By Yang Pok Rhee, Chansoo Park, and Bui Petersen

As globalization continues to expand in recent decades, the role of multinational enterprises (MNEs) in the growth of the global economy has also dramatically increased. Specifically, to enhance business performance in host countries and to ensure successful forays into new markets, it is advisable that MNEs address local issues such as unemployment and poverty. To address these concerns, Corporate Social Responsibility (CSR) has emerged as the predominant approach. Practicing CSR wherever a MNE operates can result in sustainable, long-term success and can ameliorate the public’s image of the foreign enterprise.

Although there are many studies on MNEs’ CSR, the exploration of specific CSR concepts, types, and their performance effects is still in its early stages. In this study, we considered whether local stakeholders have an influence on subsidiaries’ CSR activities, such as responsive CSR, which includes legal and institutional; coded and regulatory; ethical; and charitable responsibilities and strategic CSR, which necessitates aggressive action to solve problems and lead organizational change. We also queried whether significant differences exist regarding the influence of stakeholder groups on subsidiaries’ CSR activities as local stakeholders may have different attitudes toward organizational change or social innovation.

Our study identified the relationship between local stakeholder pressures and 177 Korean foreign subsidiaries’ CSR. Our analysis yielded two important findings. First, local primary stakeholders, which include consumers, employees, and suppliers, increase responsive CSR activities but have no influence on strategic CSR activities. Second, local secondary stakeholders, which consist of the local government, media, community, and civil institutions, have a strong influence on both responsive and strategic CSR activities, with a stronger influence on strategic CSR activities.

In practice, this study can serve as a guideline for the types and drivers of CSR activities of subsidiaries, and also provide a practical framework for CSR dimensions. Our study suggests a change in managerial implications toward the primary group of stakeholders (i.e., consumers, employees and suppliers) – their unprecedented access to free and abundant information is exerting increased pressure on MNEs to conduct their business in a socially responsible way.

Reference:

Rhee, Y. P., Park, C., & Petersen, B. 2021. The Effect of Local Stakeholder Pressures on Responsive and Strategic CSR activities. Business & Society, 60(3), 582-613. DOI.10.1177/0007650318816454