Master Thesis International Business & Management

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Master Thesis

International Business & Management

Antecedents of Corporate Social Responsibility in horizontal networks: A conceptual and illustrative study of airline alliances.

F.S. Menkveld (S2051338) University of Groningen Faculty of Economics and Business

Supervisor: dr. M.M. Wilhelm Co-assessor: dr. K. van Veen

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Abstract

This research focusses on the implementation of CSR beyond the firm boundaries in horizontal networks. It argues that if a firm can be hold responsible for the CSR practices of a supplier in its vertical network, it can also be hold responsible for the CSR practices of a partner firm in its horizontal network. Eleven propositions have been developed to help understand the antecedents of holistic CSR implementation in horizontal networks. These antecedents focussed on i.e. visibility of the firm, transparency, dependency and the network characteristics interconnectedness, network density and centrality. The SkyTeam airline alliance was used as an illustrative case study to observe the engagement of CSR in a horizontal network. The main observations of this case show that the factors firm visibility and a strict regulative institutional environment could potentially be antecedents that explain the engagement of firms in CSR best and might therefore be important factor for the holistic implementation of CSR throughout a horizontal network. Dependency was observed to be a factor that could potentially allow the independent firms in this case study to successfully negate pressure from horizontal partners to engage in CSR. However, further empirical research should be conducted to verify these observations.

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1.0 Introduction

In recent years, the subject of Corporate Social Responsibility (CSR) has gained much interest (Ayuso, Roca & Colomé, 2013). Firms are triggered by different actors in their environment (stakeholders) to focus on the social and environmental issues related to their international business (Maloni & Brown, 2006; Amaeshi, Osuji & Nnodim, 2008; Lynes & Andrachuk, 2008; Andersen & Skjoett-Larsen, 2009; Cruz, 2013). One of these triggers is the increasing public expectation on firms to grasp their social, economic and environmental responsibility (Cowper-Smith and Grosbois, 2011; Cruz, 2013) or the special interest groups and global activism making demands on companies (Juholin, 2004). According to the article ‘The good company’ published by the Economist (2005), the CSR movement mobilized public sentiment and has publically embarrassed firms that failed to recognize the importance of CSR which has to encourage firms to take their social and environmental responsibilities serious. Also, legislative bodies publish CSR policies to promote sustainable behaviour of firms (e.g. the European Commission’s publication: A Renewed EU strategy 2011-14 for Corporate Social responsibility, 2011; Steurer, Martinuzzi & Margula, 2011). Moreover, Juholin (2004) discusses that social policies of organizations in the future will get more and more important and the key audiences promoting these social policies will become more influential, making CSR a great research topic due to the expected future interest and thus its growing importance.

Academics are focussing on a broad area of topics within the scope of CSR in international business. Most recent is the attention of academics and firms on sustainability implementation that exceeds firm boundaries (Maloni & Brown, 2006; Andersen & Skjoett-Larsen, 2009). “One of the most notable changes in the way companies work with sustainability issues is the shift of the focus from own operations to improving the performance of supply chains (Kogg & Mont, 2012:154).” This shift of focus by firms seems rational because of the increasing strategic importance of supply chain management due to global competition in which networks compete and not individual firms compete as stand-alone entities (New, 2004; Christopher, 2005).

Firms in different industries apply various strategies to gain a competitive advantage over competitor firms (Cravens et al., 1996). Hence the network a firm is embedded in, consisting of e.g. partner firms or buyers & suppliers, can differ greatly from a network of a different or competitor firm. There is e.g. a big difference between vertical and horizontal firm networks. The supply chain example mentioned before is a great example for CSR integration in a vertical network, covering the buyers and suppliers of a firm, linking suppliers to end-users (Cravens et al., 1996). However, there is a lack of research focussing on CSR implementation in horizontal networks, which involves partner firms operating on the same stage of the supply chain, e.g. cooperation with service providers (consultants and research agencies) or potential competitors (Cravens et al., 1996). Also, the formation of alliances and joint ventures are great examples of the utilization of horizontal networks in international business (New, 2004). If firms can be hold responsible for CSR practices of their suppliers in a vertical network (Andersen & Skjoett-Larsen, 2009; Awaysheh & Klassen, 2010), logically firms can also be hold responsible for the CSR practices of partner firms in horizontal networks. Furthermore, due to the fact that in horizontal networks, firms at the same stage of the supply chain cooperate and these firms may be competitors, it is interesting to what extent a firm helps a horizontal network partner firm (competitor) with CSR implementation. This to achieve a CSR standard throughout the horizontal network even though excelling in CSR may be a competitive advantage for the initial (helping) firm.

A great example of an industry that noticeably makes use of horizontal networks is the aviation industry. A lot of airlines join forces on international markets by creating strategic alliances (Wargenau & Che 2006; IATA 2012). According to the International Air Transport Association (IATA)

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Economics Briefing of 2012, the three major alliances in the aviation industry are Star Alliance, SkyTeam and Oneworld. Together they provided over 80% of the total available capacity across the Pacific and the Atlantic and close to 80% of the total capacity between Asia and Europe in the middle of 2011 (IATA 2012). These numbers show the dominant position of the three major alliances in the aviation industry. In these alliances, airlines collaborate under the same brand name and provide “extras” in comparison to an airline operating alone. The benefits the customer can expect of airlines cooperating in an alliance in contrast to a stand-alone airline according to KLM (2014) are e.g. the wide range of extra destinations, adapted flight schedules to improve connections and a standardized level of quality throughout the alliance. The last example is important since a customer expecting to fly with one airline might fly the first leg of its journey with this airline and later transfer to one of the airline its alliance partners for the last leg of its journey. When the quality (in e.g. service, passenger comfort or flight safety) of the airline its alliance partner does not match the expected level, it can harm the alliance its brand image and therefore the image of all the affiliated partner airlines. Thus, it is in the interest of all alliance members to achieve a minimum quality standard throughout the entire alliance. This is more or less the same problem firms face with regards to CSR in vertical networks, when a supplier of a firm its business operations does not match the standard as expected from stakeholders of the buying firm they can successfully pressure the buying firm to adapt its business operations. Furthermore, in the case of the airline industry, the partners of an alliance are publically known. Moreover, all partners promote their cooperation with their alliance and its members. This is in contrast to partners in vertical networks, the information regarding vertical network partners is less publically known when compared to horizontal network partners in the aviation industry. Meaning that one can more easily identify if a firm collaborates with a firm performing unethical business behaviour. One can therefore argue that it is also important for horizontal networks to make sure a CSR standard has been implemented throughout the whole horizontal network.

