The effect of culture on Corporate Social
Performance
How do cultural dimensions influence corporate social performance and does financial performance moderate these relationships?
Master thesis
Date of submission: 20th of January, 2019
Name: Rianne Kleefman Student number: S3223299 Email: r.w.kleefman.1@student.rug.nl
Supervisor: Dr. O. Lindahl Co-Assessor: Dr. R.W. de Vries
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ABSTRACT
Corporate Social Responsibility (CSR) and Corporate Social Performance (CSP) have become more important and interesting for companies over the past years. However, even though CSR is growing in popularity, variances can still be found between the CSP of companies. These differences have been linked to cultural differences. However, until now results are found to be contradicting and/or insignificant. Therefore, this study aims to provide more clarity regarding the influence of national culture on companies’ their CSP. In particular, this study investigated the influence of the following GLOBE dimensions on CSP: Power Distance, In-Group Collectivism, Societal Collectivism, Gender Egalitarianism, Assertiveness and Uncertainty Avoidance. Additionally, this study investigates the moderating role Financial Performance is argued to play in these relationships. An Ordinary Least Squares (OLS) regression has been done with the CSP scores of CSRHub of 293 companies from 22 countries. Significant relationships were found for all cultural dimensions, however, the nature of some relationships was surprising. Additionally, contradicting findings were found for Assertiveness and Gender Egalitarianism. Significant positive relationships were found for Power Distance and Uncertainty Avoidance. Furthermore, In-Group Collectivism and Societal Collectivism both showed to negatively influence a company’s CSP. Finally, contrary to expectations, the moderating role of Financial Performance could not be confirmed by this study. The findings of this Master thesis show the impact of the not earlier confirmed cultural dimensions In-Group Collectivism and Societal Collectivism. Moreover, the findings help companies better understand how their decisions are influenced by the national culture of their home country.
Keywords: Corporate Social Performance, GLOBE, Uncertainty Avoidance, Gender
3 TABLE OF CONTENT ABSTRACT ... 2 ABBREVIATIONS ... 6 1. INTRODUCTION ... 7 2. LITERATURE REVIEW ... 10
2.1 Corporate Social Responsibility ... 10
2.1.1 Corporate Social Responsibility ... 10
2.1.2 Corporate Social Performance ... 11
2.2 National culture ... 12
2.3 The link between national culture and CSP ... 14
2.4 Hypothesis development ... 17 2.4.1 Power Distance ... 17 2.4.2 Collectivism ... 18 2.4.3 Gender Egalitarianism ... 20 2.4.4 Assertiveness ... 21 2.4.5 Uncertainty Avoidance ... 22
2.4.6 The moderating role of financial performance ... 23
2.5 Conceptual model ... 27
3 METHODOLOGY ... 28
3.1 Data collection and sample ... 28
4 5.1 Descriptive statistics ... 35 5.2 Regression results ... 36 5.3 Moderator analysis ... 39 5.4 Robustness checks ... 42 5.4.1 Robustness test 1 ... 42 5.4.2 Robustness test 2 ... 42 6 DISCUSSION ... 43 7 CONCLUSIONS ... 47 7.1 Theoretical implications ... 47 7.2 Managerial implications ... 49
7.3 Limitations and future research ... 49
REFERENCES ... 51
APPENDICES ... 57
Appendix 1: Results prior literature Hofstede dimensions ... 57
Appendix 2: Countries used in the sample ... 58
Appendix 3: Different industries ... 59
Appendix 4: Preliminary analysis ... 60
4.1 Independence of errors ... 60 4.2 Normality ... 60 4.3 Homoscedasticity ... 61 4.4 Linearity ... 62 4.5 Multicollinearity ... 62 4.6 Outliers ... 62
Appendix 5: Correlation matrix ... 64
Appendix 6: Robustness test 1 ... 65
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7 1. INTRODUCTION
Over the past decades, the belief that companies solely exist as an economic entity shifted towards the assumption that companies do have social responsibilities towards their various stakeholders (Ho, Wang & Vitell, 2011). Social- and Environmental- issues like global warming and child labour could explain this shift (McWilliams & Siegel, 2001). Additionally, global economies are argued to becoming more inter-related. Consequently, multinationals are not solely corporate citizens of their home country but carry the responsibilities for cross-national issues as well (Ho et al., 2011). Furthermore, Accenture (2010) argues that 93 per cent of CEOs perceive sustainability issues as vital for future success. In 2007 sustainability was just an increasing concern, emerging as a business issue (Accenture, 2010). Nowadays, it became a top-of-mind issue around the world (Halkos & Skouloudis, 2017). As sustainability is part of CSR, the same evolution is expected for CSR.
Throughout the years, scholars and organizations became more interested in CSR (Halkos & Skouloudis, 2017; Ho et al., 2011). But what is CSR specifically? And what differentiates CSR from CSP? CSR can be seen as a mix of four different responsibilities, namely: economic-, legal-, ethical- and philanthropic- responsibilities (Carroll, 1991). It assumes that companies have a responsibility for their impact on society besides their narrow economic responsibility (Visser & Tolhurst, 2010). CSP, on the other hand, deals with the extent to which CSR is implemented into a company (CSRHub, 2018B). CSP could, for instance, be measured by the CSR policies developed by companies or other observable outcomes (Wood, 1991).
8 relationship (Peng et al., 2012; Ioannou & Serafeim, 2012), or a negative relationship (Ho et al., 2011; Thanetsunthurn, 2015). The same holds for Hofstede’s dimensions Masculinity and Uncertainty Avoidance.
Considering the variety of opinions regarding the relationship between national culture and CSP, a research gap occurs. As scholars do not seem to agree while using similar frameworks, the use of a different framework could reveal more about the relationships. Most scholars use Hofstede’s dimensions, consequently, other cultural dimensions such as the “Global Leadership and Organizational Behaviour Effectiveness” (GLOBE) dimensions would be interesting to use. The GLOBE research program is an extension on Hofstede’s dimension and consists of three more dimensions than Hofstede as it differentiates Hofstede’s Masculinity and Collectivism dimensions into various specialized dimensions (House, Javidan, Hanges & Dorfman, 2002). Consequently, GLOBE exists of dimensions which are more specialized on certain aspects of either Collectivism or Masculinity. Additionally, whereas Hofstede’s survey was only conducted under employees of IBM, GLOBE’s survey was world-wide based focused on managers from various companies (Minkov & Hofstede, 2011). Consequently, GLOBE’s dimension should be less influenced by one specific company culture than Hofstede’s was. Therefore, GLOBE’s dimensions may be more suitable for this type of research. Ultimately, I propose to investigate the relationship between CSP and national culture by using GLOBE as a measure of national culture. Considering prior literature, the following dimensions will be analysed: Power Distance, In-Group Collectivism, Societal Collectivism, Gender Egalitarianism, Assertiveness and Uncertainty Avoidance.
