The Effects of National Culture on
Corporate Social Performance
MSc International Business & Management
18
thJune 2018
Master Thesis
Tommaso Carnevali Supervisor: dr. C.H. Slager
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Abstract
The present research builds on institutional theory and the business literature that analyzes the effects of culture on CSR outcomes. A limited number of studies have addressed how differences in institutional settings determine a different approach towards the implementation CSR practices. We aim to fill this gap relying on the GLOBE framework (House et al., 2004), to measure the following cultural dimensions: collectivism, power distance and performance orientation. Using a sample of 4957 firms from 42 countries, we obtained data about CSP from the Thomson Reuters ASSET4 and used OLS to test the hypotheses. The findings contribute to the international business research which focuses on the role of informal institution in shaping the behavior of companies and provide a possible explanation for the observed CSP heterogeneity across firms. For policy makers and corporate managers, this study provides them with further elements useful to tailor different CSR strategies to specific cultural context.
Keywords: CSR; Corporate Social Performance; Institutional Theory; Cross-National; Culture;
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Table of Contents
Introduction ………6
1. Literature Review………8
1.1 Corporate Social Performance Model………...8
1.2 CSP and Institutions………13
1.2.1 Institutional Theory……….13
1.2.2 National Business Systems (NBS)………..14
1.3 Cultural System………...16 1.3.1 GLOBE Project………...17 1.4 Hypotheses Development ………..17 1.4.1 Collectivism………18 1.4.2 Power Distance………...……19 1.4.3 Performance Orientation………...……..20 1.5 Conceptual Model………...21 2. Methodology……….22 2.1 Variables………..22 2.2.1 Dependent Variable – CSP……….22
2.2.2 Independent Variables – Cultural Dimensions………...24
2.2.3 Control Variables………24
2.2 Data and Sample……….26
3. Results………...29
3.1 Descriptive Statistics………...29
3.2 Correlation………..31
3.3 Regression Analysis Results………...32
4. Discussion……….38
5. Concluding Remarks………42
5.1 Theoretical Implications……….42
5.2 Managerial Implications……….43
5.3 Limitations and Future Research………44
References……….47
5
List of Figures
Figure 1: Carroll (1979) Corporate Social Performance Model………...…..9
Figure 2: Wood (1991) Corporate Social Performance Model (Wood, 2010)………..12
Figure 3: Research Conceptual Model………..21
List of Tables
Table 1: Industry Frequency………..27Table 2: Country Frequency………..28
Table 3: Descriptive Statistics by Industry………29
Table 4: Descriptive Statistics by Country………30
Table 5: Descriptive Statistics………...31
Table 6: Correlation Matrix………...32
Table 7: Variance Inflation Factor (VIF)………...34
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Introduction
The recurring question in the debate about Corporate Social Responsibility (CSR) has been, since the beginning, to whom companies are responsible and what is the reason for undertaking CSR initiatives (Wood, 1991).
In the past, CSR has been considered as an additional cost for shareholders and it was argued that business’s responsibility only concerns the maximization of profit (Friedman, 1970). However, in nowadays globalized economy, businesses are required not only to be profitable and meet their customers’ needs, but also to pay attention to social and environmental issues, especially when operating across nations (Pedersen & Andersen, 2006). Therefore, both the international business community and the academic business literature are focusing more on CSR issues (Andersen & Larsen, 2009).
In order to measure the outcomes of the CSR strategies implemented by firms, we based our research on the concept of Corporate Social Performance (CSP) which has gained momentum in the literature (Ho et al., 2012; Ioannou & Serafeim, 2012). CSP can be defined as “a business
organization’s configuration of principles of social responsibility, processes of social responsiveness, and policies, and observable outcomes as they relate to the firm’s societal relationships” (Wood, 1991: 693). In other terms, the CSP allows researchers to quantify the
results deriving from the application of CSR-related practices.
Most of the previous studies focused their attention on the relationship between CSP and financial performance, while only a few tried to analyze how differences in institutional settings determine a different approach towards the implementation CSR practices (Ioannou & Serafeim, 2012; Jackson & Apostolakou, 2010: Campbell, 2007; Haxhi van Ees, 2010). Therefore, the present study analyses an unexplored field of research (Ioannou & Serafeim, 2012). The existing gap can be explained by the impossibility to make a comparison of CSP across countries. Indeed, as recognized by Ioannou and Serafeim (2012), the literature is still far from being able to explain social performance heterogeneity across firms. For this reason, the relationship between CSP and cross-national diversity is relevant, and this research could provide with additional results that might be useful to understand and explain social performance heterogeneity.
7 institutions as National Business Systems (NBSs) following the Whitley’s framework (1999). In this way, we could have a more complete understanding of the institutions’ influence on firms and how it varies according to different countries (Hartmann & Uhlenbruck, 2015). As regards institutions, national culture which is considered an informal institution, has been not addressed by many studies (Peng et al., 2014), therefore there are not conclusive findings about the role of culture in determining CSR-related outcomes (Miska et al., 2018). However, culture, through its values and norms, influences the behaviors of the members of a society and affects human relationships (Roy & Goll, 2014). The previous empirical studies about the effects of culture on CSP resulted in diverging outcomes and therefore called for further research aimed at investigating the link between national institutions and CSP, and explain the different social performance patterns across firms (Ioannou & Serafeim, 2012).
We therefore focused on the following research question: What are the effects of the cultural
systems on CSP variation among companies coming from different countries?
8
Literature Review
1.1 Corporate Social Performance Model
Despite the foundations of CSP date back to the 1950s, the CSP area of interest has remained ambiguous and complex in the academic literature and a consensus about the definition of the concept CSP has not been reached (Wood, 2010). Indeed, CSP was often wrongly associated to the equivalent of Corporate Social Responsibility, Corporate Social Responsiveness, or all those themes, which emphasize the centrality of the interdependence between a business and its stakeholders (Wartick & Cochran, 1985).
Carroll (1979) was the first who theorized about CSP and in his study designed the first
conceptual model of CSP (Wood, 2010). He stressed the fact that the ‘responsibility’ factor in CSR was not quantifiable; therefore, he selected ‘performance’ as the operative term (Wood, 2010).
According to Carroll’s (1979) CSP model, the social responsibility of business "must embody the economic, legal, ethical, and discretionary categories of business performance" (Carroll 1979, p. 499; Ho et al., 2012). Indeed, Carroll suggested that businesses have four main responsibilities: i) economic, namely the duty to be productive and profitable, ii) legal, namely the duty to act within the framework of legal requirements, iii) ethical, namely the duty to follow established rules defining appropriate behavior, iv) discretionary, namely the duty to contribute to the development of the society (Maignan, 2001). Thus, four domains of CSR (economic, legal, ethical, and discretionary) characterize Carroll’s (1979) model of CSP (Figure 1). These four domains were put into a matrix together with a set of social issues, which are supposed to affect business practices (Wood, 2010). Ultimately, the ‘cube’ of CSP was finalized with the philosophies of responsiveness dimension with a total of 96 cells, through which CSP could be measured (Wood, 2010).