Academics have focussed on several tools firms apply for the implementation of CSR standards beyond firm boundaries (throughout the firm its supply chain) by, e.g. bargaining power, transparency and dependency. However, this line of research has mainly focussed on issues arising in vertical networks and thus far avoided the issues arising in horizontal networks. Therefore, this research extents prior literature by focusses on the effects of network characteristics for CSR implementation in horizontal networks. Focussing on CSR implementation in horizontal networks is a new topic and recent research has mostly focused on CSR in supply chains. It is thus theoretically interesting to focus on what factors influence the implementation of CSR beyond the firm boundaries and how firms can make sure that the CSR standards of their partner firms are on an acceptable level. In other words, how can firms in horizontal networks influence its partners to guarantee an acceptable CSR standard level is adopted throughout the entire horizontal network or, what are the antecedents of holistic CSR implementation in horizontal networks?

The theoretical framework established in this research regarding CSR implementation in horizontal networks will provide the foundation for future research on this topic. Eleven propositions are formed by extending the existing literature on CSR implementation throughout vertical networks and discuss its applicability to horizontal networks. Since this is a relatively new research topic, a horizontal network (SkyTeam) will be used in an illustrative case study, which forms the second part of this paper. The observations on this case will provide some insight in the implementation of CSR throughout a horizontal network. With these observations, this paper tries to answer the following research question: What are the antecedents of holistic CSR implementation in horizontal networks?

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2.0 The rise of Corporate Social Responsibility in Business

Firms increasingly recognize that being socially and environmentally responsible is essential and therefore engage in different CSR initiatives (Du, Bhattacharya & Sen, 2011; Lee & Kashmanian, 2013). Large multinationals put together environmental annual reports, implement sustainability strategies and create codes of conduct in response to the pressure exerted by their stakeholders (Amaeshi, Osuji & Nnodim, 2008; Andersen & Skjoett-Larsen, 2009; Weber & Marley 2012).

There is, however, no clear definition of Corporate Social Responsibility (Panapanaan et al., 2003; Roberts, 2003; Juholin, 2004; Lepoutre, Dentchev & Heene, 2007; Andersen & Skjoett-Larsen, 2009; Ehasz & Lan, 2011; Bhatia, 2012; European Commission, 2012). Many scholars in the field of CSR agree that CSR encompasses the relationship between the firm and the larger society and the firm its voluntary actions regarding social, economic and environmental issues (Panapanaan et al., 2003; Andersen & Skjoett-Larsen, 2009). The word voluntary mentioned by Andersen & Skjoett-Larsen (2009) is important in this description of CSR since Ehasz & Lan (2011) find that generally speaking, CSR of organisations should go beyond the basic economic and legal requirements considered by their stakeholders, implying that CSR initiatives only count as CSR if they are voluntary and not obligatory (Schmitz & Schrader, 2015). The European Commission uses the following definition of CSR: it is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (COM 2011: 6). Furthermore, the European Commission stresses in their report on renewed EU strategy for CSR (2012:3) that “Corporate Social Responsibility concerns actions by companies over and above their legal obligations towards society and the environment” which corresponds with the consensus of academics as stated by Andersen & Skjoett-Larsen, 2009 and Ehasz & Lan (2011). Meaning that in order to be able to measure the engagement of corporations in CSR activities, the obligatory CSR practices should be considered first. These obligatory CSR practices mentioned by firms can then be disregarded so only the voluntary CSR practices are remaining. By only focussing on the CSR activities of a firm that go beyond the required activities, one can give an objective conclusion on the engagement of a firm in CSR. Keeping this in mind, one can expect a varying level of CSR engagement from individual firms since outside of legal and other obligations (e.g. trade associations or industry-wide requirements) the outlines are subjective (Juholin, 2004) and therefore liable to dissimilar interpretation by firms.

Ehasz & Lan (2011) stress that when one evaluates CSR, one should keep in mind that CSR is an evolving concept, the needs of the world its population and that from companies change over time and so the requirements placed on businesses will as well. This evolvement of the concept of CSR has been shown by Carroll (1999) in his research on the evolution of CSR. He shows that since the 1950s in which the concept of corporate social responsibility has first emerged among businesses, the definition of CSR has become more specific in the 1970s and started to include alternative themes such as business ethics and corporate citizenship since the 1990s. Furthermore, in line with Ehasz & Lan (2011), Carroll (1999) mentions that the definition of CSR may be further revised due to further development of theory and conducted research. However, the core of CSR will always focus on the most important public concerns regarding business and society relationships (Carroll, 1999).

It is interesting to review the motives of firms on why they engage in CSR. As mentioned earlier, firms risk being publically scrutinized when they show signs of unsustainable or unethical behaviour (Boyd et al., 2007). Juholin (2004) found, through a case study on Finish firms, that the major motive for firms to engage in CSR is long-term profitability, keeping a long-run perspective by earning their legitimacy as well as their licence to operate. The firms used for this case study motivated their employees to do business in accordance with corporate values (which reflected CSR values), ensuring

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ethical behaviour throughout the firm. Also, the case firms aimed for increased competitiveness by demonstrating to be a good corporate citizen. And finally, the studied firms came in contact with their stakeholders to be aware of their expectations and to prepare and anticipate the firm its future operations with this knowledge. These three means supported long-term profitability but also show that engagement in CSR is more focussed on ensuring future existence and profitability of the firm and risk management than voluntary ethical or philosophical behaviour.

Lynes & Andrachuk (2008) proposed a ‘four systems of influence’ model to explain the motivations of firms and therefore the degree of commitment to CSR. These motivations apart from stakeholder pressure also include image enhancement, which is in line with the results of Juholin (2004). Through image enhancement a firm receives their legitimacy and license to operate from their stakeholders. Furthermore, Lynes & Andrachuk (2008) mention that financial benefits as well as gaining a competitive advantage are two additional motivations for firms to engage in CSR.

3.0 Extending CSR beyond firm boundaries

A recent change in the field of CSR is the focus on implementation of CSR beyond firm boundaries. Through globalisation, the nature of business relations has changed and is increasingly crossing national borders. As a result, CSR is not only applicable to the domain of an individual company within its own juridical walls, multinational companies are now being held responsible for CSR issues of their global trading partners as well (Roberts, 2003; Maloni & Brown, 2006; Andersen & Skjoett-Larsen, 2009). This new approach of implementing CSR beyond firm boundaries has largely been focussing on the implementation of CSR across the supply chain of firms, or in other words, a firm its vertical network. Different industries take advantage of various or even unique supply chain structures and subsequently encounter different issues regarding their specific supply chain (Maloni & Brown, 2006). Consequently a lot of researchers focus on CSR issues related to a specific industry (mainly the consumer products industry and the manufacturing industries according to Maloni & Brown, 2006), or utilise case studies on individual firms to verify and prove their propositions. The main consensus of these studies is that a failure to manage and control the economic, social and environmental impacts of the supply chain can damage the reputation and the brand of a firm. This may therefore also be true for firms cooperating in a horizontal network.

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a sustainable supply chain) on their suppliers despite their lower bargaining power and amount of resources. Nevertheless, Surroca, Tribo & Zahra (2013) find evidence that MNE’s which are confronted with pressure from stakeholders to comply with social and environmental standards tend to transfer the corporate social irresponsible activities to foreign subsidiaries with less regulations rather than adopting uniform policies throughout its network.