9 financing alternatives, it becomes interesting to investigate the moderating role of Financial Performance. Most scholars argue a direct relationship between CSP and Financial Performance, however, I argue that there is none as companies should be favourable towards CSP in order to invest their slack resources into CSP improvement. CSP unfavourable companies would be unlikely to invest their slack resources into CSP improvement as they would not see the importance of it. Instead, Financial Performance takes a moderating role, as it enables companies favourable towards CSP to invest more resources into CSP improvement (Tsoutsoura, 2004). Based on all assumptions, the following research question has been conducted:
How do cultural dimensions influence corporate social performance and does financial performance moderate these relationships?
This study aims to contribute to prior literature by providing more knowledge regarding the relationship between cultural dimensions and CSP. Additionally, by providing more clarification about the moderating role financial performance plays within these relationships. Furthermore, this study has managerial contributions by providing companies more insight into how their decision-making is influenced by their home country. These contributions will be provided by using a new and less outdated dataset for cultural dimensions. An OLS regression will be conducted to investigate these relationships.
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2. LITERATURE REVIEW
Several studies have been dedicated to CSR, however only a few investigated the relationship between national culture and CSP. This section analyses the current literature, presents the hypotheses and introduces the conceptual framework.
2.1 Corporate Social Responsibility
Due to environmental and social issues such as global warming, there is a growing interest in CSR (McWilliams & Siegel, 2001; Halkos & Skouloudis, 2017). Carroll (1991) mentioned that for 30 years, academics and practitioners strived to establish a definition of CSR. More than two decades later scholars still not seem to settle on a clear definition of CSR (Thanetsunthorn, 2015). Without an agreed-upon definition, it becomes difficult to exactly measure CSR or CSP, considering that various studies believe CSR comprehends something different. Additionally, even though CSR and CSP are interrelated, they do not mean the same thing. Therefore, definitions will be provided for both concepts.
2.1.1 Corporate Social Responsibility
11 An explanation for not being able to have an agreed-upon definition could be because CSR is context-specific (Ringov & Zollo, 2007). Campbell (2007: 950) mentions that CSR “may mean different things in different places to different people at different times”. Ho et al. (2011: 423) also argue that this could be due to cultural differences and mention the following: “The interpretation of what the domain of corporate social responsibility is and the implementation (measured by corporate social performance) may be different in each country due to cultural differences.”
In this study, I use a definition based on McWilliams and Siegel (2001) their definition. Assuming that CSR comprehends all actions that are beyond a company’s own interests and are not required by law. Additionally, these actions should do some social good. Such actions could be linked to for example human rights, sustainability and philanthropy.
2.1.2 Corporate Social Performance
Besides CSR it is also important to understand what Corporate Social Performance (CSP) comprehends. Just as CSR there is no consensus of what the most appropriate definition is for CSP (Ioannou & Serafeim, 2012). Carroll (1979) attempted to define CSP with the help of a three-dimensional model. Arguing that CSP includes the integration of CSR, social issues and philosophies of social responsiveness. In 1985, Wartick and Cochran offered an extension to Carroll’s dimensions arguing that “corporate social involvement rests on the principles of social responsibility, the process of social responsiveness and the policies of issues management” (Wartick & Cochran, 1985: 767). Wood took their definition two steps further and defined CSP as: “a business organization’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s societal relationships” (Wood, 1991: 693). Various scholars agree with similar types of definitions (Ioannou & Serafeim, 2012; Waddock & Graves, 1997; Hillman & Keim, 2001). CSRHub (2018A) argues that a companies CSP can be determined based on four different categories: community, employees, environment and governance. They argue that companies’ their actions in these categories affect their CSP. I would define CSP as the extent to which firms implemented CSR and are actively attempting to improve the community, their employees, the environment and their governance.
12 consists of all intentions to do further good or the actions taken. CSP solely focuses on the extent to which CSR is implemented into companies and how good (or bad) they are performing.
2.2 National culture
The origin of different cultures is argued to be due to groups of people starting to develop distinguishable characteristics, setting them apart from other groups of people (House et al., 2002). Throughout the years, various scholars attempted to find an appropriate definition for national culture. But in the jungle of national culture definitions, there is one author that stands out. Hofstede’s dimensions from 1980 are widely used in business and management (Schwartz, 2006). Additionally, Hofstede (2011: 3) developed a widely used definition for national culture: “The collective programming of the mind that distinguishes the members of one group or category of people from others”. Schwartz (1999) is another well-known author that developed cultural dimensions in reaction to Hofstede’s dimensions. Moreover, Schwartz (1999: 25) refers to Williams (1970) when defining culture and argues that: “Cultural values represent the implicitly or explicitly shared abstract ideas about what is good, right, and desirable in a society”. Meaning that cultural values explain the norms telling people which kind of behaviour is appropriate in certain situations. In this study, the definition used for national culture is combining Williams’ and Hofstede’s definition. The definition used is the following: “National culture comprises the programming of the mind which distinguishes a group of people from others, this programming shows what this group of people think regarding what is good, right and desirable.”
13 Hierarchy, Mastery, Affective Autonomy, Intellectual Autonomy and Egalitarianism. Contrary to Hofstede, Schwartz (2006) believes that there is a difference between cultural dimensions and individual values. Moreover, Schwartz (2006) does not have a sample from businesses but surveyed various people from different backgrounds. As this is a study focused on companies their behaviour, Schwartz’ dimensions may not be suitable for this study. The GLOBE research program may be so. Being a less criticized study as Hofstede’s and comprehending nine dimensions. Additionally, its sample consists of thousands of middle managers (House et al., 2002). It consists of several phases and methods investigating relationships between organizational culture, societal culture and organizational leadership (House et al., 2002). The GLOBE project consists of the following nine cultural dimensions (GLOBE, 2016):
1. Uncertainty Avoidance – To which extent people avoid uncertainty
2. Power Distance – To which extent authority, status privileges and power differences are accepted by the community
3. Societal Collectivism – To which extent collective action and collective distribution of resources is encouraged and rewarded by societal and organizational institutional practices
4. In-group Collectivism – To which extent individuals express loyalty, cohesiveness and pride in their groups
5. Gender Egalitarianism – To which extent gender equality is minimized
6. Assertiveness – To which extent individuals are confrontational and assertive in their relationships
7. Future Orientation – To which extent individuals engage in future-oriented behaviours 8. Performance Orientation – To which extent group members are encouraged and
rewarded for excellence and performance improvement
9. Humane Orientation – To which extent individuals are encouraged and rewarded for being fair, generous, altruistic and caring
14 2.3 The link between national culture and CSP
As earlier mentioned, I argue that the national culture of the company affects its decision-making. This assumption is based on the Upper Echelon Theory which explains that the outcomes of an organization are reflections of the cognitive bases and values of the organizations’ powerful actors (Hambrick & Mason, 1984). As decision makers use their own set of ‘givens’ when deciding, the actions of companies are affected by the type of decision makers (March & Simon, 1958; Hambrick & Mason, 1984). These givens comprehend their (1) assumptions or knowledge about future events, (2) alternatives knowledge, (3) their knowledge regarding the consequences of these alternatives (March & Simon, 1958). All these ‘givens’ are the set of knowledge a Top-Management Team (TMT) has, their values, and preferences (Hambrick & Mason, 1984). These givens will work as a filter when strategic decisions are made (Hambrick & Mason, 1984) and are captured through the demographic characteristics (Sambharya, 1996). Demographic characteristics such as nationality, age, education, socioeconomic roots, or cognitive base values influence the strategic choices made by decision makers (Hambrick & Mason, 1984). Consequently, it can be assumed that the nationality of the TMT has an influence on the decisions made by them, and thus also the decisions concerning the CSP of a company. Assuming that the TMT would mainly consist of executives from a company’s home country, it can be assumed that the national culture of that country affects their CSP.
