Skip to main content
SpringerLink
Log in

From Voids to Sophistication: Institutional Environment and MNC CSR Crisis in Emerging Markets

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Why do multinational corporations (MNCs) frequently encounter corporate social responsibility (CSR) crises in leading emerging markets in the new century? Existing research about institutional impacts on MNC CSR has developed a void-based account about how the flawed institutional system allows misdeeds to happen. But the fact that such misdeeds have turned into increasing CSR crises in the new century along with institutional change is rarely taken into account. This paper combines studies of institutional voids, institutional entrepreneurship, and stakeholder theory to develop a concept of institutional sophistication, which refers to both the top-down maturation of the regulatory system that standardizes firm behavior and the bottom-up diversification and intensification of grassroots initiatives that redefine stakeholder membership. Based on this concept, we developed a framework to comprehensively demonstrate how both institutional voids and sophistication drive the MNC CSR crisis in leading emerging markets. Empirically, we established an original database that includes 309 publicized CSR crises encountered by major foreign MNCs in China, India, and Russia, 2000–2011. Through a content analysis, the paper reveals six common sophistication processes that drive the MNC crisis across contexts and also specifies stakeholder strategies that make these processes happen and vary by social problems and national contexts. We also discussed the value of studying corporate social irresponsible behavior in understanding the institution–MNC relationship.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Abbreviations

ACFLU:

All China Federation of Labor Unions

CSE:

Center for Science and Environment

CSR:

Corporate social responsibility

IPE:

Institute of Public and Environment Affairs

MNC:

Multinational corporation

NGO:

Non-governmental organizations

PSA:

Professional supervisory agency

References

  • Amold, D. G., & Bowie, N. E. (2003). Sweatshops and respect for persons. Business Ethics Quarterly, 13(2), 221–242.

    Article  Google Scholar 

  • Arnold, D. J., & Quelch, J. A. (1998). New strategies in emerging markets. Sloan Management Review, 40(1), 7–20.

    Google Scholar 

  • Auzan, A. (1995). Changes in the behavior of Russian consumers under recent reforms. Journal of Consumer Policy, 18, 73–84.

    Article  Google Scholar 

  • Auzan, A. (2001). The transformation of Russian political mores. In H. Isham (Ed.), Russia’s fate through Russian eyes (pp. 96–124). Boulder, CO: Westview Press.

    Google Scholar 

  • Balakrishnan, K. G. (2009). Judicial activism and the role of green benches in India. Speech at Asian justices forum strengthening court capacity on environmental adjudication.

  • Barley, S. R., & Tolbert, P. S. (1997). Institutionalization and structuration: Studying the links between action and institution. Organization Studies, 18(1), 93–117.

    Article  Google Scholar 

  • Bartley, T. (2003). Certifying forests and factories: States, social movements, and the rise of private regulation in the apparel and forest products fields. Politics and Society, 31, 433–464.

    Article  Google Scholar 

  • Basu, K., Fields, G. S., & Debgupta. S. (2007). Labor retrenchment laws and their effect on wages and employment: A theoretical investigation. The Institute for the Study of Labor (IZA) discussion paper. No. 2742.

  • Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(30), 946–967.

    Article  Google Scholar 

  • Chen, D., Newbury, W., & Park, S. H. (2009). Improving sustainability: An international evolutionary framework. Journal of International Management, 15, 317–327.

    Google Scholar 

  • Child, J., & Tsai, T. (2005). The dynamic between firms’ environmental strategies and institutional constraints in emerging economies: Evidence from China and Taiwan. Journal of Management Studies, 42, 95–125.

    Article  Google Scholar 

  • China Consumer’s Association website. (2011). http://www.cca.org.cn/.

  • Chitra, A. (2003). Role of NGOs in protecting environment and health. In M. J. Bunch, V. M. Suresh & T. V. Kumaran (Eds.), Proceedings of the third international conference on environment and health (pp. 105–112). 15–17 December 2003, Chennai, India: Department of Geography, University of Madras and Faculty of Environmental Studies, York University.

