTRODUCTION ... 9

2. LITERATURE REVIEW ... 13

2.1 HUMAN RIGHTS ... 13

2.2 BUSINESS AND HUMAN RIGHTS ... 15

2.3 CORPORATE POLITICAL ACTIVITY ... 16

2.4 POLITICAL RESOURCES ... 17

2.5 HOST COUNTRY INSTITUTIONAL ENVIRONMENT ... 19

3. RESEARCH GAP AND RESEARCH QUESTIONS ... 20

4. THEORETICAL FRAMEWORK ... 22

4.1 POLITICAL RESOURCES AND HUMAN RIGHTS ... 23

4.2 HOST COUNTRY INSTITUTIONAL ADVANCEMENT ... 28

5.VISUALISATION OF MODEL ... 30

6. METHODOLOGY ... 30

6.1 RESEARCH DESIGN ... 31

6.2 QUANTITATIVE RESEARCH ... 32

6.3 DATA COLLECTION AND MEASURES ... 33

6.3.1 Dependent Variable ... 33 6.3.2 Independent Variables ... 34 6.3.3 Moderating Variable ... 39 6.3.4 Control Variables ... 40 6.4 CORPORATE SAMPLE ... 42 6.5 STATISTICAL METHOD ... 43 7. RESULTS ... 45

(7)

7.1 DESCRIPTIVES ... 45

7.1.1 Correlations ... 46

7.2 HIERARCHICAL BINARY LOGISTIC REGRESSION ANALYSIS ... 47

7.2.1 Model 0 – The intercept-only model ... 48 7.2.2 Model 1 – Control variables ... 49 7.2.3 Model 2 – Direct Relationship ... 50 7.2.4 Model 3 – Moderated relationship ... 52 7.3 SUMMARY OF RESULTS ... 54 8. DISCUSSION ... 54 8.1 SUMMARY AND FINDINGS ... 55 8.1.1 Firms’ Political Financial Resources ... 55 8.1.2 Firms’ Political Reputational Resource ... 57 8.1.3 Firms’ Political Relational Resource ... 58 8.1.4 Moderating Effect of The Level of Institutional Advancement in the Host Country ... 60 8.2 ACADEMIC CONTRIBUTION ... 61 8.3 MANAGERIAL CONTRIBUTION ... 62 8.4 LIMITATIONS AND FUTURE RESEARCH ... 63 9. CONCLUSION ... 65 10. REFERENCES ... 68 11. APPENDICES ... 82

(8)

Index of tables, figures and appendices

Figure 1 – Visualisation of Model p. 30

Table 1 – Geographic Distribution of MNE location p. 42

Table 2 – Mean, Standard Deviations and Correlations p. 47

Table 3 – Variance Inflation Factor Values p. 47

Table 4 – Regression overview p. 48

Table 5 – Binary logistic regression - The Intercept-only Model p. 49

Table 6 – Binary logistic regression – Control Variables p. 50

Table 7 – Binary logistic regression – The Direct Relationship p. 51

Table 8 – Binary logistic regression – The Moderated Relationship p. 53

Table 9 – Evolution of variables through the steps of the analysis p. 53

Table 10 – Overview of tested hypotheses p. 54

(9)

1. Introduction

In a world of increased economic and global integration, multinational enterprises (MNEs) are taking on increased market shares across borders (Rugman & Verbeke, 2004). In light of this development, the relationship between business and human rights, which for decades has been seen as belonging to two completely different fields, has been increasingly discussed (Ruggie, 2007). This empirical research seeks to place itself in the context of the increasing attention to human rights as a business issue, put forth by the activities of organizations such as United Nations (UN) increasingly addressing the important role of business in relation to human rights. As multinational enterprises progressively pursue operations across borders, the importance of international business and government relationships (IBGR) has increased concurrently (Jiang et al, 2015). In the last decades, there has been paradigm shift with regards to the role of the political and governmental context in which international business operates. From being seen as a mere part of the exogenous context of international businesses, it is now widely acknowledged as an increasingly endogenous and preponderant variable of global firms (Frynas et al., 2006). Nevertheless, several scholars see increased corporate political activity to raise several governance issues. As argued by Grosse (2005), multinationals have emerged as significant actors in politics and their role as a private political authority also carries substantial public responsibility. Corporate political activity enhances the role of the private authority relative to the public authority, and scholars question whether significant corporate political activity should be a part of a healthy democracy (Dahan et al., 2013; Büthe, 2003).

Popularly discussed in academia and business research is the resource-based view of the firm (Barney, 1986, 1991; Peteraf, 1993). The resource-based view seeks to explain how the internal resources of a firm lead to sustained competitive advantage (Kraaijenbrink et al., 2010). Several authors have attempted to integrate the external political behaviour of firms to the

(10)

resource-based view (Bonardi, 2011). They have looked at firms attempting to influence public policies in order to establish to what extent these firms possess certain firm-specific resources enabling them to do so. Lu and Choi (2013) suggest that the outcome of the firm’s political strategies eventually depends on the volatility of the regime in which it operates. Thus, the political and governmental environment is highly connected to a firm’s political activities. Through the effects of globalization, businesses today often place their subsidiaries in developing countries with lower institutional advancement and respect for human rights (Scherer & Palazzo, 2008). Several authors have mentioned that political resources are vital for a firm operating in developing markets (Lu & Choi, 2013; Frynas et al., 2006). Hillman (2005) argues that firms pursue political strategies to create linkages with the government in the host country, in order to reduce uncertainty and environmental fluctuations. Corporations seek to build political connections in host countries as it, amongst other things, leads to preferential treatment by the government, lighter taxation and relaxed regulatory oversight of the company (Faccio, 2002; 2006). This is supported by authors such as Hillman & Hitt (1999) and He et al. (2007) who argue firms’ political resources to have positive influences on firm performance because they assist to secure favourable regulatory conditions (Agrawal & Knoeber, 2000).