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Table 1 Comparison of the relationship between CSR and cultural dimensions
16 dimensions (Appendix 1) do not seem to agree on the nature of the relationship as well. Furthermore, Waldman et al. (2006) were unable to find significant results for In-Group Collectivism. Moreover, Table 1 shows that no prior literature investigated the impact of Assertiveness and Humane Orientation on CSP. Considering the limited literature using GLOBE’s dimensions, it is interesting to investigate these dimensions and their relationship with CSP.
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2.4 Hypothesis development 2.4.1 Power Distance
Power Distance is explained as to which extent less powerful members of institutions and organizations expect and accept an unequal power distribution (House et al., 2002). Additionally, it explains the extent to which leaders should be obeyed without question (House et al., 2002; Ringov & Zollo, 2007).
Power Distance is expected to influence CSP in several ways. Firstly, Waldman et al. (2006) argue that high Power Distance devaluates CSR for managers. This devaluation is the result of high-level managers in such societies being expected to be self-centred. Additionally, they are expected to be lacking care for their stakeholders and society. Therefore, high Power Distance companies are expected to have lower CSP. As Hofstede (2010) uses a similar definition of this dimension as House et al. (2002), prior literature using Hofstede’s dimension has been taken into account as well. Firstly, it is argued that low Power Distance enables society and/or employees into discussing environmental- and social- initiatives more openly and pressure management into discussing such initiatives (Peng et al., 2012; Ringov & Zollo, 2007). Additionally, citizens are expected to be less likely to tolerate questionable business practices in low Power Distance societies (Ho et al., 2011). Consequently, higher CSP levels are expected in low Power Distance societies.
18 Nevertheless, I expect a negative relationship between Power Distance and CSP. Proposing that the lack of critique and vertical communication within companies with high Power Distance inhibits stakeholders and/or society their influence on a company’s actions. Due to the lack of influence, companies will feel less pressured to optimize their CSP. Instead, companies remain focused on profit maximization. Therefore, the following hypothesis has been developed: H1: The higher the Power Distance of a company’s home country, the lower the corporate social performance.
2.4.2 Collectivism
Collectivism assumes that people are integrated into groups. The opposite, Individualism, is defined as the expectation that people should solely look after themselves and their immediate families (Hofstede, 2011). GLOBE divided collectivism into two dimensions namely Societal Collectivism and In-group Collectivism.
In-Group Collectivism
19 On the contrary, Pent et al. (2012) found a negative relationship between collectivism and CSP. They explain this by referencing Matten and Moon (2008) arguing that low collectivistic companies do explicit CSR. Explicit CSR is defined as: “voluntary, self-interest drives policies, programmes and strategies by companies addressing issues perceived as being part of their social responsibility by the company and/or its stakeholders” (Matten & Moon, 2004B: 9). This would be due to the lack of resources available at companies in high collectivistic countries (Ioannou & Serafeim, 2012). Leftist political ideologies in such societies lead to fewer resources available as more regulations and higher corporate taxations are present. With fewer resources available, lower CSP is expected in such societies.
To conclude, I expect to find a negative relationship between In-Group Collectivism and CSP. Similarly to Wald et al. (2006), I expect that in high In-Group Collectivistic societies, companies are more loyal and concerned with their In-Group than with their stakeholders and society. As the In-Group is assumed to be focused on obtaining high profits, fewer resources are expected to be allocated towards CSP improvement. Consequently, hypothesis 2 will be the following:
H2: The higher the In-Group Collectivism of a company’s home country, the lower the corporate social performance.
Societal Collectivism
Societal Collectivism can be defined as: “The degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action” (House et al., 2002: 5).
20 On the contrary, Ioannou and Serafeim (2012) argue that due to leftist political ideologies fewer resources are available in high collectivistic cultures. The reason is that such cultures would have more regulations and higher corporate taxations. Consequently, higher CSP scores are expected in low collectivistic cultures (Ioannou and Serafeim, 2012; Matten and Moon, 2008). Finally, I assume there is a positive relationship between Societal Collectivism and CSP. Even though, fewer resources are expected to be available in high Societal Collectivistic countries (Matten & Moon, 2008; Ioannou & Serefeim, 2012). I argue that available resources are not the main reason why companies improve their CSP. Companies should feel concerned with their impact on society and their stakeholders in order to improve their CSP. Without this concern, they will be less likely to invest the needed resources in CSP improvement. Companies who do feel responsible are expected to invest more resources into CSP. Consequently, the following hypothesis has been developed:
H3: The higher the Societal Collectivism of a company’s home country, the higher the corporate social performance.
2.4.3 Gender Egalitarianism
21 roles which makes that the traditional stereotypical male trait of self-expansion is less likely to be present (Miska et al., 2018). Such traits are argued to negatively affect environmental sustainability, therefore, high Gender Egalitarianism is expected to result in greater environmental sustainability practices (Miska et al., 2018).
Furthermore, scholars argue that Gender Egalitarianism can be seen as a proxy for Hofstede’s Femininity dimension (Ringov & Zollo, 2007; Ho et al., 2011). A feminine society is one in which the roles of men and women overlap (Ho et al., 2011). These overlapping gender roles are in line with Gender Egalitarianism’s definition concerning minimization of gender role differences. Masculine societies have traditional gender role divisions and thus are lower on Gender Egalitarianism. Consequently, such societies have distinct differences in how men and women act and which roles they would take. Feminine societies are argued to emphasize more on their social relationships, care for the weak, modesty and interpersonal harmony (Ringov & Zollo, 2007). With feminine cultures caring more for the weak, they are expected to care more about their impact on society and thus invest more resources into CSP improvement (Ringov & Zollo, 2007; Calza, Cannavale & Tutore, 2016).
To conclude, I expect finding a positive relationship between Gender Egalitarianism and CSP. High Gender Egalitarianism’s characteristics such as rejecting unethical working behaviours, caring for the weak and improved human development make me believe that high Gender Egalitarianism companies care more about their CSP. Therefore, higher CSP scores are expected for high Gender Egalitarianism companies. Additionally, the minimization of masculine traits such as self-expansion would result in higher CSP scores. The reason is that management would not solely think about their own self-interest in such societies. Based on these arguments, the following hypothesis has been developed:
H4: The higher the Gender Egalitarianism of a company’s home country, the higher the corporate social performance.
