The Role of Managerial Values for Corporate Social Responsibility in Developed and Developing Countries: Germany and Brazil

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Master Thesis

MSc. International Business & Management

The Role of Managerial Values for Corporate Social

Responsibility in Developed and Developing Countries:

Germany and Brazil

By RENATA SHENKMAN S2782898 r.shenkman@student.rug.nl Saffierstraat 210 9743 LN Groningen Tel: +31644436560 e-mail: r.shenkman@student.rug.nl

University of Groningen

Faculty of Economics and Business

June, 2017

Word count: 16.712

Supervisor: Dr. de Vries

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2 ABSTRACT

Despite the increasing importance of Corporate Social Responsibility (CSR) in developing countries, most of the research focuses on CSR in context of developed countries. This research aims to fill the gap by investigating the relationship between managerial values and CSR focusing on differences in developed and developing countries. For the cross-country comparison, Brazil and Germany were chosen as two representative national contexts. In line with the upper-echelon theory, an underlying assumption is that the firm’s CSR strategy is driven by personal values of the manager. Moreover, drawing on the institutional theory the national institutional context and the level of development are expected to moderate the relationship in both countries. This explorative study employed the grounded theory in order to find new insights. Therefore, qualitative data were generated from semi-structured interviews with three German and three Brazilian CSR managers from well-known multinational enterprises. Additionally, archival documents in forms of sustainability reports were used. This investigation emphasizes common characteristics and differences of CSR practices in Brazil and Germany. The results of this study indicate that there are particular managerial values such as self-transcendence which influences the CSR implementation and the level of engagement. Aside from that, personal integrity and a high level of managerial discretion emerged as important variables. The findings of this study suggest that CSR in developed countries is characterized by environmental, - and employee- oriented CSR activities with a high reliance on governmental regulations. Developing countries follow a more active CSR approach and put emphasis on society-oriented CSR activities.

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3 ACKNOWLEDGEMENTS

I would not have been able to deliver this thesis without the support of several people. Therefore, I would like to dedicate this section to those people who helped and motivated me in times of uncertainty and setbacks.

First and foremost, I would like to thank my supervisor Dr. de Vries from the University of Groningen who guided me throughout the whole process of this thesis. Whenever I felt lost he gave me advice and steered me in the right direction. However, he allowed this research to be my own piece of art. Second, I would like to thank all my friends in Germany, Netherlands and Brazil who helped me to reach the participants for this study. Furthermore, I would like to send thanks and warm greetings to my interviewee partners in Brazil and Germany for their good collaboration and their precious time. I am sincerely grateful that you gave me the opportunity to get interesting insights of your work and your personal experiences, without you this thesis would not have been the same.

Finally, I would like to express my gratitude to my mother and my sister for providing me with their consistent encouragement and emotional support. All the accomplishments of my academic years and my entire life would not have been possible without you.

Thank you,

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4

Increase in the human population, natural resources depletion and the rising awareness of global issues have changed the situation of firms drastically. In the last decades, the concept of Corporate Social Responsibility (CSR) has become increasingly important for the academia and business (Carroll, 1991; Schaltegger; Windolph, Harms & Hörisch, 2014). Nowadays, the majority of the Fortune 500 publish their CSR practices in an annually report and have senior executives responsible for the CSR implementation (Governance Accountability Institute, 2012). In spite of the high engagement of organizations worldwide, it is still unknown how distinctive practices can be explained across countries.

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9 Despite the global importance of CSR and the acknowledgment of context-specific determinants (Matten & Moon, 2008; Campbell, 2007), the majority of the research focuses on CSR linked to Western economies with highly developed institutions. There is a scarcity of studies that empirically investigate the role of particular managerial values for the implementation of CSR strategies in a comparative context of developed and developing countries. Thus, the present exploratory study aims to fill this gap by investigating the impact of managerial values for CSR from a cross-country perspective. Therefore, the influence of managerial values on CSR activities in developed and developing countries of two exemplary local settings, Germany and Brazil, will be compared. Moreover, drawing on the institutional theory, it will be explained how the institutional context and the level of development affect the relationship between managerial values and CSR in both sample settings. Brazil and Germany have a large impact on the global economy and show a high commitment to CSR practices (The World Bank, 2017; Schaltegger et al., 2014). Therefore, they represent important perspectives for the current development of CSR. Additionally, the distinctive development levels of those countries, identify them as appropriate subjects for this study since indications for a broader phenomenon can be implied (The World Bank, 2017; Sobczak & Coelho, 2010).

The research question of the present study is therefore:

How do managerial values impact the firm’s CSR engagement and implementation and how does this relationship differ between developed and developing countries?

To find answers to the research question, the following sub-questions will be addressed:

•! To what extent do managerial values influence strategic decisions of a firm?

•! Are there particular personal values that have an impact on the sustainability strategy of a firm?

•! How do the CSR activities differ in developed and developing countries? •! What is the impact of the institutional setting and the level of development on the

relation between managerial values and CSR?

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10 (Jamali, 2007; Abugre, 2014). First, this study will apply both the institutional as well as the upper-echelon theory on two exemplary national settings with the aim to uncover country specified CSR activities in developed and developing economies (Blowfield & Frynas, 2005).

Second, since values are considered as unobservable characteristics (Hemingway & Maclagan, 2004; Hambrick & Mason,1984), the explorative nature of this study enables to gain a better understanding of the influence of executives’ values on the formulation of strategic decisions in developed and developing countries. Additionally, the perspective of sustainability managers in particular, allows for a deeper insight in differences of the CSR strategy on the country level (Schaltegger et al. 2014). Consequently, investigating the relationship between managerial values and the CSR strategy from the perspective of a CSR manager extends prior literature. Moreover, conducting interviews with CSR managers from well-known multinational corporations (MNCs) can reveal particular managerial values that can be used as characteristics for a successful CSR manager. Above all, important concepts such as the key role of managerial values and the institutional context are linked and highlight the global significance and complexity of CSR (Carroll, 1991; Matten & Moon, 2008).