  • Clarkson, M. (1994). A risk based model of stakeholder theory. In Proceedings of the second Toronto conference on stakeholder theory. Toronto: Centre for Corporate Social Performance & Ethics, University of Toronto.

  • Crotty, J., & Hall, S. M. (2011). A vacuum of responsibility: NGO perceptions and response to environmental issues in Russia. San Antonio, TX: Academy of Management Proceedings.

    Google Scholar 

  • Crotty, J., & Rodgers, P. (2012). Sustainable development in the russian federation: The limits of greening within industrial firms. Corporate Social Responsibility and Environmental Management, 19(3), 178–190.

    Google Scholar 

  • Deng, G. S. (2006). Trends of China NGO development. Presentation at Tsinghua University, Beijing.

  • DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48, 147–160.

    Google Scholar 

  • Doh, J. P., & Guay, T. R. (2006). Corporate social responsibility, public policy, and NGO activism in Europe and the United States: An institutional-stakeholder perspective. Journal of Management Studies, 43, 47–73.

    Article  Google Scholar 

  • Donaldson, T., & Dunfee, T. W. (1999). When ethics travel: The promise and peril of global business ethics. California Management Review, 41(4), 45–63.

    Article  Google Scholar 

  • Eisenhardt, K. M. (1989). Building theories from case study research. The Academy of Management Review, 14(4), 532–550.

    Google Scholar 

  • Evans, P. B. (1995). Embedded autonomy. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Falkenberg, A. W. (2004). When in Rome … moral maturity and ethics for international economic organizations. Journal of Business Ethics, 54, 17–32.

    Article  Google Scholar 

  • Fineman, S., & Clarke, K. (1996). Green stakeholders: Industry interpretations and response. Journal of Management Studies, 33, 715–730.

    Article  Google Scholar 

  • Fligstein, N. (2001). The architecture of markets: An economic sociology of capitalist societies. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman.

    Google Scholar 

  • Gimpelson, V., Kapeliushnikov, R., & Lukiyanova, A. (2009). Employment protection legislation in Russia: Regional enforcement and labor market outcomes. IZA Discussion Paper No. 4484. http://ssrn.com/abstract=1490506. Retrieved Sep 2012.

  • Gladwin, T. N. (1987). Environment, development, and multinational enterprises. In C. S. Pearson (Ed.), Multinational corporations, environment, and the third world (pp. 3–34). Durham, NC: Duke University Press.

    Google Scholar 

  • Harris, H. (2001). Content analysis of secondary data: A study of courage in managerial decision making. Journal of Business Ethics, 34, 191–208.

    Article  Google Scholar 

  • International Trade Union Confederation. (2012). Annual Survey of violations of labor union rights.

  • Interview with the director of the Regulation Department, National General Administration of Quality Supervision. (2012). China Standardization Press.

  • Johnson, H. L. (1985). Bribery in international markets: Diagnosis, clarification and remedy. Journal of Business Ethics, 4, 447–455.

    Article  Google Scholar 

  • Jones, M. T. (1999). The institutional determinants of social responsibility. Journal of Business Ethics, 20, 163–179.

    Article  Google Scholar 

  • Khanna, T., & Palepu, K. (1997). Why focused strategies may be wrong for emerging markets. Harvard Business Review, 75, 41–51.

    Google Scholar 

  • Khanna, T., & Palepu, K. (2010). Winning in emerging markets. Boston, MA: Harvard Business Press.

    Google Scholar 

  • Kostova, T., Roth, K., & Dacin, T. (2009). Theorizing on MNCs: A promise for institutional theory. Academy of Management Review, 34(1), 171–173.

    Article  Google Scholar 

  • Kostova, T., & Zaheer, S. (1999). Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24, 64–81.

    Google Scholar 

  • Kumar, R., Murphy, D. F., & Balsari, V. (2001). Altered images: The 2001 state of corporate responsibility in India poll (understanding and encouraging corporate responsibility in South Asia—Update 1). New Delhi: Tata Energy Research Institute.

