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Firms’ corporate social responsibility behavior: An integration of institutional and profit maximization approaches

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Abstract

Understanding firms’ behavior across countries – a key concern in the international business literature – requires the joint consideration of both institutional influences and firms’ profit maximization goals. In the corporate social responsibility (CSR) area, however, researchers have utilized theories that take into account only one or the other – institutional theory, which explains CSR as legitimacy-seeking activities in line with national-level institutions, or economic-based approaches that consider CSR effects only in terms of firm profitability. While an institutional argument implies convergence in CSR behavior among firms in similar institutional contexts, profit maximization logic treats CSR as a firm-specific behavior. We integrate these perspectives by demonstrating the moderating effects of firms’ economic motivations for seeking legitimacy on the relationship between institutional environment and CSR responsiveness. We argue that variations in firms’ economic visibility and economic vulnerability can bring about differences in their need for societal goodwill, and in turn, their legitimacy seeking. Findings on a database of apparel firms’ employee-related CSR across 23 countries support this overall argument. The integration of such fundamentally different theoretical perspectives allows us to contribute new theoretical insights to international business on the influence of national institutions on firms’ behavior.

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Notes

  1. Our database of local firms contrasts with other work focusing on MNEs. Since MNEs may not completely reflect the host country environment in which they operate, such research poses some difficulties for assessing the role of context for firms’ CSR behavior. Smaller local firms differ from MNEs in many ways, including cost pressures, ownership, and strategies used (Fernández & Nieto, 2006), all likely to influence CSR practices in important ways.

  2. Although not at the firm-level of analysis, CSR has also been considered from a more micro-based approach that stresses managerial choices and attributes, including altruism and self-interest (Keim, 1978), “enlightened” self-interest (Buehler & Shetty, 1974), “moral intensity” (Paolillo & Vitell, 2002), personal values and religious beliefs (Angelidis & Ibrahim, 2004; Hemingway & Maclagan, 2004), support for employee voluntarism (Peloza & Hassay, 2006), perceptions of stakeholders (Agle et al., 1999; Henriques & Sadorsky, 1999), and CEO leadership in terms of vision and a role model of integrity (Waldman et al., 2006). Still others focus on observable CEO characteristics such as age, functional experience, and education (Manner, 2010), as well as their personal incentives for engaging in CSR (McGuire, Dow, & Argheyd, 2003).

  3. While earlier conceptualizations of collectivism highlight the importance of social norms, group membership, and collective goals governing the behavior of individuals (Chen et al., 1998; Hofstede, 1980; House et al., 2004), more recent conceptualizations have differentiated between horizontal collectivism, which emphasizes personal equality and social interdependence (Schaubroeck & Lam, 2002), and vertical collectivism, which stresses the differences among individuals, takes hierarchy as a given, and accepts status differences within the group (Khatri et al., 2006). The approach taken in this research is consistent with the notion of horizontal collectivism.

  4. Corresponding to ISIC Rev.3 codes 1810 and 1920 (United Nations Statistics Division, 2013), the apparel industry manufactures items of clothing such as tee shirts, blouses, trousers, sportswear and swimsuits, jackets and other outerwear, graduation gowns, socks, lingerie and other undergarments, headwear such as baseball caps, footwear such as running shoes, and some textiles such as towels and slipcovers.

  5. As a recent example, an apparel factory in Dhaka, Bangladesh collapsed in 2013 due to unsafe conditions, killing over 1100 workers and injuring more than 2500.

  6. Since the nature of CSR varies significantly across industries (Buehler & Shetty, 1974; Fry et al., 1982), it is useful to control for industry (Cox et al., 2004; Johnson & Greening, 1999; Strike, Gao, & Bansal, 2006). For example, environment-related CSR may be more pertinent for petroleum firms than for banking firms, while employee-related CSR may be more relevant for clothing firms than R&D institutions.

  7. These ten categories are: treatment of the employee with respect and dignity (no physical or emotional abuse), enhanced health and safety standards, freedom of association and collective bargaining, no discrimination on basis of religion, age or sex, reasonable hours of work, appropriate wages, appropriate overtime compensation, no forced labor, no child labor, and ensuring employees are aware of their rights.

  8. Countries include Albania, Argentina, Bangladesh, Brazil, Bulgaria, Cambodia, Canada, China, Colombia, Dominican Republic, Ecuador, Egypt, El Salvador, Guatemala, Honduras, Hong Kong, India, Indonesia, Jordan, Korea, Macau, Madagascar, Malaysia, Mauritius, Mexico, Pakistan, Peru, Philippines, Portugal, Singapore, Slovakia, Sri Lanka, Taiwan, Thailand, Tunisia, Turkey, the United States, and Vietnam.

  9. The aggregated form of HDI has been extensively used in international business to examine, for example, entry strategies in emerging economies (Meyer, Estrin, Bhaumik, & Peng, 2009), social welfare (Stroup, 2007); economic growth (Berggren & Jordahl, 2005; Easton & Walker, 1997), and FDI inflows (Bengoa & Sanchez-Robles, 2003).

  10. Interaction graphs available upon request.

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Acknowledgements

In addition to our hardworking editor, Joseph Cheng, whose suggestions were invaluable, we are grateful to a number of other individuals for their extremely helpful advice on this research, including Kiran Awate, Anastasia Bailey, Christopher Brown, Alena Clarke, Sarah Doyle, Lorraine Eden, Christopher Holloman, Bob Lount, James Oldroyd, William Stromeyer, Steffanie Wilk, and Bijuan Zhong.

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Authors and Affiliations

  1. Department of Management, Stillman School of Business, Seton Hall University, South Orange, USA

    Susan L Young

  2. Management and Human Resources, Fisher College of Business, The Ohio State University, Columbus, USA

    Mona V Makhija

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  1. Susan L Young
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Accepted by Joseph Cheng, Guest Editor, 21 April 2014. This article has been with the authors for two revisions.

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Young, S., Makhija, M. Firms’ corporate social responsibility behavior: An integration of institutional and profit maximization approaches. J Int Bus Stud 45, 670–698 (2014). https://doi.org/10.1057/jibs.2014.29

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