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11 2. LITERATURE REVIEW

In this section the key theoretical concepts will be introduced that are necessary to get a better understanding of the research objective and the following argumentation of this study. First, the concept of managerial values and the value theory by Schwartz (1987; 1992, 1994) will be introduced. Second, a theoretical insight of CSR in relation to managerial values will be given. Furthermore, the institutional setting for CSR in developed and developing countries will be explained. Finally, the Brazilian and German context for this study will be presented.

2.1 Managerial Values

There are different theoretical frameworks that discuss the role of the executive. The new institutional theory argues that executives are embedded in an institutional environment that form the “rules of the game” which reduce not only opportunistic behavior but also uncertainty (North, 1991). According to the institutional theory executives do not have autonomous power over decisions of the firm. They are bounded by certain rules and isomorphic pressures and they need to show conformity in order to achieve legitimacy. Therefore, managerial values do not play a significant role from the perspective of the institutional theory (DiMaggio & Powell, 1983). In opposite, the agency theory reasons that distinctive firm outcomes are a result of different governance structures. Hence, managers can integrate their individual preferences but they should avoid it since they act as agents of their shareholders (Jensen & Meckling, 1976). The importance of managerial values for the firm’s outcome is highlighted in the upper-echelon model. Hambrick and Mason (1984) argue that “organizational outcomes –both strategies and effectiveness- are viewed as reflections of the values and cognitive bases of powerful actors in the organization” (Hambrick & Mason, 1984:193). They found that both observable characteristics as for instance the educational background and unobservable attributes of managers such as values and cognitive frameworks

determine the strategic choices (Hambrick & Mason,1984; Hemingway & Maclagan, 2004). Since this study will particularly focus on the impact of managerial values on CSR, the

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12 2.2 Value Theory

Personal values present research objects for several fields of studies as for instance management science and sociology. According to Agle and Caldwell (1999) the existing definitions of personal values show a common argumentation: values determine the individual behavior (Agle & Caldwell, 1999; Schwartz & Bilsky, 1987; Hemingway & Maclagan, 2004). The value theory by Rockeach (1973) and Schwartz (1987, 1992, 1994) remains the most common theory in the field of management. According to Rockeach (1973) the nature of value can be explained as “an enduring belief that a specific mode or conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence” (Rockeach, 1973:5). This definition stresses that values can be viewed as norms that can serve for the development of uniform behavior among a group.

Schwartz value system theory (1987, 1992, 1994) extended Rockeach’s theory by focusing on the driving intentions of several values and their common attributes. He categorized ten basic value types: power, achievement, hedonism, stimulation, self-direction, universalism, benevolence, tradition, conformity, security which are illustrated and explained in table 1. According to Schwartz (1987, 1992, 1994, 2006) these values are culturally universal and are presented in a circular structure which is depicted in figure 1. The circular structure of the value types shows polar opposites and different degrees of compatibility which reflect the dynamic relationship between the value types. Hence, values that are next to each other are compatible, whereas those that lie in an opposite position are more conflicting. In this context, Schwartz (1987,1992,1994, 2012) recognized two value conflicts:

self-enhancement vs. self-transcendence and openness to change vs. conservation (Schwartz,

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13 associated studies (Schwartz, Melech, Lehmann; Burgess; Harris & Owens, 2001). For the purpose of the present research the definition of values as “desirable, transsituational goals, varying in importance, that serve as guiding principles in people’s lives” (Schwartz, 2006:1) is identified as appropriate. The PVQ will be used to compare managerial values for this study.

FIGURE 1

Structure of values by Schwartz

(source: Schwartz, 2012:9)

TABLE 1

Schwartz’s ten basic value types and the associated value items

(source: Lee, Soutar, Sneddon, 2010: 2; adapted from Lee, 2008)

Figure 1. Theoretical model of relations among ten motivational types of value

Although the theory discriminates ten values, it postulates that, at a more basic level, values form a continuum of related motivations. This continuum gives rise to the circular structure. To clarify the nature of the continuum, I note the shared motivational emphases of adjacent values:

a) power and achievement--social superiority and esteem; b) achievement and hedonism--self-centered satisfaction; c) hedonism and stimulation--a desire for affectively pleasant arousal; d) stimulation and self-direction--intrinsic interest in novelty and mastery;

e) self-direction and universalism--reliance upon one's own judgment and comfort with the diversity of existence;

f) universalism and benevolence--enhancement of others and transcendence of selfish interests;

g) benevolence and tradition--devotion to one's in-group;

h) benevolence and conformity--normative behavior that promotes close relationships; i) conformity and tradition--subordination of self in favor of socially imposed

expectations; Universalism Benevolence ConformityTradition Security Self-Direction Stimulation Hedonism Achievement Power 9 Schwartz: An Overview of the Schwartz Theory of Basic Values

Produced by The Berkeley Electronic Press, 2011

2

Schwartz’s Value Theory

Schwartz (1992) defined 10 basic values according to the goals that underlie them (see Table 1). Data from hundreds of samples in more than 80 countries have found support for the existence of these 10 basic values and for the relationships between them, as illustrated in Figure 1. It is the theoretical relationships between the values, identified by a quasi-circumplex that differentiates Schwartz’s (1992, 1994) theory from other values theories. This critical aspect has the potential to significantly add to our understanding of how values motivate different behaviours.

TABLE 1: Schwartz’s 10 value types and the 45 associated individual level values items

Value-Type Definitions Value Items For Each Value Type Power: Social status and prestige, control or

dominance over people and resources.

Social power, authority, wealth

Achievement: Personal success through demonstrating competence according to social standards.