In resource-rich African countries, there is an abundance of coal, gold, minerals and petroleum, of which extraction and sale should benefit the local population (Aaronson, 2011). Nevertheless, in many resource-rich developing countries, the government lacks the skills, the will or the expertise to enable them to do so. Consequently, the extractive industries in African developing countries are frequently hosts of multinational corporations, reaping the benefits of lower labour and security standards, little corruption control and lax regulatory oversights (Aaronson, 2011). The human rights performance of companies present in the host country is often intertwined with the human rights performance of the government, making the allocation of

(11)

responsibility increasingly blurry and complex (Bazela, 2012). This notion is evident from cases such as British Petroleum in the district of Casanare in Colombia (Bazela, 2012). In initiating operations in Colombia, a chain of grave human rights violations towards the local population was triggered. The company had strong ties with the prevailing government, and the National Guard was sent in to protect the business rather than the native population (Bazela, 2012). Due to the company’s operations the people grew poorer, their land was destroyed and the population was tortured, kidnapped and killed, with the government turning a blind eye to the wrongdoings of the corporation or actively assisting them (Bazela, 2012). Similar cases of harmful collusion between business and government have also occurred in other places in the world, emphasizing the importance of researching the role of firms’ political behaviour in relation to the corporate human rights violations they commit (Kaeb, 2007). According to the CHRD database, which is the biggest comprehensive database in the world for mapping corporate human rights abuses, almost 30% of the corporate human rights violations have been committed with the assistance of the state (CHRD, 2016). This astonishing percentage emphasizes the possible problematic relationship between international business and government, and human rights. Furthermore, globalization has increased the mobility of MNEs’ intangible resources, thus giving them a stronger bargaining power in business-government relations (Dunning, 1998). This does, perhaps more than ever, call for more research in this field, to investigate the collusive elements between international business and governments, and their effects on corporate human rights abuses.

Naturally, the level of interaction between MNEs and the host country government is dependent on MNE’s resources to do so, commonly referred to as political resources (Dahan, 2005), representing a highly unexplored factor in the literature. This paper intends to fill this literary gap by exploring both company-level and country-level variables. On the company-level it will explore to what extent firms’ political resources may be related to corporate human rights violations.

(12)

Simultaneously, on a country-level, the host country’s level of formal institutional advancement will be investigated to observe the possible moderating effects on the relationship between firms’ political resources and corporate human rights performance. This relationship will be analysed quantitatively by looking at the three most prominently argued political resources for the literature in the field for a sample of 83 MNEs active in the extractive industries of 25 African countries. Given the growing importance of non-state actors, and the seemingly changing power balance between governments and businesses with regards to human rights, it is important that the research keeps up with these contemporary processes (Bernhagen & Mitchell 2010). This study can contribute to research and practice on multiple levels. Firstly, this study seeks to give businesses insight into the power of political resources, and the importance of careful deployment of these. Further, this study can contribute to new insight on how the political power of firms can be related to socially irresponsible behaviour, which is of relevance to stakeholders such as governments, NGOs, and civil society. This study also intends to bring attention to people who are particularly at risk of being affected by corporate human rights abuses, and offers elements of guidance and increased attention to the importance of the implementation of anti-corruption policies.Lastly, the outcome of this paper will complement the existing knowledge in the field of human rights as a business issue, and contribute to it by adding the underexplored variable of firm-specific political resources. In its essence, this paper also seeks shed light on the debate around the general political behaviour of firms, and to question its place in a healthy democracy.

(13)

2. Literature Review

This section will explore the key literary contributions of the field. Firstly, it will elaborate on the concept of universal human rights and its post WW2 development. Secondly, it will explore the relationship between business and human rights. Thirdly, the concepts of corporate political activity (CPA) and political resources are investigated. The section is concluded by an examination of the institutional environment of host countries.

2.1 Human Rights

In the aftermath of the Second World War a strong international focus to ensure universal security of human rights emerged. For the vast majority of states endorsement with these newly shared standards of integrity was attractive, and it was seen as a necessary condition to be considered a worthy member of the international society (Donnelly, 1998). The codification of a set of unifying universal human rights transpired, underlining a new inclusive set of universally shared standards (Donnelly, 1998). This led to the development of the UN’s Universal Declaration of Human Rights (UDHR), approved by the general assembly on December 10, 1948 (UDHR, 1948). As called for by president Franklin Roosevelt in his State of the Union Address of 1941, the protection of four essential freedoms underlined the development of the UDHR; The freedom of speech and expression, the freedom of worship, the freedom from want and the freedom from fear (Morsink, 1999). The UDHR’s first declaration states that “All human beings are born free and equal in dignity and rights” (UDHR, 1948, Article 1, in Schoorl, 2015, p.9), followed by the statement that “Everyone is entitled to all the rights and freedoms set forth in this Declaration..” (UDHR, 1948, Article 2). These initial articles emphasize the uniqueness of the UDHR as the first declaration of its

(14)

kind to conclude that how a government treats its citizens is an international concern, and should no longer be viewed as a mere domestic issue. Though seen as an important step towards peace and human development, the creators of the declaration could not have foreseen its projective importance for future generations (Trindade, 2008). Successive generations of humans, across cultures, have recognized the “common standard of achievement” in the UDHR, ensuring a continuous pressure to achieve protection of human rights on a global scale (Trindade, 2008). The UDHR has had substantial influence, and has been incorporated into most of the 185 constitutions of UN member states (Shiman, 1993), and has spurred the adoption of more than seventy other human rights treaties across the globe (Trindade, 2008).

In spite of its theoretical universal nature, it is acknowledged that there is still a long way to go in securing the unanimous distribution of human rights security across the world, largely because the protection of human rights still depends on national adoption and execution (Trindade, 2008). Even if international governmental organizations such as the UN have a standard-setting and norm-generating role, the involvement of additional actors has become increasingly important to secure universal human rights throughout the world (Thakur, 1994). Neumayer (2005) argues that networks of, and individual, non-governmental organizations substantially serve enhance security of human rights on a global scale, such as Amnesty International. Next to the NGOs, businesses have emerged as new political actors in the field, and are seen to carry a substantial responsibility in securing human rights (Ruggie, 2007).