9 According to Carroll (1979), CSP results from the three-dimensional combination of (1) corporate social responsibility, (2) philosophy of corporate social responsiveness, and (3) social issues (Wartick & Cochran, 1985). Corporate social responsiveness represents the companies’ decision to react to social issues and does not always imply a proactive attitude since it could also imply no response to social issues (Ho et al., 2012).
10 Carroll’s (1979) framework is the first research which created an archetype for business and society that aggregates different competing perspectives (Wartick & Cochran 1985; Wood 1991; Ho et al., 2012). Consequently, the CSP model consist in a relevant framework for comprehensive analyses of business and society (Wartick & Cochran, 1985). Indeed, the innovation of the CSP model is its integrative nature. That nature makes it unprecedented, because rather than claiming that both economic and public policy responsibility are incompatible with the concept of social responsibility (Friedman, 1962; Heyne, 1968; Preston & Post, 1975), CSP incorporates economic responsibility and public policy responsibility into the notion of social responsibility (Wartick & Cochran, 1985). The new enriched concept of responsibility, which follows an approach based on principle, process, and policy, is pivotal in the CSP model to provide a distinct overview of a company’s overall effort to fulfill its commitment towards the society (Wartick & Cochran, 1985).
Wartick and Cochran (1985) building on Carroll’s (1979) work, published their integrative
study on CSP “The evolution of the corporate social performance model,” which extended the three-dimensional integration of responsibility, responsiveness, and social issues (Carroll, 1999; Wood, 1991). One of the criticisms moved by Wartick and Cochran (1985) towards Carroll’s study (1979) was that “his review failed to capture the model’s dynamic evolution and to capture the process of analysis, debate, and modification that characterizes scholarly inquiry” (Wartick & Cochran, 1985; p. 759).
Wartick’s and Cochran’s (1985) major contribution was a re-elaboration and update of Carroll’s study (1979) three facets of corporate social responsibilities, corporate social responsiveness and social issues, into a framework which includes principles, processes, and policies (Carroll, 1999). They listed, criticized and synthesized what they consider to be three challenges to CSR: economic responsibility, public responsibility and social responsiveness (Wood, 1991). Their model included three segments: principles, processes and policies, representing philosophical, institutional and organizational orientations, respectively.
The two authors made the CSP model more robust and logical (Wood, 1991) by arguing that Carroll’s (1979) CSR definition embodied the ethical component of social responsibility and therefore should be treated as a principle, social responsiveness shall be conceived as a process, and finally social issues management should be considered as a policy (Carroll, 1999).
11 economic responsibility becomes a component of social responsibility (Ho et al., 2012). In addition, also the processes of responsiveness were the ones used by Caroll (1979), namely reactive, defensive, accommodative and proactive. Those were the processes that allowed the companies and their managers to react to the society’s changes and demands (Wood, 2010). In the process of social responsiveness both social responsibility and social responsiveness concepts are complementary vehicles to achieve corporate social obligations (Ho et al., 2012). Furthermore, the policies of issues management refer to the operationalization of social responsiveness to identify effective corporate social policies. (Wood, 2010; Ho et al., 2012).
Wood (1991) observed that the concept of CSP in the literature instead of integrating past
studies was creating diverging point of views on CSP and social responsibility. In addition, according to Wood (1991), Wartick and Cochran (1985) CSP model presented some limitations.
Indeed, the need for a component which indicate actions and outcomes was stressed, since in the definition of the CSP model the “performance” term was not adequately explained by only interaction or integration (Wood, 1991). The CSP model was considered too limited and an additional component was deemed to be necessary since the Wartick’s and Cochran’s (1985) policies of social issues management as an outcome variable does not reflect the actual performance (Wood, 2010). Formal policies may not contemplate those actions moved by informal, unwritten schemes and positive outcomes of CSP may be driven by behaviors which are embedded in the institutions and not formally explicated.
Bearing in mind these limitations, Wood (1991) moved forward and defined CSP as “a business
organization's configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships” (Wood, 1991, p.693). Hence, Wood (1991), based the CSP model
(Figure 2) on structural principles of responsibility as inputs, processes of social responsiveness as throughputs, and ultimately outputs and outcomes.
12 The structural principles of CSR constitute the first part of the CSP Model and integrate the main theories of CSR namely: i) Carroll (1979) four-categorization of social responsibility, ii) Preston and Post (1975) public responsibility and iii) Sethi (1979) classification of companies as reactive, defensive or responsive, into a multilevel analysis (institutional, organizational and individual level) (Wood, 1991; Wood, 2010). The principle of legitimacy explains business's role as a social institution. The principle of responsibility requires companies to assess the specific impact of their area of business on society, highlights the relationship a given company has with its own environment. The principle of managerial discretion implies the responsibility of executives, as moral agents, to exercise their discretion towards socially responsible outcomes (Wood, 1991; Wood, 2010).
Figure 2. Wood’s CSP Model (Wood, 2010)
The second part of Wood’s CSP model is represented by the processes of corporate social
responsiveness. In Wood’s view (1991), the approaches for social responsiveness (reactive,
defensive, accommodative, proactive) used by Carroll (1979) can only be considered as organizational responses to social pressures. Thus, Wood conceptualized the responsiveness facet with specific categories of processes for environmental scanning, stakeholder management and issue management.
Outcomes of corporate behavior are the innovative contribution to CSP and constitute a step
13 (Wood, 1994; Wood. 2010). These outcomes are driven by the structural principles of CSR and processed by the processes of social responsiveness (Wood, 2010).
If compared to earlier CSP models, the Wood’s (1991) model is considered more exhaustive since it complemented the CSP conceptualization with elements not fully addressed before (Carroll, 1999).
1.2 CSP and Institutions
The concept of CSP has been mostly studied in relation to financial performance. Research have sought to determine the relationship between social and financial performance with the main concern of whether the engagement on social responsibility would also be beneficial for the company itself (Brown, 1998; Waddock & Graves, 1997; Orlitzky et al., 2003 van Beurden and Gössling, 2008). However, less attention was directed to other factors which could also affect CSP, especially from an institutional standpoint. Accordingly, there is little research on the effects of firm’s institutional environment on the variation of CSP and thus the engagement of firms to act responsibly (Arminen et al., 2018). Indeed, Campbell (2007) argues that corporations are embedded a broad set of political and economic institutions that influence firm’s choices and actions. Therefore, examining institutions is pivotal to comprehend what effectively determines corporate social responsibility (Campbell, 2007). Jones (1999) affirms that also CSP and its components are context dependent (Arminen et al., 2018). Hence, companies’ level of CSR implementation might be developed in reaction to wider social and institutional environment in the CSR domain (Jackson & Apostolakou, 2010)
1.2.1 Institutional Theory
The present research draws on the institutional theory as the main theoretical framework. Our research study is aimed at capturing the differences of CSP level across countries, and as Aguilera and Jackson (2003), our view is that, since stakeholder identities and interests change from country to country, institutional theory is a useful tool for understanding those differences among nations that shape organizational behavior (Matten & Moon, 2008). Moreover, the institutional theory allows researchers to evaluate the relations and interactions between stakeholders, which are relevant elements to understand CSR, given its tendency to follow society’s orientation (Matten & Moon, 2008).