    Google Scholar 

  • Lane, H. W., & Simpson, D. G. (1984). Bribery in international business: Whose problem is it? Journal of Business Ethics, 3, 35–42.

    Article  Google Scholar 

  • Langley, A. (1999). Strategies for theorizing from process data. Academy of Management Review, 24(4), 691–711.

    Google Scholar 

  • Lawrence, T. B. (1999). Institutional strategy. Journal of Management, 25, 161–187.

    Article  Google Scholar 

  • Ljubownikow, S., & Crotty, J. (2010). The state and civil society in post-Soviet Russia: The development of a Russian style civil society. In Academy of Management Conference, Montreal, Canada. August 6th–10th 2010.

  • Longnecker, J. G., McKinney, J. A., & Moore, C. W. (1988). The ethical issue of international bribery: A study of attitudes among US business professionals. Journal of Business Ethics, 7, 341–346.

    Article  Google Scholar 

  • Lu, Y. Y. (2007). NGOs in China: Development dynamics and challenges. Discussion Paper 18. China Policy Institute, University of Nottingham, Nottingham.

  • Machleder J. (2006). Contextual and legislative analysis of the Russian law on NGOs. Discussion Paper, INDEM Foundation: Moscow, Russian Federation.

  • Maguire, S., Hardy, C., & Lawrence, T. B. (2004). Institutional entrepreneurship in emerging fields: HIV/AIDS treatment advocacy in Canada. Academy of Management Journal, 47, 657–679.

    Article  Google Scholar 

  • Margolis, J. D., & Walsh, J. P. (2003). Misery loves firms: Rethinking social initiatives by business. Academy of Management Review, 28, 268–305.

    Google Scholar 

  • Meyer, J. W., & Rowan, B. (1977). Institutional organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83, 340–363.

    Article  Google Scholar 

  • Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.

    Google Scholar 

  • Norcia, V. D. (1989). The leverage of foreigners: Multinationals in South Africa. Journal of Business Ethics, 8, 865–871.

    Article  Google Scholar 

  • North, D. C. (1990). Institutions, institutional change, and economic performance. Cambridge, NY: Cambridge University Press.

    Book  Google Scholar 

  • OECD Report. (2006). Environmental policy and regulation in Russia: The implementation challenge.

  • Ohmae, K. (1995). The end of the nation state. New York: Free Press.

    Google Scholar 

  • Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24, 403–441.

    Article  Google Scholar 

  • Palazzo, G., & Richter, U. (2005). CSR business as usual? The case of the tobacco industry. Journal of Business Ethics, 61, 387–401.

    Article  Google Scholar 

  • Palley, T. J. (2002). The child labor problem and the need for international labor standards. Journal of Economic Issues, 36, 601–615.

    Google Scholar 

  • Phillips, N., & Tracey, P. (2009). Dialogue. Academy of Management Review, 34(1), 169–173.

    Article  Google Scholar 

  • Powell, W. W., & DiMaggio, P. J. (Eds.). (1991). The new institutionalism in organizational analysis. Chicago, IL: The University of Chicago Press.

    Google Scholar 

  • Prahalad, C. K. (2009). The fortune at the bottom of the pyramid: Eradicating poverty through profits. Pennsylvania: Wharton School Publishing.

    Google Scholar 

  • Ramakrishna, K. (1984). The emergence of environmental law in the developing countries: A case study of India. Ecology Law Quarterly, 12, 907–935.

    Google Scholar 

  • Sampradaan Indian Centre for Philanthropy. (2004). A Review of Charities Administration in India.

  • Sanjay, K. (2003). Consumer movement in India: Issues and problems. New Delhi: Sarup & Sons.

    Google Scholar 

  • Saraf, D. N. (1990). Law of consumer protection in India. Bombay: N.M. Tripathi.

  • Savage, G. T., Nix, T. H., Whitehead, C. J., & Blair, J. D. (1991). Strategies for assessing and managing organizational stakeholders. Academy of Management Executive, 5, 61–75.

    Article  Google Scholar 

  • Sheingate, A. D. (2003). Political entrepreneurship, institutional change, and American political development. Studies in American Political Development, 17, 185–203.