Successful, capable, ambitious, influential

Hedonism: Pleasure and sensuous gratification for oneself

Pleasure, enjoying life, self-indulgent

Stimulation: Excitement, novelty, and challenge in life

Daring, a varied life, an exciting life

Self-direction: Independent thought and action—choosing, creating, exploring

Creativity, curious, freedom, independent, choosing own goals

Universalism: Understanding, appreciation, tolerance, and protection for the welfare of all people and for nature

Equality, a world at peace, social justice, broadminded, wisdom

Protecting the environment, a world of beauty, unity with nature

Benevolence: Preservation and

enhancement of the welfare of people with whom one is in frequent personal contact

Helpful, honest, forgiving, loyal, responsible

Tradition: Respect, commitment, and acceptance of the customs and ideas that traditional culture or religion provide

Humble, devout, accepting my portion in life, respect for tradition, moderate

Conformity: Restraint of actions, inclinations, and impulses likely to upset or harm others and violate social expectations or norms

Politeness, obedient, honouring parents and elders, self-discipline

Security: Safety, harmony, and stability of society, of relationships, and of self

National security, social order, clean, family security, reciprocation of favours

Note. Adapted from Lee et al. (2008)

The Relationship between Values and Behaviour

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14 Of particular relevance for the present research phenomenon is the link between particular managerial values and CSR strategies in developed and developing countries (Blowfield & Frynas, 2005; Abugre, 2014). Therefore, the theoretical construct of Corporate Social Responsibility (CSR) will be examined in the next section.

2.3 Corporate Social Responsibility (CSR)

There is not a clear definition of Corporate Social Responsibility (CSR). However, it is mostly used as an umbrella term which encompasses several concepts that are related to environmental issues, social relations and human resource management (Bowie, 1997). Within this context the same key idea emerged: firms are expected to regard profit maximization not as their only goal (Friedman, 1962). Thus, companies are expected to not only embed social and environmental problems into their core strategy but they should also actively enhance the overall development of sustainability (Abugre, 2014; Shrivastava & Hart 1995; Schaltegger, Herzig, Kleiber & Müller, 2002).

For the purpose of this study CSR is defined as:

[. . .] the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as improving the life of the local community and society at large (WBCSD, 1999:65).

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15 FIGURE 2

The Pyramid of Corporate Social Responsibility

(source: Carroll, 1991:42)

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16 examine how CSR practices differ in developed and developing countries, the dimension CSR implementation will be investigated.

FIGURE 3

Triple I approach of the ICSB

(source: Schaltegger et al., 2014:5)

2.4 Managerial Values and Corporate Social Responsibility Strategy

CSR interrelates business and society which generate diverse expectations depending on the level of analysis. There are three main levels: “institutional, organizational and individual” (Wood, 1991: 695). Within this context, managers are defined as moral actors that can use managerial discretion in order to promote socially responsible results (Wood, 1991). Even though there are certain CSR standards, managers possess a certain level of discretion. Within this context personal values play a significant role since they guide the behavior of individuals (Schwartz, 2006). The present study puts its main focus on the individual level. According to Hemingway and Maclagan (2004) and in line with the upper -echelon model, the formulation and implementation of the firm’s CSR strategy is influenced by both the goals of the firm and by managerial values (Choi & Wang, 2007; Finkelstein & Hambrick, 1990; Hambrick & Mason, 1984). Hambrick (2007) revised the upper-echelon perspective and introduced the managerial discretion as one additional important moderator. Managerial discretion is defined as the latitude of decision making. The impact of managerial values on strategic choices increases with the level of managerial discretion (Hambrick,

1 International Corporate Sustainability Barometer: Introduction and Structure 5

Intention: Why do companies manage sustainability? Integration: To what extent is corporate sustainability embedded in core business and organisation? Practice of corporate sustainability Imple-mentation: How is corporate sustainability operationalised?

Fig. 1.1 ‘Triple I’ approach of the ICSB

The ‘Triple I’ approach offers a structured way to comprehensively analyse the various aspects of corporate sustainability. It covers (1) intention, the motivations and objectives of corporate sustainability; (2) integration, the company’s embedding of sustainability into its business and organisation; as well as (3) implementation, the dissemination of sustainability measures and tools and the measurement of sustainability impacts within the company.

1.2.1 Intention

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17 2007). Moreover, Choi and Wang (2007) discuss the role of organizational culture which encourages particular managerial values.

Prior studies which linked individual values to ethical choices and environmental behavior, argue that particular personal values such as self-transcendent and openness to change support pro-environmental behavior, whereas self-enhancement and conservation affect the environmental behavior negatively (Stern & Dietz, 1994; Karp, 1996). Therefore, socially oriented managerial values as self-transcendence and openness to change are important in order to identify societal needs and environmental challenges. Integrity, which describes an uniformity of managerial values and their behavior, encourages corporate philanthropic practices as well (Choi & Wang, 2007). Additionally, Elkington (1999, 2001) point out that openness to change is relevant for a CSR strategy in order to be aware of novel and innovative solutions for CSR issues. Hence, these personal values combined with an organizational culture that integrate sustainability related issues promote CSR engagement (Hemingway, 2005; Egri & Herman, 2000). However, there are only a few studies that investigated the relationship between a set of managerial values associated with CSR strategies comparing developed and developing countries (Jamali, 2007; Blowfield & Frynas, 2005; Frynas, 2006; Abugre, 2014). Consequently, the institutional setting for CSR in developed and developing economies will be discussed in the next part.

2.5 The Institutional Setting for CSR in Developed and Developing Countries The institutional theory is a widely used framework for explaining differences of CSR strategies across countries (Aguilera & Jackson, 2003, Campbell, 2007). Prior research explained national deviations in CSR applications as a result of country specific institutional dissimilarities (Campbell, 2007). Organizations and their managers are embedded in an institutional context which has a substantial impact on their CSR behaviors (Muthuri & Gilbert, 2011). North (1991) defines institutions as the “rules of the game” which are “the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, tradition and codes of conduct), and formal rules (constitutions, laws, property rights)” (North, 1991: 97).