(15)

2.2 Business and Human Rights

In an age of globalization and the increased erosion of the nation-state, business has evolved as new political actors (Habermas, 2001). This post-national constellation state as described by Habermas (2001) has called for a paradigm shift towards the role of business in relation to human rights (Scherer & Palazzo, 2008). Historically, the corporate and the governmental agenda for human rights has been held separate, and human rights standards have only been considered the responsibility of the government, excluding private actors. Nevertheless, in light of the exponential growth of multinational corporations and subsidiaries abroad pose a challenge to existing regulatory frameworks. Generally, the parent firm and the subsidiary are considered two separate legal entities, thus, the parent firm has no legal accountability for the wrongdoings of its subsidiaries abroad (Ruggie, 2007). In the absence of a binding global law to control these multinational firms, the need for developing common principles becomes evident (Ruggie, 2007). The agenda of structuring a comprehensive framework for governing corporate human rights infringements have been a struggle for global governance entities for decades, and first attempts can be traced back to the UN in the 1970s (Ruggie, 2007). Nevertheless, the first discussions stalled in 1992 after failing to reach consensus between the involved parties (Ruggie, 2007). The pursuit continued through the adoption of a “soft-law” approach, and in 2000 the United Nations Global Compact was implemented. The aim of the compact was to attract companies to engage in socially responsible business behaviour through entirely voluntary measures (Ruggie, 2007). Its key focus areas concerns human rights, labour standards, environmental protection, and later included anti-corruption (Ruggie, 2007). Due to dispute and slow progress of the processes to engage businesses to behave socially responsibly, the UN assigned a Special Representative of the Secretary General (SGSR) to clarify the policies of business and human rights (Ruggie, 2007).

(16)

framework builds on years of extensive research taking into account stakeholders such as governments, business and civil society organizations across the globe. The framework is built on three foundational interdependent pillars (Ruggie, 2008). Firstly, the state holds the duty to protect its citizens against all human rights violations, including corporate. Secondly, the corporate party holds the duty to respect human rights throughout its value chain (Ruggie, 2008). This pillar emphasizes the importance of due diligence, forcing companies to consider and critically review the risks of human rights violations in their strategic operations and transactions (Sherman & Lerh, 2010). Lastly, it is essential that victims of human rights abuses be given the access to remedy, both judicial and non-judicial (Ruggie, 2008). The framework also aim to bring attention to the problem of silent complicity, where businesses are not only expected to do no harm, they are also obligated to alarm and address when human rights infringements occur in places where they operate (Ruggie, 2008). Thus, businesses emerge as a new political authority where the strict division between the private business and the nation-state becomes increasingly blurry, and the interaction and interdependence between the two spheres becomes evident. Through their interaction, firms develops policies, processes and practices with the intention of influencing governmental policy and processes to correspond with their corporate desires (Getz, 1997).

2.3 Corporate Political Activity

International business research has often highlighted how government actions strongly contribute to create the winners and the losers of the market place, motivating firms to interact with government (Boddewyn & Brewer, 1994). According to Baysinger (1984), Corporate Political Activity (CPA) blossoms as the firm’s political environment offers opportunities for corporate attempts to influence policymakers in their favour, with respect to electoral, legislative or regulatory processes. Firms may engage in political activity as a defence mechanism, in order to revolt or stop political

(17)

processes threatening their competitiveness (Getz, 1997). According to Hillman & Hitt (1999) CPA can be classified in three categories: information provision, financial contributions and constituency building (Hillman & Hitt, 1999). Many scholars view CPA as relatively unproblematic conducts occurring across most industries and regions, even if transparency about corporate political activity is generally poor (Hond et al., 2014). Nevertheless, there have been growing concerns that firms’ political activity often crosses the line of legitimate regulatory participation in democratic decision-making, to instead merely pursue political strategies in self-interest at the cost of socially beneficial interest, with the growing power of multinational corporations enabling them to do so (Hond et al., 2014). Authors have argued that the CPA of a firm depends largely on its abilities to engage in such activity (Keim, 2001; Mcwilliams, 2002; Dahan, 2005; Bonardi, 2011). In this view, corporate political activity is increasingly seen in relation to firm-specific resources (Boddewyn & Brewer, 1994; Dahan, 2005).

2.4 Political Resources

Commonly referred to as political resources, the literature in the field has attempted to describe the capabilities of firms to exert influence on their regulatory environment (Dahan, 2005). The importance of political resources for firms has been argued immense by several authors. According to Shaffer (1995) regulatory instances typically have asymmetric effects on competing firms, attributing this view to the relationship between firm performance and the capabilities of firm to adapt with new legislation. Frynas et al. (2006) finds evidence that firm-specific political resources are strongly related to first-mover advantages of the firm. Furthermore, Faccio (2002; 2006) finds evidence that the deployment of political resources in a host country often leads to preferential treatment and relaxed regulatory oversight. Dahan (2005) further emphasises importance of bundling of political resources, and discuss how different bundles of political resources will affect

(18)

the success of firms’ political strategies (Dahan, 2005).

Throughout the course of time several authors have attempted to classify and define the political resources of firms. First attempts comes from authors such as Boddewyn & Brewer (1994), who define political resources to be intelligence and cognitive maps about non-market environments, better access to decision makers and opinion makers, and better bargaining or non- bargaining skills. They argue that political resources of the firm include financial resources, reputation, coalition-building ability and political entrepreneurship (Boddewyn & Brewer (1994) in Frynas et al., 2006, p. 324). Baron (1995) suggests that political resources entail expertise and skills in the management of relationships with political actors. Further he stresses the importance of reputation as a responsible actor, and access to political decision-makers. Attarca (1999; 2000) goes on to focus on specific resources affecting the political environment. These are technical-economic expertise, organizational resources, political expertise, relational resources, reputation and financial resources. Dahan (2005) restricts the term political resources to concern “Assets and skills utilized in the political arena” (Dahan, 2005, p.1). He contributes eight different political resources to his typology including expertise, financial resources, relational resources, organizational resources, reputational resources, public image and recreational resources. Frynas et al. (2006) contributes to the conceptualisation of political resources by defining them to be “Any firm attributes, assets, HR or other that allow the firm to use political processes to improve efficiency and profitability” (Frynas et al., 2006, p. 3).

Importantly, evidence show that there can be a harmful relationship between political resources and socially irresponsible outcomes. Fisman and Wang (2015) investigated the relationship between firms’ political relational resources, and workplace mortality. Their evidence indicates that work place mortality for a politically connected firm is two to three times larger than that of a non-connected firm in China. Furthermore, the development of political resources is

(19)

central in transition economies with weak legal systems and institutions, because politically connected firms are recipients of substantial advantageous treatments, as opposed to non-politically connected firms (Hao, 2012; Sun et al., 2011). In many transitional economies it becomes evident that the incumbents have accumulated an abundance of political resources, whereas entrepreneurial entrants must try their best to develop and deploy political resources effectively to secure their prosperity and survival (Sun et al., 2011). Lu and Choi (2013), argue that the role of the institutional and governmental context in which the firm operates, have important implications for the success of the firm in the host country. They further argue that the alignment between political resources and the external environment of the firm will determine the firm’s performance (Lu and Choi, 2013). Thus, the development, accumulation and deployment of political resources become increasingly important in relation to the advancement of the host country’s institutional environment.