These examples show different network forces functioning on the background affecting the relationship between network partner firms. These characteristics logically affect the reaction of firms on the pressure exerted by a network partner and determine whether or not a firm is able to successfully influence its partner. However, it remains unclear to what extent the forces being applied in vertical networks might also be applicable in horizontal networks.

4.0 CSR in aviation

After giving insight in the general discussion what CSR encompasses, the extension of CSR beyond the firm boundaries and the motives of firms to engage in CSR, the next part of this paper will focus on industry specific CSR issues in the aviation industry. Among others, Cowper-Smith & Grosbois (2011) state that the adoption of CSR in the aviation industry has been slow. Nevertheless, an increasing amount of airlines are implementing sustainability initiatives and report their commitment to CSR.

The airline industry is very interesting in terms of CSR research because of its potential to bring social and economic benefits to its destinations and its clear negative socioeconomic and environmental impacts that are associated with flying, e.g. CO2 emissions and noise pollution (Chan & Mak, 2005; Hooper & Greenall, 2005; Walker and Cook, 2009; Cowper-Smith & Grosbois, 2011). Additionally, the aviation industry is forecasted to continue to grow and according to ICAO (2013) the international traffic is expected to be 2,6 times greater in 2030 compared to 2010 and domestic traffic is expected to be 2,3 times that of 2010 respectively. The industry’s growth forecast and the fundamental environmental and socioeconomic impacts related to aviation have increasingly pressured airlines to commit to CSR (Cowper-Smith & Grosbois, 2011).

Academics focus on different aspects of CSR in the aviation industry. Most of the issues are related to the environmental impact of flying, e.g. fuel consumption and the related CO2 emissions by aircraft. This is reflected by the study by Mak et al. (2007). They try to map the status of environmental reporting of airlines but do not include the socioeconomic aspects of CSR in their research. Other research is mainly focussed on the effects of flying on local air quality and the noise pollutions (particularly near major airports) due to airplanes and activities on airports (Hooper & Greenall, 2005; Lynes & Dredge, 2006). However, no research is including factors related to firms cooperating in airline alliances but focus on airlines as individual firms. Factors that may influence airlines to engage in certain activities have been disregarded thus far.

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count (Cowper-Smith & Grosbois, 2011). This makes comparing the reports difficult since the average reader might not know what the law requires and what are voluntary CSR initiatives. This may lead to false conclusions or a biased view on what firm is more committed to CSR. What has been found when one analyses the content of CSR reports published by different airlines, is the focus on the environmental aspect of flying, providing less attention to the social and economic issues that are part of CSR (Walker & Cook, 2009; Cowper-Smith & Grosbois, 2011). This might be due to the clear environmental impacts associated with air travel as mentioned earlier (Lynes & Andrachuk, 2008) and matches the focus of academics. Nevertheless, Lynes & Andrachuk (2008) state that there is a noticeable change from the focus on only the environmental impact to an increase in the focus on socioeconomic issues covering all three aspects of CSR.

Correspondingly, the focus on the environmental aspects of flying and the lack of focus on the socioeconomic aspects and the environmental aspects of CSR can also be found in documents from regulative and representative bodies of the aviation industry, e.g. ICAO and IATA. A great example of this is the annual review of 2013 published by IATA, which describes the state of the aviation industry from 2012 (including growth, fuel costs, safety etc.). One of the chapters focusses on the environment and the impact of the aviation industry. The social and economic issues are omitted in this document and no attention is given to CSR implementation (which should include the socioeconomic issues) of the airline members from IATA.

There are at least three different regulative bodies in the institutional environment of airlines. The national aviation authority (NAA) represents the home country institutional environment. The International Air Transport Association (IATA) and the International Civil Aviation Organization (ICAO) are the international regulative parties. Furthermore, regional associations such as e.g. the Association of European Airlines (EAE) or the Association of Asia Pacific Airlines (AAPA) can also be part of the institutional system in the airline its environment. IATA is the main trade association for all airlines. They represent, according to their website, about 84% of the total air traffic. ICAO is a specialized agency of the United Nations and focusses on stimulating safe and orderly development of international aviation. ICAO is guiding member states (of the UN) in setting standards and developing regulations (including environmental protection) contrarily, IATA is focussing on its member airlines and their operation standards. This means that if ICAO provides CSR standards, which are then adopted by the aviation authority of the member state, these can be counted as regulative and hence cannot be counted as a voluntary CSR initiative if the airline complies. Similarly, IATA and the initiatives from the regional associations, which exceed legal requirements, but are regarded as trade-association or industry wide requirements can only be counted as obligatory requirements when adopted by an airline.

As an example: the sustainability targets set by IATA in its policy measures for climate change (2013) are the following:

• An average improvement in fuel efficiency of 1.5% per year from 2009-2020; • A cap on net aviation CO2 emissions from 2020 (carbon-neutral growth);

• A reduction in net aviation CO2 emissions of 50% by 2050, relative to 2005 levels.

An interesting observation is that again, one can see the focus on environmental issues since these targets set by IATA are focussing on fuel efficiency and CO2 emission reduction and do not include socioeconomic targets.

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socioeconomic issues) implemented by airlines were Cowper-Smith & Grosbois in 2011. They analysed annual CSR reports that were available as of January 2009 from airlines that were member of one of the three big alliances. This meant that only 14 out of the 41 airlines (34%) that are member of an alliance were analysed. The authors created a framework that included all published CSR goals from these airlines. For each goal, the amount of airlines reporting that specific goal was recorded. Additionally, if an airline used a measurement for their contribution to the goal, this was noted as well. The tables that result from this qualitative research approach provide an overview showing the spread and broadness of CSR initiatives realized by the studied airlines as well as the depth and profoundness invested by these airlines in each initiative. The main finding of the research of Cowper-Smith & Grosbois (2011) was the focus of these airlines on the environmental aspects, which could be expected since CSR issues concerning the environment are the issues airlines are confronted with most often according to the authors. Furthermore, only a couple of initiatives (reducing CO2 emissions and reducing aircraft noise) were adopted by every studied airline. This shows that there was not much overlap in the reported CSR initiatives among the sample airlines if only two topics were implemented by all studied airlines. It was not analysed whether or not the CSR reports from airlines that were part of the same alliance showed similarities. It would have been interesting to see whether or not partner airlines have common CSR goals or apply the same standards due to the fact that these partner airlines operate under the same (alliance) brand.

There is thus a lack of research focussing on the implementation of CSR beyond the firm boundaries, throughout a horizontal network and this can be seen in the current status of CSR research in the aviation industry. Most of the CSR research in the aviation industry is focussing on single CSR issues or the current status of CSR adoption by individual airlines, but no connection is made by comparing individual airlines or airlines within a network. It is important to gain insight in the adoption of CSR in horizontal networks since there is currently not much research focussing on this topic even though one can argue that firms can be hold responsible for the unethical business behaviour of partner firms. Therefore, the next part of this paper will identify the various antecedents that have to be in place to assist the holistic implementation of CSR throughout a horizontal alliance.