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18 is societal legitimacy. Thus, due to the importance for a firm to obtain social legitimacy, various CSR efforts became institutionalized in different countries. In order to strengthen the reputation and to show the goodwill, global firms face stricter pressures and are expected to engage more in CSR related issues than domestic firms (Kostova & Zaheer, 1999). However, a study by Maignan and Ralston (2002) show that even though several isomorphic pressures (DiMaggio & Powell, 1983) encourage uniform CSR practices, there is not a-one-size-fits-all approach. Jones (1999) investigated institutional determinants in the context of social responsibility and found that the development level of the country determines the CSR engagement of an organization. Hence, there are certain differences with regards to CSR strategies between developed and developing economies. A developing country is affected by institutional voids, which are described as “situations of absent or weak institutional arrangements that support markets” (Mair & Marti 2009:4). Consequently, when investigating the research phenomenon of this study the institutional setting plays an important role. For the purpose of this study the three institutional categories (regulatory, normative and cognitive- cultural) developed by Scott (2001) are used to describe their moderating effect on the relationship between managerial values and the CSR strategy in developed and developing countries.

2.5.1 Regulative institutional context. The regulative institutional context consists of rules

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20

2.5.2 Normative institutional context. Normative institutions consist of social norms and

values that determine which corporate behavior is acceptable (Campbell, 2006; Muthuri & Gilbert, 2011). Organizations are expected to behave as a “good corporate citizen” (Brammer & Millington, 2004) in order to get societal legitimacy. Therefore, they need to adjust their CSR approach to existing normative principles (Campbell, 2007; Muthuri & Gilbert, 2011). These normative regulations are enforced by several stakeholders as for instance Non- governmental organizations (NGOs), investors or the media. In recent decades a lot of global organizations such as the International Organization for Standardization (ISO) have established global guidelines concerning CSR practices amongst other the UN Global Compact and the Global Reporting Initiative (GRI). On the one hand the standards are regarded as incentives for firms to engage in CSR activities but on the other hand they are used as a control tool (Scherer & Palazzo, 2011; Muthuri & Gilbert, 2011).

Looking at the normative institutional context in Germany, NGOs social groups, the media as well as international associations are considered as the most important stakeholders for encouraging CSR practices and establishing the normative context (Schaltegger et al., 2014). Furthermore, German firms show a high awareness of sustainability regulations. CSR practices are linked to stakeholders’ requirements. Especially employee related issues are considered as important for German companies (Schaltegger et al., 2014). When looking at the Brazilian normative context, companies and stakeholders in Brazil are increasingly engaging in CSR practices and adopt national and international CSR regulations (Galego-Alvarez et al., 2014). According to Duarte (2010) the majority of the ISO 14.0011 environmental certificates in Latin America, are handed to Brazilian firms (Galego-Alvarez et al., 2014).

2.5.3 Cognitive -cultural institutional context. The cognitive-cultural institutional setting

consists of cultural values, shared beliefs and cognitive frameworks which determine what is regarded as an appropriate CSR behavior and has a central impact on the CSR strategy of a firm (Scott, 2001; Kostova & Zaheer, 1999). This is due to organizations need to adapt to the existing cognitive framework in order to get legitimacy (Kostova & Zaheer, 1999). Isomorphic pressures activated by external international and national rules and standards

1_{ISO 14.001 belongs to the international standards on enviornmental management. In particular, ISO 14.001 is}

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21 result to the adaption of best practices regardless of the industry (Matten & Moon, 2008, Muthuri & Gilbert, 2011). Existing literature argued that the cultural dimension individualism

vs. collectivism is relevant in the context of CSR (Hofstede, 1980, 2001; Hofstede, Hofstede,

& Minkov, 1991, 2010)2. Managers from a culture valuing collectivism, such as Brazil, stress CSR activities that have an impact on the greater society (Waldman; de Luque; Wasburn; House; Adetoun, Barrassa & Dorfman, 2006; Hofstede, 1980, 2001).

In opposite, countries that are more individualistic such as Germany are less concerned about societal issues (Waldman et al., 2006). Managers from developed countries tend to focus on the welfare of shareholders and are less concerned on the welfare of the greater society. On the contrary, managers from a weaker institutional environment have a greater personal feeling of responsibility and thus are more engaged in activities concerning the welfare of the community (Waldman et al, 2006; McWiliams & Siegel, 2001). Since CSR is regarded as a solution for problems within the country, the cognitive-cultural institutional setting in Brazil encourages philanthropic CSR programs (Sobczak & Coelho, 2010). In opposite to Brazil, German corporations mostly engage in employee related issues as for instance better work conditions (Schaltegger et al., 2014).

2_{One of Hofstede’s cultural dimensions is Individualism vs Collectivism, which describes the ties between}

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22 2.6 The Brazilian and German Context

Brazil and Germany belong to the largest economies worldwide with a high commitment to CSR practices (The World Bank, 2017; Schaltegger et al., 2014). Therefore, these countries represent important perspectives for the current development of CSR. Additionally, the distinctive development levels of those countries, identify them as appropriate objects of investigation since the aim of the study is to get a better understanding of CSR strategies in developed and developing countries. Figure 4 illustrates the development level of Brazil and Germany by comparing the gross domestic product (GDP) rate which is adjusted by the purchasing power parity (PPP). Germany represents a highly developed and industrialized economy with a high GDP of 47, 268.43 international $ in 2015. This contributes to 5.41% of the world economy (The World Bank, 2017). Most of the share is created through export. Consequently, Germany represents a classic well developed country in Continental Europe (Schmidt, 2008; Schaltegger et al., 2014). Even though there are some improvement regarding social and environmental issues as for instance the decline of the poverty rate and a reduction of deforestation in the rainforest areas, Brazil still need to deal with development difficulties regarding sustainable progress and social inequality (The World Bank, 2017; Damiano-Teixeira & Pompermayer, 2007). Currently, Brazil has a deep recession crisis, driven by political instability. This has resulted in a decreasing GDP rate of 15, 473.7 of international $ in 2015.

