Bartlett and Ghoshal’s typology of international strategy

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Strategies for managing CSR in MNE subsidiaries

CSR strategies in MNEs are complex due to them operating globally (Husted & Allen, 2006) and multiple studies (e.g. Cruz & Boehe, 2010; Jamali, 2010; Muller, 2006) have attempted to explain the strategic implication of CSR in MNEs. Even if it is hard to determine the strategic implication of CSR, literature still succeeds with covering essential parts. Firstly, MNEs that have subsidiaries in multiple countries require a CSR strategy that is satisfying for several stakeholders in different locations (Hah & Freeman, 2014). Hence, it is a link between CSR and stakeholder governance because management of CSR requires close collaborations with all stakeholders (Jacqueminet & Trabelsi, 2018). Secondly, how MNEs prioritize CSR activities are connected to the organization’s’ value proposition for different stakeholders (Freeman, 1984). However, when incorporating several stakeholder demands, misaligned demands that the managers need to deal with may arise (Jacqueminet & Trabelsi, 2018). When studying the management of CSR in subsidiaries it is important to consider this misalignment. Misalignment will result in consequences for the implementation of CSR when it comes to the subsidiaries decision on which demands to address, hence, the implementation will be weaker if misalignment exists between demands. Misalignments are more common in MNEs because they operate in multiple countries and need to satisfy demand from both local and global stakeholders (Hah & Freeman, 2014). Hence, MNEs tends to struggle when it comes to managing an effective CSR strategy in the subsidiary.

Stakeholder theory vs Shareholder theory

The stakeholder theory argues that shareholders are only one of the multiple influential stakeholders in an organization (Freeman, 1984; Freeman, Harrison, Wicks, Parmar, & De Colle, 2010). This is the opposite to the shareholder theory presented by Milton Friedman that argues that shareholders demand are the only influential stakeholder organizations need to consider (Friedman, 1970). Stakeholders are defined as individuals that are influenced by or can influence which activities the organization carries out (Freeman, 1984; Hah & Freeman, 2014; Yang & Rivers, 2009) such as employees, consumers, suppliers, society, investors, governments, and competitors (Freeman, Harrison, & Wicks, 2007; Freeman et al., 2010). Stakeholders will be discussed from the subsidiaries perspective and could be both local and global (Jacqueminet & Trabelsi, 2018). If the stakeholder is part of the subsidiary it is a local stakeholder, such as society. The parent firm is a global stakeholder (Jacqueminet & Trabelsi, 2018) and for any subsidiary, the parent company is an important stakeholder (Ghoshal & Bartlett, 1990) that both theories agree upon. Because, the parent company own a large piece of the subsidiary and have a large influence on the subsidiary (Jacqueminet & Trabelsi, 2018), implying that the parent company is a shareholder. Hence, the parent company will suffer if the subsidiary fails to manage their CSR activities (Kostova & Zaheer, 1999; Jacqueminet & Trabelsi, 2018). Furthermore, Freeman et al. (2010) acknowledge financiers as a primary stakeholder, but the stakeholder theory also acknowledges other stakeholders equally important such as customers, suppliers, local communities and employees.
According to Jacqueminets and Trabelsis (2018) study, the stakeholder theory is more in line with how MNEs prioritize their subsidiaries initiatives. MNEs tend to prioritize by identifying several local stakeholders such as national government, customers, suppliers, local authorities, local NGO and local society that influences the subsidiaries to choose CSR initiatives (Jacqueminet & Trabelsi, 2018; Park & Choi, 2015). The main conclusion from their study was the importance of both the local and global stakeholder demand as well as how the implementation of CSR in subsidiaries suffer from misalignment in demands. Additionally, they argue for the influence of distance on CSR in conjunction to the degree of alignment. However, Jacqueminets and Trabelsis (2018) study was a single case study of one MNE, which could affect the general conclusions from their study. Nevertheless, several other studies are also acknowledging the stakeholder theory to be important for CSR (e.g. Hah & Freeman, 2014; Freeman et al., 2010; Yang & Rivers, 2009; Freeman et al., 2007).
Furthermore, Park and Choi (2015) did a multiple regression analysis of the relationship of local CSR practice and stakeholders, which concluded that the parent company, government, and NGOs are the most influential stakeholders. Internal managers, customers, local society, and media were not influential. However, this research was limited to Korean MNEs which limit their use of the conclusion. An opposition study conducted by Beal and Neesham (2016) argues for the importance of shareholder values instead, which are similar to the shareholder theory to some extent. They argue that CSR is unique because it focuses on a micro-to-macro transition that could be dealt with by applying systematic CSR and that the primary purpose for any organization is to maximize general welfare. Instead of looking at stakeholder demand organizations should apply systematic CSR that is guided by “a focus on value creation, on-going assessment of collective outcomes and reflective engagement in the aggregation process.” (Beal & Neesham, 2016, p.219). Finally, they argue that applying a stakeholder approach to systematic issues such as CSR is not ideal because a stakeholder network is usually not as complex and extensive as the social system in which the organization operates in. Hence, an analysis based on stakeholders will not be efficient for managing CSR, instead, they suggest a systematic approach.