5.0 Antecedents of CSR implementation

This research is focussing on the extension of CSR beyond the firm boundaries and the ability of firms to influence partners in its network to engage in CSR in order to create a horizontal network in which each network partner complies with a minimum CSR standard. A minimum CSR level implemented throughout a firm its network is important since previous research shows that firms can be hold responsible by its stakeholders for the (unethical) CSR related practices of firms in its network. This research aims to gain insight in the motivation of firms to extent CSR beyond its borders and whether or not firms are able to successfully influence network partners to engage in CSR and to analyse the antecedents supporting or hindering this relationship. The first segment of this part of the paper will focus on the motivations of firms to extent CSR beyond its firm boundaries. Various external factors that force firms to engage in CSR, e.g. different forms of transparency, the influence of stakeholders and the institutional environment are discussed. The second segment of this part of the paper focuses on the ability of firms to extent CSR beyond their firm boundaries. Various implications that influence the adoption of CSR by horizontal network partners as e.g. power imbalance and dependency are examined. Also network characteristics as i.e. interconnectedness, centrality and network density and their effect on CSR transfer from one horizontal partner to the other are discussed as well.

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5.1 The motivation for firms to extent CSR beyond its borders

As stated above, this section of the paper is focussing on various factors that influence firms to extent CSR beyond its firm boundaries. The fast majority of the currently available literature is focussing on the implementation of CSR throughout a vertical network as e.g. supply chains. The available literature is analysed and this paper tries to extend the current literature by discussing its applicability to horizontal networks and use examples in the aviation industry to support this. Therefore, the following part will discuss the effects of CSR implementation in supply chain management and to what extent the same factors are expected apply in horizontal networks.

Various issues concerned with the engagement of firms in CSR are explained in the literature by using the term transparency. However, the term transparency is used to explain different issues and is used in different forms. The following part of this paper will explain the various applications of transparency in the literature and the effect each form of transparency has on the engagement of firms in CSR and that of the firm its network. Generally speaking, transparency reflects the information asymmetry between the principal and the agent (Watts, 2015).

5.1.1 Transparency

Transparency can be used to explain the extent to which other firms in the supply chain of an organization as well as the end-consumer are able to receive information regarding the supply chain of an organisation (Awaysheh & Klassen, 2010). If the business practices of the partners in the network of a firm are visible to the end-user and the other partner firms, the network of the firm is considered to be completely transparent. As an example to explain this, one can consider the supply chain of a manufacturing firm. The end product produced by a manufacturing firm can consist of various components or raw materials that are supplied by partners in the vertical network of the firm. When the consumer knows the origins of the components used for the end product and thus the business operations of the suppliers, the supply chain of the end-product manufacturing firm is transparent.

There are various ways transparency within a supply chain can develop. When one considers conflict diamonds and organic food for example, it is clear that it is essential for the firm to provide full supply chain disclosure to ensure full traceability of goods (New, 2004) in order to remain legitimate. In the first example, it has to be clear to the consumer that the products are truly organic and therefore worth the premium price in contrast to non-organic food. Furthermore, conflict diamonds are believed to fund warlords and rebels in Africa which use the profits to buy arms (Amnesty USA). These firms will naturally have to be clear to their consumers regarding the origin of their products to remain legitimate. Also the institutional environment can pressure firms to disclose their vertical network partners. For example, publically traded firms in the U.S. are required to disclose information regarding the source of some conflict minerals (Chen & Slotnick, 2015). In these cases, the transparency is relatively high since these firms disclose their supply chain partners and the origin of their products.

The last decade, the environment of firms has changed, affecting the transparency of the firm its network. The Internet and social media make it easier for stakeholders to find information regarding the partners of a firm. NGOs and civil society actors have highlighted unethical behaviour of firms (New, 2004; Yawar & Seuring, 2015) and their supply chains (Jenkins, 2006; Park-Poaps & Rees, 2010). They can rally public support and put pressure on firms to change unethical business behaviour (Lee & Kashmanian, 2013). Stakeholders are holding the buyer firms responsible for the actions of their suppliers, even if the buying firm does not directly control or own the production process (Roberts, 2003; New, 2004). This shows that firms have a stake in the (ethicality of the)

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business performance of its suppliers. Kashmanian, Keenan & Wells (2010) state that the unethical supplier performance can harm the reputation of the buying firm. Therefore to protect the brand image of the firm it is necessary that firms extent CSR beyond their firm boundaries throughout their supply chain. Awaysheh & Klassen (2010) state that this can also potentially be done proactively, to lower the risk of a harmed brand image and a damaged firm reputation. Thus, even if the network of the firm is less transparent (or opaque in other words), if stakeholders receive information regarding the unethical behaviour of a network partner, they will hold the firm responsible for this, which can lead to a damaged firm image. Therefore, proactive extension of CSR to the firm its network partners (through e.g. codes of conducts or the implementation of CSR standards etc.) makes sense since firms will then be able to show their stakeholders (when potential unethical behaviour of a partner is discovered) that the firm did what they could do (by letting suppliers sing a code of conduct for example) and thus safe a legitimate firm reputation.

To report the engagement of firms in CSR to its stakeholders and therefore to reduce the information asymmetry and increase transparency, various means are used. Firms use CSR or environmental reports or dedicate a chapter in their annual report to CSR (Amran, Lee & Devi, 2014; Yawar & Seuring, 2015) in order to inform their stakeholders regarding their CSR practices. These reports have to address the varying needs of all the different involved stakeholders (Tschopp & Natanski, 2014). The various stakeholders involved are e.g. the national and local governments, NGOs, labour organizations, community groups and academic experts and network partner firms (Lee & Kashamanian, 2013). These stakeholders use the reports for different means, e.g. analysts may require the CSR reports in order to rank investment opportunities and special interest groups use them to monitor the corporate actions of firms (Tschopp & Natanski, 2014). Existing CSR reports are often focusing on addressing the needs of the primary stakeholders of the firm (Tschopp& Natanski, 2014). One should keep in mind that firms might use these reports to “greenwash” their sustainability practices (Watts, 2015: 33). The extent to which the actual engagement of a firm in CSR and their reporting on their CSR engagement is synchronized is defined in this paper as reporting transparency.

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behave opportunistically and decide not to give full disclosure of all their business practices since it is hard for their stakeholders to discover this due to the opaqueness of the network. If the network would be transparent, it makes no sense for firms to give false disclosure since this would be immediately discovered and harm the image of the firm.

