Defining and deterring corporate social irresponsibility: embracing the institutional complexity of international business

Abstract

Purpose This paper aims to put forward a definition of corporate social irresponsibility (CSI) which is relevant to the study of complex organizations and in particular, the multinational enterprise (MNE). This paper then offers a framework as a foundation to discuss the institutional complexity of CSI to aid international business (IB) scholars, practitioners and policymakers achieve a clearer understanding of the mechanisms that may penalize and subsequently deter MNE irresponsibility. Design/methodology/approach In presenting the approaches taken by social regulation researchers and IB policy scholars to understand MNE irresponsibility, this paper proposes a definition of CSI and explicates the various mechanisms associated with deterring MNEs from behaving irresponsibly. Findings Therefore, how can MNEs be deterred from behaving irresponsibly? To further the research agenda concerning CSI in IB, far less common are a definition of CSI relevant to the complex IB context; and a framework that explicates both the legal and social components of CSI, particularly as they unfold in a complex, diverse and often divergent institutional landscape. Overcoming these two primary obstacles is important because when complexities associated with CSI emerge, researchers need to be able to ascertain and expound upon what they are observing so that comparisons can be made and more MNE CSI research can be accrued over time. Research limitations/implications To help the development of future research, we offered a more precise definition of CSI, one which is more relevant to the study of the MNE and the complex contemporary IB environment. By embracing complexities, this paper also outlines an institutional complexity approach, one which highlights both the role of formal and informal regulatory institutions. Though IB has traditionally focused on the role of formal regulation, there is much more to be unearthed by exploring the additional and concurrent influence of social regulatory institutions. Practical implications There is a high level of heterogeneity in the motivations and modes used by MNEs to enter international markets, which likely influence efforts made by these firms to adapt to different types of formal and social institutional pressures. When firms invest significantly in a market, they have a greater economic dependence in that market and institutions have a greater opportunity to exert pressures. For instance, foreign direct investment requires a higher level of (longer-term) commitment, transfer of capital, exchange of expertise and learning, meaning that firms depend much more on local authorities to perform in the market and accomplish their goals. Social implications Enabled by new technologies and, particularly, social media platforms, stakeholders can now engage in organized forms of regulatory activities, as is evident in the lesbian, gay, bisexual, transgender, queer, black lives matter and gender equality social activist movements. Through prominent collective actions, the impacts of globally organized social movements may be increasingly non-location bound, placing MNE managers at the heart of new challenges and opportunities to engage with global stakeholders. Infomediaries such as the press, have always been of historical importance, due to their role in shaping stakeholder expectations and opinions of the firm and thus, the reputation and legitimacy of that firm. Originality/value This study enriches the understanding of what CSI is, why we are likely to observe it in practice and how it affects MNEs. This paper offers a definition of CSI that is sufficiently nuanced to capture the complexity of the contemporary IB environment, as well as a framework that, this paper proposes, presents a clearer understanding of the institutional mechanisms that may deter MNEs from behaving irresponsibly. By encouraging scholars to examine the institutional complexity of MNE CSI, the paper hopes to contribute toward building a bridge which connects the IB policy and social regulation research streams.

How can international business research contribute towards the sustainable development goals?

“…Interestingly, the majority of the studies focus on the external environment of MNEs rather than internal factors for explaining misbehaviour. Related literature considers the notion of “corporate social irresponsibility”, and studies formal institutional and informal social mechanisms to deter irresponsible MNE behaviour (Brammer et al , 2021). The type of IB research exemplified by these studies is crucial for an understanding of how IB activities may not only promote but also sometimes hinder, the achievement of the SDGs.…”

“…the vulnerability of a natural area) or even the combined actions of many firms and other organisations. IB could engage with this work to make distinct contributions on our understanding of aspects such as divergent stakeholder expectations to and pressures on MNEs across contexts (Brammer et al , 2021), CSP implications of the organisation of CSR activities internally in MNEs across borders (Asmussen and Fosfuri, 2019), the role of MNEs in local versus global environmental problems and others.…”

Environmental, social and governance (ESG) performance in the context of multinational business research

“…Building on these foundations, a first body of emerging work studies ESG-FP relationships for firms in emerging market settings (Duque-Grisales and Aguilera-Caracuel, 2021). Other emerging work in the field tracks the ESG performance of multinational enterprises (MNEs) in the various countries and regions in which they operate (Salsbery, 2021), primarily based on concerns about MNEs engaging in corporate social irresponsibility (CSI) in jurisdictions with less stringent formal and social institutional pressures (Brammer et al, 2021). There have been additional attempts to develop frameworks for assessing ESG-related risks on a country level to assess ESG risks related to governments or government-related issuers beyond individual companies (Pollard et al, 2018).…”

“…This body of work examines how MNEs adopt and enact ESG practices across different markets and jurisdictions. The body of work has origins in theories on CSI and is based on concerns that ESG performance might be lower in jurisdictions with less stringent formal and social institutional pressures (Brammer et al, 2021), thus leading to the assumption that emerging country contexts might place fewer demands on companies to adhere to superior ESG performance. However, prior research has primarily studied the companies headquartered in developed economies (particularly the USA) and the uptake of corporate sustainability practices (broadly defined) among international subsidiaries.…”

Haven‐Sent? Tax Havens, Corporate Social Irresponsibility and the Dark Side of Family Firm Internationalization

“…This is surprising, as FFs are recognized as the most prevalent form of organization (Dey et al ., 2020); hence, their irresponsible conduct represents the greatest (potential) concern for societal harm. As CSI – ‘claims of stakeholder impairing behavior ascribed to organizations following perceived or substantive inter/intra‐organizational (in)actions which diverge from stakeholder expectations, rules of law and/or institutional logics’ (Brammer, Nardella and Surdu, 2021, p. 304) – is acknowledged to be conceptually distinct from CSR (Chatterji and Toffel, 2010; Nardella, Brammer and Surdu, 2020), it remains important to explore not only how SEW influences FFs to ‘do good’, but also from ‘doing harm’ (Frooman, 1997; Surroca, Tribó and Zahra, 2013).…”