2.5 Host Country Institutional Environment

Early institutionalists such as Veblen (1919) define institutions to be “settled habits of thought common to the generality of man ” (Veblen, 1991, p. 239). Very influential was also the understanding of institutions put forth by Spencer (1967), viewing society as an organic system, which evolves through time. Throughout time, the system would adapt to its context through the functions of its organs, structured as institutional subsystems. More recently, North (1990) defined institutions to be “ The rules of the game of a society, or more formally, the humanly devised constraints that shape human interaction” (North, 1990, p.3). Similarly, Scott (1995) defines institutions as “regulatory, normative, and cognitive structures and activities that provide stability and meaning to social behaviour” (Scott, 1995, p.33). Institutions affect the performance of economies in the sense that properly developed institutions dramatically reduce transaction costs

(20)

(North, 1990). According to Peng et al. (2008) institutions exist to govern societal interactions throughout a broad spectrum of areas, such as politics, law, economic deliberalisation, regulatory regimes and society through cultural values and ethical norms.

Institutions can be broadly classified as being either formal or informal (North, 1990). The informal institutions include costs and sanctions, taboos, customs, traditions and codes of conduct among others. Formal institutions typically include instances such as constitutions, laws and property rights (North, 1990). Lastly, the new institutional economist Williamson (2000) undertakes novel approach to institutional theory. Through multileveled societal analysis, Williamson (2000) emphasises the immense importance of institutions in relation to the economic performance of firms. Traditionally, international business research has focused both on the informal and formal institutional environment of a host country (North, 1990) Nevertheless, while recognizing the vast importance of informal institutions in international business and international business research (Dikova & Witteloostuijn, 2007), this study will only consider the effect of formal institutions on MNEs. This is chosen because the formal institutions largely aim to direct economic behaviour (Dikova & Witteloostuijn, 2007). Nations differs in political risk, which heavily affect the stability and prevailing standards of markets, emphasising the immense important of firms’ development of firm-specific political resources in relation to the formal institutions in the host country in which it operates (Peng et al, 2008).

3. Research Gap and Research Questions

Scholars such as Boddewyn & Brewer (1994), Hillman et al (2004), Dahan, (2005) and Bonardi (2011) have paved the way for the novel approach of integrating corporate political activity in the resource-based view. Frynas et al. (2006) contribute to the field by establishing that firms’ political resources are vital to obtain first-mover advantages in transition economies. Hillman et al. (2004)

(21)

establish that firm-specific political resources can accrue benefits for the firm, and contribute positively to firm performance. Lu and Choi (2013) view the political resources of firms to have strong influence on firm growth in emerging economies, dependent on the political regime of the host country. Faccio (2002; 2006) find that politically connected firms enjoy a significantly increased corporate value, and that the stock price value of a firm increases if one of its board members should enter national politics. Nevertheless, the literature in the field has paid little attention to the socially irresponsible actions of firms that may be increased as a consequence of firms’ political activity coming from their accrued firm-specific political resources. Fisman and Wang (2015) touch upon the subject by investigating firm’s political relational resources in relation to socially irresponsible behaviour. Fisman and Wang (2015) investigate the relationship between political relational resources and human rights, by finding a significant positive relationship between politically connected firms and workplace mortality. Their study concludes that firms enjoying a political relational resource have a significantly increased workplace mortality rate. Nevertheless, this study seeks to investigate politically resources more holistically than Fisman and Wang (2015), by researching several firm-specific political resources from the literature in the field. A broader approach to political resources is undertaken as authors such as Dahan (2005) acknowledges the importance of resource bundling, and how accumulating several political resources remain vital to successfully impact host country policy making (Dahan, 2005). Furthermore, this study also seeks to investigate all types of human rights abuses related to the firms operations, not just workplace security and mortality as investigated by Fisman and Wang (2015). Further, this study adds a novel approach by also taking the formal institutional context into account, through the anticipation of a moderating effect of the level of formal institutional advancement in the host country, on the relationship between firm-specific political resources and

(22)

corporate human rights performance. In light of the discovered gap, this study seeks to answer the following research questions:

a) To what extent do the political resources of firm affect their likelihood of committing corporate human rights violations?

b) How does the host country’s formal institutional advancement moderate this relationship?

The following sections will firstly depict how these questions will be addressed through a theoretical framework leading to the development of six hypotheses. A section describing how the study will be conducted methodologically follows this. Consequently, a descriptive statistical analysis and a hierarchical binary logistic regression analysis will be undertaken based on a corporate sample of 83 firms. Next, the results from the quantitative analysis will be discussed in light of the anticipated hypotheses, literature and methods, as well as its academic relevance and managerial contribution. The section will also entail critical evaluation of the theory, the findings and the methods proposed in this research, as well as comparison of results to similar studies in the field. The shortcomings of this study will then be discussed to illustrate where possibilities for future research on this topic exist. Finally, the findings of this analysis will be presented in consideration of the proposed research questions and conclusions are drawn.

4. Theoretical Framework

Currently, business and human rights is an area of research that is lacking theoretically informed quantitative studies (Hamann et al., 2009). Thus, there is little foundational material to serve as point of departure of the theoretical development of this research or studies of a comparative nature.

(23)

Nevertheless, this section builds upon the limited existing theoretical and empirical research in the field, to propose six hypotheses in investigating the relationship between firm-specific political resources and human rights, as well as how this relationship is moderated by the host country’s formal institutional advancement.