As a means to reduce the greenwashing of CSR reports and to allow stakeholders to compare the sustainability of firms, standard reporting guidelines have been developed. The literature suggests that the reporting standards developed by the Global Reporting Initiative (GRI) is the most widely recognized standard and is commonly applied by firms around the world (Beare, Buslovich & Searcy, 2014; Tschopp & Natanski, 2014; Watts, 2015). Also, initiatives as e.g. the Transparency Benchmark from the Dutch Ministry of Economic Affairs focus on the quality and quantity of CSR reporting among the largest companies in the Netherlands. They rate the reports of Dutch firms and create a list publishing these results annually. Furthermore, stock exchange indices (as e.g. the Dow Jones Sustainability Index) focus on the integration of sustainability considerations of investors, provide lists of firms that according to them are truly excelling in CSR in comparison to other firms. All of these different initiatives show that there is a need of stakeholders to have the ability to recognize the true reporting transparency of firms.

However, one should keep in mind that there could be a difference between the willingness and ability of firms to reach full transparency (Watts, 2015). Firms aiming for high transparency might not have the necessary monitoring capabilities or competences to provide the required data. Also, managers might be reluctant to disclose unethical behaviour and decide that it is a too great of a risk to fully disclose all data. Furthermore, relatively new firms might simply not have the required financial resources available. These issues all affect the extent to which full transparency can be reached (Watts, 2015).

One can differentiate between which parties an information asymmetry exists. Awaysheh & Klassen (2010) state that transparency can exist between (outside) stakeholders and the firm, and between firms within a network. However, the asymmetry of information between firms and between the firm and an outside stakeholder can be separated. This part of the paper will focus on inter-firm transparency and the information asymmetry between stakeholders and a firm (supply chain visibility) will be discussed in the part focussing on the presence of NGOs (5.2.2).

In the case of inter-firm transparency, Akkermans, Bogerd & Doremalen (2004) state that it involves the extent to which partners are openly sharing all the relevant information to its collaborating partners. It determines according to Akkermans et al. (2004), the extent to which collaboration between supply chain partners is successful. It includes the extent to which firms have to spend resources in monitoring the behaviour of its partner. Yawar & Seuring (2015) state that codes of conducts (CoCs), the implementation of standards as well as monitoring and auditing are compliance strategies that are frequently applied by firms. These strategies are, according to the authors, largely applied in vertical networks to implement and ensure that stakeholder expectations are ensured across their supply chains as an answer to increasing external stakeholder pressure that demands legitimacy and accountability of the practices of the firm at the supplier level.

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chain cooperate. Hence, the contracts used in buyer-supplier relationships are not applicable in horizontal networks. The ability to influence horizontal partner firms to adopt production requirements is therefore different in vertical and horizontal networks. In the case of the aviation industry, one can see that the alliances SkyTeam and Star Alliance published a CSR or environmental commitment statement. This statement shows the intentions of the alliance members regarding the engagement in CSR. The commitment statement is a form of a code of conduct utilized by these airline alliances. Nevertheless, information regarding the use of other more formal means as e.g. contracts to ensure ethical business performance is not mentioned by these alliances. Furthermore, no information is found regarding audits or implemented monitoring means to ensure compliance to the commitment statement.

One can argue that the motivation of firms to extent CSR throughout its supply chain is linked to transparency. When the transparency of the network is relatively high, firms within the network are informed about the business practices of their partners and can put pressure on firms to repair the potentially unethical behaviour of its partners. Firms have to be less concerned regarding any undiscovered unethical business that might be discovered. Hence when the transparency between firms is high, there is less need to spend resources on codes of conducts or the implementation of standards as CSR compliance strategies since the monitoring of actions of the network members is already in place. Nevertheless, when the transparency of the network is relatively low, firms can proactively extent CSR beyond its borders (through codes of conducts or the implementation of CSR standards) to legitimize to their stakeholders that they are not tolerating unethical business behaviour even though through the less transparent network, they do not receive information regarding the potentially unethical business performance of their partner. Nevertheless, one should keep in mind that a less transparent network might leave room for opportunistic behaviour of a partner firm that can decide not to give full disclosure and pursue in unethical business operations. As stated earlier, supply chains are excellent examples of vertical networks. Supply chains of firms can be very complex. The raw materials and components of the end products made by firms can be supplied from multiple different suppliers. Hahn, Duplaga & Hartley (2000) analysed the supply chain of Hyundai Motor Company, one of the largest business groups in Korea. They state that (as is typical for the automotive industry) Hyundai has approximately 400 first-tier suppliers, 2,500 second-tier suppliers and an unknown amount of higher tier suppliers. Hyundai might be an example of a firm with a large amount of suppliers and suppliers of suppliers, however, it shows the potential high degree of complexity of vertical networks. Obviously, one can argue that the complexity of such networks has an effect on the transparency of these supply chains and the extent to which complete transparency can be achieved. This paper therefore expects that since firms can be hold responsible for the unethical behaviour of its suppliers in potentially complex vertical networks, firms can also be hold responsible for the unethical behaviour of horizontal network partner firms.

As mentioned previously, alliances are a form of a horizontal network. In the aviation industry, firms cooperate with partner firms in horizontal networks using alliances. The complexity of the applied horizontal network is less in contrast to the potential complexity of vertical networks, as mentioned above. The number of partners in the three main alliances in the aviation industry range from 13 in Oneworld to 26 in the case of Star Alliance. Furthermore, there are no second tier partners that have to be taken into account (on the horizontal level) otherwise they would be a member of the alliance. Moreover, the firms in aviation alliances provide full network disclosure and publically promote their cooperation with partner firms. The horizontal network in case of the aviation industry is therefore likely to be more transparent since all the partners a firm can receive information from are known

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and the number is limited. Also, due to institutional obligations, some of the airlines are obligated to inform their stakeholders on the CSR engagement through mandatory CSR reports.

In sum, this research argues that irrespective of the fact that an unethical partner is part of the vertical or horizontal network of a firm, if this information is available to the stakeholders of a firm, they will put pressure on the firm to repair this unethical behaviour or risk a damaged firm reputation if a firm fails to do so. Firms are also likely to proactively implement CSR beyond its firm boundaries when the transparency is low to safe the brand image of the firm if later stakeholder receive information regarding unethical behaviour of the firm its partners. This leads to the following proposition:

Proposition 1a: If the lead firm of the network has relatively little information on the actions of its

members, the transparency of the network is relatively low, and the firm is likely to proactively implement CSR throughout its horizontal network, in order to remain legitimate when later unethical behaviour of a network partner is discovered.

Proposition 1b: If the network of a firm is highly transparent, the lead firm receives all the relevant

information regarding the actions of its members, therefore, potential unethical business behaviour from its members which can harm the brand image if the leading firm is instantly discovered, hence there is less need for the leading firm to spend resources on the implementation of CSR compliance strategies throughout its horizontal network.

5.2 The effects of the institutional environment

Multiple actors are part of the institutional environment of firms. All of them motivate firms to engage in CSR differently. This part of the paper will first focus on governments and regulative bodies and how they motivate firms to engage in CSR. Afterwards, the effect of NGOs on CSR implementation of firms will be discussed.

