Seeking Legitimacy Through CSR: Institutional Pressures and Corporate Responses of Multinationals in Sri Lanka

Abstract

Arguably, the corporate social responsibility (CSR) practices of multinational enterprises (MNEs) are influenced by a wide range of both internal and external factors. Perhaps most critical among the exogenous forces operating on MNEs are those exerted by state and other key institutional actors in host countries. Crucially, academic research conducted to date offers little data about how MNEs use their CSR activities to strategically manage their relationship with those actors in order to gain legitimisation advantages in host countries. This paper addresses that gap by exploring interactions between external institutional pressures and firm-level CSR activities, which take the form of community initiatives, to examine how MNEs develop their legitimacy-seeking policies and practices. In focusing on a developing country, Sri Lanka, this paper provides valuable insights into how MNEs instrumentally utilise community initiatives in a country where relationshipbuilding with governmental and other powerful non-governmental actors can be vitally important for the long-term viability of the business. Drawing on neo-institutional theory and CSR literature, this paper examines and contributes to the embryonic but emerging debate about the instrumental and political implications of CSR. The evidence presented and discussed here reveals the extent to which, and the reasons why, MNEs engage in complex legitimacy-seeking relationships with Sri Lankan host institutions.

Reality or Illusion? The Efficacy of Non‐market Strategy in Institutional Risk Reduction

“…Legitimacy is gained when firms align their behaviours with their institutional environment (Deephouse and Carter, 2005;Suchman, 1995). Research shows that CSR improves legitimacy (Beddewela and Fairbrass, 2016;Hadani and Coombes, 2015;Scherer, Palazzo and Seidl, 2013;Zheng, Luo and Maksimov, 2015) which culminates in reduced risk exposure (Bansal and Roth, 2000;Luo, 2001;Stevens, Xie and Peng, 2016) and enhanced organizational performance (Mellahi et al, 2016). In Ghana and other emerging countries, CSR initiatives such as philanthropy are positively interpreted; hence firms that give back to society are widely respected, admired and tolerated (Ofori and Hinson, 2007).…”

Congruence in Corporate Social Responsibility: Connecting the Identity and Behavior of Employers and Employees

“…While high ESR-CSR congruence on the Entwined Social Responsibility pattern Congruence in Corporate Social Responsibility: Connecting the Identity and Behavior… is likely to require sustained high levels of engagement and congruence in terms of social responsibility, companies cannot rest on their laurels, believing that they have achieved the highest levels of CSR and related congruence. Ongoing efforts are needed to maintain this pattern of engagement in social responsibility, possibly by exploring new directions in CSR (e.g., creating shared value), altering stakeholder expectations, and increasing awareness concerning new problems and updated regulations (see for example Albareda et al 2008;Beddewela and Fairbrass 2015;Millington 2003, 2004;Helmig et al 2013;Pearce and Manz 2011). In the case of full congruence on Behavior-based or Identity-based Social Responsibility, the challenge could be maintaining the congruence when one of the parties (employees or employers) could increase the current low identity/behavior and congruence could be lost.…”

Corporate Social Responsibility of Forestry Companies in China: An Analysis of Contents, Levels, Strategies, and Determinants

“…With globalization and increasing societal expectations about the sustainable use of forests, corporate social responsibility (CSR) practices in the forest sector have gained attention and become increasingly crucial because of the environmentally sensitive nature of forest-based businesses [5][6][7]. CSR can help forestry companies improve relationships with stakeholders, maintain legitimacy [8][9][10], address challenges [11], realize sustainable development [11,12], and achieve competitive advantages [6,11,[13][14][15][16]. In China's transitioning economy, forestry companies face serious challenges associated with environmental deterioration, trade frictions, and irresponsible corporate behavior.…”