Management of CSR in different countries

The environment that MNEs function in is distinguished by numerous, diversified and somewhat contradictory institutional and civilizing coercion (Pereira & Malik, 2015 cited by Patnaik et al., 2018). The greater the institutional distance between two countries, the more difficult will it be for an organization to enter a new host country (Salomon & Wu, 2012). Liability of foreignness is a disadvantage that all firms experience to some extent when operating across borders, due to an unfamiliarity with the local market, practice, and regulations (Hymer, 1960) and lack of local legitimacy (Salomon & Wu, 2012). To deal with the liability of foreignness the firm can engage in local isomorphism, which is based on imitating the practice of local firms (Salomon & Wu, 2012), a practice also acknowledged by other studies (e.g. Husted & Allen, 2006; DiMaggio & Powell 1983). When MNEs engage in local isomorphism the challenge will not only be to adopt the strategy but also to preserve some consistency within the organization and between subsidiaries (Hah & Freeman, 2014). Hence, there are not only benefits with local isomorphism strategies. On the contrary, others argue that the pressure for local isomorphism is not applicable for MNEs due to them being foreign (Jamali, 2010). Local isomorphism is not the only way for MNEs to gain local legitimacy (Kostova, Roth & Dacin, 2008) another example would be to apply CSR activities in the host country that contributes to increased local support (Hah & Freeman, 2014). This strategy will lead to a diversity of organizations in the host country instead of only similarities (Kostova et al., 2008). Research does also support this strategy by acknowledging that MNEs have the power to gain local legitimacy by influencing instead of adapting to the local market (Tan & Wang, 2011). Furthermore, there are several frameworks that go in depth on the differences between countries in general, this thesis will investigate two of them, the Hofstede model (Hofstede, 2011) and the CAGE framework (Ghemawat, 2018). The Hofstede (2011) model consist of six dimensions of national cultures and it shows cultural differences. Each country could be put into his model to create an index (Hofstede insights, 2019) from which managers could analyse the cultural differences and get a better understanding of the differences and how to manage them. Hofstede’s model measure power distance; individualism/collectivism; masculinity/femininity; uncertainty avoidance; long/short term orientation; and indulgence/restraints (Hofstede, 2011). Depending on the countries position in the index, different assumptions could be made. The second framework is the CAGE framework that identifies the cultural, administrative geographic and economic distance between countries (Ghemawat, 2018). Which is explained in table 6 in appendix 1 (Researchgate, 2019). This framework could be used when creating organizational strategies in an international context.

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Implementation strategies

Literature consists of several studies aiming to define domestic and multinational CSR strategies (e.g. Cruz, & Boehe, 2010; Jamali, 2010; Muller, 2006). However, due to MNEs complex operations in several countries, systems and culture´s, it is assumed that it is difficult to theoretically assess the strategic implementation of CSR (Hah & Freeman, 2014). When reviewing the literature, it is difficult to compare different empirical results and generalizations between different geographical regions are not possible. One common nominator is whether MNEs should implement globally integrated strategies or locally responsive strategies (Hah & Freeman, 2014; Tan & Wang, 2011; Cruz, & Boehe, 2010; Jamali, 2010; Muller, 2006).

Bartlett and Ghoshal’s typology of international strategy

Furthermore, Ghoshal and Bartlett (1990) created a typology for different organizational strategies in MNEs, namely the global, international, multinational or transnational approach, which is applicable to CSR implementation and practice (Jacqueminet & Trabelsi, 2018; Arthaud-Day, 2005). These approaches have been acknowledged and adopted by several researchers throughout the years (e.g. Filatotchev & Stahl, 2015; Jamali, 2010; Husted & Allen, 2006; Christmann, 2004). MNEs implement different approaches depending on which country the subsidiary is located in (Rathert, 2016; Maignan & Ralston, 2002). The typology describes how corporations implement international strategies as well as two-fold pressure that comes with global operations, which is local responsiveness and global integration (Ghoshal & Bartlett, 1990). The local responsiveness refers to the extent the firms needs to adapt to the local environment, the pressure for global integration refers to the extent the firm needs to standardize procedures, each to operate successfully and efficiently. This is tested through a matrix, resulting in four different outcomes, as presented in figure 1.
In this thesis MNEs are the focus and for that reason it is apparent that the theory related to MNEs state that high pressure for global integration is important. Therefore, two approaches from Bartlett & Ghoshal´s matrix are commonly used, either to apply a local approach that includes being locally responsive and having a transnational mentality or ignore nuances and apply a global and more standardized CSR strategy. Finally, Ghoshal and Bartlett (1990) argue that MNEs should be viewed as an interorganizational system instead of an organization. They argue that by viewing the MNE as an interorganizational system they could apply exchange theories and network methodologies, which is beneficial since the subsidiaries relation to the home country can vary. Network analysis is a way to analyse a complex setting by looking at a network of related activities.