14 Institutions may affect firm’s behavior by imposing rules, laws and sanctions, but also by transferring on firms their common understanding of the society (McGuinness Demirbag, 2012; Miska et al., 2018).
We preferred the institutional theory, compared to other theories commonly used in the domain of sustainability such as the stakeholder theory, which evaluates if and why firms comply with their own interests and the stakeholders’ interests (Campbell, 2007). We selected the institutional theory since, as suggested by Campbell (2007), the stakeholder theory looks at the relationship between stakeholders and management, rather than focusing on the effects culture has on firm’s CSR practices and consequently is not the appropriate theory to understand when and why corporations are likely to implement CSR practices (Miska et al., 2018).
1.2.2 National Business Systems
As recognized by Whitley (1999), institutions diverge from country to country and jointly represent different “types” of National Business Systems (NBS), designed according to a different economic rationale (Matten & Moon, 2008; Whitley, 1999; Ioannou & Serafeim, 2012). In particular, as suggested by Matten and Moon (2008), the institutional frameworks’ development influences and modifies the NBSs thus resulting in national differences in CSR (Whitley, 1997). NBSs are defined as “distinctive patterns of economic organization that vary
in their degree and mode of authoritative coordination of economic activities, and in the organization of, and interconnections between, owners, managers, experts, and other employees” (Whitley, 1999:33; Ioannou & Serafeim, 2012).
According to Whitley (1999), the NBS framework is based on several empirical studies which showed that some relevant institutions, namely the political, financial, labor and cultural systems have a decisive influence on corporations’ behavior (Aguilera Jackson, 2003; Campbell 2007; Ioannou & Serafeim, 2012). Whitley’s NBS model includes all these types of institutions and also focuses on the decisive role of the cultural system.
15 For instance, a study carried out by Maignan and Ralston (2002) found that the influence of managers and stakeholders on the firms’ CSR behavior considerably diverge across UK, France, Netherlands and USA, due to the political and cultural institutions present in those countries. In another study, Maignan (2001) examined consumers from USA, Germany and France and recognized that depending on the different cultural and philosophical attitude of the countries analyzed, consumers’ support of social responsible organizations diverged. In their research, Matten & Moon (2008) assumed that the differences in CSR among different countries can be explained by the presence of historically embedded institutions.
A concept similar to the NBS is the Varieties of Capitalism (VoC) framework, developed by Hall & Soskice (2001) which takes into consideration two NBS frameworks, namely Liberalized Market Economies (LMEs) and Coordinated Market Economies (CMEs). According to the VoC framework, corporations’ success is influenced by their ability to create and maintain stable contacts and relationships with governments, customers and other stakeholders (Hartmann & Uhlenbruck, 2015). At the same time, the firm's capacity to coordinate with different actors varies among countries, depending on the specific national institutional environment (Hartmann & Uhlenbruck, 2015). Furthermore, as recognized by Hall and Soskice (2001) divergent national institutional settings could create institutional advantages for companies which operate in different countries (Jackson & Apostolakou, 2010).
Jackson and Apostolakou (2010) used the VoC to investigate the influence of the institutional environment on CSR activities, within the two NBS frameworks, namely Liberalized Market Economies (LMEs) and Coordinated Market Economies (CMEs). The results of their study showed that firms based in more liberal market economies are able to reach higher levels of CSP, compared to firms operating in coordinated markets economies. The reason for those differences resides in the divergent corporate governance conditions, which allow stakeholders to be more or less involved in corporate decision-making across countries (Aguilera and Jackson, 2003).
16 1.3 Cultural System
Institutions may be differentiated, according to their characteristics, in formal or informal (Crossland & Hambrick, 2011). In further details, formal institutions set the political, economic rules and relationships which regulate property rights and transactions in a given society (North, 1990: 47; Crossland & Hambrick, 2011) while informal institutions are not explicit and can be found outside the legal system being deeply rooted in the society (Crossland & Hambrick, 2011) and consisting of informal rules and values. In general, the formal institutions are enforced by the state while the informal institutions are enforced by the people (Crossland & Hambrick, 2011).
In the international business and management research field, culture is often considered an element belonging to the informal institutions (e.g., Dikova, Sahib, & van Witteloostuijn, 2010; Miska et al., 2018). Indeed, different set of values, beliefs, ideas, attitudes which are proper of a national culture guide individuals’ choice on the acceptable and unacceptable behaviors (Gallego-Alvarez and Ortas, 2017), making culture relevant for sustainability practices. Indeed, in general stakeholders from different countries have expectations about corporate decisions which vary according to their own values, rules and practices (Carroll, 1979; Gallego-Alvarez & Ortas, 2017).
In addition, sociocultural values proper of the nations where companies operate can influence their decision-making processes and consequently their behavior (Arminen et al., 2018). According to House et al. (2004), culture acts as a framework that allows us to understand significant events derived from several human groups’ common experience.
It follows from the above that culture is an essential variable to analyze and predict firm’s CSP and related aspects (Miska et al., 2018; Roy & Goll, 2014).
The IB literature allowed us to empirically demonstrate a relationship between cultural systems and CSP (Roy & Goll, 2014). For instance, Haxhi and van Ees (2010), in their study, recognized that corporate governance best practices are influenced by different national cultures. In addition, Crossland and Hambrick (2011) analyzed managerial discretion and found that some cultural traits influence directly managers’ choices. Furthermore, as previously mentioned, Ioannou and Serafeim (2012), studied the effects of Whitley’s (1999) political, labor, education and cultural systems and found that CSP diverge according to different NBSs.
17 masculine and with more uncertainty avoidance presented a higher CSP, showing that the differences in CSP were based on different national cultures.
1.3.1 GLOBE project
As regards the conceptualization of culture, Hofstede’s studies (1980, 2001) are the most used by the IB literature and specifically in the research field of CSR concerning culture (Ioannou & Serafeim, 2012; Husted, 2005; Ho et al., 2012; Haxhi & van Ees).