4.1 Political Resources and Human Rights

In an increasingly globalized international context, it has been argued that the strict division of labour between private business and the nation-state does no longer hold and that interaction and interdependence between actors of different spheres are unavoidable (Scherer & Palazzo, 2011). The interdependent relationship between government and international business is evident in many developing countries. Governments want to pursue economic growth and development for which they need corporate activity, while companies are dependent on governmentally approved access to markets or to production inputs (Grosse, 2005). Often, interaction between international business and government is seen as relatively unproblematic behaviours occurring across most industries and regions (Hond et al., 2014). In fact, since the ties between the government and the MNE play an instrumental role in determining the accountability of the organization, by initiating a strong relationship with the prevailing regime, the company may undertake a greater set of obligations in securing human rights (Ratner, 2001). According to Dunning (1998) the relations between MNEs and host country governments have undergone a shift from being seen as conflictual-adversarial towards cooperative-complementary. Similarly, MNEs are being increasingly seen as actors that can positively influence their environment and lower the levels of corruption in the country (Robertson &Watson, 2004). According to Kwok and Tadesse (2006) the presence of MNEs in a host country lower the corruption level in a long-term perspective, suggesting that through the

(24)

pressure from the international community the MNEs model more globally accepted behaviour into the practices of the host country.

On the contrary, as emphasized by Faccio (2002; 2006), firms may gain incentive to deploy political resources and become politically connected in search of relaxed regulatory oversight. As argued by Dunning (1998) developing countries are often targets of excessive inbound foreign direct investment (FDI) leading to increased economic dependence, and decreased sovereignty to act on behalf of its citizens. Many developing countries often accept a reduction in labour market and environmental policy standards to increase FDI, and the government may show propensity towards corporate desires as opposed to supporting the rights of its citizens (Vogel, 2001). According to Bonardi et al. (2005), firms are most likely to engage in political activity, when governmental interaction heavily impacts their business. Many countries have nationalized their extractive industries, often leading to the settlement of a joint venture between the local government and the MNE entailing a close collusion between industry and government (Haslam & Heidrich, 2016). Consequently, there is a strong need for companies to interact with the government in the extractive sector, and business executives often push for regulation to favour their operations in the host country (Faccio, 2002; 2006).

Problematically, the regulations corporations tend to push for are by no means neutral in regards to human rights (Cragg, 2012). As highlighted by Ratner (2001), the relationship between firms and governments becomes problematic because the relationship between corporations and the human rights of the citizens constitute something far different from the relationship between governments and the human rights of the citizens. Thus, international business and government relations can entail a harmful collusion, increasing the risks of corporate human rights violations (Boele et al., 2001). In response to corporate demands, host country governments have reportedly adjusted domestic laws, handed over tracts of land from local populations to businesses, and often

(25)

turned a blind eye to corporations breaking domestic law (Ratner, 2001). According to Kwok & Tadeese (2006), MNEs may bring undesirable consequences in the host country as their operations have environmental impacts through exploitation of natural resources, cause environmental damage and employ child labour. MNEs operating in developing countries often depend on protection of corporate assets by national security forces, which can in turn, as seen in the aforementioned case of BP in Colombia, lead to severe human rights violations (Bazela, 2012). Often times companies will be responsible for human rights violations, but share the responsibility with the state which may assist the violation through the national guard or paramilitary acting to protect the assets and the interests of the corporations (Bazela, 2012). Strong association with the government entails a strong association with the greatest set of resources available to violate human rights, such as the police and the military with accompanying weapons, as well as the existing judicial instances that are capable of undermining human rights (Ratner, 2001).

Furthermore, the process of implementing a standard in a host country, or condemn certain practices, may be delayed due to firms deploying political resources. Through political interactions, companies can gain significant insight and influence in political processes, allowing them to push for delays, or even regression, of unfavourable policy outcomes for their business (Fremeth & Richter, 2011). History has shown problematic examples of this where business executives have managed to stall de prohibition of deadly chemicals, because its prohibition would negatively impact their business. For example, certain asbestos businesses have managed to continue operations due to their ability to delay or regress unfavourable policies seeking to ban the practice, in spite of the widespread international condemnation of asbestos usage (Fremeth & Richter, 2011). Similarly, as argued Fisman and Wang (2015) the political resources of companies in China may allow businesses to circumvent governmental constraints to pursue self-interest at the cost of socially beneficial outcomes. They argue that collusion between the local governments and

(26)

business are said to be the cause of China’s pollution problems, as the relationship between firms and government allow firms to evade official emission regulation (Fisman & Wang, 2015). Thus, firms may use their political resources in ways to promote their business, however, they are doing so at the cost of violating the human rights of certain stakeholders.

As the political resources of firms accumulate, their ability to generate relations with the government increases, which in turn may lead to an increased risk of committing corporate human rights abuses. The literature in the field has identified a multitude of political resources for firms (Dahan, 2005). Nevertheless, broad consensus in the literature has been reached about the importance of three political resources. Firstly, the most prominent and commonly mentioned firm-specific political resources from the literature in the field are firms’ political financial resources as mentioned by Attarca, (1999; 2000), Boddewyn and Brewer (1994), and Dahan (2005). Political financial resources of firms can be both direct, through campaign contributions, and indirect serving to finance the accumulation and deployment of other political resources, emphasizing its importance in firms’ development of a large set of political resources (Dahan, 2005). By accumulating and using political financial resources in a host country, firms may bribe and manipulate government officials and build other political resources to receive preferential treatment, such as preferential allocation of land and relaxed regulatory oversights (Faccio, 2002; 2006). Furthermore, financial resources can facilitate firms’ adjustment or active response to change in external policy, pushing for delays or circumvention of unfavourable policy (Fremeth & Ritcher, 2011). Thus, hypothesis 1a states:

H1a: A firm’s political financial resources increase the likelihood of allegations of human rights violations against the firm.

(27)

Secondly, a company can take advantage of their reputation as a transparent and responsible actor, and thus are said to possess a political reputational resource (Dahan, 2005). Political reputational resources are important political resources for firms as argued by Baron (1995), Attarca (1999; 2000), Boddewyn and Brewer (1994) and Dahan (2005). The extractive industry has a particularly ruthless reputation for human rights infringements (Ruggie, 2007). Nevertheless, actors in this sector may use affiliation with soft-law global governance mechanism to improve their relative reputation in the industry (David-Barrett & Okamura, 2013). With a positive institutional reputation in the eyes of the government, the company may enjoy preferential treatment and relaxed regulatory oversight (Faccio, 2002; 2006), enabling them to commit human rights violations without severe consequences. Thus, hypothesis 1b states:

H1b: A firm’s political reputational resources increase the likelihood of allegations of human rights violations against the firm.