2.4.4 Assertiveness
22 (Ringov & Zollo, 2007; Hofstede, 2010). Therefore, this section will mainly discuss studies using Hofstede’s masculinity dimension.
Ho et al. (2011) argue that unethical behaviour is usually expressed due to the values of greed, assertiveness and competitiveness. While they expected to find a negative relationship between masculinity and CSP, they found a positive one. They argue that the positive relationship is the result of specific areas of CSP having a positive relationship with masculinity. Additionally, Tice & Baumeister (2004) found that subjects who would help others would describe themselves as less assertive than subjects who would not help others. This would indicate that Assertiveness inhibits helping behaviour. Consequently, lower CSP would be expected from Assertive companies. Additionally, Assertive companies are argued to care less for the weak than their low Assertiveness counterparts (Ringov & Zollo, 2007). This also indicates that CSP improvement is not one of their priorities.
Considering prior literature, I argue that Assertiveness has a negative relationship with CSP. I believe that assertive, aggressive and confrontational behaviour are indicators of egoistic behaviour. This egoistic behaviour influences CSP negatively as egoistic companies are expected to not care about their impact on society and their stakeholders. Additionally, competitive behaviour is expected to negatively affect CSP. The reason is that companies are less likely to invest resources into activities they do not directly gain from in competitive societies. This to ensure their profits are competitive to that of their competitors. Moreover, such companies are expected to show more unethical behaviour in order to achieve their goals. Considering these assumptions, I propose the following hypothesis.
H5: The higher the Assertiveness of a company’s home country, the lower the corporate social performance.
2.4.5 Uncertainty Avoidance
Uncertainty Avoidance is defined as: “The extent to which members of an organization or society strive to avoid uncertainty by reliance on social norms, rituals, and bureaucratic practices to alleviate the unpredictability of future events” (House et al., 2002: 5). House et al. (2002) linked this dimension to a specific questionnaire item which investigated if people would aim to lead highly structured lives without many unexpected events.
23 companies, higher CSP is expected from such companies (Peng et al., 2012). Moreover, they argue that CSR helps to maintain long-term relationships between companies and their stakeholders. Additionally, high-risk behaviour is found to be related to unethical behaviour (Rallapalli, Vitell, Wiebe & Barnes, 1994). As high Uncertainty Avoidance company tend to stay away from high-risk behaviour, societies with low Uncertainty Avoidance are expected to have more unethical traits. As unethical behaviour is not in line with CSP, a positive relationship is expected between Uncertainty Avoidance and CSP (Thanetsunthorn, 2015). Finally, Quigley et al. (2005) argue that high Uncertainty Avoidance companies consider all aspects of the company important. As neglecting one part may result in uncertain situations, they would also ensure that their CSR is following all formal procedures.
Secondly, it is argued that Uncertainty Avoidance has a negative relationship with CSP (Halkos & Skouloudis, 2017). As high Uncertainty Avoidance companies find it more difficult to adapt to social and environmental demands, it is expected to negatively affect CSP (Ringov & Zollo, 2007). Another explanation of the negative relationship is the costs of CSR practices. Considering that these costs are assumed to be high with uncertain benefits, high Uncertainty Avoidance companies may refrain from such investments (Slawinski & Bansal, 2015).
Considering all arguments, I expect to find a positive relationship between Uncertainty Avoidance and CSP. The reason is the notion that high Uncertainty Avoidance companies would aim to diminish environmental and social uncertainties around them. Additionally, such companies would like to maintain their long-term relationships by taking responsibility for the impact of their actions and by taking care of their stakeholders and society. Therefore, I expect higher CSP scores in high Uncertainty Avoidance countries. Consequently, I developed the following hypothesis:
H6: The higher the Uncertainty Avoidance of a company’s home country, the higher the corporate social performance.
2.4.6 The moderating role of financial performance
24 Campbell, 2007). These slack resources could then potentially be invested in CSP improvement (Tsoutsoura, 2004). However, this would imply that only companies who are doing good could do well (Margolis & Elfenbein, 2007). Nevertheless, differences can be found between companies with the same Financial Performance. For example, the Return on Assets of Express Scripts is found to be higher than that of Diageo. However, Diageo (70) has a higher CSP score than Express Scripts (57) (CSRHub, 2018B). These scores indicate that CSP is not solely affected by Financial Performance and that the intention to conduct CSR should be present. Without this intention, companies would not invest their slack resources into improving their CSP.
As priory mentioned, the Upper Echelon Theory explains that a company’s decisions are influenced by the cognitive bases and values of the decision makers within the company (Hambrick & Mason, 1984). When slack resources would be available, the decision makers their cognitive bases and values would affect the relocation of these resources. When the Top Management Team (TMT) would lay high importance on CSP, they would make different decisions regarding their slack resources than when they would find CSP unimportant. A company which finds CSP important would presumably invest these slack resources into CSP improvement. Companies regarding CSP as unnecessary expenditures which only reduce profits would assumingly invest their slack resources into more closely related business activities. Considering these arguments, I assume that Financial Performance plays a moderating role in the relationship between cultural dimensions and CSP.
25 Nevertheless, I argue that Financial Performance plays a significant moderating role in the relationship between national culture and CSP. The reason is that companies with disappointing Financial Performance would prefer allocating their resources to short-term projects which are more closely related to their main business than CSR (Waddock & Graves, 1997). I presume it is unlikely that such companies would obtain loans or subsidies solely for CSP improvement. Thus, Financial Performance is expected to moderate the relationship between cultural dimensions and CSP. However, not all relationships are affected in the same way.
Considering hypothesis 1-6, it is expected that the relationships including Power Distance, In-Group Collectivism, and Assertiveness react differently on Financial Performance than the positive relationships. Companies with either high Power Distance. In-Group Collectivism or Assertiveness are expected to be strongly influenced by Financial Performance. When their Financial Performance would not be optimal, they would invest their resources into more closely related business activities than CSP improvement. In case there is an abundance of resources such companies may improve their CSP out of self-interest. From these CSR initiatives, the company would directly benefit by for example improvement of their reputation and relationships with various stakeholders. It should be noted that due to the surplus in financial resources, companies do not have to allocate fewer resources to their main business activities. Therefore, one could assume that higher Financial Performance leads to higher CSP scores. Thus, Financial Performance is expected to weaken the negative relationship between Power Distance/In-Group Collectivism/Assertiveness and CSP. Building on these assumptions, the following hypotheses have been developed:
H7A: Higher Financial Performance negatively moderates the negative relationship between Power Distance and Corporate Social Performance
H7B: Higher Financial Performance negatively moderates the negative relationship between In-Group Collectivism and Corporate Social Performance
H7C: Higher Financial Performance negatively moderates the negative relationship between Assertiveness and Corporate Social Performance
26 in slack resources which could be invested into improving their CSP even more (Waddock & Graves, 1997). The abundant resources are expected to widen the gap between favourable- and unfavourable- companies. Reason it that companies favourable towards CSP invest even more resources into CSP improvement than when their Financial Performance is not optimal. As such companies are more likely to invest even more resources into CSR, significant differences are expected between companies with high- and low- Financial Performance. Consequently, Financial Performance is expected to positively moderate the relationship between CSP and Societal Collectivism, Gender Egalitarianism and Uncertainty Avoidance. Consequently, the following hypotheses have been developed:
H7D: Higher Financial Performance positively moderates the positive relationship between Societal Collectivism and Corporate Social Performance
H7E: Higher Financial Performance positively moderates the positive relationship between Gender Egalitarianism and Corporate Social Performance
27 2.5 Conceptual model
Figure 1 presents the conceptual framework which is based on the literature review and proposed hypotheses.