However, in the present study we decided to use another measurement, namely the Global Leadership and Organizational Behavior Effectiveness (GLOBE) Project (House et al., 2004), which was created to study country’s national cultural dimensions and their relationship with leadership (Parboteeah, et al., 2012) and allows for cultural comparisons between 62 country scores. We selected this study since it is considered more complete than the Hofstede’s framework as it includes additional cultural dimensions (Parboteeah et al., 2012). In particular, the GLOBE project, in order to evaluate differences among countries, focuses on nine possible cultural dimensions, namely: 1) Power distance, 2) Social collectivism, 3) In group collectivism, 4) Uncertainty avoidance, 5) Gender egalitarism, 6) Assertiveness, 7) Performance orientation, 8) Future orientation, 9) Humane orientation.
Due to the additional culture dimensions, through the use of the GLOBE project we could complement previous studies (Ioannou & Serafeim, 2012) on CSP which relied only the Hofstede’s (1980) dimensions. Furthermore, since the GLOBE study distinguishes between cultural values and cultural practices we considered it to be better suited to evaluate the impact of culture on firm’s CSR outcomes (Miska et al., 2018). In this regard, we decided to follow previous research (Miska et al., 2018; Roy and Goll, 2014) and focus on cultural practices’ scores, which are considered better indicators of country sustainable practices (Roy & Goll, 2014) as they allow us to understand the current perceptions of each culture (Waldman et al., 2006).
1.4 Hypotheses Development
18 reason we decided to test its significance for CSP, as it might be a relevant trait for sustainability (Miska et al., 2018).
1.4.1 Collectivism
The GLOBE study distinguishes two different Collectivism dimensions: Institutional and In-Group Collectivism. In the present research, we used Institutional Collectivism which in a previous study resulted more significant to measure cultural effects on CSR, than in-group collectivism (Waldman et al., 2006). Institutional collectivism is defined as “the degree to
which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action” (House & Javidan, 2004: 12) In other terms, it
explains to what extent people should behave in a way which benefit the entire society and consequently be rewarded by the collectivity (Waldman et al., 2006).
Collectivism in the GLOBE framework is generally compared to individualism, since it measures the same cultural characteristic of society, but with a different label for the dimension. As recognized by Ioannou and Serafeim (2012), people in individualistic society are more inclined to implement and develop CSR activities to satisfy the expectations of the shareholders. By contrast, as regards collectivism, Michailnova and Hutchings (2006) recognized that collectivistic societies are populated by individuals which tend to have strong relationships with each other (Graafland & Noorderhaven, 2018). In addition, as suggested by Thanetsumthorn (2012), employees from companies located in collectivistic societies are more ethically oriented than the employees belonging to companies in individualistic societies. As showed, collectivistic societies focus more on group loyalty and less on the individuals’ goals (Parboteeah et al., 2012) while individualistic societies focus on individuals’ needs rather than society’s ones.
As far as sustainability is concerned, in line with previous studies which used the GLOBE (Waldman et al., 2006; Parboteeah et al., 2012), we proposed that collectivistic societies have a positive relationship with sustainability practices, since in those environments people are more inclined to support behaviors and practices which benefit the society as a whole. Indeed, as recognized by Waldman et al. (2006), executives in collectivistic cultures tend to recognize more the importance of long-lasting relationships with key stakeholders and their responsibility towards the community while taking corporate decisions.
Accordingly, we proposed that:
Hypothesis 1: Firms in cultures which present a high level of collectivism exhibit a higher
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1.4.2 Power distance
The Power distance values are taken into consideration to measure the extent to which power is unequally distributed throughout a culture (Waldman et al., 2006). As recognized by Carl et al. (2004), power distance values represent the extent to which the members of a society believe that power should be held only by few people and that those people should be respected and obeyed (Waldman et al., 2006). In particular, cultures characterized by higher power distance are more inclined to perceive and accept the hierarchy between superiors and subordinates. However, the researchers are not conclusive on this point. Indeed, Husted (2005), argued that high levels of power distance and respect for authority tend to limit the positive reaction of the society to sustainability issues (Miska et al., 2018). By contrast, Ioannou and Serafeim (2012) recognised that high levels of power distance could allow the people in power to think about their role and responsibility and consequently positively influence their decision to promote corporate sustainability practices (Miska et al., 2018).
At the same time, also other research showed different outcomes. For instance, Ringov and Zollo (2007) and Ho et al. (2012) predicted a negative relationship and found a positive link. By contrast, Peng et al. (2014), Park et al (2007), Husted (2005), Waldman et al. (2006) found a negative link.
Power distance has also an effect on companies’ behavior. Indeed, as recognized by Waldman et al (2006), a society characterized by high power distance negatively influences corporations’ managers which are less concerned about employees, environmentalists and customers (Gallego-Alvarez & Ortas, 2017). In addition, it should be noted that people coming from countries with higher power distance scores are more likely to accept business practices which do not reflect high sustainability standards (Ho et al, 2012).
As a consequence, we expected high power distance countries to score lower on CSP compared to those countries characterized by lower levels of power distance. Our approach is consistent with previous studies which predicted a negative relationship between power distance and CSP (Waldman et al., 2006; Ho et al., 2012; Ioannou and Serafeim, 2012; Thanetsumthorn, 2015; Paborteeah et al., 2012).
In light of what explained, we proposed that:
Hypothesis 2: Firms in cultures with a high level of power distance exhibit a lower corporate
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1.4.3 Performance orientation
Performance orientation is commonly used to measure the extent to which individuals of a society are more inclined to reward innovation and performance improvement (Parboteeah, et al., 2012). In a society characterized by high performance orientation, people are usually less likely to promote sustainability activities while in a low performance-oriented society, people are more inclined to further enhance CSR (House et al., 2004; Parboteeah et al., 2012).
In particular, as recognized by several studies (Cullen, Parboteeah and Hoegl 2004, Parboteeah, Bronson and Cullen 2005), societies with high performance orientation are characterized by people focusing on the achievement of the objective and less on the method to achieve it. Moreover, it is more likely that in those societies the established objective could be achieved in a less sustainable way (Messner and Rosenfeld, 2001; Miska et al., 2018).
Accordingly, in high performance-oriented societies it is less likely that people would promote cooperative spirit and quality of life since the focus will be on the result rather than the people. Consequently, firms would tend less to promote and implement social sustainability practices (Parboteeah et al 2012).
In the Hofstede’s (1980, 2001) conceptualization, the Performance Orientation dimension has been related to the masculinity trait (Parboteeah et al., 2012). According to Husted (2005), masculinity cultures focus on material success opposed to a concern with the quality of life. Indeed, Hofstede (1980, 2001) conceived masculinity as related to the choice for material wealth and argued that it influences people’s choice for economic growth rather than environmental safeguard (Hofstede, 2001 p. 32; Husted, 2005).
Previous studies using GLOBE’s Performance Orientation (Miska et al., 2018; Parboteeah et al., 2012) and those which relied on Hofstede’s (1980, 2001) masculinity (Husted, 2005; Gallego-Alvarez & Ortas, 2017) presented consistent results and confirmed a robust negative relationship between performance orientation and sustainability.
In light of what explained, we proposed that:
Hypothesis 3: Firms in cultures which present a high level of performance orientation exhibit
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1.5 Conceptual Model
The conceptual model summarizing the hypotheses can be visualized as follows:
22
Methodology
The aim of the present research is to assess how country variations, in terms of different cultures, affect the CSP score of firms. To test the hypotheses, firm-level and country-level variables, depending on their nature, were collected from various sources such as Thomson Reuters ASSET4, DataStream, Worldscope Database, and the World Bank database. The variables and the reason for choosing them will be introduced in the following paragraph and briefly explained.
2.1 Variables
2.2.1 Dependent Variable – CSP
Previous research has showed different approaches for measuring CSP even though the request for a multidimensional system of measurement which could be applied to a wide variety of industries and companies has been greatly emphasized (Waddock and Graves, 1997). As recognized by Ioannou and Serafeim (2012), designing a precise and appropriate measure of CSP is a demanding task, due to the multi-domain nature of the theoretical construct, and “limited insights provided by measures that focus on firms’ single activities are among the main
challenges of sustainability-related measures” (Miska et al., 2018, p. 271).
As recognized by Turker (2009), the Kinder, Lydenberg, and Domini (KLD) Database, the Fortune Index, and the Canadian Social Investment Database (CSID), to mention a few, are some of the most common approaches to measure CSP (Ho et al., 2012). However, these mechanisms have showed limitations in the measurement of CSP (Ho et al., 2012). For instance, the KLD Database gives the same weight to each of the eight attributes it uses, which does not allow to take into account the incremental differences between dimensions (Ho et al., 2012) and only includes data about companies listed in the United States stock market (Hartmann and Uhlenbruck, 2015). As regards the Fortune Index, it has been criticized since it focuses on financial performance instead of social performance. As concerns the CSID, it includes only Canadian listed companies, and consequently it could not be used for cross-country research (Ho et al., 2012).
By contrast, the Thomson Reuters ASSET4 Database “represents a comprehensive platform
for establishing customizable benchmarks for the assessment of corporate performance”
23 developing sustainable business strategies (Hartmann & Uhlenbruck, 2015). In addition, the ASSET4 includes data about a broader variety of firms worldwide if compared to the KLD.
The ASSET4 includes environmental, social and governance scores and data, which are translated into units and allow to carry out an optimal quantitative analysis despite the qualitative nature of most of the dimensions (Ioannou & Serafeim, 2012). Indeed, the data are checked through a multi-step process control procedure, which ensures a high level of accuracy and data quality (Hartmann & Uhlenbruck, 2015). ASSET4 gathers 900 evaluations points per each firm which are functional to a default equal-weighted framework aimed at calculating 250 key performance indicators and organizes those in 18 categories included in four pillars: i) Environmental performance score, ii) Social performance score, iii) Corporate Governance score, iv) Economic performance score (Ioannou & Serafeim, 2012). See Appendix 2 for a description of ASSET4 pillars and categories.
For the purpose of the present research, in order to create a comprehensive CSP index, the dependent variable (DV), Corporate Social Performance (CSP), included the environmental and social values. The year 2016 was used as basis for the analysis since in recent years (2017-2018) several missing values have appeared. A score from 0 to100 was attributed to each company, following its overall performance in the environmental, social and governance dimensions (Hartamann & Uhlenbruck, 2015; Thomson Reuters, 2013). However, as suggested by Ioannou & Serafeim (2012), an aggregation issue similar to the KLD dataset previously mentioned could arise. Indeed, the problem of which weight assign to the environmental and social pillars is not currently resolved by the business literature (Ioannou & Serafeim. 2012). In addition, Corporate Governance is usually considered a subcategory of CSP, and the original data retrieved included also its scores. However, according to Cai et al. (2016), an analysis based on Corporate Governance scores could have the risk of capturing the impact of country factors in corporate governance rather than the broader CSP. This is because, as showed by Doidge et al., (2007) country factors allow to understand more the variance of corporate governance than company characteristics (Cai et al., 2016).
24 companies of the sample. The Environmental rating is based on key issues related to protecting the environment, such as carbon emissions or biodiversity and land use. The Social rating is based on key issues related to social problems, such as labor management or privacy and data security (Cai et al., 2016).
2.2.2 Independent Variables
The National Culture dimension scores for each country of the sample represents the independent variable (IV). To measure the variable, the corresponding values are obtained from the GLOBE Project study (House et al. 2004). The GLOBE Project is a more recent extension of Hofstede’s (1980; 2001) work, which includes nine dimensions and is considered a more comprehensive measure in cultural studies, if compared to Hofstede’s (1980; 2001). Consistent with previous studies (Parbotheeah et al., 2005; Parbotheeah et al., 2012; Miska et al., 2015) the research uses GLOBE’s cultural practices country scores. The GLOBE project includes 62 countries and the scores of the dimensions vary on a 1-7-point scale range for each of the Institutional Collectivism, Power Distance, and Performance Orientation dimensions (see Appendix 10 for the cultural scores of each country). The measurement of Institutional
Collectivism is based on questions aimed at evaluating the degree of acceptance by societies of
a collectivist economic system over individual interests, group loyalty preference at the expense of individual goals, and group cohesion or individualism (Waldman et al., 2006). Power
Distance assess the concentration and privileges of power. This dimension quantifies how much
power is concentrated at the upper levels of society and the tendency of those in power positions to preserve this power relationship with others (Waldman et al., 2006; Carl et al., 2004).
Performance Orientation measures the degree of importance individuals give to values such as
excellence, reward, and the ability to perform and produce results (Paborteeah et al., 2005).
2.2.3 Control Variables
In order to carry out a comprehensive analysis, a set of variables commonly used in the assessment of social and environmental sustainability were used. Those variables consisted in firm-level financial information, country-level variables, industry information for the companies and company-level CSP data.
25 general public, government, and NGOs, thus being more prone to engage in more explicit environmental and social related activities to respond to public expectations, scoring higher on CSP (Gallego-Alvarez and Ortas, 2017; Jackson and Apostolakou, 2010). In addition, it was argued that employees may put pressure on firms to adopt practices aimed at increasing sustainability and ultimately CSP (Miska et al., 2015). Companies often consider CSR costly and especially firms which have no resources to finance and undertake socially responsible actions, can be unwilling to implement activities in that sector. By contrast, companies which have many resources usually invest in those activities, particularly if their executives recognize the potential positive impact that CSR may have in terms of lower financial risk, employees’ motivation, customer’s and investor’s satisfaction, for their business (Jackson and Apostolakou, 2010). To do so, the natural log of the number of employees, was used as a proxy for each company taken into consideration.
Secondly, to control financial performance and its effects, we included Return On Assets (ROA) as the availability of financial means may determine investments in CSP (Hartmann and Ulhenbruck, 2015). The relationship between Financial and Environmental and Social Performance is positively correlated in most of the previous studies (Orlitzky et al., 2003; Margolis & Walsh, 2003; Goll & Rasheed, 2004; van Beurden & Gössling, 2008; Ioannou & Serafeim, 2012; Arminen et al. (2018)).
Furthermore, Leverage was also included and measured by dividing the total debt by total asset and this variable served as a proxy for the riskiness of a firm (Waddock Graves, 1997: Ho et al., 2012; Arminen et al., 2018). According to Gallego-Alvarez and Ortas (2017) previous research has not reached common results about the influence of companies’ leverage on CSP practices. Besides Clarkson et al. (2008) found a positive connection (Gallego-Alvarez and Ortas, 2017), in the present analysis, the impact leverage on CSP is considered negative, following the results deriving from previous studies (Waddock Graves, 1997: Ho et al., 2012; Arminen et al., 2018)). In particular, CSP was expected to increase in presence of high firm performance and to decrease when firm risk is particularly high (Campbell, 2007; Ioannou & Serafeim, 2012).
26 of CSR practices, and the most important source of new ideas and technology for corporate sustainability (Gallego-Alvarez & Ortas, 2017).
The Industry Classification Benchmark (ICB) was used as a reference to differentiate industries, with a dummy variable, to check for potential variations in the different industrial sectors of the economy. The ICB classifies industries into ten categories, which are Oil and Gas, Basic Materials, Industrials, Consumer Goods, Health Care, Consumer Services, Telecommunications, Utilities, Financials and Technology. The ICB classification provides a complete tool for industry analysis and divides companies into four levels, which include: 10 industries, 19 super sectors, 39 sectors and 104 subsectors (ICB, 2007; Jackson and Apostolakou, 2010). Indeed, as showed by Gray et al. (1995), depending on the product industry, companies could be more proactive in engaging in CSP practices (eg. healthcare or energy sector) (Gallego-Alvarez & Ortas, 2017).
At country level, the annual Gross Domestic Product (GDP) (transformed into the natural logarithm), based on purchasing power parity as well as annual population growth rate, were included to check the size of the economy. The data for the corresponding values were retrieved from the World Bank’s World Development Indicator databank. GDP per capita is the monetary value of all final goods and services generated per resident in an economy, using purchasing-power parity rates for reasons of comparison across economies. As suggested by previous literature (Parboteeah et al., 2012; Waldman et al., 2006; Roy and Goll, 2014; Miska et al., 2015), in countries where the GDP is higher, there may be higher requirements for sustainability-related practices because of higher spending and generally advanced wealth levels. For instance, according to Esty and Porter (2005), the level of national income gives rise to different environmental results (Graafland & Noorderhaven, 2018). In addition, strong population growth can lead to degradation or social inequality. Therefore, we included for each country the Annual Population Growth Rate.
2.3 Data and Sample
27 homogeneous sample. Taken together, the scores of firms from USA, UK, Australia, Japan and Canada, represent the 65% of the total sample.
As regards the industry distribution and frequencies, it is worth noting that, as shown in Table 1, Financials is the most present sector (22,8%) in the sample, together with Consumer Services (13,3%), Consumer Goods (10,8%) and Industrials (18,6%). As observed, the industry classification is essential to have an overview of the distribution of the sample and in the present case it is possible to recognize a homogenous variety of industries in the sample.
28
29
Results
3.1 Descriptive Statistics
Table 3, 4 and 5 show the descriptive statistics and presents the average scores, maximum and minimum, and standard deviation for the variables gathered for our sample. The overall CSP index varies from a minimum of 7.81 to a maximum of 97.5 on a scale of 0-100. The mean score is 51,02, while the standard deviation for CSP overall index is 29,27. As recognized by Ioannou and Serafeim (2012), a significant variation in CSP can be identified both within and across countries.
The considerable variation in CSP index scores across countries (Table 4) demonstrates that the level of economic development can influence the companies’ CSP scores. Indeed, CSP in developed countries is relatively higher than in developing countries. In addition, the CSP index presents a Skewness of 0.34, which suggests that the distribution is not symmetric and a negative Kurtosis -1.35, which hints that the tail (potential outlier) character of the distribution is less extreme than that of a normal distribution.
The descriptive statistics in Table 5 also shows that some control variables include missing values. This aspect reduced the number of our observation from the original 4957 observations to 1638, for the full model. In particular, the R&D variable presents the greatest amount of reduction in terms of sample. Indeed, even though the data regarding R&D were gathered through one of the most complete and exhaustive database (World Scope database), most of the companies failed to provide their expenditure values of R&D, thus reducing significantly the number of observation. To check the accuracy of the analysis, the model was further tested also without the R&D variable in order to test a greater number of observations.
30
31 3.2 Correlation
Table 6 below shows the Correlation matrix. As shown, there is not a significant correlation between the dependent variable (CSP index) and the independent variables (culture dimensions). Besides that, only Performance Orientation shows a weak negative correlation of -0,208 between CSP and Performance Orientation. In addition, another variable which is relatively significant is the Firm Size, with a correlation of 0,479.
The correlation matrix has not shown relevant results and it is possible to argue that the correlation coefficients do not always predict the potential effects the variables selected will have on the dependent variable CSP. Thus, the main conclusion would only be drawn after the regression analysis will be completed and presented.
32 3.3 Regression Analysis Results
The effects of cultural dimensions, controlled by firm-level and country-level variables on the firm’s CSP index, were estimated through linear regression models using ordinary least squares (OLS) estimation. This is consistent with previous studies (Ioannou & Serafeim, 2012; Ringov & Zollo, 2007; Arminen et al., 2018; Husted, 2005; Park et al., 2007; Cox et al., 2011; Thanetsunthorn, 2015) which generally used OLS as a technique to estimate Culture and CSR-related data.
33 As in previous research (Arminen et al., 2018; Ioannou & Serafeim, 2012; Hartmann and Uhlenbruck, 2015) the control and the independent variables were lagged by one year to take into account the possible reverse causality. Thus, the dependent variable expresses values for the year 2016, while the control variables from the year 2015. Furthermore, regarding the industry variables a dummy-code was created to in order to control for its impact.
In order to verify the presence of heteroscedasticity, the under-standardized scores were tested and, as showed in the scattered plot (Appendix 9), after a visual analysis, we supposed that our estimation would not be affected by heteroscedasticity. However, the White test was conducted to further check the possible presence of heteroscedasticity. The results of the White test did not allow us to accept the null hypothesis, thus implying that some heteroscedasticity is present within our data sample. As a consequence, a robust standard errors model was conducted to be completely sure about the effects of heteroscedasticity of the sample. However, the results were similar to the ones of a normal test with a neglectable effect on confidence intervals, hence with no significant variation in the final results.
It is worth mentioning that, even though some heteroscedasticity was present, it had no impact on the results of our regression analysis, due to the high number of observations in our sample.
In addition, a collinearity analysis was run, to check for the presence of multicollinearity (a condition in which variables are correlated to one another). The results show that the Variance Inflation Factor (VIF), for all the variables taken into account, present low values which allowed us to conclude for no multicollinearity. The VIF (Table 7) measures the effect the other independent variables have on the variance of the regression coefficient. High VIF scores imply the presence of multicollinearity, but in the present analysis only the R&D control variable is around 3.1, which is below the level of VIF between 6-10, and which hints the presence of multicollinearity.
34 To test the hypotheses, we used four different models with CSP index as dependent variable, and a gradual introduction of the control and independent variables.
The analysis (regression results are presented in Table 8) was conducted firstly, by running a model only with the control variables which are the industry dummies, the natural logarithm of firm size (the number of employees was used as a proxy), leverage, ROA, the natural logarithm of R&D, the natural logarithm of GDP and the annual population growth rate. Successively, in the second model, the cultural dimensions scores (collectivism, power distance and performance orientation) were included as independent variables and the complete analysis was carried out. In addition, in the third model, the variable R&D was left out in an additional regression in order to check the result with an increased number of observations (from 1638 to 4170). Finally, in the fourth Model an additional test was run to validate the consistency of the results without the overrepresentation of US companies in the sample.
The analysis was conducted with the SPSS. The Industrials Dummy variable was automatically left out of the analysis by the software in Model 1, 2, 4, while Financials was excluded in Model 3, in both cases because of collinearity. However, this did not impact the final results as Model
35 3 presented equivalent results even with the Industrials variable as the excluded dummy. The industry classification was indeed included as a control variable, but the main purpose of the research remains how the cultural system affects the values of CSP for a given company.
Model 1 presents a R2 of 0.378 and an Adjusted R2 of 0.373, which results change if the
independent variables are included in Model 2. Model 2 produces a change in R2 of 0.025,
indeed, the R2 result is 0.404 and the Adjusted R2 is 0.397. However, in Model 3 with the
exclusion of R&D variable and the increase of the number of observation, the R2 consists of
0.300 and an Adjusted R2 of 0.297. This result suggests the importance of R&D for the model
and highlights that without R&D there is a loss of overall significance. At the same time, all the coefficients of the independent variables increase their significance. Collectivism highlights a change in the sign of the coefficient, while Power Distance and Performance Orientation confirm the positive relationship present also in Model 2.
Regarding the hypotheses, only H3, regarding the performance orientation, confirmed our assumptions for all the models since its coefficients resulted significant. Indeed, performance orientation presented negative coefficients (with ***p<0.01), which validate the prediction that performance-oriented cultures tend to show low scores of CSP. By contrast, the hypothesis H1 and H2 could not be confirmed in Model 2 since they do not show a significance in the coefficients. However, in Model 3 all the three independent variables coefficients resulted significant at ***p<0.01 level, but only Performance Orientation complied with the initial assumptions, thus confirming H3.
For what concerns firm-level variables, in all the models Firm Size resulted significant at the ***p<0.01 level since presented positive coefficients. Surprisingly, leverage did not present negative coefficients and was not significant. In addition, R&D resulted significant and confirmed the positive relationship between the R&D and the increase of CSP.
At country-level, GDP resulted significant for all the three models, thus highlighting the fact that wealthier countries show higher scores in CSP. However, the annual population growth rate, did not comply with the assumption that in countries where there is a greater increase in terms of population, CSP scores are worse.
36 points of explainability and thus the model resulted less significant compared to Model 2 which represents the full model of the research and where the companies from all countries are included together with the R&D control variable. Notwithstanding the smaller R2 value of 0,244
and an Adjusted R2 of 0,229, Model 4 confirmed some of the results showed by the other
37
Table 8. Regression Analysis Coefficients
Variables Model 1 Model 2 Model 3 Model 4
Ln Firm Size 9,512*** (,438) 8,841*** (,480) 7,685*** (,226) 5,751*** (,664) ROA ,133** (,046) ,119* (,046) ,690* (,030) ,047 ,087 Leverage ,000 (,001) ,000 (,001) ,000 (,000) ,003 (,004) Ln R&D 1,385*** (,274) 1,868*** (,355) 1,562*** (,422)
Industry Dummies Yes Yes Yes Yes
Ln GDP 6,400*** (1,385) 10,374*** (1,589) 4,334*** (,987) 10,581*** (1,693)
Pop. Growth Rate 3,828**
(1,791) 8,692*** (2,085) 6,144*** (1,183) 4,250* (2,197) Collectivism -1,102 (2,213) 4,024*** (1,126) -5,716** (2,621) Power Distance 3,320 (2,865) 6,544*** (1,834) ,324 (3,166) Performance Orientation -24,402*** (3,138) -22,731*** (1,886) -18.880*** (3,565) (Constant) -117,535*** (16,729) -68,243** (34,669) -17,225 (19,821) -19,446 (37,972) Observations 1638 1638 4170 952 F Statistics 65,846 60,843 104,560 16,692 Prob > F (Sig.) ,000 ,000 ,000 ,000 R2 ,378 ,404 ,300 ,244 Adjusted R2 ,373 ,397 ,297 ,229
Standard Errors in parentheses reported under the regression coefficient
38
Discussion
The present paper analyses the effects of cultural dimensions on CSP. The paper has the purpose of contributing to the CSR literature, supporting the idea that institutions constitute a determinant for CSR. Therefore, we relied on the institutional approach and reviewed previous literature examining the influence of informal institutions on CSR outcomes.
The choice of an institutional approach is based on the fact that, in the current CSR literature, institutions have been overlooked (Jackson & Apostolakou, 2010; Ioannou & Serafeim, 2012). Indeed, CSR research has concentrated its attention on CSR outcomes rather than on its determinants (Jackson & Apostolakou, 2010) or has investigated the relationship between CSR and firm financial performance. By contrast, as suggested by Jackson and Apostolakou (2010), CSR practices are more likely to be implemented and become effective to the extent that they are embedded within different types of institutions (Jackson & Apostolakou, 2010).
Up to now, a limited number of studies have investigated how different factors affect CSP variation (Campbell, 2007; Ioannou & Serafeim, 2012). Following the path of Ioannou and Serafeim (2012), we decided to fill this gap in the existing literature of Culture and CSR. In further details, instead of analyzing all the components of the National Business System (NBS) institutional framework (Whitley, 1999), we focused our attention on the cultural system’s impact on CSP. As argued by Ho et al. (2012), national culture shapes the value system of a given country, consequently determining the behaviors of a society. For this reason, our research took inspiration from the literature which connects culture to sustainability, previously theorized by Husted (2005).
To complement Ioannou and Serafeim (2012) research, we decided to follow a different approach regarding the conceptualization of culture, namely using the GLOBE project’s scores instead of the most commonly used Hofstede method. The reason for this choice is the will to further test the importance of institutions in shaping organizational outcomes and verify whether the results obtained by Ioannou and Serafeim (2012) are consistent with a different culture dimensions’ measurement.
Institutional Collectivism, Power Distance and Performance Orientation were expected to have
39 Our findings suggest that certain cultural characteristics could have a central function in explaining CSP divergences across countries.
Hypothesis 1 predicted that cultures which present a high score on institutional collectivism
will have a higher CSP outcome compared to more individualistic societies. The positive relationship between institutional collectivism and CSP is based on previous studies which also used the GLOBE Project’s scores for culture measurement (Waldmann et al., 2006; Paboteeah et al., 2012; Miska et al., 2018). According to Waldman et al. (2006), a peculiarity in collectivistic countries is the importance given to future concern collective interests. Therefore, decision-makers in such cultural environments are more inclined to put into actions strategies that might benefit the collective groups. In this regard, CSR practices, which have the purpose of preserving the sustainability of the environment and societies are more coherent with collectivist’s beliefs (Parboteeah et al., 2012).
Contrary to our expectations, the coefficients estimated in the full model (Model 2) were negative and not significant. Therefore, we could not confirm the H1 and the positive relationship between a higher level of collectivism and CSP.
A plausible explanation for a negative relationship between Collectivism and CSP might be given by the results obtained by Husted (2005) and Ioannou and Serafeim (2012) in their study. According to them, a higher level of individualism implies a greater achievement in terms of CSP. Husted (2005) motivated his choice by stating that in individualistic societies the creation of environmental movements is favored by the greatly presence of interest groups rather than centralized associations. Hence, due to the higher presence of environmental groups, cultures with a tendency for individualism should show sound institutional capacity to react to sustainability challenges (Husted, 2005).
40
Hypothesis 2 is not significant for the full model. Consequently, we could not confirm the
predicted outcome of a negative relationship between power distance and CSP. However, it is worth mentioning the controversial nature of the power distance dimension, as it has been associated with inconsistent findings also in other studies (Miska et al., 2018) or with opposite results compared to the predicted relationship (Ioannou & Serafeim, 2012).
Our hypothesis was in line with previous studies (Husted, 2005; Cai, et al., 2016; Ioannou & Serafeim, 2012; Hartman & Uhlenbruck, 2015; Walmann et al, 2006; Parboteeah et al., 2015). Accordingly, Ho et al. (2012) argued that cultures with high power distance tendencies are more likely to accept questionable business practices, thus more incline to neglect CSR matters. Ioannou and Serafeim (2012) and Waldman et al. (2006) argued that the positive coefficient of the power distance variable could be explained by the possible creation of a sense of noble obligation that decision-makers experience and which leads them to concern for stakeholders and society necessities. Moreover, Miska et al. (2018) proposed that in countries characterized by high power distance, decision-makers might use CSR commitments as a safeguard mechanism to preserve their positions of power. Indeed, as suggested by Carl et al. (2004), power distance correlates with self-protective behaviors, and consequently high power distance could give rise to opportunistic behaviors.
As showed by previous CSR-related studies (Dahlsrud, 2008; Wilburn & Wilburn, 2011), the idea that executives or power hierarchies could pursue considerable social purposes is in line with the suggestion that sustainability practices are implemented to gain consensus among stakeholders in relation to their economic behavior, the so called “license to operate” (Miska et al., 2018). Furthermore, social order, stability and harmony are considered peculiarities in high power distance culture, and as confirmed by Deephouse et al., (2016) cultures with higher power distance have a greater respect for corporations. Therefore, the suggestion that, in power distance settings, corporations are more likely to implement CSR practices appears to be coherent (Miska et al., 2018).
Hypothesis 3 predicted that in cultures which scores high on performance orientation, the
consequent CSP level would be lower. We expected performance orientation to have a negative relationship with the CSP. As observed in the regression’s coefficients, this hypothesis is confirmed. These findings are validated for all the model estimated and suggest that the results are robust and significant.
42
Concluding Remarks
5.1 Theoretical Implications
The present study has also some theoretical implications, which demonstrate that research is essential in the CSR-Culture field of study.
Accordingly, the aim of this paper is to contribute to the theoretical and empirical literature on corporate social performance and thus offer new evidence on the relative importance of country factors such as cultural traits as determinants for the heterogeneity of sustainability scores across countries. Therefore, this paper builds on the Ioannou and Serafeim (2012) study to complement the growing international business literature, in particular the one aimed at analyzing institutional diversity and its implications for the research in this field (Jackson & Deeg, 2008; Ioannou and Serafeim, 2012). In particular, the present work has the purpose of filing the gap present in the IB literature, namely explaining the role institutions have in relation to corporate social performance of companies.
Most of the studies in the international business and management sector have used Hofstede’s measurements to assess the cultural dimensions in their quantitative analysis. As opposed to other culture-CSR studies, this took as basic cultural framework the GLOBE project. The choice was driven by the desire to provide with additional results and verify whether they could support previous findings about the same topic, given the lesser number of research using the GLOBE framework. In addition, the GLOBE measurements, due to the distinction made between cultural values and cultural practices, create new opportunities for estimating culture’s influence on CSP (Miska et al., 2018; Roy & Goll, 2014). Furthermore, compared to the Hofstede’s method, which presents only four cultural dimensions, the nine dimensions characterizing the GLOBE project allow researchers to study culture from different perspectives and have a more comprehensive understanding of the matter.
43 Since H1 and H2 were not confirmed, because the results are mixed and not significant, the main theoretical contribution was given by the Performance Orientation variable. This cultural trait has not been used in previous research as the other two variables just mentioned. However, our findings suggest robust results about its relevance for CSP. In all the estimated models, the relationship remains negative and the coefficients are significant. Previous studies have also found and confirmed the same negative relationship (Miska et al., 2018; Paborteeah et al., 2012) even while using Hofstede’s Masculinity variable, which is related to Performance Orientation (Husted, 2005; Gallego-Alvarez & Ortas, 2017).
The H3 findings provide support for the relevance of informal institution in shaping the behavior of companies and a possible explanation for observed CSP heterogeneity across firms (Ioannou & Serafeim, 2012). Indeed, we can argue that within the cultural system of NBS the dimension of performance orientation is a consistent significant factor which explains CSP variation. In our case, CSR practices are more likely to be adopted and produce benefits for the stakeholders of corporations in countries where performance orientation is not very emphasized. This confirms that behaviors of companies are related and influenced by the institutions (Jackson & Apostolakou, 2010). In our case differences in cultural dimensions has shown to predict different outcomes of CSR activities and these findings could represent an explanation for the heterogeneity in CSP scores across countries.
In conclusion, although the H3 has been confirmed and the study has obtained consistent results if compared to previous literature, the non-significance of the effects produced by the prediction of H1 and H2 calls for further and thorough analysis in future research.
5.2 Managerial Implications