Lastly, political relational resources in securing political connections for the firm are argued important by Boddewyn and Brewer (1994), Baron (1995), Attarca (1999; 2000), Dahan (2005), Hao (2012), Faccio (2002; 2006) and Hond et. al, (2014). Firms can accumulate political relational resources through tight relationships with government officials, employment of a current or former politician to their board of directors, or through their main shareholders (Faccio, 2002; 2006). These firms may enjoy preferential treatment and relaxed regulatory oversights to commit human rights abuses that go largely unpunished. Thus, hypothesis 1c states:

H1c: A firm’s political relational resources increase the likelihood of allegations of human rights violations against the firm.

(28)

4.2 Host country Institutional Advancement

As suggested by Lu and Choi (2013), the outcome of the firm’s political strategies are highly dependent on the volatility of the regime in which it operates and firms’ political activities are highly connected to the political and governmental environment. Extractive firms tend to operate in resource-rich countries with weak governance and corruption control (Aaronson, 2011). Since firms that can link themselves to the government often enjoy privileged treatment by local governments in transition economies, it is not surprising that companies heavily deploy political resources in these regions (Sun et. al, 2011). International business literature has highlighted that the political behaviour of firms go hand in hand with corruption, decreased transparency levels and lower levels of integrity in business operations (Chen et al., 2010). Furthermore, in a context of political uncertainty, corporations respond by allocating extensive resources to pursue political strategies (Lenway & Rehbein, 1991).

In host countries with poor levels of institutional advancement, political resources of firms may be used to build relationships with government officials who feel more inclined to receive contributions and bribes in order to grant leases on land that is already occupied by native populations (Aaronson, 2011). A corrupt regime may contribute to prevent optimal allocation of resources and support certain private business and industries over others (Bazela, 2012). Similarly, political instability and weak institutional systems entails a poorly functioning court system for punishing corporate human rights violations (Bazela, 2012). As companies enter unstable regions, their involvement with political actors can fuel conflict, corruption and human rights abuses (Bazela, 2012). As argued by Faccio (2002; 2006), in the presence of stringent regulation and lack of conflict, political connectivity of firms seems less noteworthy and common. Oppositely, political connections are strikingly more common in the presence of lax regulations, weak institutions and political instability (Faccio, 2002; 2006). In the absence of a strong formal institutional

(29)

environment, firms may build ties and connections with government officials in corrupt ways, or to a corrupt, unjust regime, giving them the space and the privacy to commit human rights abuses largely unpunished (Aaronson, 2011). As discovered by Fisman and Wang (2015), politically connected firms in the Chinese coal industry had a mortality rate two to three times larger than that of non-connected firms. In a similar manner, firms in the African extractive industry can take advantage of their political resources in the context of low formal institutional advancement in the host country to commit human rights abuses. Thus, it should be anticipated that the formal institutional environment in the host country in which the firm operate moderates the relationship between the firm-specific political resources and corporate human rights violations. Accordingly, the following hypotheses are developed to account for the anticipated moderating effect of the host country’s institutional advancement:

H2a: The level of advancement of the host country’s institutional environment moderates the relationship between firm-specific political financial resources and allegations of corporate human rights violations such that the lower the level of institutional advancement, the greater the likelihood of allegations.

H2b: The level of advancement of the host country’s institutional environment moderates the relationship between firm-specific political reputational resources and allegations of corporate human rights violations such that the lower the level of institutional advancement, the greater the likelihood of allegations.

(30)

H2c: The level of advancement of the host country’s institutional environment moderates the relationship between firm-specific political relational resources and allegations of corporate human rights violations such that the lower the level of institutional advancement, the greater the likelihood of allegations.

(31)

6. Methodology

This section will provide an overview of the research design chosen for this study, data sample, data collection procedure, measures and statistical methods.

6.1 Research Design

The aim of this research is to gain insight on how the three independent variables representing a firm’s political resources will affect the likelihood corporate violations of human rights. This empirical study will also observe how the variable of the host country’s institutional advancement level will moderate the relationship between firm-specific political resources and the likelihood of corporate abuse allegations. This research is carried out as an explanatory study, through the formulation of a research question, to development of testable hypotheses (Saunders, 2011). The explanatory approach is undertaken because the researcher intends to go beyond a mere descriptive study, to look for explanations behind occurrences (Saunders, 2011). An explanatory approach is the most appropriate in testing relationship between variables (Lewis et al., 2007). The developed hypotheses are tested using quantitative observations retrieved from several databases containing the necessary data. Relevant statistical tests will be applies to search for statistical significance of the assembled data to complete the empirical study (Saunders, 2011).

A disadvantage of this research design is that it solely investigates the hypotheses in question, and thus the potential impact of other variables will not be taken into account. If the research aimed at investigating the topic without making pre-assumptions about the expected relationships, an exploratory approach would have been more appropriate (Saunders, 2011). Nevertheless, due to the increasing attention to the relationship of international business and government relations as well as the call for more empirical studies in the field of business and

(32)

human rights, it is expected that investigation of the relationships in question can contribute with valuable insight in this novel field of research (Hamann et al., 2009), and thus an explanatory approach is appropriate.

6.2 Quantitative Research

The data used in this study will be analysed through quantitative methods. The obtained data will be analysed using the statistical software SPSS (version 22) to look for possible correlations through a multilevel analysis. The quantitative approach is chosen because it allows for testing of the established hypotheses, and it is useful for studying large populations (Saunders, 2011). Furthermore, the results may be generalizable when the data are based on random samples of sufficient size. As a research method the quantitative analysis is relatively quickly done, with the help of statistical software (Saunders, 2011). Nevertheless, it is acknowledged that there are several limitations to quantitative research. For example, it may be less flexible, and allows for less discrete input than qualitative research. Further, the quantitative data analysis seeks to obtain context-independent findings, and thus the contextual details aside from the specific variables in question will be absent (Saunders, 2011). It is also important to acknowledge that such research is often subject to statistical errors (Labaree, 2011). Further, while acknowledging the argument of Frynas et al. (2006), who argue that the political resources of firms is difficult to investigate quantitatively, a quantitative research strategy is chosen. This is chosen because quantitative studies tend to be more objective, and the results tend to cultivate more tangible and robust results (McFadzean, 2007). Other studies in the field have undertaken the same kind of approach giving reassurance that this method is broadly agreed upon in investigating political behaviour of firms. For example, Lu and Choi (2013) undertook a quantitative study in investigating the relationship between corporate

(33)

political activity in emerging economies and firm growth, with the host country’s political regime as a moderating variable.