28 3 METHODOLOGY
This section will present the different variables used in this study. Furthermore, it will present the research methods and sample used.
3.1 Data collection and sample
To test the hypotheses quantitative research will be conducted using secondary data. Various databases will be combined to obtain secondary data.
3.1.1 Variables
This study will deal with independent-, dependent- and control variables. All of them will be explained in the following section.
Independent variables
Several independent variables can be distinguished in this study. The independent variables are Power Distance, In-Group Collectivism, Societal Collectivism, Assertiveness, Gender Egalitarianism and Uncertainty Avoidance. The dimension scores are derived from GLOBE’s 2004 Culture and Leadership Study (House et al., 2004). This data is the result of a ten-year research program, comprehending 61 societies around the world and featuring data from 17,300 middle managers from 951 organizations (GLOBE, 2016A). From this data, nine dimensions are developed, scored on a 1 to 7 scale. In case a country would be a 6.7 on Power Distance, it would mean that there is a high Power Distance present. For each company the cultural dimensions have been used of their home country, assuming that companies are mostly influenced by the culture of their home country. Moreover, this study looks at how cultural dimensions currently are. Therefore, the as are scores have been used instead of the should be scores.
Dependent variable
29 Additionally, Thanetsunthorn (2015) argues that the Fortune Reputation Index is not a social performance evaluation as it relies on a financial indicator of performance.
Another widely used database is the Global Reporting Initiative (GRI). The GRI includes the sustainability reporting of companies around the world and is used by firms as a framework for their sustainability reporting. Considering that the sustainability reporting is done by the company themselves, GRI could be biased and thus not a reliable database for this study. The CSRHub database comprises of 18,424 ratings and rankings of companies from 132 countries. This database combines data from Socially Responsible Investing analysis firms, Non-Governmental Organizations, government databases, publications and research reports, and the input from CSRHub users (CSRHub, 2018B). These data sources include ASSET4, Carbon Disclosure Project, EIRIS and IW Financial. The company ratings published by CSRHub are based on four categories, these categories and their description can be found in Table 2.
30 Based on these four categories, companies receive a rating between 0 and 100 (100 being a positive rating). Considering that CSRHub has a wide range of different countries and companies, ratings done by external officers and companies from different industries. It is assumed that CSRHub will be an appropriate database to use for this study. For this study, the 2018 ratings will be used.
Moderator
One moderator can be defined namely Financial Performance. The Financial Performance of a company is expected to either facilitate or obstruct the CSP of companies. It is expected that with higher Financial Performance, companies would have more resources available to invest in improving their CSP.
Popular measures of Financial Performance are Return on Assets ( ROA) and Return on Equity (ROE) (Peng et al., 2012; Waddock & Graves, 1997; Nelling & Webb, 2009). However, as prior literature chooses ROA over ROE this study will also use ROA to measure Financial Performance. ROA explains the profitability of a company relative to its assets. Data concerning the ROA of companies used will be obtained from their Annual Report. When a company does not provide their ROA, it will be calculated by using Formula 1.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠∗ 100
Formula 1: ROA formula
Considering that companies are likely to invest previous profits into an improvement of their CSP. A time lag should be used in order to ensure that the Financial Performance of a company has the time to influence the CSP of the company. Therefore, the ROA ratios of 2017 have been used in order to obtain suitable results.
Control variables
In order to assure the significance of this study, various control variables are used. These control variables are expected to affect CSP as well. I will attempt to control effects on two levels, namely: firm-level and industry-level.
Firm size
31 firms are expected to have lower CSP scores (Udayasankar, 2008). Data regarding firm size will be obtained from companies their annual report and will be based on the number of employees a firm has.
Industry
The industry a company operates in is used as a control variable as it could show in which industries companies would be more prone to improve their CSP. Jackson and Apostolakou (2010) argue that when companies operate in the same industry, consequently they would face similar challenges. Therefore, it is likely that common CSR regulations and patterns are developed within industries. Another reason, for differing CSP practices across industries, is that some industries benefit more from good reputations due to CSR practices than others. For example, industries that are perceived high risk regarding environmental issues such as the oil sector and chemical industry would benefit more from CSR practices (Jackson & Apostolakou, 2010; Sun & Stuebs, 2013). In total, 24 industries can be differentiated in the sample which can be found in Appendix 3. The Global Industry Classification System has been used to divide the companies in different industries.
3.1.2 Sample
This sample will be constructed by using public companies from the Forbes Global 2000 list. The largest companies are taken from this list and used to investigate the relationship between CSP and national culture. Prior literature differs quite regarding the number of observations and countries used in their dataset. Ringov and Zollo (2007) for instance observed 463 companies from 34 countries whereas Thanetsunthorn (2015) analysed 3055 companies from 28 countries. Therefore, I calculated the minimum sample size for this study using Formula 2 (Khan Academy, 2018).
𝑝̂ ± 𝑧 𝑎 2⁄ √𝑝̂(1 − 𝑝̂) 𝑛
̇
Formula 2: Sample size formula
32 not know the size of the sample proportion yet, I would pick a figure which would maximize 𝑝̂(1 − 𝑝̂). Consequently, 𝑝̂ would be 0.5 and the formula would result into Formula 3.
1.645 √0.5(1 − 0.5) 𝑛
̇
≤ 5
Formula 3: Sample size formula for this study
33
4 PRELIMINARY ANALYSIS 4.1 Model description
Various steps will be taken while analysing the data in this study. The statistical program SPSS will be used for the analysis. Moreover, an Ordinary Least Squares regression has been found most appropriate when investigating the relationships between a dependent variable and various independent variables.
Before being able to conduct an OLS, several assumptions need to be confirmed. Reason for this is that invalid assumptions may affect the results and consequently the conclusions based on them. The assumptions that need to be checked are regarding the independence of observations, homoscedasticity, linearity, multicollinearity, normality and significant outliers (Mason & Perrault, 1991; Tabachnick & Fidell, 2007)
34
4.2 Preliminary analysis
Firstly, a preliminary analysis has been conducted in order to check if the data is in line with all assumptions it should meet. This section will provide a short overview of how the assumptions passed the text. Appendix 4 gives a more in-depth overview of all the assumptions. First of all, the Independence of errors has been tested. As can be seen in the table in Appendix 4.1 the Durbin-Watson test provides a value of 1,967. This value indicates there are weak correlations, therefore the independence of errors assumption has been passed.