Global approach

MNEs tend to implement the same strategy to CSR as they have an organizational strategy (Husted & Allen, 2006). A global approach is common when implementing core activities because it is generally more proactive, efficient and well-integrated (Jamali, 2010). Another reason for MNEs to use globalized strategies is because it is more cost efficient to have all strategic functions based in the headquarter (Arthaud-Day, 2005), which is in line with a global approach. However, the disadvantages with global strategies are the absence of ownership and legitimacy at a local level. Another disadvantage with a global CSR strategy is that the likelihood for socially irresponsible actions in the subsidiary increases because of the home country stakeholder pressure increases (Surroca, Tribo, & Zahra, 2013). Nevertheless, some part of the MNEs CSR strategy needs to be global in order to establish consistent implementation and avoid illegitimacy spill over (Jacqueminet & Trabelsi, 2018).

Carroll’s pyramid of corporate social responsibility

Previously, firms were seen as merely entities aimed at maximizing profits for their possessors (Gomez-Carrasco, Guillamon-Saorin & Osma, 2016; Friedman, 1970). Carroll´s pyramid of CSR is according to Crane and Matten (2004) the concept of CSR that is most frequently used in developed countries (Deigh, Farquhar, Palazzo & Siano, 2016; Crane & Matten, 2004). It is a model that is constituted of four different kinds of social responsibilities, namely: economic, legal, ethical and philanthropic (Carroll, 1991). Each responsibility in the model is ranked in order of its importance, implying the need to fulfil one before moving up to the next (Deigh et al., 2016). Economic responsibility is the highest and most vital priority on which all others are founded on. Moreover, the organization must take their legal responsibility within each country and submit to what is right or wrong to operate. Other laws that are not established but still expected by society are the ethical principles and activities. Lastly, the philanthropic responsibility at the top of the model emphasizes the importance for the organization to act in the good of society by contributing to the community and cultivating the overall quality of life. The model proposes that organizations should attempt to fulfil these duties concurrently, that deem themselves socially responsible. Carroll´s pyramid of corporate social responsibility (1991), is a model cited by numerous authors in studies on CSR and has evolved over time, indicating its significance.

Economical responsibility

As previously stated, the dimension of the pyramid which supports the others is the economic responsibility (Lyra, De Souza, Verdinelli & Lana, 2017; Deigh et al., 2016; Carroll, 1991). Thus, it undermines that a firm must be profitable first in order to meet other responsibilities. Without profit, the firm does not survive and cannot benefit society in the long term. Nevertheless, even purely economic conduct must be considered through the lens of the remaining responsibilities (Meynhardt & Gomez, 2019; Schwartz & Carroll, 2003). Indicating that economic performance can be considered illegal or legal, moral or unethical.

Table of contents :

1 Introduction
1.1 Background
1.2 Problem statement
1.3 Purpose
1.4 Research questions:
1.5 Delimitations
1.5.1 Location delimitations
1.5.2 Organization delimitations
1.5.3 Sample delimitations
1.5.4 Theory delimitations
1.6 Key definitions
1.6.1 Corporate social responsibility (CSR)
1.6.2 Multinational enterprises (MNE)
1.6.3 Subsidiary
1.6.4 Management
2 Literature Review
2.1 History of CSR
2.2 Strategies for managing CSR in MNE subsidiaries
2.2.1 Stakeholder theory vs Shareholder theory
2.2.2 Management of CSR in different countries
2.3 Implementation strategies
2.3.1 Bartlett and Ghoshal’s typology of international strategy
2.3.2 Global approach
2.3.3 Transnational approach
2.4 Carroll’s pyramid of corporate social responsibility
2.4.1 Economical responsibility
2.4.2 Legal responsibility
2.4.3 Ethical responsibility
2.4.4 Philanthropic responsibility
2.5 Summary
3 Methodology
3.1 Research philosophy
3.2 Research design
3.2.1 Qualitative research
3.3 Research method
3.4 Sampling strategy
3.4.1 Sample size
3.5 Data collection
3.5.1 Primary & secondary data collection
3.5.2 Search process
3.6 Data Analysis
3.7 Trustworthiness and limitations
3.8 Ethical considerations
4 Empirical findings
4.1 Case 1 – IKEA
4.2 Case 2 – Telia
4.3 Case 3 – AstraZeneca
4.4 Case 4 – SEB
4.5 Case 5 – Husqvarna
5 Analysis
6 Conclusion
6.1 Discussion and Implications
6.1.1 Practical implications
6.1.2 Theoretical implications
6.1.3 Managerial implications
6.1.4 Ethical and social implications
6.2 Limitations and future research
References

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