6.3 Data Collection and Measures

6.3.1 Dependent Variable

The data for human rights violations will be retrieved from the Corporate Human Rights Database (CHRD). The CHRD database has obtained data from the Business & Human Rights Resource Centre (BHRRC) to monitor the allegations of global corporate human rights abuses with data from 2000 to the present, representing the biggest database of its kind worldwide (Olsen, 2014). The information provided on the CHRD website is coded through the online tool Qualtrics. The CHRD database is a great source of input for this research as it systematically organizes and codes company abuse, making it suitable for quantitative analysis and investigation of the dependent variable of this study. Furthermore, this database is chosen because it gives a holistic overview of all the different corporate abuse allegations by firms (Olsen, 2014). It is important to note that the CHRD project is a work in progress, and data is continuously being coded and added. In order to contribute and gain access to this database, the researcher coded parts of the data for human rights abuses in the mining industry of Tanzania and Zambia.

The Corporate Abuse Allegation (CAA) is the unit of analysis presented in the CHRD database (Olsen, 2014), and thus the unit of analysis in this study. The CAA is restricted to be “an instance in which some group and/or individual accuses a company of a human rights abuse” (Olsen, 2014, p. 2). The CAAs are classified into five main kinds of violations of human rights: labour, environment, health, abuse and economic development (Olsen, 2014). The dependent

(34)

variable in this study is determined to be 1 or more CAA against the firm. The measure of CAAs in this study captures all the different types of violations undertaken by companies in the extractive industry. This study will measure the CAAs dichotomously, thus the following dichotomous variable measure is employed:

If a firm has received 1 or more corporate abuse allegations in the timeframe of 2000 to 2014 according to the CHRD database then =1, otherwise 0

6.3.2 Independent Variables

6.3.2.1 Political resources

Political resources will be measured using secondary data from different sources, as no holistic and comprehensive database is available. Political resources constitute a complex variable to measure, as transparency about corporate political activity may be limited (Hond et al, 2014), and political resources are difficult to measure in quantitative terms (Frynas et al. (2006)). Similarly, the literature in the field of political resources is characterized by strong pluralism as to what firm-specific resources are actually political (Dahan, 2005). Nevertheless, this study will investigate the three most prominent political resources from the literature in the field, due to the broad consensus among authors in the literature around the importance of these three resources. The three political resources include firms’ political financial, reputational and relational resource. Measurement of more than one political resource was chosen in alignment of the view of Dahan (2005) who argues that political resource bundling is central, where accumulation and deployment of political resources have collective importance and are seen as mutually reinforcing. The following three

(35)

sections will elaborate on the data collection and measurement of each of the political resources serving as independent variables of this research.

6.3.2.1 Political Financial Resources

For retrieving data for firm’s political financial resource, the data from the multinationals’ consolidated balance sheet for the year 2014 was used. The Orbis company database served as a primary source of data for financial resources. This database was seen as highly suitable as Bureau van Dijk’s Orbis Database has been used in several other quantitative studies, and it is seen as one of the most comprehensive and detailed databases in the world for firm-level information (De Jong & Van Houten, 2014). Financial resource of firms will be measured through organizational slack, as proposed by (Astley (1978) in Bourgeois (1981)). This measure is appropriate as it is argued that organizational slack serves as a main source to promote political behaviour within organization (Bourgeois, 1981). According to Bourgeois (1981), the concept refers to “ A cushion of actual or potential resources, which allows an organization to adapt successfully to internal pressures for adjustment or to external pressures for change in policy, as well as to initiate changes in strategy with respect to the external environment,” (Bourgeois, 1981, p. 30). Organizational slack is seen as a highly appropriate measure for this variable, as this accounting-based measure of profitability is seen as favourably comparable across firms and accounts for the differences in firm size (Peng et al., 2010). In line with the study of Peng et al. (2010), organizational slack will serve as a proxy for the firm’s political financial resource and will be measured through a quantitative continuous measure, retrieved through the following formula:

(36)

𝑂𝑟𝑔𝑎𝑛𝑖𝑧𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑆𝑙𝑎𝑐𝑘 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

6.3.2.2 Political Reputational Resources

The political reputational resources of firms will be measured through official support a soft-law global governance mechanism, employed as the Extractive Industry Transparency Initiative (EITI) in this study. The EITI is an international organizational, which works to promote transparency and common standards of behaviour in the extractive industry (eiti.org, 2016). The EITI emerged in response to the public discussions of the “resource-curse” of the extractive industries and NGO pressures (eiti.org, 2016). Transparency in the extractive sector is widely seen as an essential tool for lowering corruption and increasing accountability of actors in the extractive industry (David-Barrett & Okamura, 2013). While the EITI primarily concerns the support and compliance by governments, extractive industry support of the EITI is growing (eiti.org, 2016). This paper will employs a firm’s official support of the Extractive Industries Transparency Initiative (EITI) to measure the political reputational resource of firms, because association with the EITI leads to reputational improvements (eiti.org, 2016). This notion is also supported by David-Barrett & Okamura (2013) as they argue that affiliation with the EITI serves as a reputation-building tool for actors involved. The data for the political reputational resources was retrieved from the EITI.org website, where an official list of the multinationals supporting the EITI initiative can be found (eiti.org, 2016). Currently, about 90 companies are officially supporting the EITI initiative, and are required to report on numbers of payments and advocate transparency (eiti.org, 2016). As argued by Rugman et al. (2011), most intangible firm-specific resources such as financial, organizational and reputational resources are held on the firm-level rather than on the subsidiary-level, but are transferrable across the subsidiaries. Thus, it is reasonable to assume that the parent company’s

(37)

official support of the EITI serves as a reputation-building tool for the subsidiaries as well. The reputational resources of firms will be measured through the firm’s official support of the EITI, and the following dichotomous variable is employed:

If the parent company of the African subsidiary are in official support of the EITI initiative, they hold a political reputational resource in the extractive industry=1, otherwise 0