Brazil plays a central role for international discussion on climate change as demonstrated by the country’s participation in the Paris Agreement and the climate framework for the 2015 COP 213

(The World Bank, 2017). Furthermore, Brazil takes a pioneer position in Latin America in context of sustainability reports and the accreditation of Certificates (Galego-Alvarez et al., 2014). According to the World Value Survey (2009), the Germany society has an above average awareness of sustainability issues regarding environmental protection. Moreover, the national and international legal framework as well as the business environment, put Germany in a leadership position for CSR in the European context (Leal Filho, & Pawlak, 2009; Schaltegger et. al., 2014).

3_{The Climate framework 2015 COP 21 was developed as a result of the Paris Climate Conference in 2015. Its}

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23 FIGURE 4

Gross Domestic Product (GDP) per capita, PPP: Germany and Brazil

(Source: The World Bank, 2017: GDP per capita, PPP (current international $))

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24 3. METHODOLOGY

The third part of this study presents the research design, the research sample as well as the methods used for the data collection and the analysis. First, the research design explains why a qualitative approach is chosen. Subsequently, the research sample is introduced in order to clarify why the specific target group was selected. The third part clarifies how the data was collected and how ethical issues were treated. The forth part elaborates on the methods for the data analysis. Finally, the validity and reliability of the research is discussed in the last section of this chapter.

3.1 Research Design

The purpose of this study is to investigate the relationship between managerial values and CSR strategies in a cross-country context. Due to the scarcity of studies that investigate the present research phenomenon an explorative research approach that builds on the grounded theory was chosen (Glaser & Strauss, 1967; Glaser, 1978; Eisenhardt, 1989). Grounded theory provides a suitable and prominent approach for qualitative investigations with the aim to develop new theory. This method is not concerned with the validation of exiting theories as it is common in deductive studies, but it aims to develop or extend a theoretical framework derived from the data (Eisenhardt, 1989; Blumenberg, Cooper & Schindler, 2011). However, different to the merely inductive approach of the grounded theory, this study will take a broader perspective and insert elements of deduction as part of the analysis. Hence, this study was not conducted in isolation of pre-existing knowledge but used “existing theory and inductively derived empirical theory to develop new explanations or transform and re-fine pre-existing theory”(Hennink, Hutter & Bailey, 2011:210). Consequently, new insights should be generated that will enable future research to do more deductive studies.

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25 based on several quantitative or qualitative data sources as for instance questionnaires, observations, archival data or interviews (Eisenhardt, 1989). In order to answer the research question that focuses on the relationship between managerial values and the CSR strategy of a firm in the context of developed and developing countries, the perspective of the individual manager will be investigated. This perspective allows to uncover the impact of unobservable characteristics such as personal values. An exploratory study in form of semi-structured interviews in combination of archival data in form of sustainability reports was therefore selected as suitable for the research issue. Moreover, there are several advantages which lead to the decision of conducting semi-structured interviews. First, the personal perspective of the CSR managers is relevant for this study. This research focuses on the individual evaluation and experiences of the CSR manager. In this context personal interviews allow the participant to talk unreservedly that lead to a rich data collection which is supportive for the development of new theoretical aspects (Flick, 2006; Blumberg et al., 2011). Second, the flexibility of interviews allows an open research process and the collection of in-depth information on complex concepts such as CSR strategies which are linked to the present research phenomenon (Hennink et al., 2011; Ritchie & Lewis, 2003).

Furthermore, interviews strengthen the understanding of the personal context in which the present research topic is embedded (Ritchie & Lewis, 2003). This is relevant for the present research aim as managerial values in a cross-country context are the subject of investigation. Overall, the balance of flexibility and structure of a semi-structured interview allow to cover the main theoretical concepts of the research phenomenon while giving enough opportunities to discuss new aspects during the interview process. Moreover, possible misunderstandings were prevented by asking follow-up questions from both sides.

Nonetheless, interviews also have some limitations that needs to be considered. First, the interviewees knew that they are recorded, thus their answers might deviate from a real world scenario which is known as the Hawthorne effect (Myers, 2009). Furthermore, it is important to develop empathy with the research partner. However, over-involvement and self-disclosure should be avoided to reduce researcher bias which is a common issue during explorative studies (Seidman, Rubin, Rubin, & Dilley, 2004).

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26 3.2 Research Sample

Since the aim of this study is to examine the effect of managerial values on the CSR strategy and how the relationship differs between developed and developing countries, interviewing CSR managers from Germany and from Brazil is identified as a suitable sample for the research context. Due to the distinctive development levels of those countries, as explained in section 2.6, Germany was used as a representative for a developed country and Brazil was regarded as a representative for a developing country. In order to generate convincing theory while taking into consideration time and resource availability limitations, a case number between 4 and 10 cases is suggested as optimal (Eisenhardt, 1989: 545). Because of the limited number of cases, a theoretical sampling was used. Contrary to statistical sampling, where the cases are picked randomly, the intention of a theoretical sampling is to purposively select a sample that is more likely to extend the existing theory (Glasser & Strauss, 1987; Eisenhardt, 1989). In order to assess whether the potential cases are appropriate for this study, certain selection criteria were developed in advance. Table 2 shows the selection criteria and the associated motivation.

TABLE 2

Case Selection Criteria

Selection Criteria Motivation

1. Interviewee: Managerial position in the CSR

sector

The perspective of managers that are involved in the CSR field is crucial for the research issue.