Secondly, a histogram has been created in order to check the normality assumption. The figure in Appendix 4.2 shows that the sample is biased to the right side in regards to its volume. Additionally, a bigger variance of observations can be found on the left side. This bigger variance of observations could be explained by potential outliers in the sample. Nevertheless, this sample can best be described as a normal distribution as it does not show similarities with other distributions such as Uniform, J, Bimodal, and Leptokurtic.
Thirdly, the sample was checked for homoscedasticity by means of a scatterplot which can be found in Appendix 4.3. The figure shows by means of a fit line that the variance is approximately the same showing that homoscedasticity is in place.
Next, the linearity assumption has been tested by means of a probability-probability plot. This plot, which can be found in Appendix 4.4, shows that overall the sample appears to follow the linear line. Therefore, the linearity assumption has been passed as well.
Fifthly, the sample was tested on multicollinearity. A correlation matrix can be found in Appendix 5. With no relationships above R ± 0,7, it can be assumed that there are no strong relationships between the variables. However, there is a score of 0,632 between Societal Collectivism and Assertiveness. This could be interpreted as a moderate relationship between the two variables. For this study, strong relationships should be eliminated using the R ± 0,7 as a maximum allowed correlation. Consequently, no multicollinearity has been detected.
35
5 RESULTS 5.1 Descriptive statistics
After passing all assumptions, the descriptive statistics are presented. The descriptive statistics show that for all variables there are 293 observations. Appendix 2 shows the home countries of these observations. Moreover, Appendix 2 shows that after removing the outliers there are only four companies from Qatar instead of the preferred five.
The dependent variable CSP has values ranging from 44 to 72 with a mean of 58,80. CSRHub (2018) mentions that the average rating in their database is around 50, this makes the data in this study above average. Additionally, Table 3 shows that the cultural dimension Uncertainty Avoidance has the biggest difference between the maximum and minimum (2,44). Assertiveness, on the other hand, has the lowest variance (1,42) with a minimum value of 3,31 and a maximum value 4,73. Furthermore, significant differences can be found regarding the ROA of firms with a minimum of -,54 and a maximum of 42,15.
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
CSP 293 44 72 58,80 5,686 Power_Distance 293 4,11 5,63 5,0581 ,28723 InGroup_Collectivism 293 3,66 5,92 4,6649 ,65127 Societal_Collectivism 293 3,56 5,22 4,3772 ,43940 Gender_Egalitarianism 293 2,50 4,07 3,3340 ,27642 Assertiveness 293 3,31 4,73 4,1660 ,39617 Uncertainty_Avoidance 293 2,88 5,32 4,3690 ,46816 ROA 293 -,54 42,15 4,9512 5,22469 Banks 293 ,00 1,00 ,2048 ,40423 CapitalGoods 293 ,00 1,00 ,0683 ,25262 Energy 293 ,00 1,00 ,0853 ,27984 Insurance 293 ,00 1,00 ,0853 ,27984 OtherIndustries 293 ,00 1,00 ,5563 ,49767 Amount_employees 293 322 2300000 121887,94 171961,081 Valid N (listwise) 293
Table 3 Descriptive statistics of the data
36 Considering the industries, Appendix 3 showed that the majority of companies come from the Banking sector (20,5%). Other well-represented industries are Energy (8,5%), Insurance (8,5%) and Capital Goods (6,8%). Considering that the amount of industries is fairly large, industries accumulating not more than 5% will be grouped together as ‘other industries’. Consequently, the industry variable will consist of 5 items instead of 24.
5.2 Regression results
Similarly to other studies regarding the relationships between cultural dimensions and CSP an OLS has been conducted (Ringov & Zollo, 2007, Ioannou & Serafeim, 2012). The regression has been conducted in order to investigate the relationships between the independent variables and the dependent variable. The influence of the various independent variables such as In-Group Collectivism and Power Distance on CSP have been individually analysed. Besides the dependent and independent variables, the control variables have been taken into account as well.
37
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8
Constant 59,669*** (,000) 46,692*** (,000) 73,523*** (,000) 80,563*** (,000) 48,204*** (,000) 52,011*** (,000) 54,147*** (,000) 71,219*** (,000) Banks -1,117 (,195) -1,122 (,190) -,237 (,774) -.767 (,340) -1,307 (,126) -,740 (,397) -1,235 (,152) -,137 (,858) CapitalGoods -,575 (,668) -3,323 (,809) -1,175 (,354) -,514 (,680) -,767 (,563) -,545 (,682) -,618 (,643) -,804 (,481) Energy -3,378*** (,006) -3,686*** (,003) -2,057* (,079) -3,415*** (,003) -3,656*** (,003) -3,090** (,012) -2,988** (,016) -2,054* (.062) Insurance -,437 (,721) -,369 (,762) -,499 (,665) -,782 (,493) -,626 (,605) -,274 (,822) -,691 (,574) -1,067 (,310) # Employees -,000002 (,240) -,000002 (,233) -,000002 (,234) -,000003* (,062) -,000003 (,222) -,000003 (,172) -,000002 (,206) -,000002 (,137) Power Distance 2,567** (,027) 6,228*** (,000) In-Group Collectivism -3,033*** (,000) -4,364*** (,000) Societal Collectivism -4,752*** (,000) -3,688*** (,000) Gender Egalitarianism 3,458*** (,004) -1,184 (,376) Assertiveness 1,821** (,034) -2,268** (,046) Uncertainty Avoidance 1,272 * (,081) 1,516** (,022) Observations 293 293 293 293 293 293 293 293 R ,175 ,217 ,378 ,404 ,242 ,214 ,202 ,565 R-Square ,031 ,047 ,143 ,163 ,058 ,046 ,041 ,319 Adjusted R-Square 0,014 ,033 ,125 ,146 ,039 ,026 ,021 ,292 F-value 1,815 2,354** 7,953*** 9,303*** 2,960*** 2,286** 2,035* 11,966*** Prob > F (Sig.) ,110 ,031 ,000 ,000 ,008 ,036 ,061 ,000 * p < .1 ** p <.05 *** p < .01
Table 4 Regression Analysis
38 influence CSP combined. This model is found to be significant with an F-value of 11,966 (p < .01). The R-Square of this model was found to be 31,9% and the Adjusted R-Square was 29,2%. In Model 2 the Goodness-of-Fit increased to 4,7% when adding Power Distance to the model. Additionally, the Adjusted R-Square (,033) of Model 2 is higher than that of Model 1 (,014). This would indicate that the added variable (Power Distance) would have an impact on CSP. When Power Distance would not influence CSP a decrease should be found of the Adjusted R-Squared compared to the Adjusted R-R-Squared of Model 1. Furthermore, both B-values of Power Distance, 2,567 (p < .05) and 6,228 (p < .01), were found to be significant. This would mean that in the case of Model 2 an increase of one unit would result in an increase of 2,567 in CSP. In the case of Model 8, an increase of 6,228 would be expected. Even though significant relationships were found, Hypothesis 1 needs to be rejected considering positive relationships were found instead of negative ones.
