CSR and MNC Competitiveness Jay Hyuk Rhee Professor of IB/Strategy Korea University Business School.
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Transcript of CSR and MNC Competitiveness Jay Hyuk Rhee Professor of IB/Strategy Korea University Business School.
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
• 3
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
• 4
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
• 9
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
• 12
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)
• 13
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
• 16
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
• 17
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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