2. Company: Large, global and well-known

MNCs which have over 50.000 employees and have operations in Germany or Brazil

The CSR strategy of MNCs is relevant for assessing the state of CSR strategies in Brazil and Germany

3. Industry: MNCs from the automotive or

consumer goods industry

The automotive and consumer goods industry contribute to major CSR relevant issues (e.g. Pollution, neutral resources depletion)

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27 A theoretical sampling of in total six managers, consisting of three German managers and three Brazilian managers were chosen for this research. All of the interviewees are currently holding a managerial position in the sustainability field of their organization which allows the exploration of personal insights from the CSR manager. As explained in the literature review, MNCs play a key role in the CSR development. They are expected to have a high engagement in CSR related issues (Kostova & Zaheer, 1999). Thus, potential companies were assessed based on their size (> 50.000 employees) and their geographical location. Thus, MNCs that have operations in either Germany or Brazil were selected in order to ensure a cross-country comparison.

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28 An overview of the research sample is depicted in table 3. It gives information of the demographic and professional characteristics of the participants. In order to ensure confidentiality and anonymity of the research the name of the companies and participants were coded alphabetically.

TABLE 3 Research Sample

Interviewee4 _Industry _Location _Function

1 Interviewee A Consumer goods

company Germany Global Sustainability Manager 2 Interviewee B Automotive industry Brazil CSR Manager 3 Interviewee C Automotive industry Germany CSR and Sustainability manager 4 Interviewee D Automotive industry

Brazil Manager of Social

Responsible Practices

5 Interviewee E Consumer good

industry Brazil Manager of Sustainable Program Development 6 Interviewee F Automotive Industry Germany CSR and Cooperate Communication Manager (source: author)

3.3 Data Collection and Development of the Interview Guide

To provide an extensive view on the relation between managerial values and CSR, the first step of the data analysis was to collect data. As case studies are object of multiple data collection methods, the main source of data for this study were interviews which were combined with archival data derived from CSR reports of the selected companies (Eisenhardt, 1989). Furthermore, information was also gleaned from the websites of the firms and public newspapers. Semi-structured interviews with a duration of 40 to 60 minutes were conducted through the web-based program Skype.

4_{Each interviewee represents only one company: Interviewee A represents company A; Interview B represents}

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29 As the present research has a cross-cultural nature, language and cultural barriers are necessary to be reduced. Therefore, to ensure comparability and completeness of the interviews, an interview guide in German and English was used (see appendix A and B). As the researcher is able to speak German, a neutral environment is created by conducting the interviews with the German CSR managers in German. In a later stage all the interviews were translated in English.

Since the research was not conducted in isolation of prior knowledge, the basis for formulating the interview questions were the underlying theoretical concepts explained in chapter 2 as well as the information required to answer the research question and sub-questions (Kumar, 1996). The interview guide consists mostly of open-end sub-questions, which encourage the respondent to speak freely about the impact of their personal values on the CSR strategy of the company. Managerial values were assessed based on Schwartz value system (1987,1992, 1994). To highlight how CSR is operationalized in developed and developing countries the CSR implementation was examined. In order to investigate the role of the institutional context, questions were formed considering the three institutional categories (regulatory, normative and cognitive-cultural) developed by Scott (2001).

To prevent social desirability bias5

when investigating the impact of personal values, indirect and anonymous questions from the perspective of another person or a group were asked. Hence, the respondents evaluated their level of a particular value as for instance self-transcendence in opposite to self-enhancement based on a self-designed scenario which implicitly underlies the particular values. After receiving permission of the participants, each interview was recorded and later transcribed. Recording the interview enabled the researcher to fully focus on the conservation and ask possible follow-up questions. In appendix D the transcripts of the interviews can be found. In order to get a comprehensive insight of the firm’s CSR practices, the sustainability reports of the company A-F were consulted. The reports were downloaded from the firms’ websites or were individually requested.

5_{Social desirability describes the tendency of people to represent behavior that are in line with social}

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30 3.4 Ethical Principles

Qualitative research focuses on personal topics and experiences of the participants and is therefore more prone to ethical concerns. In particular, during the process of data collection several ethical issues may occur (Hennink et. al, 2011). There are three common ethical principles that need to be considered during the research process: informed consent, confidentiality and anonymity (Boeije, 2010). Informed consent presents the researcher’s obligation to explain the nature and purpose of the investigation. Informed consent should guarantee that the participant is aware of the fact that he is part of a research for which he should give his consent (Boeije, 2010; Bulmer, 2008). In order to seek permission to conduct the present research, the participants received a written consent form which described the aims and procedure of the interview. Additionally, the consent form outlined the participants’ rights to withdraw from the study at any time (see appendix E). Furthermore, the interviewees had the possibility to request the interview questions before the interview.

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31 3.5 Data Analysis

After collecting the necessary information, the data need to be analyzed to find parts that can develop or extend the existing theory. As the research aims for a cross-country comparison between managerial values in Brazil and Germany, the first part of the analysis contains a cross-country case analysis (Eisenhardt, 1989; Flick, 2006). Hence, cross-case similarities and differences were derived from the data and the existing theory.

There are numerous debates about the appropriateness of computer assisted data analysis methods for qualitative research (Boeije, 2010). The main benefit of computer assisted methods in comparison to manual methods is the speed for analyzing a large amount of data, which can facilities the theory building procedure (Ritchie & Lewis, 2003). However, Weitzman (2000) argues that “the very ease, speed and power of the software have the potential to encourage...the research to take shortcuts” (2000: 807-8). Furthermore, Robert and Wilson (2002) state that: “The first and foremost point to make about the use of computers in qualitative analysis is that computers do not and cannot analyze qualitative data." (2002:6). Since the view of the human actors is crucial for qualitative research, it is argued that a software can only support but not substitute the researcher’s analytical role within the process (Adam & Podmetnik, 2005; Ritchie & Lewis, 2003). For the present investigation the support of computer assisted methods was regarded as not necessary because the number of cases are comparable low and therefore the amount of generated data was considerably easy to see through. Therefore, the analysis was conducted manually, which freed the researcher from any mediating impact of the software and additionally enabled a more natural way of data analysis (Rodik & Primorac, 2015).