6.3.2.3 Political Relational Resources

This research uses the definition of politically connected firms as proposed by Faccio (2006), and later also operationalized by Hao (2012). As proposed by Faccio (2006), a company is politically connected, and thus have a relational resource, if at least one of its largest shareholders, thus anyone controlling >10% of the shares, or if one of its top managers (thus executive manager, or a non-executive chairman) is closely related to a minister or a political party in the host country. In determining a close relationship, documentation of a direct relationship is considered, and not mere indirect such as through campaign contributions. This definition is chosen as it corresponds closely with Dahan (2005)’s conceptualization of political relational resources, which includes both formal and informal relations with policy makers. In following the data collection strategy proposed by Faccio (2006), data for this variable was captured through an investigation of the African subsidiary’s executive managers, main stakeholders and board of directors to look for possible documented relationships with the host country government. The data for the firms’ political relational resources was gathered through different commonly available sources such as Orbis, Linkedin, LexisNexis and Google as no single, comprehensive overview was retrievable. This approach has several weaknesses, since the political relational resources and connections may be non-transparent through conventional sources. Nevertheless, through this investigation enough

(38)

biographic data was retrieved for the 83 subsidiaries included in this research to document the executive manager that has been the longest in office in the period between 2000-2014, the board of directors in the same period, as well as any governmental stakeholders.

As Faccio (2006) documented in her analysis, this study wishes to confirm a durable, documented close relationship. In contrast to Faccio (2006)’s analysis of political relations of firms, this research intends to capture the relational resource of the firms’ subsidiary in the host country, as opposed to the parent company. This approach is undertaken as relationships with governmental officials are seen as a location-bound firm-specific advantage, and thus is specifically held by each individual subsidiary (Rugman et al. 2011). The measurement for firms’ relational resources will be employed through a dichotomous variable, as firstly proposed by Hao (2012) in his study of politically connected firms. According to the well-accepted theory by Faccio (2006) the political relational resource of firms is employed through the following dichotomous variable:

If a subsidiary’s top executives or largest shareholders are or were politicians, civil servants, members of parliament or close to a political power in host country the firm is politically connected and holds a political relational resource =1, otherwise 0

Importantly, it is to consider that if a firm is coded 0, we cannot properly confirm that a firm is not politically connected. Rather, we can confirm that if a firm is coded 1, one or more of it’s top executives, board members or largest shareholders were politically connected enough to be documented in Orbis, through LinkedIn or in articles obtained in open-search tools such as LexisNexis and Google. Thus, they are seen to hold a substantial, documented political relational resource in this study.

(39)

6.3.3 Moderating Variable

6.3.3.1 Host Country Institutional Advancement

The moderating variable of this research is measured on a country-level, through a composite measure of the host country’s institutional advancement level. For investigating the moderating independent variable, data was retrieved from the World Bank’s Governance Index. This database is appropriate because it comprises the widest range of institutional matters, and across the longest period of time (Dikova and Witteloostuijn, 2007). Further, the data is based on “several hundred individual variables measuring perceptions of governance drawn from 37 separate data sources constructed in 31 different organizations” (Kaufmann et al., 2003). The index provides scores for five different items of measurement for each country. Firstly, it measures Voice and Accountability, which represent political, civil and human rights. Secondly, Political Stability measures the likelihood of violent threats to, or changes in the government. Thirdly, Government Effectiveness measures the competence of the bureaucracy and the quality of public service delivery. Fourthly, Regulatory Quality measures the incidence of market-unfriendly policies. Fifthly, Rule of Law measures the quality of contract enforcement, the police, the courts, as well as the likelihood of crime and violence. Lastly, Corruption Control measures the exercise of public power for private gain (Kaufmann et al., 2003). These aggregate indicators constitute a combined view of enterprises, citizens and expert survey respondents (Kaufmann et al., 2003). The countries are given a score ranging from -2.5 to 2.5 on each of the indicators presented in the World Bank Governance Index, where a high score indicates a high level of institutional advancement (Kaufmann et. al., 2003).

Operationally, the values for the host country’s level of institutional advancement will be consolidated by averaging the values over the five indicators in the index to obtain a holistic value for measuring the institutional advancement of the host country. Dikova and Witteloostuijn

(40)

(2007) employed the same operationalization and moderating variable in investigating entry and establishment modes in transition economies, and executed the research successfully with the proposed operationalization. The composite measure will be continuous and range from – 2.5 to 2.5 as available in the database, but will be inverted so that a higher score indicate a lower level of institutional advancement, and a low score corresponds with a higher level of institutional advancement.

6.3.4 Control Variables

This study employs two control variables. Control variables are included in this research to exclude other alternative explanations for the findings of the study (Schmitt & Klimoski, 1991). Furthermore, control variables are used to diminish error terms of the research, and increase the statistical power of the findings (Becker, 2005).

6.3.4.1 Firm Size

This study uses firm size as a control variable. Data for firm size according to number of employees is retrieved from Bureau Van Dijk’s Orbis Company Database, where the companies’ consolidated balance sheet can be retrieved. This control variable is chosen because an increased size of a firm relates to several firm-specific changes (Li et al., 2008). Thus, an increase in firm size may in itself affect the likelihood of CAAs against companies. Firm size as a control variable is also included as Kramer et al. (2009) finds, through an analysis of 85 firms, a positive significant relation between firm size and corporate human rights performance. Furthermore, this control variable is relevant

Referenties

GERELATEERDE DOCUMENTEN

• Circa 97% heeft in 2013 toegang tot het internet. • In Europa gaat Nederland aan kop met IJsland. In de wereld met Zuid Korea. • Verzadigingspunt fysieke toegang in Nederland

Until now, a few clinical studies showed that BKPyV miRNA levels in renal transplant patients can be detected in plasma and urine and in recipients with BKPyVAN 104,105..

Stefan Kuhlmann is full professor of Science, Technology and Society at the University of Twente and chairing the Department Science, Technology, and Policy Studies (STePS). Earlier

Evaluated properties include the occurrence of the martensitic transformation, the electron density of states, the Fermi velocity, the phonon density of states, the Eliashberg

The Web-based self-help intervention, based on ACT and self-compassion, was appreciated by partners of cancer patients and helped them to cope with negative. emotions, thoughts,

The results reported in Table 4 indicate that emotion-focused coping acts as a moderator in the relationship between all three of the work related stress variables Gob stress,

We first examined the effect of EBV infection on the expression of B-cell genes relevant to T-cell activation and potentially involved in the cognate interaction with the T cell..

Crystal structures of glutamate transporters in multiple different conformations have been solved, but most structures were determined at relatively low resolution, with