5.2.1 Governments and regulative bodies

In recent years, governments have joined other stakeholders in pressuring firms to engage in CSR (Albareda, 2008). Local and national governments, which are part of the institutional environment of a firm, can obligate firms to report on their business operations. Business laws and business structures are different from country to country (Amaeshi, Osuji & Nnodim, 2008), also the CSR agenda of governments varies from one country to the other (Moon, 2007). What in one country is regarded as business obligation is considered to be “governmental, societal or individual responsibility” in other countries (Moon, 2007: 298).

Thus far, according to Beare et al. (2014) governments have not provided much direction to CSR reporting. Nevertheless, they become increasingly more active in proactively promoting CSR, especially in Western Europe (Steurer, Martinuzzi & Margula, 2012; Beare et al., 2014). However, governments apply different engagement modes. As an example, the study of Albareda (2008) identified that the UK and Italy rely on the voluntary approach for firms to engage in CSR and support and form multi-stakeholder partnerships projects with business. On the other hand, Albareda (2008) found that Norway is focusing more on passing legislation to integrate CSR into public policy. However, as Moon (2007: 301) notes, governments can as a minimum “endorse” ethical business behaviour.

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Generally, the two different modes governments apply to encourage firms to engage in CSR can be divided into soft versus hard policies. Governments can apply various non-mandatory policy means to promote CSR practices (Albareda, 2008). These can complement or be replaced by mandatory and enforced regulations, which are regarded as hard policies (Moon, 2007; Steurer et al., 2012). The use of the more subtle approach through soft policies may be connected to cultural norms according to Beare et al. (2014). They may also be preferred when mandatory CSR standards are challenged at a political level or not practicable at e.g. an international level (Steurer et al., 2012). One should keep in mind that it is not only the presence of regulations that matters according to Campbell (2007) but also the monitoring capabilities of the states and their ability to enforce the set regulations.

Campbell (2007) proposes that firms are more likely to engage in CSR if it is supported by strong and well-enforced state regulations. Attig et al. (2014) found evidence to support this proposition and state that firms with subsidiaries in countries with a strong institutional environment are linked with higher CSR ratings. Interestingly, other literature suggests that the use of soft CSR public policies by governments is preferred in order to strive for voluntary ethical behaviour of firms (Albareda, 2008). The intention is that through the utilization of soft regulations, good practise will emerge in the industry (Moon, 2007). This different standpoint is interesting when one connects this to the definition of CSR. As stated before in this paper, CSR should go beyond the requirements set by e.g. governments or trade organizations and therefore are voluntary. However, if soft regulations are not sufficient and good practices have not been emerged in the industry by itself, hard policies might be a solution since they proved to be effective. Moreover, if these policies and regulations have been created in cooperation with firms and stakeholders, this has a positive effect on CSR engagement of the organization as well (Campbell, 2007).

In addition to hard and soft regulations, the literature suggests governments of various countries (as the example above regarding the UK and Italy) are focussing on partnership projects (directed by governments), brining firms and stakeholders together in order to promote CSR (Albareda, 2008). These partnership projects have high resemblance with the cooperative creation of regulations as mentioned above, indicating that partnership projects can be expected to positively affect CSR engagement of firms.

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In the case of horizontal networks, especially in the aviation industry, this is also the case. Airlines located in different countries are cooperating under the same alliance brand. Each of the partner airlines is embedded in a different institutional environment. Therefore, different CSR policies or regulations apply for every airline. Whether or not a partner firm is part of the horizontal or vertical network of a firm, the same implications are expected to apply, stressing that aligned regulations reflecting the clear goals of the regulative bodies, promote CSR. Nevertheless, the CSR policies and regulations set by the institutional environments differ. One can expect that if the European Commission has dispersed objectives, independent countries will have so as well. Thus, one can expect that every airline will have different policies it will obligate to and therefore engage in CSR differently.

Even though the nature of the airline industry is to bring passengers or cargo from one part of the world to another, possibly crossing national borders, there is a limit on the current regulations a foreign country its regulative bodies put on the airlines from other countries of origin. This is because what allows airlines to fly to or over a specific country or state is a contract between the country of origin of the airline and the state it wants to fly to or over. It is not a contract between the airline itself and the country it wants to fly to, which is different from when a firm wants to export its goods to another country applicable to most other industries. The various ‘freedoms of the air’ are specified by ICAO (2015).

Currently, various restrictions for airlines exist which forbid specific airlines to fly to specific nations. An example of this is the black list created by the European Commission (2015) which list airlines that are banned to fly to Europe due to the insufficient safety level incorporated by the airline. Furthermore, currently, various airlines from the United States of America are asking the US to ban various airlines from the Middle East access to US markets due to unfair competition (View from the wing, 2015). Nevertheless, regulations set by national regulation bodies covering other than safety, security and protection against unfair competition are currently not applicable to other than country of origin airlines.

A conflict can occur when one airline is obligating to one regulation and a partner airline to a contradictory one. This obviously affects the potential CSR standard being implemented in a horizontal network. It is difficult to make all airlines obligate to contradicting targets. The alignment of policies and regulations regarding CSR in the aviation industry should therefore be an objective for the regulative bodies worldwide. Also, industry wide trade organizations might be able to assist. As mentioned before, IATA is setting minimum (environmental related) CSR targets for its member airlines. This is one of the many CSR policies airlines have to comply with. Nevertheless, since IATA is covering 83% (IATA) of the total air traffic, they can potentially combine the voices of each airline and address their issues to governments as a single voice, rather than dispersed voice from all the individual airlines. Alternatively, the alliances themselves can proactively communicate with regulative bodies aiming for aligned policies formed by the relevant regulative bodies or create a clear list of regulations the alliance members will obligate to, removing all contradictory policies and regulations.

In sum, the literature suggests various ways regulative bodies motivate firms to engage in CSR. The use of soft policies by governments provides the space firms can use to engage in CSR voluntarily. The use of hard policies is also found to positively support the adoption of CSR by firms, however it conflicts with the definition of CSR that states that it should go beyond the regulative requirements. Nevertheless, requiring a certain minimum CSR engagement of firms might invite them to extent their CSR beyond the required minimum and not only comply with the minimum set by the regulative bodies. However, the CSR regulations set by the respective regulative bodies can vary greatly as

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stated earlier. Thus the CSR goals of each firm in a horizontal network will be different and possibly contradicting. These implications can hamper the overall implementation of CSR throughout a network, since the CSR goals of each firm may be different. The more the CSR policies and regulations set by the applicable individual regulative bodies are aligned, the more overall implementation CSR throughout a network is promoted by the institutional environment. Furthermore, since the literature suggests that the implementation of CSR goals is not the sole responsibility of the regulative bodies, but also the responsibility of the industry themselves, the presence of industry wide trade organizations and their ability to influence regulative bodies to align CSR regulations and policies, can be argued to also affect the implementation of CSR throughout a horizontal network. With this in mind, the following two propositions have been developed:

Proposition 2: Horizontal network partner firms have to comply with the individual mandatory hard

and soft CSR regulations set by their respective regulative (governmental) bodies in their institutional environment, the more these set regulations of the various regulative bodies across network members (?) are aligned, the more the overall adoption of CSR throughout a horizontal network is promoted and hence the higher is the CSR standard implemented throughout a horizontal network.

