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How Do Foreign SMEs Mitigate Violent Conflict Risk by Doing Good? An Instrumental Stakeholder Theory Perspective

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Abstract

Large foreign firms’ interventions in violent conflicts have drawn increasing research attention. Nonetheless, scant research has investigated how foreign small and medium-sized enterprises (SMEs), which have little capacity in peacebuilding, can protect themselves from violent conflict risk. Drawing upon the instrumental stakeholder theory (IST), this study explores two specific local community-oriented corporate social responsibility (CSR) practices (i.e., corporate philanthropy and workforce localization) as violent conflict risk buffering strategies for foreign SMEs. Further, we examine their varying effects in different institutional environments (i.e., host country media freedom and labor rights protection). Using data from a cross-country survey of Chinese foreign SMEs combined with archival data from multiple sources, we empirically confirm the attenuating effects of both corporate philanthropy and workforce localization on foreign SMEs’ violent conflict risk. Besides, we discover that host country labor rights protection strengthens the mitigation impact of workforce localization on violent conflict risk. Our study advances the literature on IST and CSR by revealing the risk mitigation mechanism of CSR activities for foreign SMEs and elucidating its institutional boundary conditions.

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Notes

  1. The number of countries drops to 27 because of the lack of secondary data in 3 countries.

  2. We used the data of World Factbook, World Press Freedom Index and the Global Rights Index in 2022 and the data of World Development Indicators in 2021.

  3. 0,1,2, 3, 4, 5 representing 5 plus, 5, 4, 3, 2, 1 in the Global Rights Index, respectively.

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Funding

This work was supported by National Natural Science Foundation of China under Grant No. 72202112, 71932005, and 71821002. This work was partially the learning outcome of the second author under the Guided Study subject at The Hong Kong Polytechnic University. The authors thank Dr. Yue Yuan and Mr. Lei Zhao for their support when developing an early version of this manuscript. The authors also thank Professor Irene Henriques and three anonymous reviewers for helping improve this paper.

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Authors and Affiliations

  1. School of Management, Zhejiang University, Hangzhou, 310058, China

    Yongyi Shou & Xueshu Shan

  2. Nottingham University Business School China, University of Nottingham Ningbo China, Ningbo, 315100, China

    Jinan Shao

  3. Department of Logistics and Maritime Studies, Faculty of Business, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China

    Kee-hung Lai

  4. School of Management, Hangzhou Dianzi University, Hangzhou, 310018, China

    Qing Zhou

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  1. Yongyi Shou
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  2. Xueshu Shan
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  3. Jinan Shao
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  4. Kee-hung Lai
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  5. Qing Zhou
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Correspondence to Jinan Shao.

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Shou, Y., Shan, X., Shao, J. et al. How Do Foreign SMEs Mitigate Violent Conflict Risk by Doing Good? An Instrumental Stakeholder Theory Perspective. J Bus Ethics (2023). https://doi.org/10.1007/s10551-023-05521-x

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