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32 and categorizing them. The data was then compared on similar phrases that appeared to be relevant for the research question. The phrases that seem to be related were labeled and then grouped into categories (Corbin & Strauss, 1998). In the second stage axial coding was conducted. This step aims to form relations between the determined categories and then classify them under an overarching observation that appeals to be most relevant for investigating the relationship of managerial values and their impact on the CSR strategy. The third step is the selective coding procedure which includes to identify core categories. These core categories aim to draw important connections to the research questions of this study (Flick, 2006).

Consequently, the cross-case analysis will give indication on the research question: how do managerial values impact the firm’s CSR engagement and implementation and how does this relationship differ between developed and developing countries?

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33 3.6 Validity and Reliability

In this section the quality of the research will be evaluated in terms of their validity and reliability. Validity includes two dimensions, internal validity and external validity. Internal validity assesses whether the research investigates what it claims to investigate (Boeije, 2010). External validity evaluates to what extent the results of a study can be applied to another research (Boeije, 2010). According to Silverman (2013) internal validity can be ensured by a constant comparative method. With regards to the present research internal validity is guaranteed as data was constantly checked and compared not only across both countries but also across different industries. Moreover, outliers which describe deviant cases and findings were not ignored but were used to enrich the theory development process (Maynard & Clayman, 2003). To enhance the precision and the external validity of the research findings, different qualitative and quantitative data sources as for instance CSR reports, websites and interviews were considered (Ritchie & Lewis, 2003). Furthermore, the use of multiple case studies contributes to a higher external validity, as the findings are more precise in comparison to a single case study. To prevent a loss of evidence, the interviews were recorded and transcribed immediately after conducting the interview (Gibbert & Ruigrok, 2010). Furthermore, the variance in gender, age and experience as well as the variety of industry sectors, in which the respondents operate generate a higher external validity. Lastly, the combination of a cross-case analysis and a within industry case analysis enables to find new categories. However, as the sample size is considerably small the generalizability of the results is limited.

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35 4. FINDINGS

In this chapter the key results that emerged from the interviews will be presented in a structured manner. In order to provide answers to the research question and sub-questions. An overview of the findings of the cross-country case analysis will be given, which will be followed by results of the within industry cross-case analysis. To illustrate the findings, exemplary responses from the interviews were selected. Lastly the most important results are summarized in table 12 and table 13.

4.1 Cross-Country Case Analysis: Brazil vs. Germany

As this study aims to investigate the impact of managerial values on the CSR strategy of the firm between developed and developing countries a cross-country case analysis will be conducted. First, main dimensions will be identified and second, the data will be analyzed by looking for cross-case similarities and differences between the responses. Thus, six main categories of investigations were identified which were partly derived from the existing literature as well as from new dimensions based on the sub-questions of this study. The following areas of investigations were found:

(1) The influence of personal integrity; (2) The level of managerial discretion;

(3) The impact of the managerial value self-transcendence in contrast to self-enhancement; (4) The impact of the managerial value openness to change in opposite to conservation; (5) The moderating effect of (a) the regulative (b) the normative and (c) the cognitive- cultural institutional setting;

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36

4.1.1 The influence of personal integrity on the CSR strategy. The first part of this analysis

provides answers to the sub-question: To what extent do managerial values influence strategic decisions of a firm. In order to answer this question, the interviewees were asked to describe their personal relationship towards topics related to CSR. Thus, they explained their motivation to work in the field of sustainability, as well as how they integrate sustainability in their daily life.

The influence of personal

integrity

Illustrative responses

Interviewee A “I cannot tell from where the interest for sustainability came from but it was always there”

Interviewee B “First I started as a volunteer (..) and then the company saw that I did a good job. Even though the economic situation in Brazil was bad, I was very motivated, I worked extra hours and I found ways to engage in CSR with only little resources involved (…).

“No matter what happens I do something because I enjoy it to do. I am satisfied and happy, when I am involved in different activities of my firm and the local community. Only then I have a feeling that I can do more than my daily work.”

Interviewee C

“I like my job because you have the feeling that you did something good and useful during your work (…). You get the feeling of being able to contribute towards making the world a bit better.”

Interviewee D “In Brazil there is a lot of poverty (...) if you help only one person then you did something good. My guiding values are love, care and faith. You have to believe in what you do. Without love and faith, nothing is possible (...). I never did something because I wanted to earn money, my first intention is to help people.”

Interviewee E “I am involved in different volunteering social projects as for instance community trainings. In my daily life I am a very sustainable person. I try to recycle, do not waste money on things I do not need, I do not have car (...) I try to give something back to the world. I enjoy my work it is dynamic, challenging and provides me with motivation for my daily life.”

Interviewee F “During my studies I started to be interested in CSR. Now, I am very happy

that it became part of my work.”

“In my daily life I try integrate sustainable practices I pay attention at waste sorting and I try to buy local groceries. I think you are mostly motivated if you do something because you like it to do with passion and your heart. I believe that the most important guiding values in my life are to be tolerant and thoughtful, family and friends are important. For me personally, being ambitious and steadily staying curious are essential values.”

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37 As depicted in table 4, during the interview the theme personal integrity emerged as an important characteristic of all CSR managers across industries in Brazil and Germany. All of the six interviewees stated that they support values that are associated with CSR as for instance justice and environmental protection.

Fairness, justice, environmental protection, respect, tolerance, being a good human are important values for a CSR manager. If you do not believe in these values, it is hardly possible to do your work

authentic. You have to identify with your work. Personal integrity is important. (Interviewee C)

The majority of the interviewed CSR managers mentioned that they are engaged in several CSR related activities outside of their work. Thus, five out of six interviewees voluntary work for social organizations. Interviewee C stated that she coordinated trainings of lower educated adults outside of her work. Moreover, all of the respondents noted that their personal interest in the topic of sustainability started prior to their career as a CSR manager

Hence, the three German CSR managers explained that they would try to integrate issues like environmental protection in their daily life by means of waste sorting, the reduction of meat consumption and the purchase of local products. They mentioned that they take a stand on better working conditions. The interviewees from Brazil highlighted that apart from waste sorting, community work is an integrated and essential part of their daily life. All of the respondents agreed that their main intention for working in the field of CSR is to do something good and useful. They work in the field of CSR because they believe in the essence of it and are not mainly driven by rewards.

I work in the field of CSR because I believe it is my responsibility. I believe that there need to be a certain philosophy behind the job, only making money and satisfying my boss would not fulfill my life.

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38

4.1. 2 The influence of managerial discretion on the CSR strategy. In order to investigate

whether the managerial values of a CSR manager have an impact on the CSR strategy of the firm, one critical theme that emerged is the managerial discretion level of a CSR manager. Hence, the interviewees were asked to (1) evaluate their discretion level on decisions regarding the firm’s CSR engagement and (2) assess the influence of particular personal values on the CSR strategy of the firm.

The influence of managerial discretion on the CSR Strategy

Illustrative responses

Interviewee A “I do not have influence on the long term goals, they were decided a long time before I have started to work in this organization. However, in diverse projects on a lower and more detailed level I have a lot of freedom and I can make free decisions. I try to integrate my individual values in areas I have more freedom as for instance in campaigns and smaller projects”

Interviewee B “I believe that my individual values shape my work a lot. I have influence on the CSR strategy of the company.

Interviewee C “The big and long term goals are led by the specialized department thus I do

not have decisive power there. However, I have discretion for my projects. Thus I can say that I have autonomy.”

Interviewee D “I have a lot of freedom during my work. As company D had not a lot of experiences in the CSR field in Brazil, they trusted me and my expertise. Hence, the management of company D gave me a lot of responsibility.”

Interviewee E “I would say I have a lot of autonomy. I would say there is a spectrum of 70 % freedom in my work.

“I believe that my individual values shape CSR activities a lot as I deliver my values and commitment to the CSR work. However, I am also steadily learning from my work in the CSR field. I would describe the relationship between my individual values and CSR as a win- win situation.”

Interviewee F “However, I am responsible for the detailed organization and measures of local projects.”

“I believe that my personal values have a high effect on local CSR activities, where I am very active and have a lot o decisive power. In general, I would say that my personal values match with the organizational values.”

Table 5: The influence of managerial discretion– Illustrative responses (source: author)

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39 they are for instance responsible for organizing local campaigns with business partners. However, long term goals and issues are determined by the executives in the board of the headquarters. In contrast to the German managerial discretion situation, the Brazilian CSR managers claimed to have a lot of decision autonomy.

I have a lot of power when it comes to decisions, even though the final word is not mine, 99% of my ideas are accepted. The company board trusts my qualification and knows that I have good ideas.

(Interviewee B)

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40

4.1.3 The influence of the value self-transcendence in opposite to self-enhancement. In the

next stage the interviewed persons were asked to evaluate their level of self-transcendence which are associated with the value items benevolence and universalism in opposite to self-enhancement linked to the value items achievement and power. The following results help to answer the sub-question: Are there particular values that have an impact on the CSR strategy of the firm? The influence of the value self- transcendence in opposite to self- enhancement Illustrative Responses

Interviewee A “I tend to see the good in people, which sometimes might seem to be a bit naive. Nature plays an important value in my life therefore I try to protect it. I appreciate it to have time instead of money. I like to work in teams, I do not need to lead a group. At this moment, people that are focused on their career are not the ones I like to spend time with. “

Interviewee B “I like to have people around me, I like to participate and do different things. I would say in my case as I had the opportunity to live outside Brazil, I gained more than a Brazilian way to do things. I am ambitious but at the same time it is important for me to help the community, thus both values are important for me.”

Interviewee C “I am a very honest and helpful person and I enjoy to spend time with my family and friends. “

“I like to have the leading role, but not because of power. I like to collaborate with people and organize tasks. Financial stability and welfare is good, but I would not buy status symbols because showing power is not my main goal. “

Interviewee D “I think family and friends are important (...) I have never done something because of appreciation, but this came eventually.”

“I am not a person that follows others’ ideas. I do things because I believe in them. (...) I do not like to discuss with people about it.”

Interviewee E “For me environmental protection is very important. I believe that as I use the natural resources I have to give something back.”

Interviewee F “I enjoy to spend time with my family and friend. For me it is important to help and care for other people. I would consider myself as an ambitious person. Success in my professional life is important for me. You have to steadily develop yourself. Environmental protection is an important aspect, as we only have one planet earth. Thus it is our responsibility to preserve it.”

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41 The conducted interviews revealed that four out of six CSR managers are driven by the value type benevolence, which is characteristic for the value self-transcendence. Thus, they are loyal and helpful and they appreciate spending time with family and friends. Two interviewees noted that the value type achievement which is linked to self-enhancement does not contradict with benevolence. They perceived benevolence and achievement as equally important. However, the definition of achievement differs for the Brazilian and the German respondents.

Taking care of my family and friends is a key for me. Moreover, I consider it as my responsibility to help the community. However, achievement is equally important - you have

to make money for you and your family therefore you need to work hard. Due to the bad social security system in Brazil, achievement is important in order to survive. (Interviewee E) I think being loyal does not contradict with the personal desire of achievement and success. I

believe that you can strive for personal success as long as you treat other people fair. (Interviewee F)

Moreover, all the respondents stressed the value type universalism that is linked to value items as equality and environmental protection. The opposing value type power, is not perceived as worth striving for.

The world does not belong to human beings but it belongs to a lot of species: animals, plants etc. Protecting the environment is not just a good thing to do, it is a must. If we do not do it, we will finish our resources (...). You have to compensate and preserve the natural resources.

(Interviewee E)

The Role of Managerial Values for Corporate Social Responsibility in Developed and Developing Countries: Germany and Brazil

Master Thesis

MSc. International Business & Management