Proposition 3: The presence of industry wide trade organisations is expected to positively affect the

implementation of CSR throughout a horizontal network by setting CSR goals the individual network partners should obligate to.

5.2.2 Presence of Non-Governmental Organizations

Next to governmental bodies, non-governmental organizations can also be part of the institutional environment of firms. As stated earlier in this paper, NGOs can use public sentiment to force firms to engage in CSR. Teegen, Doh & Vachani (2004) describe the development of NGOs as follows. First, individuals or a group of people sustain collective action over time, focusing on important social issues, a social movement is formed. When the social movement is structurally evolving, creating a freestanding presence within the broader institutional environment, an NGO is formed.

Hendry (2006) develops various propositions that explain what factors he expects that influence NGOs to target a particular firm. He proposes that industry-leading firms are more likely to be targeted by NGOs. Through the pressure asserted by NGOs, the industry-leading firms will change their business behaviour. Through mimic isomorphism, other firms in the same industry might adapt their business behaviour, even though they did not experience direct pressure of the NGOs (Hendry, 2006). Also, market leaders are valuable targets for activist-stakeholder groups since due to the wide presence of these firms, activist-stakeholder groups can encourage other stakeholders to participate (Rowley & Breman, 2000). Both studies link market leaders to firm size and therefore argue that larger firms are more likely to be targeted by NGOs compared to small firms. Furthermore, larger firms have potentially more complex operations and can be active in multiple lines of business, making them vulnerable targets for NGOs (Rehbein, Waddock & Graves, 2004).

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strategy (Udayasankar, 2008). This is in line with the findings of Besser (1999). He found that small enterprises invest in local relationships and align their operations with the desires of their local stakeholders since the small firm relies on its local reputation. Also, when firms have already linked their brand with social responsibility, they are likely to be targeted as well (Arganti, 2004). NGOs might hold these firms to a higher standard or believe that these firms are more willing to make CSR changes. These firms open themselves to public scrutiny by creating a sustainable brand image (Rowley & Berman, 2000). Furthermore, NGOs might believe that firms that are linked to a good CSR image do not deserve this image or are not truly excelling in CSR to the extent that is satisfactory to the NGO (Arganti, 2004).

Hendry (2006) argues that firms which are closely linked to the end product are more likely to be targeted by NGOs. These firms are known to the consumer and therefore, NGOs can mobilize the consumer to influence the firm. The same applies to firms with a high brand value. Better-known brands are great targets for NGOs due to the potentially attention of a wide public (Rowley & Berman, 2000). Therefore, large firms with high product visibility and a potentially high brand value are expected to adapt their unethical behaviour in order to negate any potential harm to their brands (Awaysheh & Klassen, 2010).

The literature thus suggests that (potentially) large firms with high brand visibility are likely to be targeted if the stakeholders of this firm (including NGOs) find the extent to which the firm engages in CSR insufficient. Therefore, these firms need do address this behaviour proactively, or risk a potential harmed brand image. Even though the literature is focusing on buyer-supplier relationships and the potentially unethical behaviour of firms in their vertical supply chain, this research argues that this can also apply to firms in horizontal networks. Firms in horizontal networks can also be hold responsible for their own unethical firm behaviour or that of its partner. In the case of the airline industry, these airlines themselves have a vertical network in which unethical business behaviour can occur. The particular airline can be hold responsible for this behaviour, the same as with other firms. Furthermore, airlines have large brand visibility and can often be large firms. Moreover, some airlines are national flag carriers, which make these airlines potentially interesting targets for NGOs. This research therefore expects that airlines have high visibility and are therefore more likely to engage in CSR proactively due to the presence of NGOs and their preference to target highly visible firms. The following proposition is developed:

Proposition 4: The more visible the firm is (due to its size or product visibility) the more likely it will

receive pressure from stakeholders and NGOs to engage in CSR and therefore the more likely it is that the firm will proactively engage in CSR and extent it beyond its borders to mitigate the risk of a damaged firm image.

As been described before, the relationship between firms and NGOs has largely been confrontational, NGOs pressure firms to repair unethical behaviour of partner firms. Lately, there has been a shift towards a more cooperative and more dialogic form of interaction between NGOs and firms (Kourula & Laasonen, 2010). The partnership projects mentioned by Campbell (2007) and Albareda (2008) can involve the cooperation of NGOs. Also, strategic partnerships between NGOs and firms have been created (Amran, Lee & Devi, 2014). These partnerships can create new modes of value creation and can be mutually beneficial for firms and NGOs (Dahan et al. 2010). These partnerships between firms and NGOs can create synergistic solutions and the sharing of critical resources, which would separately be difficult to achieve (Amran et al., 2014). Competencies and capabilities can be mutually shared as well as access to different resources (Teegen et al., 2004;

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Dahan et al. 2010). NGOs can also assist firms in entering new markets or even the development of new innovative business models (Dahan et al. 2010). There are various degrees to which a firm can cooperate with an NGO. Austin (2000) developed a collaboration continuum defining the extent of collaboration from Philanthropic (low level of engagement) through Transactional (medium) to Integrative (high).

Partnerships between firms and NGOs lead to organizational learning according to Amran et al (2014). Also, if the cooperation between the firm and the NGO is successful, the firm can expect enhanced legitimacy (Amran et al., 2014). This can be expected since NGOs receive high level of positive public attitude and trust (Arganti, 2004). Due to the public collaboration of the trusting NGO and a firm, some of the public trust will automatically flow to the firm. Ultimately this cooperative relationship is found to result in higher disclosure incentive on sustainability information from the firm and better sustainability reporting quality. Collaboration with NGOs can therefore be related to a higher quality of CSR reporting. NGO collaboration also occurs in the aviation industry. Multiple airlines are cooperating with NGOs as e.g. the World Wide Fund, the make-a-wish foundation or the Red Cross. The literature suggests that these collaborations are mutually beneficial. However, one can argue that if an NGO collaborates with a firm performing unethical business behaviour can inflict damage in the perceived legitimacy of the NGO. Therefore, one can argue that it is likely that an NGO only collaborates with airlines who the NGO is convinced of is performing well regarding CSR in order to minimize the risk of a damaged public image. Hence the following proposition is formed:

Proposition 5: The collaboration of a firm with an NGO will only succeed when the CSR standard of

the firm is sufficient, therefore it is expected that firms successfully collaborating with an NGO are linked to a relatively higher CSR engagement.

5.3 The ability of firms to influence network partners

Now that the motivations of firms to extent CSR beyond its borders have been discussed through visibility and stakeholder pressure, this segment of the paper will focus on the ability of firms to influence its horizontal network partners to engage in CSR. First the imbalance in power and dependency will be discussed. Afterwards, the network characteristics and their effects on the transfer of CSR throughout the network will be reviewed.