Model 3 has an R-Square of 14,3% and an Adjusted R-Square of 12,5%. Again this would indicate that In-Group Collectivism has an impact on the dependent variable as the Adjusted R-Square is higher than that of Model 1. Moreover, Model 3 has found to be significant with an F-value of 7,953 (p < .01). Additionally, as expected a negative relationship was found between In-Group Collectivism and CSP. B-values of -3,033 (p < .01) and -4,364 (p < .01) were found resulting in the acceptance of Hypothesis 2.
With an R-Square of 16,3% and an adjusted R-Square of 14,6%, Societal Collectivism is also found to improve the model. Additionally, Model 4 is found to be significant with a F-value of 9,303 (p < .01). Against expectations, significant negative coefficients were found for Societal Collectivism. Both B-values, -4,752 (p < .01) and -3,688 (p < .01), were significantly negative which leads to the rejection of Hypothesis 3.
Model 5 shows an R-Square of 5,8% and an Adjusted R-Square of 3,9%, again indicating that adding another independent variable improves the model. The F-value of 2,960 shows that the model is again significant at p < .01. Moreover, a positive relationship between Gender Egalitarianism and CSP (3,458; p < .01) was found in Model 5. However, Model 8 shows an insignificant B-value of -1,184. Due to these contradicting findings, hypothesis 4 cannot be confirmed.
39 With regards to the Assertiveness dimension, both significant negative and positive coefficients have been found. As these findings are contradicting, hypothesis 5 cannot be confirmed. With an R-Square of 4,1% and an adjusted R-Square of 2,1%, Uncertainty Avoidance is also found to improve the model. Additionally, the F-value of 2,035 was found to be significant at p < .1. Furthermore, positive relationships (1,272; p < .1 & 1,516; p < .05) have been found between Uncertainty Avoidance and CSP. Consequently, hypothesis 6 can be confirmed. The moderator analysis will be presented separately in the next subchapter. This should not have any negative consequences for the analysis as the results in the moderator analysis would be the same when they would be merged with the results of the main relationships. However, two separate tables will increase the ease of reading due to the high amount of different models used in both the main relationships analysis and the moderator analysis.
5.3 Moderator analysis
After testing the first six hypotheses, the moderating role of Financial Performance has been analysed. Table 5 shows the results of the moderation analysis. When analysing the F-values of all models it shows that they are all significant. Model 2, 4, 5 and 9 are all significant on the p < .01 level, Model 3, 6 and 7 on the p < .05 level, and finally Model 8 is significant on the p < .1 level. Again, Model 1 with only the control variables has been found insignificant.
40 Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
41
ROA x Power Distance -,049
(,839)
-,097 (,710)
ROA x In-Group Collectivism -,167*
(,080)
,093 (,543)
ROA x Societal Collectivism ,202
(,184)
,254 (,291)
ROA x Gender Egalitarianism -,210
(,248) -,150 (,623) ROA x Assertiveness -,295 (,129) -,114 (,691)
ROA x Uncertainty Avoidance ,359
(,014) ,338** (,038) Observations 293 293 293 293 293 293 293 293 293 R ,175 ,565 ,220 ,392 ,413 ,254 ,236 ,249 ,595 R Square ,031 ,320 ,049 ,153 ,171 ,064 ,056 ,062 ,354 Adjusted R Square 0,014 ,291 ,022 ,129 ,148 ,038 ,029 ,036 ,312 F-value 1,815 10,968*** 1,814* 6,429*** 7,318*** 2,445** 2,086** 2,354* 8,347*** Prob > F (Sig.) ,110 ,000 ,074 ,000 ,000 ,014 ,037 ,018 ,000 * p < .1 ** p <.05 *** p < .01
42
5.4 Robustness checks
After the regression, robustness tests have been conducted by means of changing both the dependent variable and the moderator.
5.4.1 Robustness test 1
Firstly, a robustness test has been done by means of changing the dependent variable into another measure of CSP. For this test, CSRhub’s scores are replaced for Thomson Reuters environmental and social scores.
Appendix 6 shows that only Model 8 is significant at the p < .01 level with an F-value of 4,342. Additionally, Model 2 is found to be significant at the p < .05. The other models, on the other hand, are not found to be significant. This would indicate that Model 1 and 3-6 all do not work. From these findings, we could assume that the findings from the main analysis do not show robustness when the CSP measures change. Nevertheless, this test partly confirms the findings from the main tests. It shows both In-Group Collectivism and Power Distance significantly influence on CSP. However, the other dimensions do only seem to partly agree with the main results (Societal Collectivism) or turned insignificant in every model.
5.4.2 Robustness test 2
Secondly, a robustness test has been done by means of switching the moderator into another measure of Financial Performance. Appendix 7 shows that instead of ROA, the ROE measure has been used for Financial Performance.
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6 DISCUSSION
The aim of this study was to investigate the relationship between various cultural dimensions and CSP (H1-H6). Prior literature proposed that both positive and negative relationships would exist between cultural dimensions and CSP depending on the dimension. Additionally, this study aimed to investigate the moderating role of Financial Performance in this relationship (H7A-H7F). As the Analysis section mentioned no support was found for Hypothesis H1 and H3. Hypothesis 2 and Hypothesis 6 were accepted and Hypothesis 4 and Hypothesis 5 only partially. Regarding the moderator role of Financial Performance, it showed that some support was found for Hypotheses 7B and 7F.
As mentioned earlier, the main models turned insignificant in Robustness test 1. This would indicate that there was something wrong with the models while using Thomson Reuters Environmental and Social scores. Only the models including solely Power Distance and including all cultural dimensions were found to be significant. To double check, another test has been conducted without the control variables. In this test which can be found in Appendix 8, more models were found to be significant such as In-Group Collectivism and Societal Collectivism. The models including Assertiveness, Gender Egalitarianism and Uncertainty Avoidance, however, did stay insignificant. I presume this could be as both Environmental and Social are part of CSP but do not encompass all that CSP covers. Besides the Environmental and Social parts, CSP also focuses on Governance and Employee well-being. The missing of Governance and Employees may explain why the models have been found insignificant. It may be that the used aspects of CSP may not be significantly affected by the Assertiveness, Gender Egalitarianism or Uncertainty Avoidance of the home country.
44 could be used as a safeguard by business executives in order to maintain their power relationships (Miska et al., 2018). I agree with the notion that the sense of noble obligation of business executives would lead to a positive relationship between Power Distance and CSP. Assuming that due to this noble obligation, business executives will feel more responsible to take care of their stakeholders and consequently improve their CSP.
