Corporate Social Responsibility in Emerging Markets: The Importance of the Governance Environment

By Li, Shaomin; Fetscherin, Marc et al. | Management International Review, September 2010 | Go to article overview

Corporate Social Responsibility in Emerging Markets: The Importance of the Governance Environment


Li, Shaomin, Fetscherin, Marc, Alon, Ilan, Lattemann, Christoph, Yeh, Kuang, Management International Review


Abstract:

* This study examines how country-level, industry-level, and firm-level factors affect the extent of corporate communications about CSR in Brazil, Russia, India, and China (BRIC). In particular, using data from the 105 largest MNCs in BRIC, we investigate CSR motives, processes, and stakeholder issues discussed in corporate communications.

* At the country level, based on a newly developed governance environment framework that differentiates between rule-based and relation-based governance, our study reveals that a country's governance environment is the most important driving force behinds CSR communications intensity.

* Our results show that firms communicating more CSR tend to be larger firms in the manufacturing industry in more rule-based societies. These firms also tend to have stronger corporate governance as measured by a high proportion of outside board directors and a separation of the roles of the chairman and the CEO.

Keywords: Corporate social responsibility. Governance environment. Rule-based. Relation-based * Emerging markets

Introduction

In recent years, the terms CSR (corporate social responsibility), corporate strategic volunteerism, social marketing, and strategic philanthropy have penetrated the mainstream literature and multinational practices (Turban and Greening 1997). Generally, CSR is considered a firm's obligation to protect and improve social welfare (Staples 2004) through various business and social actions (Sen and Bhattacharya 2001; Turban and Greening 1997), ensuring equitable and sustainable benefits for the stakeholders. Increasingly, companies are rolling out CSR initiatives that have also been shown to become key success factors and sustainable competitive advantages (Lichtenstein et al. 2004). In mature economies, such as those in the US and Western European countries, corporate communication is often used to highlight companies' commitments to CSR (Esrock and Leichty 1998; Hooghiemstra 2000), enhance marketing efforts, and legitimize the company's corporate image in the eyes of its various stakeholders (Birch and Moon 2004; Ringov and Zollo 2007). Communications about CSR has therefore emerged as a vital and integrated part of organizational marketing to enhance the corporate image (Chahal and Sharma 2006).

Already more established in developed-country firms, CSR has become important for firms in the developing countries. Although extensive research has been conducted on CSR in the developed countries, much less is known about CSR in the developing countries. So far general knowledge about CSR in the developing countries can be summarized by two main points. First, firms in developing countries adopt CSR less than their counterparts in the developed world (e.g., Welford 2004), and second, the main reason for this gap is due to their low economic development levels (e.g., Baughn et al. 2007). Our limited understanding of CSR in the developing economies poses a pressing challenge for both the international community and academics.

In recent years there has been a drastic increase in health and product safety issues associated with products from emerging economies, such the milk and toy scandals in China (e.g., Bogdanich 2008). This not only has caused concern in the international community, but has also negatively impacted the image of the country of origin and the corporate reputation of the firms that reside there. Therefore, the international community, multinational corporations, and firms in the emerging economies all need to gain a better understanding of the importance of CSR and what affects CSR in the emerging countries. From an academic perspective, CSR scholars are faced with the challenge of determining what factors influence firms in the emerging economies to behave in a socially responsible way. Theoretically, we also need to understand what macro factors, aside from the known factors such as the level of economic development, may help determine the overall CSR level of firms in a particular country. …

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