5.3.1 Power and Dependency

Dependency captures the context to which extent a firm is depend on a partner firm. As an example, Awaysheh & Klassen (2010) explain that dependency in a vertical network represents the extent to which a firm has to rely on partners in its supply chain for critical resources, capabilities or components. Anderson & Narus (1990) argue that it is the perceived relative dependence of a firm on its partner that determines to what extent the partner will have influence over, or is influenced by the firm. They define relative dependence as the perceived difference between the relative dependence of the firm itself and its partner firm on their working partnership. In their research they find that the independent firm can successfully influence the dependent firm in their working relationship. Meaning that the ability of a firm to influence an actor is dependent on the dependence of the actor on the firm (Touboulic, Chicksand & Walker 2014).

Dependency and its effect on the relationship between firms in supply chains has been a subject of multiple studies. These studies argue that buyers with a power advantage facilitate supplier adaption and show supplier collaboration with the requirements set by the buyer (Hoejmose, Grosvold & Millington 2013). Cox et al. (2003) explain that the power situation between the buyers and suppliers can be in one of the next four states:

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• Buyer dominance, in which the buyer can control the relationship;

• Interdependence, in which both the supplier and buyer heavily depend on each other; • Independence, both the buyer and supplier have no resources available to determine the

shape of the relationship;

• Supplier dominance, which states that the supplier can control the relationship.

These asymmetric power relationships can be significant drivers of the implementation of CSR practices throughout a supply chain (Hoejmose et al., 2013). This has been the subject of multiple studies in supply chain management (Cascario & Piskorski, 2005; Andersen & Skjoett-Larsen, 2009; Awaysheh & Klassen, 2010; Hoejmose et al., 2013). Hoejmose et al. (2013) find, in accordance with previous research, that dependency or an asymmetric power relationship, affects CSR implementation of partners in supply chain management. Accordingly, Andersen & Skjoett-Larsen (2009) and Touboulic et al. (2014) find that powerful (independent) organisations have greater leverage and can therefore control the social practices of its suppliers. Dependency can thus create a power imbalance in favour of the independent firm, which therefore receives leverage on the dependent firm and can set CSR requirements. This however works both ways as the state supplier dominance shown before suggests. A firm can put pressure on a partner (or supplier) to engage in CSR, but when the firm is dependent on that partner, the partner firm can successfully negate this pressure (Pedersen & Andersen, 2006; Andersen & Skjoett-Larsen, 2009; Awaysheh & Klassen, 2010). Touboulic et al., (2014) note that in the case of supplier dominance, the engagement in CSR remains minimal. An example of this is when a firm has e.g. a monopoly position. In these situations where firms enjoy nil or very few competition, their motivation to engage in CSR may be low since firm reputation is not likely to affect the sales of this firm very much. The reason for this is that customers or buyers have none or few alternatives (Campbell, 2007). Correspondingly Awaysheh & Klassen (2010) state that a firm is less likely to influence the priorities of its supplier (e.g. focus on sustainability), if the firm is highly dependent on its supplier. This means that the firm with a monopoly can claim an independent position in an inter-firm relationship.

In a joint dependent relationship (interdependence) where the supplier and buyer are dependent on each other, Hoejmose et al. (2013) find that this is related to a social responsible supply chain. Their reasoning behind this is that a jointly dependent relationship causes a sense of common purpose and the risk of their unethical behaviour being exposed equally harms both partners. They provide an example explaining that when the products of a buyer are boycotted due to unethical business behaviour, the sales of the interdependent supplier are directly affected. This is because in an interdependence relationship, the large portion of the supplier its sales is linked to the boycotted buying firm.

When a (dominant) buying firm is focusing on CSR implementation in its supply chain, Touboulic et al. (2014) mention that it can become increasingly dependent on its suppliers despite its dominant position. One can therefore argue that the position of a firm can tend towards the dependent position when it is striving to implement CSR throughout its supply chain. It can become dependent on its suppliers to comply with the sustainability requirements.

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tool for sustainability and allows the large proactive buyer to set sustainability requirements and ensure compliance from the dependent suppliers throughout its network (Touboulic et al., 2014). The reviewed literature largely focusses on dependency and the related power imbalance in the relationship between buyers and suppliers in supply chains. Their conclusion is that is that a large independent buyer (buyer dominance) can successfully set CSR requirements for its dependent suppliers. Nevertheless, the implementation of CSR throughout the network of the independent buyer makes the firm become more dependent on its suppliers to meet its CSR requirements. When the buyer is dependent on the supplier (supplier dominance), the supplier is able to successfully negate pressure from the buyer to meet its requirements. In the case when the firms are interdependent, both firms risk equal harm when unethical behaviour is found, therefore this relationship is found to support CSR implementation from both parties. Finally, in an independence relationship, the partners are not dependent on each other and therefore do not aim to influence each other in engaging in CSR.

These relationships and the related power (im)balance between the partners can also be found in horizontal networks. Even though firms at the same stage of the supply chain cooperate, one firm can be more dependent on their relationship than the other party. When one analyses the aviation industry, this can be found as well. As stated before, about 80% of the total capacity of flights across the Pacific and the Atlantic, and between Europe and Asia is delivered by airlines that are a member of one of the three large alliances. Partner airlines collaborate and are able to offer its customers a range of extra destinations through this collaboration. This form of cooperation allows airlines to share passengers with one another and therefore make it interesting for airlines to join these alliances. One can argue that relatively smaller airlines are more dependent on the larger airlines (and their larger supply of potential passengers) than the other way around. This can make the smaller airline dependent on the larger airline, the same as a big buyer and a dependent supplier. Hence one can argue that these independent larger airlines are able to successfully set CSR requirements for the smaller airline to meet which is the same phenomenon as present in the buyer dominance state in supply chains. On the other hand, one can argue that these airlines are interdependent on each other since they are operating under the same alliance brand. When one airline is being boycotted, it cannot transfer its passengers to its partner airlines. The alliance brand image is therefore equally important to each partner. Supply chain management literature suggests that in these interdependent relationships both parties strive for ethical business performance due to the shared risks. Hence, the interdependent state of the relationship between the airlines might be an antecedent that aids in the holistic implementation of CSR throughout the horizontal network. However, the state supplier dominance can also be present in the relationship between airlines. If one airline has a competitive advantage in the form of e.g. a monopoly, supply chain management literature suggests that it can successfully negate pressure from partner firms to engage in CSR. When the airline for example is located in a geographical location that other firms cannot reach due to e.g. regulative complications, this airline gains an independent position irrespective of firm size. In the case of airline alliances, a couple of airlines are the founding partners. One can argue that these airlines can set the entry requirements for new entrants and decide whether or not a firm can joint their alliance. Hence one can reason that the founding partners have an independent position compared to the potential entrant. Nevertheless, once again, if this entrant has a competitive advantage that the whole alliance can benefit of (e.g. a network of destinations the other partners strive to get hold of, or a large sum of potential transfer passengers), the power imbalance can move in favour of the new entrant and he can therefore potentially negate any CSR entry requirements due to its independent position. The following proposition is offered: