THE ROLE OF INSTITUTIONS IN
COMPARATIVE CSR BETWEEN DEVELOPED
AND DEVELOPING COUNTRIES
A multi-layered institutional approach to cross-national differences
between India and the UK
Author: Fardau Jansma Student number: S2042320 Email: f.jansma1@sudent.rug.nl
Supervisor: drs. H.A. Ritsema Co-assessor: dr. B.J.W. Pennink
Groningen, August 2012
University of Groningen
Faculty of Economics and Business
2
THE ROLE OF INSTITUTIONS IN
COMPARATIVE CSR BETWEEN DEVELOPED
AND DEVELOPING COUNTRIES
A multi-layered institutional approach to cross-national differences
between India and the UK
ABSTRACT. The contextual nature of Corporate Social Responsibility (CSR) drives the diversification of CSR from a multinational perspective. This paper applies Whitley’s (1994) National Business System approach in order to assess whether institutional characteristics that form MNEs’ CSR activities differ between developed and developing economies. The study finds that these differences are not significant within the sample, which might be caused by a variety in pressures stemming from the organizational field. Moreover, this study highlights the importance of the role of business within society. This responsibility can be approached by two schools of thoughts, representing a trade-off between social responsibility and profit maximization.
3
PREFACE
This master thesis is the final piece of work from the Pre-MSc International Business and Management. Despite the relative short period of two years, it was a valuable step to take.
This thesis is written in the area of my interest. Multinational firms have the power and many resources in order to care for the environment and being profitable at the same time. It worries me to see that there are still many places in which the working conditions of employees are far below humanity standards. The research enabled me to take the ethical approach to CSR by highlighting the philosophical perspective on the role of businesses within society.
The process of writing this thesis was both inspiring and difficult at some moment. Napoleon Hill (1883-1970), a well-known American writer, argues that ‘what the mind of a man
can conceive and believe, it can achieve’. The following quote by Hill describes my way of
working: “Do not wait; the time will never be just right. Start where you stand, and work with
whatever tools you may have at your command, and better tools will be found as you go along”.
This thesis signifies the ending of my educational career, and the beginning of a working career in Amsterdam. During the process of writing I received support from my supervisor mr. drs. H.A. Ritsema, whom I would like to thank for his guidance. Additionally I would like to thank R. van der Reest for his patience and believe in me.
Fardau Jansma,
4 INDEX
1. INTRODUCTION 5
2. LITERATURE REVIEW 8
2.1DEFININGCORPORATESOCIALRESPONSIBILITY 8
2.1.1THREE CSR MODELS 9
2.2CORPORATEPURPOSE 11
2.2.1CSR REPORTING/ DISCLOSURE 12
2.3COMPARATIVECSR 13
2.3.1INSTITUTIONAL CONTEXT AS AN ANALYTICAL FRAMEWORK 14 2.3.2MUTUAL RELATIONSHIP BETWEEN INSTITUTIONS AND ECONOMIC DEVELOPMENT 16
2.3.3ECONOMIC DEVELOPMENT ON CSR 16
2.3.4INSTITUTIONS AND CSR 17
2.4CONCEPTUALMODEL 18
2.5MEASUREMENTFRAMEWORKOFTHEKEYCONCEPTS 19
3. DATA AND METHODOLOGY 21
3.1RESEARCHDESIGN 21
3.2CASESELECTION 22
3.3DATAANALYSIS 23
4. ANALYSIS 24
4.1CASEDESCRIPTIONMININGINDUSTRYANDBANKINGSECTOR 24
4.1.1MINING INDUSTRY 24
4.1.2BANKING SECTOR 25
4.2COMPANYPROFILES 27
4.2.1COMPANY PROFILE TATA STEEL 27
4.2.2COMPANY PROFILE ANGLO AMERICAN 29
4.2.3COMPANY PROFILE STATE BANK OF INDIA (SBI) 31 4.2.4COMPANY PROFILE STANDARD CHARTERED BANK 32
4.3NATIONALBUSINESSSYSTEMSUKANDINDIA 33
4.3.1INDIAN BUSINESS SYSTEM 34
4.3.2THE UNITED KINGDOM’S BUSINESS SYSTEM 35
5. DISCUSSION AND CONCLUSIONS 38
5.1DISCUSSIONOFTHEPROPOSITIONS 38
5.2LIMITATIONSANDSUGGESTIONSFORFUTURERESEARCH 40
5
1. INTRODUCTION
Corporate Social Responsibility (CSR) is a multidimensional concept and therefore highly sensitive to the contextual environment (Moon and Vogel, 2008). Theories on CSR vary among studies, ranging from instrumental to ethical theories. Instrumental theories view social responsibility as a strategic tool in order to meet economic objectives (Garriga and Melé, 2004). The ethical perspective is central to this thesis and includes the role of business in society, by acting social responsible. Society does not solely function as the environment of firms. Moreover, firms can be described as an ‘organ’ of society which serve a social function (Schwartz and Saiia, 2012).
CSR is a relatively recent and fast upcoming subject in academic literature (Matten and Moon, 2008). As a result of globalization and the extension of Multinational Enterprises (MNEs) across countries, social responsibility becomes a rapidly developing business strategy (Logsdon and Wood, 2002). During the past years interest and concerns around CSR has grown due to growing problems such as climate change, poverty and human right violations (Campbell, 2007; Kolk and Tulder, 2010). This paper addresses the relationship between differences in CSR practices among developed and developing countries, and the local institutional context of MNEs.
CSR is a collection of many definitions and interpretations, concerning the overall business practises and how these can have a positive influence on society. On the one hand, many definitions formulated in today’s literature remain vague. Matten and Moon (2008) argue that this complexity is due to its dynamics, as CSR is embedded in each social, political, economic, and institutional context. On the other hand, the definitions are to a large extent similar and overlapping. In general, CSR includes the actions of a firm, which are taken with respect to their employees, communities, and the environment, which goes beyond legally requirements (Dam and Scholtens, 2008). A commonly cited definition, formulated by Carroll (1979: 497) describes CSR as: ‘The economic, legal, ethical, and discretionary expectations that
6 enterprises. The commision defines CSR as: ‘The responsibility of enterprises for their impact on
society’ (European Commission, 2011: 6).
The relationship between MNEs and society is rather complicated in terms of social responsibility (Campbell, 2007). To simplify this relationship it can be interpreted as a ‘social contract’, which includes obligations, opportunities and mutual advantage (Drucker, 1974). Despite the voluntary character of this contract, firms experience strong and constant pressures from institutions and the organizational field (Campbell, 2007; Matten and Moon, 2008). On the one hand, institutions are responsible for guiding firms in their activities by a broader societal interest and the demands of sustainable development, environmental protection, business ethics, social and economic rights (Polishchuk, 2009). On the other hand, influences from the organizational field stem from isomorphic pressures, as different types of organizations involve with each other, in order to develop collective understandings (Jamali and Neville, 2011). Additional pressures are created by the firms’ management, by motives of managers, shareholders and other key stakeholders (Matten and Moon, 2008). The implementation of social responsibility differs among countries and changes within them (Lindgreen, Swaen and Campbell, 2009). This indicates that CSR depends upon national factors, built on the notion that international firms adjust their activities to the specific local business systems (Chapple and Moon, 2005).
Institutional theory presents a framework which analyses the role and place of CSR in the context of its economy and society (Jamali and Neville, 2011). It also reviews the relationship between organizational choices, which are shaped, mediated and channelled by the institutional environment (Jamali and Neville, 2001). This study is built on the National Business System (NBS) approach which enables to identify the institutional environment of a society (Morgan, 2007). Drawing on the study by Jamali and Neville (2001) and Matten and Moon (2008), this thesis presents a multi-layered institutional framework in order to identify drivers leading to CSR diversification among MNEs located in developed and developing countries. Using this framework it becomes clear that the local economic development is not the main driver for corporate behaviour.
7 2001). The social responsibility of MNEs from developing economies can be characterized as firms who care for social responsible behaviour, but integrate this less into their corporate strategies compared with developed economies (Visser, 2008). There is a need for more critical approach in order to understand to what extend MNE’s are socially responsible, what its consequences are, and its actual impact on social and environmental issues (Gugler and Shi, 2009). Moreover, the effect of institutional conditions on corporate behaviour needs attention (Campbell, 2007).
It is here that this research tries to contribute to the existing body of literature. The main question of this research addresses the issue of comparative CSR activities in developed and developing countries. An important aspect of this refers to the nature and level of institutional pressures supporting or impeding such diffusion. This leads to the following research question:
What institutional drivers effect differences in CSR activities among MNEs located in developed- and developing countries?
This paper aims first at contributing to the current knowledge and understanding of CSR, aiming at differences between CSR activities of MNEs located in developed and developing countries. In order to assess and explain these differences, the firms’ institutional environment will be taken into account. Second, the potential important role of MNE’s acting socially responsible will be analysed, given its societal orientation. The most important driver for CSR can be described as the belief that good corporate citizenship makes good business sense (Chavez, 2011).
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2.
LITERATURE REVIEW
This chapter analyses and schematizes key concepts relevant to the subject, aiming to make explicit theories and draw assumptions from previous research. The literature review starts with an introduction to Corporate Social Responsibility (CSR), including its many definitions and the historical evolution of the concept. The role of Multinational Enterprises (MNEs) within society is of key importance in this matter. Drawn on the theory by Carroll (1991), this role can be specified into four types of corporate responsibilities. Firms are not obliged to involve with social responsible activities, causing diversity in CSR performance. Two schools of thoughts enable to describe how MNEs can interpret this ‘social contract’ with society. The controversy in these ‘philosophies’ can be perceived as differences in the trade-off between social causes and financial performance. The following section covers the issue of diversification in CSR practices across countries, by taking into account the role of institutions which are represented by the National Business System (NBS). In addition, the relation with economic development will be considered when examining comparative CSR. At the end of the current chapter, a conceptual model of the study will be presented, which is built on the propositions and focal relationships. Subsequently the measurement framework, a schematized overview of the key concepts, provides a more specific overview of the core elements and its characteristics.
2.1 DEFINING CORPORATE SOCIAL RESPONSIBILITY
CSR is a complex concept both in theory and practice, which continues to evolve over time. Many definitions are made, as much has already been written. Virtually all attempts to define social responsibility of firms include the notion that firms have obligations towards society beyond their economic responsibilities to shareholders (Schwartz and Saiia, 2012).
The Council and the European Parliament both requested the Commission of the European Communities to further develop and promote their CSR policies in order to create sustainable growth, responsible business behaviour and durable employment generation in the medium and long run. The commission defines CSR as: ‘The responsibility of enterprises for their impact on society’ (European Commission, 2011: 6).
9 seems to be relatively new, the philosophy behind CSR can be traced back for many centuries (Blowfield and Frynas, 2005). Most research centres its attention on a relatively recent period, as CSR experienced a significant growth since the 1950s, which is called the modern period of CSR. Bowen (1953) acknowledged that social responsibility contains a truth, which will guide business in the future. In the 1960s, definitions of CSR started to significantly expand and were reviewed in a managerial context. These definitions included the notion that social responsibility goes beyond economic and legal obligations (Carroll, 1999). And so the concept evolved through years when in 1975 Backman - an economics professor - introduced the environmental aspects of CSR. These aspects have a much shorter history then societal factors and are now seen as an important element in the current CSR construct. During the same decade, a significant body of new governmental bodies on social legislation was established (Carroll, 1991). The 1980s can be characterized as a period with fewer original definitions, but instead introduced alternative themes and increased its research (Carroll, 1999). The role of stakeholders was acknowledged, which lead to several theoretical frameworks as for example Corporate Social Performance (CSP), stakeholder theory, and business ethics theory (Carroll, 1999). Literature on the use of resources and environmental impacts still did not fall under the field of CSR. In the 1990s CSR still had its main focus on sustainability, though the shift towards the environment restarted. The combination of social and environmental issues was consistent with the convergence of the CSR concept (Krumwiede, Hackert, Tockle and Vokurka, 2012). In terms of definitions, this period did not introduce new original descriptions (Carroll, 1999).
From a historical perspective, CSR is the latest manifestation of earlier debates on the role of businesses in society (Blowfield and Frynas, 2005). For the future Carroll (1999) expects that CSR develops on a global scale, and in new and emerging technologies, fields and commercial applications. The pressure for MNEs to comply with social responsible codes increases. And in the current challenging economic climate firms focus on their profitability, by reducing their spending, release workers, and raise fees to consumers (Chavez, 2011). Today, the most important driver for CSR is the belief that: ‘Good citizenship makes good business sense’ (Chavez, 2011: 49).
2.1.1 Three CSR models
10 composed by Carroll (1991). The pyramid (Figure 1) is hierarchically built on an economic paradigm, and consists out of four levels of responsibilities contributing to the overall CSR construct. The first and most fundamental is the ‘economic responsibility’ to be profitable. The second level is the ‘legal responsibility’ to obey the laws set forth by society. The third, which is closely linked to the second, is the ‘ethical responsibility’ to do what is right even when business is not compelled to do so by law. The fourth and apex of the pyramid is the ‘philanthropic
responsibility’, also referred to as discretionary responsibility, which best can be described as the
resources contributed by corporations toward social, educational, recreational and/or cultural purposes (Carroll, 1991; Windsor, 2006).
From a more pragmatic perspective this model tries to explain that firms should strive to be profitable, obey the law, be ethical, and to be a good citizen. Two additional models are reviewed by Geva (2008). Both models (Figure 1), the intersecting circles (IC) and the concentric circles (CON), are built on the same four elements as the pyramid. The IC model does not belief, in contrast with the CSR pyramid, in a hierarchical approach. Instead, this model argues that the four elements are interrelated and does not express its preferences of importance. According to Geva (2008), this advantage is also the main difficulty of the IC model, as it fails guiding managers to make decisions between competing responsibilities. The CON model is in line with the pyramid by arguing that profitability is the core responsibility of the firm. Though this core is embedded in, rather than separated from, the broader responsibility to the good of society (Geva, 2008). All four responsibilities are integrated with each other, and each item must be decided within the context of social improvement.
11
2.2 CORPORATE PURPOSE
From a historical point of view, companies were seen as an instrument of the government. While today, since the mid-nineteenth century, firms function independent from the state (Baskin, 2006). Though, there is an implicit contract between firms and society, or as well between the economic sector and society. There are many views and theories on the role of firms within the society, referred to as ‘corporate purposes’ (Baskin, 2006), which are mainly built on the trade-off between financial performance and social responsibility. This refers to a highly debated issue in philosophical underpinnings CSR to what extend ‘doing good’ functions as a distraction from the core business (Schwartz and Saiia, 2012). Peter Drucker (1974), a well-known CSR researcher since the 1960s, argues that a business ‘must do good in order to do right’, which indicates that ecomic performance is a necessary condition for survival. Matten and Moon (2008) agree upon this theory by stating that: ‘A socially conscious but bankrupt business is no good to
anyone’. The trade-off between financial performance and social responsibility can be specified into two general thoughts, categorized into a narrow- and broad view (Schwartz and Saiia 2012). First, the narrow view is represented by a Nobel prize-winning economist Milton Friedman. His view on CSR is important, due to a famous article published in the New York Times Magazine (Friedman, 1970). This article summarizes his contractarian view on the responsibility of business in society. Friedman argues that the only and most important responsibility of firms is to maximize profits and increase shareholders’ wealth, while conforming to the rules and regulations of the local society (Beurden and Gössling, 2008; Schwartz and Saiia, 2012). Firms can be socially responsible, only if it maximizes shareholder wealth (Campbell, 2007). This indicates that making profit takes precedence over CSR, but does not function under all conditions. Rules and regulations refer to the issue that firms should abide to the law, should not involve with deception and fraud, and should comply with ethical standards (Schwartz and Saiia, 2012).
12 firm does not respond to their philanthropic obligation, they are still characterized as broad CSR if they have additional ethical obligations beyond Friedman’s. In other words, if a firm is not fully and consistently in line with all elements of Friedman’s view, they should be considered as broad CSR (Schwartz and Saiia, 2012).
2.2.1 CSR reporting/ disclosure
Linear with the growing interest in the CSR construct, interest rises on how firms report their CSR activities. Since the 1990s more firms started to voluntarily report their social and environmental practices, by providing information on for example their policies, progress and results. This resulted in a high variety in reports, with differences in definitions and indicators, length, approach, scope and debt of accountability (Kolk, 2010; Fortanier, Kolk and Pinkse, 2011). The lack of a common understanding on CSR reporting makes it difficult for firms to develop consistent strategies, which causes inconsistency in communication strategies (Nielsen and Thomsen, 2007). Reports can therefore have a narrow focus on environmental disclosure, or can be fully integrated on the environmental, social and economic dimensions of CSR. The latter refers to the triple bottom line reporting. The idea behind the triple bottom line includes that firms are not solely judged based on their financial performance, but also on how firms perform when taking social and environmental issues into account (Elkington, 2004). Though, firms cannot encounter the value of CSR reporting, since the performance of CSR is hard to measure and possibly involves high costs. In fact, a study by Hutton, Goodman, Alexander, and Genest (2001) indicated that expenses on communicating CSR are ranked third in the budgets of communication departments in big corporations.
13 CSR activities in their annual reports, and determined that institutional pressures influence the adoption of CSR reporting practices.
When examining differences among CSR reporting, the country of origin effect should be taken into account. Within the international business field, much research has been done regarding CSR reporting in a cross-national context. This effect can be explained as: ‘The impact
of a country’s physical and human resources and political institutions, as well as culturally based characteristics’ on the competitive position of a firm from this particular country
(Fortanier, Kolk and Pinkse, 2011: 667). In several European countries, as for example Denmark, governments and legislators recommend firms to be transparent, and to report on their social and environmental activities (Nielsen and Thomsen, 2007).
2.3 COMPARATIVE CSR
The recent worldwide adoption of CSR policies and strategies can be interpreted as a result of globalization (Matten and Moon, 2008). The 1950s and 1960s were dominated by the
‘convergence theory’, at least in Europe and the United States (US), including the perception that management practices are universal and homogeneous. One used to believe that when applying the same management practices all over the world, this would even turn developing countries into rich and developed economies (Hofstede, 1983; Jamali and Neville, 2011). Nevertheless, in the 1970s researchers started to recognize the unreal nature of this theory, as firms remained contextualized by their national culture and local institutions (Jamali, 2008; Matten and Moon, 2008). This ‘divergence theory’ suggests that management practices and business systems are adapted to a country’s historical, cultural, economic, and political context (Jamali and Neville, 2011). Therefore it can be stated that differences in CSR activities are part of the debate on convergence versus divergence management practices (Matten and Moon, 2008; Jamali and Neville, 2011).
14 state. Over time, societies have developed different systems of markets, which potentially explain the variety in CSR activities.
2.3.1 Institutional context as an analytical framework
Institutions can both constrain and support corporate actions (Campbell, 2007; Jamali and Neville, 2011). But instead of suggesting that CSR activities are solely a reaction to institutional pressures, institutional theory highlights relevant questions about how organizations are shaped, mediated and channelled by the institutional environment (Jamali and Neville, 2011). Organizational questions in this thesis refer to the social responsible activities of multinational firms. Additionally, institutional theory presents a framework enabling a clear concept of the role and place of CSR in the economy and society (Polishchuk, 2009). Today, MNEs are exposed to both local and global institutional pressures. This thesis solely draws on local pressures from the parent country. The capacity of the state in order to monitor corporate behaviour and to enforce regulation, contribute to these institutional pressures (Jamali and Neville, 2011). According to Campbell (2007) it can be assumed that states do not always execute this process effectively. Organizations can react to these regulations on a reactive or proactive basis. The choice in this matter contributes to the variety in CSR strategies among countries (Özen and Küskü, 2008).
15 are part of the ‘new institutionalism’. This means that when organizational practices become institutionalized, they are considered legitimate (Tempel and Walgenbach, 2007).
A third pressure refers to the internal generation of firm policies and practices (Husted and Allen, 2006). Routines which are developed for specific challenges can cause internal reproduction. These routines are often adopted in order to reduce searching costs. Nevertheless, basic structures that are imprinted on new organizations tend to resist change over time. Although this stability may reduce costs, it can also reduce ‘effectiveness if more efficient ways
of organizing are ignored’ (Husted and Allen, 2006: 842).
Institutions can be described as humanly devised constraints that structure human interaction, and are able to influence economic performance (North, 1994). The role of institutions is important, as they should guide firms in developing and performing their CSR activities. Institutions enable predictable and patterned interactions that are stable, constrain individual behaviour, and are associated with shared values (Matten and Moon, 2008).
Recent institutional theories highlight the global spread of CSR and acknowledge its social contextualization (Matten and Moon, 2008). Drawing on research by Jamali and Neville (2011) and Matten and Moon (2008), CSR practices are to be analysed in the context of historically grown institutional frameworks, shaping the National Business System. These systems, referred to as NBS, are built on cultural, educational and labour, political, and financial institutions. Whitley (1994) believes that firms are economic actors influenced by several environmental issues, which mainly stem from the nation in which the firm is operating. Additional influences are driven by the local environment from the parent country, and international institutions. Differences in large institutions generate significant variations in how firms and markets are structured and operate (Whitley, 1994). These institutional domains and the varying NBSs are fundamental for understanding cross-national differences in the nature and drivers of CSR (Jamali and Neville, 2011). Differences in NBS create a divergence in CSR management practices among countries (Jamali and Neville, 2011; Whitley 1994). This rejects the convergence theory, which is according to Matten and Moon (2008), driven by global institutional pressures. Jamali and Neville (2011: 617) agree upon this, but also argue that ‘convergence is not necessarily substantive and that the implicit CSR interpretations of local
16 2.3.2 Mutual relationship between institutions and economic development
A well debated topic within the international business literature deals with the role of institutions on economic development. Institutions, both formal; norms of behaviour, and informal; laws and rules, develop and diversify through time (North, 1994; Polishchuck, 2009), as MNEs co-evolve with these changes causing an unpredictable environment (Cantwell, Dunning and Lundan, 2010). Diversity in institutions can therefore, according to Khalil (2010), explain the differences in economic development among countries. The relationship between institutions and economic development is a rather complex one, as to a certain extent the level of economic development also influences institutions. According to Polishchuck (2009) the choice of an institution depends on its relative advantage, which is determined by the level of economic development. This causal relationship falls outside the scope of this research, and is therefore subject to further research.
2.3.3 Economic development on CSR
A commonly held believe on firms from developing economies includes that they are environmental polluters, because they do not face the same institutional pressures as firms from developed countries, nor do they have adequate resources to change this behaviour (Özen and Küskü, 2008). More specifically this means that a low economic development reduces the probability of MNEs engaging with CSR (Campbell, 2007). This is in line with the research by Visser (2008), who states that CSR practices of MNEs in developing economies can be characterized as less embedded in corporate strategies and less politically rooted than in most developed countries. Consequently this responsibility is extensive, but less formalized and philanthropic oriented (Jamali and Neville, 2011). Firms operating in developing economies are more exposed to cultural and religious values of the parent country. When the environment suffers for example from high inflation rates, low productivity growth, and a weak consumer confidence, the probability to behave socially responsible is respectively low (Campbell, 2007).
17 Built on this theory about the influence of economic development on CSR, the following proposition is formulated:
Proposition 1. MNEs headquartered in a developing environment, as opposed to a developed environment, are less likely to act socially responsible.
2.3.4 Institutions and CSR
Matten and Moon (2008) argue that differences in CSR activities among countries are generated by a variety of longstanding and historically entrenched institutions. Campbell (2007) agrees upon this theory, but also recognizes that institutions are not the only argument causing differences in socially responsible corporate behaviour. Institutions are not static, as they are influenced by dynamic pressures causing the institutional environment to change over time (Campbell, 2007). Differences between institutions result in varying structures and operations of firms and industries (Whitley, 1994). Institutions can induce managers to behave in certain ways, by using positive incentives, rewards and other mechanisms. This ‘mental mind-set’ of managers is an important indicator of how the firms and markets are perceived. Firms strive to act in ways that are deemed appropriate by other firms and the environment (Campbell, 2007).
Institutional pressures have been recognized to have a strong impact on social corporate behaviour. The quality of institutions depends on its design, including the presence of regulations and the capacity of the state to monitor corporate behaviour (Campbell, 2007). When institutions initiate strong and well enforced regulations, firms are more likely to act socially responsible. But within the context of this assumption, one must acknowledge that firms from developing countries experience relatively low institutional pressures (Özen and Küskü, 2008).
Drawing on the study performed by Matten and Moon (2008), institutional frameworks shape National Business Systems. The NBS approach enables to explain differences in CSR practices, shaping the institutional environment. This leads to the following proposition:
18 P1
P2 2.4 CONCEPTUAL MODEL
The conceptual model (Figure 1) illustrates the objective of this study and summarizes the focal relationships outlined in previous sections. CSR activities of MNEs differ on a cross-national basis. The model is built on three elements, which are central to the research. First, drivers for this diversification can be assigned to the local economy of a country. In general, previous research indicated that firms from developing countries are less involved with social responsibility, compared with firms from developed environments. Second driver refers to the institutional framework of the parent country. Institutions, represented by its National Business System (NBS), are responsible for guiding firms and industries in their activities, by in this case supporting social causes. A third relationship between institutions and economic development is acknowledged, but falls outside the scope of this research. Moreover, the two propositions (indicated as P1 and P2) are central to the analysis.
FIGURE 2. Conceptual model
Organizational field
The local economy
MNE
CSR activitiesDeveloped country
Developing country
Historically grown national institutional
framework
19 2.5 MEASUREMENT FRAMEWORK OF THE KEY CONCEPTS
The following framework presents specific elements drawn from the theoretical framework. It summarizes and frames the core concepts on which the analysis is built.
TABLE 1. Measurement framework
ELEMENTS CHARACTISTICS O R G . F IE L D Isomorphic
pressures (Jamali and Neville, 2011)
Mimic isomorphism Adopting recognized best practices and managerial fads
Normative isomorphism
Aligning with standards set by educational of professional authorities
Coercive isomorphism Complying with codified rules, norms or laws C S R A C T IV IT IE S CSR responsibilities (Carroll, 1991) Philanthropic responsibilities
Contribute to a firms resources to the community and the aim to improve the quality of life
Ethical responsibilities The obligation to do what is right, just and fair, by avoiding harm
Legal responsibilities Law is society’s codification of right and wrong, firms should abide to the law
Economic responsibilities
Making profit is the basic responsibility on which all other rests CSR perception
(Schwartz and Saiia, 2012)
Broad Firms should go beyond profit and respond to ethical/ philanthropic responsibilities
Narrow The only and most important
20 The framework is categorized into three core concepts, drawn from the literature review: the organizational field, CSR activities, and the institutional context. These concepts, including its elements and characteristics, will be reviewed during the analysis. The features of CSR will be explored by comparing the CSR activities performed by MNEs in the context of economic development and institutional pressures, represented by the NBS. The above framework functions as a hand-over for the obtained company information.
CSR reporting (Fortanier, Kolkse and Pinkse, 2011)
Country of origin effect The impact of a country’s physical and human resources and political institutions, as well as culturally based characteristics
Social disclosure CSR reporting can be fully integrated when taking all three dimensions into account Environmental disclosure Economic disclosure IN S T IT U T IO N A L C O N T E X T Economic development (UNCTAD)
Developed country Country with a high economic growth and protection
Developing country Low economic growth, weak institutions and poor governance systems
Institutional framework
represented by NBSs (Whitley, 1994)
Political system These institutions affect the nature and structure of National Business Systems by affecting the ways in which firms and other actors engage in economic activities.
Cultural system Financial system
21
3. DATA AND METHODOLOGY
This chapter elaborates on the research methods that are used in order to address the research question and perform the analysis. It discusses how the formation of the case selection took place, and explains how the collected data is measured and translated into results.
3.1 RESEARCH DESIGN
The aim of the study is to improve the current understanding of CSR, and to analyse drivers causing differences in socially responsible activities of MNEs across countries. In accordance with Matten and Moon (2008), this research relied on the notion that MNEs face severe institutional pressures, increasing the complexity and causing a variety in CSR. This complexity increases with the level of multinationality, due to institutional duality from home and host country pressures (Jamali and Neville, 2011). Since institutions have a causal relationship with economic development, these differences in CSR are amplified by the local economic development of MNEs (Khalil, 2010; Visser, 2008).
Due to the exploratory nature of the analysis, a case study was deemed useful. A case study enables to examine phenomena within the relevant context instead of outside the context (Gibbert, Ruigrok and Wicki, 2008). Subsequently, it provided a systematic way of generating and testing theory and reporting on the findings. This method compensates for a lack of established theory or inadequate constructs by collecting theories on CSR and reducing them into summary statements (Thomas, 2005). Therefore patterns in qualitative data have been traditionally presented in a narrative form (Gibbert, Ruigrok and Wicki, 2008). This approach enables gaining a better understanding of CSR interpretation set within an institutional context. Though, limitations of the case study method refer to the problem of generalizability. The current case is built on four MNEs, of which critics might argue the reliability (Thomas, 2005).
22 by the National Business System (NBS), and the economic development. A comparative study between those variables respectively representing MNEs’ CSR activities, and the local economic development enabled to indicate the direction between these relationships.
3.2 CASE SELECTION
The organizational field is determined as an influential driver for firms to act socially responsible (Campbell, 2007). Therefore, the case selection was determined to include four multinational firms from two different industries with varying affinities regarding CSR. This approach enabled to increase the reliability and decrease the probability of biased results. Firms which are closely involved with social responsibility throughout the entire production process are from the materials industry. Two MNEs were selected from a developed and developing economy: Tata
Steel India and Anglo American UK. Tata Steel operates within the industrial metals & mining (#1750) sector specialized in iron and steel. These are producers of primary iron and steel products such as pipes, wires, sheets and bars, encompassing all processes from smelting in blast furnaces to rolling mills and foundries (ICB, accessed 24/05/2012: 1). Anglo American is specialized in platinum, and produces also diamonds, copper, nickel, iron ore and metallurgical and thermal coal. Therefore this firm can be classified in both the industrial metals & mining (#1750), and mining (#1770) sector. Organizations with lower associations with social responsibility stem from the financial sector (Jeucken, 2001). Two multinational banks were selected to represent this industry: State Group of India Banking and Standard Chartered Group
UK. Both companies operate in the banking (#8350) sector, providing a broad range of financial services including retail banking, loans and money transmissions (ICB, accessed 24/05/2012: 5)
In addition to influences stemming from the organizational field, this research also takes into account differences between institutions located in developed and developing economies. Tata Steel and the State Group of India Banking, both located in India, represent the developing economy. India has a long tradition of paternalistic philanthropy. Big family-owned firms are particularly active in providing basic services, such as schools and health care, for local communities. Anglo American and Standard Chartered Group UK are headquartered in the United Kingdom, a country famous for its innovations in CSR practices.
23 Chartered Group represent one of the countries’ largest banks (respectively number 345 and 138). The selected countries were based on the United Nations Conference on Trade and Development (UNCTAD). This organization promotes development-friendly integration of developing countries into the world economy, and makes a clear distinction between developed and developing countries (UNCTAD, accessed 20/03/2012).
3.3 DATA ANALYSIS
The analysis, built on two Indian and two British firms, was categorized in threefold. First, influences from the organizational field were determined. Second, the firms are analyzed according CSR responsibilities, CSR perception, and CSR reporting. The third part explored the local environment of the companies, as part of the institutional analysis which is built on four pillars contributing to the NBS: cultural, educational and labour, political and financial systems (Jamali and Neville, 2011). This enabled to present a relevant contextual background on corporate decision making.
The three subdivisions are also highlighted in the measurement framework, which functions as a guideline for the analysis. The elements constitute to the analysis, in drawing an overview of the firms´ CSR activities and the local institutions, including their mutual relationships.
24
4.
ANALYSIS
The analysis functions as input for testing the propositions that are formulated in the literature review, and visualized in the conceptual model. Four companies from two different industries will be analysed in order to shed light on their CSR activities. The measurement framework, including its key concepts, is central to the analysis and integrated with the industry-, company-, and country information. First, the organization field is described by exploring the mining and banking industry in the context of their CSR history. Second, the four MNEs are analyzed according to their CSR responsibilities, perception, and reporting practices. Third, the National Business Systems (NBSs) approach will be performed for the two focal countries: India and the United Kingdom.
4.1 CASE DESCRIPTION MINING INDUSTRY AND BANKING SECTOR
Industries often develop their own regulations to ensure fair practices, quality, workplace safety, and by developing regulations for involved actors (Campbell, 2007). Therefore the organizational field functions as a strong indicator for firms engaging with social responsible activities. The multinational firms, selected for the case study, operate within the basic materials
industry and the financials industry (ICB, accessed 24/05/2012). This ordination is based on the
Industry Classification Benchmark (ICB), which is an industry classification taxonomy developed by Dow Jones and Financial Times Stock Exchange (FTSE). It is used to segregate markets into sectors within the macro economy.
4.1.1 Mining industry
25 mining industry is becoming aware of their social and environmental responsibilities, as firms are getting responsive to emerging global normative shifts and dynamics (Dashwood, 2012). For mining companies, CSR is about the trade-off between the diverse demands of communities and the necessity to protect the environment, with the continuing need to increase the financial performance (Jenkins and Obara, 2006). Frynas (2005) distinguishes four drivers indicating why mining companies engage with CSR. These drivers include gaining competitive advantage, create and maintain a stable working environment, build a good reputation, and keeping its employees satisfied.
CSR activities of mining companies have the tendency to focus on community initiatives, because mining has a significant effect on the local population (Jenkins and Obara, 2006; Kapelus, 2006). This refers to the philanthropic responsibility of a firm by contributing resources to the community in order to improve it quality (Carroll, 1991). To some extent, communities have always played a role to the mining industry and represent the local culture.
According to Jenkins and Yakovleva (2006) there is an increasing need for mining firms to justify their existence and report on their performance through the disclosure of information about social and environmental performance, health and safety issues and ethics. Although the level of CSR disclosure in annual reports is increasing, firms still report on a general level and are qualitative oriented. An interesting trend refers to the increasing number of firms who publish stand-alone sustainability reports, in order to communicate their environmental performance. This trend started, for the mining industry, to develop since the 1990s. Today, the industry is moving towards a leadership position in terms of CSR reporting (Jenkins and Yakovleva, 2006).
4.1.2 Banking sector
26 social responsible business activities (Jothi, 2010), as CSR has become an integral part of corporate strategies for banks.
The financial industry is traditionally known for its relatively low impact on the environment, although its overall size makes bank influential (Jeucken and Bouma, 1999). This indicates that banks themselves do not generate environmental and social impact. Though their impact on employment and periodically through the massive restructuring and mass redundancies suggests otherwise (Herzig and Matten, 2011). Banks translate CSR into their philanthropic responsibility to members of their communities, in terms of employee volunteering, mentoring, and sponsorship of local activities, and continuing commitment to CSR activities (Harzig and Moon, 2011). Actors in the financial sector are also recognized for being prominent members of collective CSR associations, assisting banks to improve their internal processes on society and the environment. These activities refer to direct impacts on the society and the environment. However, the financial sector has received much attention because of its actual and potential role to influence, and being influenced by, the indirect impacts of the environmental and social activities of its clients (Harzig and Matten, 2011).
27 TABLE 2. Organizational fields
ORGANIZATIONAL FIELD Mining industry Banking sector Isomorphic pressures Mimic + + Normative ++ ++ Coercive + + CSR evolution Impact ++ -- Reputation -- + CSR responsibility Philanthropic + ++ Ethical - + Legal - + Economic + +
CSR disclosure Reporting intensity + -
Rating system: + + high + mid-high - mid-low - - low
4.2 COMPANY PROFILES
From both industries, two companies are selected to represent the case analyses. With backgrounds from different economies. The selected firms headquartered in India are: Tata Steel and State Bank of India. Firms from the United Kingdom (UK) are: Anglo American and Standard Chartered Bank.
4.2.1 Company profile Tata Steel
28 community which is created around an industry, by development in water and electricity, education and basic infrastructure (AR Tata Steel, 24/05/2012).
Tata Steel is well known for its social consciousness, which can be accredited to the vision of founder Jamsetji Nusserwanji Tata (1839-1904). Tata had a clear vision in mind as he was more concerned with the society, then with the idea of creating wealth (Singh, 2008). J.N Tata set out to lay the foundations of a modern manufacturing-based economy in India. This was very innovative since the country distracted its wealth from the agricultural commodities that India was famous for. The philosophy was that society is not just another stakeholder, but the main purpose of business. This refers to the broad view of social responsibility, including the belief that a corporate purpose goes beyond making profit (Baskin, 2006; Schwartz and Saiia, 2012). This perception was ultimately translated into an official policy statement: ‘Tata Steel
believes that the primary purpose of a business is to improve the quality of life of people. It will volunteer its resources, to the extent it can reasonably afford, to sustain and improve the environment, and the quality of life of the people of the areas in which it operates’ (Singh, 2008: 24). Tata followed his vision and succeeded in giving India its first integrated steel plant (current: Tata Steel), its first power generating company (current: Tata Power), and its finest technical institute (current: the Indian Institute of Science in Bangalore).
Up to now Tata Steel achieved pioneering initiatives in steelmaking, responsible industrialization with minimal impact on the environment, and the social-economic empowerment of the community. The firm complies with systems in order to meet international standards for environmental management. For Tata Steel CSR is not just a policy, but a value integrated in the system through years. The firm believes that good citizenship does not negatively influence business performance, but support each other through good times and bad. In contrast with Carroll’s CSR pyramid, Tata Steel does not believe that philanthropic, ethical, and legal responsibilities rest on economic achievements. The firm is committed to all four layers, but does not approach it from a hierarchical perspective.
29 actions on sustainability and corporate citizenship, and how the environment, employees, business, and the community were affected.
Tata Steel commissioned a ‘Health, Safety and Environment Committee’, who develop policies in order to improve working conditions. Tata Steel is also committed to the environment and aims at being part of the solution to issues such as ‘climate change’. The firm has a reputation of taking good care of their employees, which was recognized by The World Steel Association. Much of the initiatives from Tata Steel to guarantee health and safety for its employees were adopted by the Indian legislation (Singh, 2008). The high focus on employees paid off, as Tata Steel for example has a record of 75 years of industrial harmony – a working period without strikes. This is rather exceptional, as the local region is famous for volatile trade unions and violent strikes (Singh, 2008). Besides taking care of its employees, Tata Steel also focuses projects on the health and welfare of the local communities.
4.2.2 Company profile Anglo American
Anglo American is a diversified British mining group headquartered in London, the United Kingdom. Their portfolio contains precious metals, base metals, and bulk commodities. Anglo American enjoys a strong market position, and is categorized as number four of the largest mining companies in the world, with over 150.000 employees (Carroll, 2012). The operations of the firm are situated for approximately 90% in developing environments, including Africa, Asia, Australia, Europe, North America and South America (Datamonitor, 2010).
In 1917 Anglo American was found, as a gold mining company, in South Africa (Anglo American, accessed 19/06/2012). Ernest Oppenheimer, the founder, managed the Anglo American, together with his second company ‘De Beer’, specialized in diamonds. In 1957 he passed away and was succeeded by his son Harry Oppenheimer, who worked for 25 years as the chairman of Anglo American (Fuhrman, 1991). Oppenheimer had ambitious thoughts, and believed that Anglo American could lift Africa out of poverty, charity and bureaucratism (Fuhrman, 1991).
30 the company's mines (Datamonitor, 2010; Carroll, 2012). Anglo American has not yet attained its targeted goal of zero harm, which restrains their image within the mining industry as pressures regarding sustainability are increasing (Jenkins, 2004). Anglo American wants to be part of the poverty solution, and believes they can support this by improving health and welfare.
Anglo American is a member of the World Business Council for Sustainable Development, an organization who guides firms to operate sustainable, and manage the social aspects of the operations. However, safety, health, and environmental laws could adversely affect the company’s financial position and future performance. Their commitment with CSR is reflected in the following statement on corporate responsibility (Business case studies, accessed 25/05/2012): ‘Though providing strong returns for our shareholders remains our prime
objective, we do not believe that these can or should be achieved at the expense of social, environmental and moral considerations. Indeed a long-term business such as ours will only thrive if it also takes into account the needs of other stakeholders such as governments, employees, suppliers, communities and customers’. This statement indicates that Anglo American aims at running a healthy business. But in terms of profit maximization the firms does not want to operate at the expense of their social responsibility, which refers to the broad perspective of CSR (Schwartz and Saiia, 2012). In the context of CSR responsibilities by Carroll (1991), Anglo American tries to confirm with every aspect.
In the annual report of Anglo American, social responsibility or sustainability is not included. Instead the firm publishes sustainable development report on a yearly basis, referred to as a ‘stand-alone report’. In this report the firm distinguishes their CSR activities into three main areas; people, society, and the environment.
31 programme, as Anglo American built new villages with better houses and infrastructure and more land for farming. This example indicates the possible impact of mining operation on people and society. Additionally, these operations also affect the environment. The increasing demand for limited natural resources forces firms to manage its operation with limited impact on the environment. Anglo American highlights four elements: water, climate change and energy, biodiversity and land stewardship, and waste and air quality.
4.2.3 Company profile State Bank of India (SBI)
State Bank of India (SBI) is ranked as the largest commercial state-owned bank, providing financial services in India. SBI is perceived as one of the largest financials institutions worldwide. It operates with 14 local head offices, 157 foreign offices, spread over 32 countries.
In the early 19th century, the firm was founded as the Bank of Calcutta. In 1951 India launched a ‘five-year plan’, with the aim to serve, in particular the rural, Indian economy. Before, commercial banks solely focused on the urban sector and were not able to respond tot the economic rise in the rural areas. To overcome this problem, the All India Rural Credit Survey Committee initiated the formation of a state-sponsored bank. In 1955 the State Bank of India was born, with a quarter of its resources controlled by the State. Additionally the government owns nearly 60 percent stake in the bank. The Indian Act enabled SBI to serve the variety of financial needs of the planned economic development. This resulted in a significant development within the rural areas, by for example modernizing the agriculture industry and increasing India’s infrastructure. As a corporate citizen SBI acknowledges its potential influence, created through its size, on the society and environment in terms of responsibility.
CSR is deeply rooted within the SBI, and through an intensive partnership with the Community Service Banking they are involved with a variety of environmental, welfare and socially sustainable projects. These projects mainly focus on educational institutions, the protection of culture and traditions, and are expressed in philanthropic donations. A recent article (The Hindu, accessed 20/07/2012) reports that SBI donates one percent of their annual profits on social and environmental initiatives in order to benefit the local community. According to SBI, companies owe their existence, because of the existence of society. From that perspective, SBI aims at contributing to sustainable development. The firm believes that: ‘honest business will be
32 The annual report (SBI AR, 2010-2011) emphasizes on the development of the community, mainly on disadvantaged population. This report sets out several initiatives undertaken in that year, ranging from child development to entrepreneur development programmes. Built on this information it can be concluded that IBS as a bank does not have a significant impact on the environment, but with is power is able to leave a footprint. In terms of the CSR pillars by Carroll (1991) IBS mainly concentrates on philanthropic responsibilities, but also fulfil their ethical, legal, and economic responsibilities. There is no stand-alone report on their CSR practices.
4.2.4 Company profile Standard Chartered Bank
Standard Chartered Bank (SCB) is a British company, headquartered in London, specialized in banking and financial services. The firm is listed on the London Stock Exchange and the Hong Kong Stock Exchange, and is consistently ranked in the top 25 among FTSE 100 companies by market capitalisation (SCB introduction, accessed 02/08/2012). Very international with operation in more than 70 markets, and 87000 employees.
Standard Chartered dates back to 1969 when two companies merged: the Chartered Bank of India, Australia, and China, founded in 1853, and the Standard Bank of British South Africa which was found in 1862. The merge aimed at increasing its foreign trading activity. From the 1990s SCB focused on access to emerging markets, enabled by its operations in the UK and North America.
Similar to the State Bank of India, Standard Chartered acknowledges their responsibility as a corporate citizen. The bank emphasizes on environmental, social and economic challenges faced by their communities. Current CEO Peter Sands repeatedly states that ‘SCB has a
responsibility to positively shape the communities in which it serves’, which are mainly located
in emerging markets (Anderson and Longenbach, 2010). The firm believes the in the responsibility of making profit, but do not want to achieve this at the expense of their principles.
33 TABLE 3. CSR of the companies
COMPANIES
MINING INDUSTRY BANKING SECTOR Tata Steel AA SBI SCB CSR responsibility Philanthropic + + + + Ethical + + + + Legal + + + + Economic + + + + CSR perception Broad + + + + Narrow - - - - CSR disclosure Social + + + + Environmental + + - + Economic - - - +
Rating system: ++ high + mid-high - mid-low - low
4.3 NATIONAL BUSINESS SYSTEMS UK AND INDIA
This study relies on the theory that institutional arrangements and social processes matter in the formulation of organizational operations. In particular multinational firms are confronted with a multitude of institutional pressures, stemming from both the parent and host environment (Jamali and Neville, 2011). The focus of this study solely relies on parent country institutional pressures, but acknowledges the convergence in corporate strategy and behaviour. The institutional environment is shaped by the countries’ National Business System (NBS), including cultural, educational and labour, political, and financial systems (Whitley, 1994). Cultural institutions can be analysed according the five dimensions by Hofstede (1983). This research solely focuses on the three most relevant pillars on which the focal countries, UK and India, significantly differ: power distance, individualism and long term orientation.
34 MNEs’ CSR activities. The NBS framework developed by Whitley (1994) will be used in order to assess the characteristics and consequences of Indian and UK business systems.
Since the National Business Systems of the UK and India will be analysed, one must consider colonial influences which might bias the results. The institutional system is created by former colonies, in response to the environment, also last after colonisation. Therefore Easterly and Levine (2003) argue that many countries’ institutions were shaped during colonization. The so-called ‘AJR theory’ confirms this theory by stressing that institutions created by European colonizers endured after independence (Acemoglu, Johnson and Robinson, 2001). Following this theory, it might be argued that the institutions of India are still slightly adjusted to the UK system. There are still British influences in terms of for example language, culture, and legal systems in its former colonies, which might have benefited the Indian business system to a certain extent.
4.3.1 Indian business system
India, officially referred to as Republic India, is a country located in South-Asia. It counts over a one billion residents, of which 40 percent is youth. From 1858 India was governed by the British government, but in 1947 the country became independent and democratic. According to Chapple and Moon (2005), the CSR approach of India is built on long-standing, religiously derived philanthropic traditions, which are significantly influenced by its ‘culture’. India is a highly cultural diversified country in terms of language, caste and religion, which makes it difficult to generalize their culture. The caste system is rooted in their traditions and was a major cultural factor in Indian life. Hofstede (1983) agrees upon this, and concludes that these systems lead to a high level of power distance. In spite of these large inequalities, Indian culture can be characterized as collectivistic (Hofstede, 1983), which means that the people have strong affinity with their society. This society is dominated by the concept of karma, and can be described as pragmatic. In terms of the five dimensions India is long term oriented, which refers to societies who are not punctual, are flexible [Hofstede, accessed 21/06/2012].
35 thirty five. India has the most 15 – 21 year old citizens of any country. Within this group, there is a relative improvement in literacy and an open mind-set stronger, with a broad acceptance of entrepreneurial values. Fifty percent of the adult population in India is currently self-employed and can be called micro-entrepreneurs. Though, the development of high productive talent remains, due the late development processes and their strong historical union activities (Grainger and Chatterjee, 2007).
After interdependency in 1947 India’s ‘political situation’ improved, shaped by the British parliamentary system. India became democratically governed and had a relatively liberal polity since independence (Chapple and Moon, 2005). Government controls were also evident in media, education, health services, and many other spheres. Foreign investment in India was highly restrictive until 1991 when an ideological shift towards market culture signalled the beginning of economic liberalisation (Ahluwalia, 2002). Before this shift, India relied on domestic resources, while new policies created better access tom imports of technology, machinery, equipment, and intermediate inputs to modernize the Indian industry.
India experienced by gradual changes a significant ‘economic growth’ since the early 1980s. The state controlled economic system before resulted in a low economic growth of 3.5 percent. The market-based system, introduced in 1991, gave rise to significant economic improvements with a growth rate around 6 percent (Ahluwalia, 2002). A revival of economic reforms and better economic policies in 2000s accelerated India’s economic growth rate to approximately 8 percent. By 2008, India had established herself as the world’s second-fastest growing major economy. For further economic growth the country struggles with three fundamental barriers: lack of infrastructure, bureaucratic obstacles, and environmental degradations.
4.3.2 The United Kingdom’s business system
36 accessed 21/06/2012) means that the country has respect for history and traditions as well as a focus on quick results in the future. For firms this means that they tend to focus on short term goals aiming at quick results.
The British system regarding ‘labour’ and employment is relatively distinctive from the European system. ‘Education’ in the United Kingdom is governed by four different systems, and therefore differs per county. The education in England is overseen by the Department for Education.
The country operates with a highly stable democratic system. This is remarkable since the government is based on an unwritten constitution. Additionally, a complicated voting system the selected government almost never is based on the majority of voters. The UK is part of the European Union (EU), but does not engage with the European Monetary Union (EMU), which indicates their need to operate with an independent political system. The UK is a monarchy, since 1917 referred to as House of Windsor. The executive power is held by the Queen on behalf of the Prime Minister and other ministers in his cabinet. The monarch has no ‘political
responsibility’, in order to symbolize the unity and continuity of the state.
37 TABLE 4. Country analysis
COUNTRY India UK Economic development Developing + - Developed - + Institutional framework (NBS)
Culture - Philanthropic traditions - Cultural diversified - High power distance - Collectivistic - Long term oriented
- Low power distance - Individualistic - Short term oriented Education and labour system +/- ++ Political system - Democratic government - Liberal state - Democratic government - Monarchy - EU Financial system
- Market-based system - Stable economic system
38
5.
DISCUSSION AND CONCLUSIONS
This chapter critically reviews and compares findings from the analysis with previous presented theories. Subsequently, answers will be given to the formulated propositions and focal research question. The limitations of the findings are provided including suggestions for future research.
5.1 DISCUSSION OF THE PROPOSITIONS
CSR theories proposed in the literature review and the institutional framework provide suggestions on how the characteristics prevalent in the NBSs of India and the UK might influence CSR activities. From the analysis it appears that the ethical approach to CSR is engaged with many business aspects. These aspects are well argued in previous literature, including a great variety in responsibility perceptions and conclusions. This thesis argues that social responsibility refers to the role of organizations in society, which can be approximated by two schools of thoughts highlighting the trade-off between social responsibility and profit maximization; broad and narrow CSR. The case analysis, built on both the mining industry and banking sector, shows that there is a strong correlation between the organizational field and corporate behaviour. The mining and banking sector are two diverse industries, with contrary thoughts and impact on the environment. This means that the industry forces isomorphic pressures on mining companies. All four firms, Tata Steel, Anglo American, State Bank of India, and Chartered Bank confirm the broad view of CSR, and do not operate at the expense of social and environmental causes, in order to achieve profit maximization. The answers to the propositions that contribute to answering the research question are the following.
Proposition 1. MNEs operating in a developing environment, as opposed to a developed environment, are less likely to act socially responsible.