    Article  Google Scholar 

  • Smith, N. C. (2003). Corporate social responsibility: Whether or how? California Management Review, 45(4), 52–78.

    Article  Google Scholar 

  • Streeck, W., & Thelen, K. (2005). Beyond continuity—Institutional change in advanced political economics. Oxford: Oxford University Press.

    Google Scholar 

  • Su, Z., & Richelieu, A. (1999). Western managers working in Romania: Perception and attitude regarding business ethics. Journal of Business Ethics, 20, 133–146.

    Article  Google Scholar 

  • Suchman, M. C., & Edelman, L. B. (1996). Legal-rational myths: The new institutionalism and the law and society tradition. Law & Social Inquiry, 21(4), 903–941.

    Article  Google Scholar 

  • Tan, J. (2009). Institutional structure and firm social performance in transitional economies: Evidence of multinational corporations in China. Journal of Business Ethics, 86, 171–189.

    Article  Google Scholar 

  • Tavis, L. A. (Ed.). (1982). Multinational managers and poverty in the third world. Notre Dame, IN: University of Notre Dame Press.

    Google Scholar 

  • Tavis, L. A. (Ed.) (1988). Multinational Managers and Host Government Interactions. Notre Dame, IN: University of Notre Dame Press.

  • Treadwell, A. B., & Pridemore, W. A. (2004). Purchasing power: Consumer empowerment and adaptation to the free market in Russia. Journal of Consumer Policy, 27, 451–474.

    Article  Google Scholar 

  • Trotter, R. C., Day, S. G., & Love, A. E. (1989). Bhopal, India and Union Carbide: The second tragedy. Journal of Business Ethics, 8, 439–454.

    Article  Google Scholar 

  • Varley, P., Mathiasen, C., & Voorhes, M. (Eds.). (1998). The sweatshop quandary: Corporate responsibility on the global frontier. Washington, DC: Investor Responsibility.

    Google Scholar 

  • Ventresca, M. J., & Mohr, J. (2002). Archival methods in organization analysis. In J. A. C. Baum (Ed.), Companion to organizations (pp. 805–828). New York: Blackwell.

    Google Scholar 

  • Vogel, D. (1995). Trading up: Consumer and environmental regulation in a global economy. Harvard University Press.

  • Waddock, S., Bodwell, C., & Graves, S. B. (2002). Responsibility: The new business imperative. Academy of Management Executive, 16(2), 132–148.

    Article  Google Scholar 

  • Walsh, J. P., Weber, K., & Margolis, J. D. (2003). Social issues and management: Our lost cause found. Journal of Management, 29(6), 859–881.

    Article  Google Scholar 

  • Williams, E. J. (1995). The Maquiladora industry and environmental degradation in the United States-Mexican borderlands. Paper presented at the annual meeting of the Latin American Studies Association, Washington, DC.

  • Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38, 341–363.

    Article  Google Scholar 

  • Zarsky, L. (1999). Havens, halos and spaghetti: Untangling the evidence about foreign direct investment and the environment. In OECD (Ed.) Foreign direct investment and the environment (pp. 48–73). Paris: OECD.

  • Zhao, M. (2013). Beyond cops and robbers: Contextual challenge driving multinational corporation’s public crisis in China and Russia. Business Horizons, 56(4), 491–501.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Institute for Emerging Market Studies, Moscow School of Management SKOLKOVO, Unit 1608, North Star Times Tower, No.8 Beichendong Road, Chaoyang, Beijing, China

    Meng Zhao & Seung Ho Park

  2. Schulich School of Business, York University, Toronto, ON M3J 1P3, Canada

    Justin Tan

Authors
  1. Meng Zhao
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Justin Tan
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Seung Ho Park
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Meng Zhao.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zhao, M., Tan, J. & Park, S.H. From Voids to Sophistication: Institutional Environment and MNC CSR Crisis in Emerging Markets. J Bus Ethics 122, 655–674 (2014). https://doi.org/10.1007/s10551-013-1751-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-013-1751-x

Keywords

Search

Navigation