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CSR and MNC Competitiveness

CSR and MNC Competitiveness. Jay Hyuk Rhee Professor of IB/Strategy Korea University Business School. Economic Model. Legal Model. Social Model. Corporate Social Responsibility. Seriously considering the impact of a company’s actions on society Historical perspectives

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CSR and MNC Competitiveness

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  1. CSR and MNC Competitiveness Jay Hyuk Rhee Professor of IB/Strategy Korea University Business School

  2. Economic Model Legal Model Social Model Corporate Social Responsibility • Seriously considering the impact of a company’s actions on society • Historical perspectives • Take actions that protectand improve the welfareof society as a whole alongwith their own interests

  3. Arguments for CSR • Addresses social issues brought on by business, and allows business to be part of the solution • The public supports CSR

  4. Arguments Against CSR • Dilutes the primary purpose of business • Business is not equipped to handle social activities • Limits the ability to compete in a global marketplace

  5. Issues & Theories in Global Strategy • Why a firm is willing to do business abroad and how it can compete in unfamiliar markets (Buckley, 1988; Dunning, 1980; Egelhoff, 1982; Hennart, 1989; Hymer, 1976; Johanson & Vahlne, 1977; Kogut & Zander, 1988; Rugman, 1980; Vernon, 1966) • Two different approaches • purpose-oriented • process-oriented

  6. Assumption & Reality • Existence of “liabilities of foreignness” (Zaheer, 1995) • MNCs (vs. indigenous competitors) • face additional costs • cultural/legal/institutional/linguistic differences • lack of knowledge of local market conditions • increased expense of communications

  7. Implications & Requirements • MNCs must have some advantages • which are, at least in part, specific to the firm and which are readily transferable within the firm and across distances • firm-specific advantages, as embodied in organizational practices which are difficult for other firms to copy (Barney, 1991)

  8. Firm-Specific Advantages • Operational measurements • technology and marketing skills • international experience • excess managerial capacity • financial and monetary factors, etc • Specific to the firm, readily transferable within the firm and across distances?

  9. MNCs • expanding into multiple host countries • operating in diverse industries • conducting many business activities • implementing different strategies • ….. thus interacting with multiple stakeholders

  10. Business Stakeholder Groups Suppliers Customers Special-InterestGroups Community Media Competitors Society Stockholders GeneralPublic Employees

  11. Home CountryStakeholder Pressures Host CountryStakeholder Pressures Standards Practices Ethics Laws Culture Customs System ofGovernment SocioeconomicSystem MNCs Standards Practices Ethics Laws Culture Customs System ofGovernment Socioeconomic System

  12. Revisiting “Firm-Specific Advs” • Are they really “firm”-specific advs? • Or advs with location-bound characteristics? • meaningful for a certain host country, industry, or business activity? • CSR : firm-specific advs with non-location-bound characteristics : especially in the Era of Social Media

  13. Challenges for MNCs • Visible targets for policy-makers and non-governmental organizations (NGOs) • “Pollution havens” (Daly, 1994; King & Shaver, 2001) • “Race to the bottom” (Korten, 1995) • blacklist of water polluters in China (China Daily, 2007) • face more labor lawsuits (Mezias, 2002)

  14. To Name A Few… • Child labor • Forced labor • Health and Safety • Discrimination • Working hours • Compensation • Management systems

  15. CSR in the Era of Social Media • The incorporation of a holistic CSR perspective within a firm’s strategic planning and core operations • More critical for MNCs that face diverse stakeholders in a global environment • need to take strategic approach to CSR

  16. Contribution of CSR Practices • Improve social legitimacy and overcome liabilities of foreignness (Campbell, Eden & Miller, 2012; Dacin, Oliver & Roy 2007) • Manage externality while create economic value (Crouch, 2006; Daudigeos & Valiorgue, 2011) • Enhance Competitiveness • Non-location-bound characteristics

  17. Applicability of CSR • Compliance with, not “differentiating,” CSR standards across diverse • host-countries • industries • business activities • Departure from the traditional assumptions and approaches

  18. CSR for MNC Competitiveness • Not any more a “nice-to-do” add-on • Need to take CSR to the strategic level • Framing the purpose of the business : To create profit by doing good business in every sense of the word

  19. Ongoing Issues • Contributions of CSR to Performance • Specifically, • How to measure CSR activities? • Internally or externally • How to measure performance? • Financial, environmental, or social

  20. Perspective 1: CSP Drives the Relationship Good CorporateReputation Good CorporateSocial Performance Good CorporateFinancialPerformance Perspective 2: CFP Drives the Relationship Good CorporateSocial Performance Good CorporateFinancialPerformance Good CorporateReputation Perspective 3: Interactive Relationship among CSP, CFP and CR Good CorporateReputation Good CorporateSocial Performance Good CorporateFinancialPerformance

  21. “Perhaps the biggest catalyst for change is that many of the big social and environmental challenges, once seen as obstacles to progress, have become opportunities for innovation and business development.” – Patrick Cescau, CEO, Unilever

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