CSR and MNC Competitiveness

Jay Hyuk Rhee

Professor of IB/Strategy

Korea University Business School

Corporate Social Responsibility

• Seriously considering the impact of a com-pany’s actions on society

• Historical perspectives– Take actions that protect

and improve the welfareof society as a whole alongwith their own interests

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Economic Model Economic Model

Legal Model Legal Model

Social Model Social Model

Arguments for CSR

• Addresses social issues brought on by busi-ness, and allows business to be part of the solution

• The public supports CSR

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Arguments Against CSR

• Dilutes the primary purpose of business

• Business is not equipped to handle social activities

• Limits the ability to compete in a global marketplace

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Issues & Theories in Global Strategy

• Why a firm is willing to do business abroad and how it can compete in unfamiliar mar-kets (Buckley, 1988; Dunning, 1980; Egelhoff, 1982; Hennart, 1989; Hymer, 1976; Johanson & Vahlne, 1977; Kogut & Zander, 1988; Rugman, 1980; Vernon, 1966)

• Two different approaches– purpose-oriented – process-oriented

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Assumption & Reality

• Existence of “liabilities of foreignness” (Zaheer, 1995)

• MNCs (vs. indigenous competitors)– face additional costs

• cultural/legal/institutional/linguistic differences• lack of knowledge of local market conditions• increased expense of communications

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Implications & Requirements

• MNCs must have some advantages– which are, at least in part, specific to the firm and

which are readily transferable within the firm and across distances

– firm-specific advantages, as embodied in organiza-tional practices which are difficult for other firms to copy (Barney, 1991)

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Firm-Specific Advantages

• Operational measurements– technology and marketing skills – international experience – excess managerial capacity – financial and monetary factors, etc

• Specific to the firm, readily transferable within the firm and across distances?

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MNCs

• expanding into multiple host countries• operating in diverse industries • conducting many business activities• implementing different strategies

• ….. thus interacting with multiple stakeholders

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Business Stakeholder GroupsBusiness Stakeholder Groups

MediaMediaSuppliersSuppliers Special-InterestGroups

Special-InterestGroups

SocietySociety GeneralPublic

GeneralPublic

CompetitorsCompetitorsCustomersCustomers CommunityCommunity

StockholdersStockholders EmployeesEmployees

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Home CountryStakeholder Pressures

Home CountryStakeholder Pressures

Host CountryStakeholder Pressures

Host CountryStakeholder Pressures

Standards

Practices

Ethics

Laws

Culture

Customs

System ofGovernment

Socioeconomic System

Standards

Practices

Ethics

Laws

Culture

Customs

System ofGovernment

SocioeconomicSystem

MNCs

Revisiting “Firm-Specific Advs”

• Are they really “firm”-specific advs? • Or advs with location-bound characteristics?

– meaningful for a certain host country, industry, or business activity?

• CSR: firm-specific advs with non-location-bound characteris-

tics

: especially in the Era of Social Media

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Challenges for MNCs

• Visible targets for policy-makers and non-governmental organizations (NGOs)

– “Pollution havens” (Daly, 1994; King & Shaver, 2001)

– “Race to the bottom” (Korten, 1995)

– blacklist of water polluters in China (China Daily, 2007)

– face more labor lawsuits (Mezias, 2002)

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To Name A Few…

• Child labor• Forced labor• Health and Safety• Discrimination • Working hours• Compensation • Management systems

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CSR in the Era of Social Media

• The incorporation of a holistic CSR per-spective within a firm’s strategic planning and core operations

• More critical for MNCs that face diverse stakeholders in a global environment – need to take strategic approach to CSR

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Contribution of CSR Practices

• Improve social legitimacy and overcome lia-bilities of foreignness (Campbell, Eden & Miller, 2012; Dacin, Oliver & Roy 2007)

• Manage externality while create economic value (Crouch, 2006; Daudigeos & Valiorgue, 2011)

• Enhance Competitiveness • Non-location-bound characteristics

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Applicability of CSR

• Compliance with, not “differentiating,” CSR standards across diverse – host-countries – industries – business activities

• Departure from the traditional assumptions and approaches

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CSR for MNC Competitiveness

• Not any more a “nice-to-do” add-on

• Need to take CSR to the strategic level– Framing the purpose of the business

: To create profit by doing good business in every sense of the word

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Ongoing Issues

• Contributions of CSR to Performance

• Specifically,– How to measure CSR activities?

• Internally or externally

– How to measure performance? • Financial, environmental, or social

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Perspective 1: CSP Drives the Relationship

Perspective 2: CFP Drives the Relationship

Perspective 3: Interactive Relationship among CSP, CFP and CR

Good CorporateReputation

Good CorporateSocial Performance

Good CorporateFinancial

Performance

Good CorporateReputation

Good CorporateFinancial

Performance

Good CorporateSocial Performance

Good CorporateReputation

Good CorporateSocial Performance

Good CorporateFinancial

Performance

“Perhaps the biggest catalyst for change is that many of the big social and environmental challenges, once seen as obstacles to progress, have become opportunities for innovation and business development.”

– Patrick Cescau, CEO, Unilever

 

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