Secondly, the relationship between In-Group Collectivism and CSP was analysed. As expected a significant negative relationship was found. Hence, H2 can be accepted. This would confirm the notion that as management only cares regarding their in-group needs, their CSP would be lower as their needs are more performance oriented (Waldman et al., 2006). Moreover, such managers would care less about their impact on society when it is not in their self-interest (Ringov & Zollo, 2007; Waldman et al., 2006). Consequently, they would be more interested in improving their financial performance instead of their CSP. I agree with the literature and assume that this negative relationship has been caused by business executives being more performance-based due to their priorities laying by satisfying their in-group needs. Therefore, they would not invest their resources in improving their CSP.
Thirdly, the relationship between Societal Collectivism and CSP was surprisingly significantly negative as well. This means that the notion that high collectivistic companies would be more ethically than low collectivistic companies would not hold (Akaah, 1990; Ho et al., 2011). Reason for this could be the assumption that low collectivistic companies do more explicit CSR (Matten & Moon, 2004A). Explicit CSR is expected to be done by low collectivistic companies as they are assumed to have more resources available due to minimal leftist political values (Ioannou & Serafeim, 2012). However, even though the relationship is found to be significant, it did not comply with H3. Therefore, this hypothesis needs to be rejected as well. I expect that this negative relationship has been found due to the lack of resources available in high Societal Collectivistic societies. This lack of resources would limit such companies in investing resources in improving their CSP. Thus, lower CSP scores are found in high collectivistic societies.
45 findings that environmental performance would be positively influenced by Gender Egalitarianism. Miska et al. (2018) argue that this could be explained by the fewer traditional stereotypical gender roles present in high Gender Egalitarianism cultures. The lack of stereotypical gender roles would minimize the influence of negative traits towards conducting CSP and therefore higher CSP should be expected (Miska et al., 2018). However, as the last model showed an insignificant negative relationship one could not be totally sure there is a positive relationship between Gender Egalitarianism and CSP. Thus, Hypothesis 4 needs to be rejected as well.
46 Finally, the moderation role of Financial Performance on the priory mentioned relationships have been examined. The results show that there are insignificant coefficients for all dimensions except In-Group Collectivism and Uncertainty Avoidance. Thus, Hypotheses 7A and 7C-7E all need to be rejected. For both In-Group Collectivism and Uncertainty Avoidance only one significant coefficient has been found. This would indicate that for both hypotheses not enough evidence is found to accept them. Similarly to the main results, a robustness test has been conducted which can be found in Appendix 7. For the robustness test, the moderator ROA has been changed for ROE which is a popular financial performance measure as well. These two measures differentiate from each other as ROA helps you measure how well management uses their assets. ROE, on the other hand, explains how well income is being generated from investments. Both are popular financial performance measures and both show similar results in this study. This would indicate that the findings of the main moderating analysis are found to be robust.
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7 CONCLUSIONS 7.1 Theoretical implications
The aim of this study was to investigate the influence of national culture on CSP. Since this study succeeded in showing the influence of national culture on CSP a couple theoretical implications can be distinguished. This study added to existing theories by investigating different measures of cultural dimensions than the majority of studies. Contrary to the majority of studies, GLOBE’s dimensions have been used instead of Hofstede’s dimensions. As GLOBE’s dimensions are an extension of Hofstede’s work and added three more dimensions, GLOBE creates the opportunity to study the influence of specific aspects of Hofstede’s dimensions. This as Collectivism and Masculinity are separated into multiple dimensions. Additionally, GLOBE presents their cultural dimensions as both cultural practices and cultural values. By analysing the cultural dimensions as they are now, this study adds to existing theory by providing more insights into how culture influences CSP. As other studies which use Hofstede’s dimensions use values instead of practices, they investigate how culture is ought to affect CSP instead of how it actually affects CSP.
This study took six cultural dimensions into account, namely: Power Distance, In-Group Collectivism, Societal Collectivism, Gender Egalitarianism, Assertiveness and Uncertainty Avoidance. Prior literature mainly focused on the impact of Power Distance. The impact of Institutional Collectivism, Societal Collectivism, Gender Egalitarianism and Uncertainty Avoidance have been minimally investigated. Additionally, most studies used Hofstede’s Power Distance and Uncertainty Avoidance dimensions instead of GLOBE’s (Ringov & Zollo, 2007; Ho et al., 2011; Peng et al., 2012; Thanetsunthorn, 2015).
48 Waldman, de Luque,
Washburn, House, Adetoun & Barrasa (2006)
Miska, Szocs & Schiffinger (2018) This study Power Distance (-) *** (+) ** (+) ** In-Group Collectivism (+) (-) *** Societal Collectivism (+) *** (-) *** Gender Egalitarianism (+) ** (+/-) Assertiveness (+/-) Uncertainty Avoidance (+) ** (+) * Future Orientation (+) ** Performance Orientation (-) ** Humane Orientation
Table 6 Findings compared to prior literature
Secondly, this study contributes to the prior literature by providing insights into the negative relationships of In-Group Collectivism and Societal Collectivism with CSP. Both dimensions have not yet been researched in their practice form and are thus important contributions to the existing literature. Explaining how the cultural dimension practices negatively affect CSP. The negative relationship between In-Group Collectivism and CSP. However, the one between Societal Collectivism and CSP was. Similarly to Power Distance, this could be explained by certain areas of CSP reacting negatively on Societal Collectivism.
Additionally, in line with prior literature, a positive relationship was found between Uncertainty Avoidance. Being in line with prior literature, it strengthens the notion that Uncertainty Avoidance positively affects a company’s CSP.
49 relationships. Nevertheless, more research may be needed concerning the unexpected findings and contradicting findings of Gender Egalitarianism and Assertiveness.
7.2 Managerial implications
Besides theoretical implications, this study also presents a managerial implication.
Firstly, it helps executives understand how the decision making of their company is influenced by the national culture of their home country. By understanding how their own decision making is influenced by national culture, companies could also anticipate the decisions of other companies better. This knowledge could give companies an advantage against their competitors who are less good in anticipating the next steps of their competitors.
Moreover, it provides companies with the knowledge what is expected from them regarding CSP. For instance, a company which comes from a CSP favourable country would know that higher scores would be expected from them. Moreover, a company from a society in which CSP is less important would, therefore, know that CSP does not have to be a high priority. This could also benefit a company as they could more effectively prioritize their resources and investments.
7.3 Limitations and future research
When interpreting the results of this study there are some limitations that should be taken into accounts.
First of all, the sample could be seen as being US-biased. As was shown in Appendix 2 the sample consists of 88 US companies, this comprises 30 per cent of the sample. As 30 per cent of the sample consists of US companies, this may result in biased statistical assumptions. Therefore, future research should aim at working with a more equal distribution of home countries.
50 are more related to stereotypes than the objective reality (McCrae, Terracciano, Realo & Allik, 2008). With the lack of another appropriate measure of national culture, future research could focus on developing a better way to denote national culture.
