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Predicting stakeholder orientation in the multinational enterprise: A mid-range theory

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Abstract

As the reach of corporations increasingly extends across borders, a key research question is whether overseas subsidiaries adopt a shareholder-centric orientation, centered on maximizing shareholder wealth, or a stakeholder-centric orientation, centered on creating value for a broader range of stakeholders. Existing theories, addressing the corporate level of analysis, focus on forces exogenous to the firm: local resource pressures, and institutional norms. Using a combination of induction and fuzzy-set analysis, I draw on documentary evidence and 298 interviews with managers and stakeholders to build theory about the conditions that shape subsidiaries’ stakeholder orientations. Two major findings emerge. First, although theory emphasizes external stakeholders’ control over resources, internal control through the corporate parent can crowd out the voices of local stakeholders. Second, although institutional theory proposes isomorphism with local norms and standards, some corporations are subject to scrutiny by global stakeholders, and their subsidiaries face higher requirements for social engagement than their peers. These findings are the foundation of a mid-range theory that combines conventional explanations, focused on environmental factors, and an internal-stakeholder perspective, based around the roles of the parent corporation as owner and resource provider, to predict stakeholder orientation.

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Notes

  1. QCA is based on a paradigm with different assumptions from conventional quantitative methodology (see Fiss, 2007; Rihoux & Ragin, 2008). To be consistent with this paradigm, I adopt the terminology of QCA researchers. Readers may consider causal conditions to resemble independent variables, and outcomes to resemble dependent variables. Please see Ragin (2008a) for a detailed introduction to the method.

  2. For more information on counterfactual analysis, please consult Ragin (2008a). Fiss (2011) provides a helpful overview for management scholars.

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Acknowledgements

This research was funded by a grant provided by the 6th Framework Programme of the European Commission (Directorate-General for Research). I am indebted to the Social Innovation Center at INSEAD, and to Lourdes Casanova, Kai Hockerts, Mario Minoja, Peter Neergaard, Esben Pedersen, Francesco Perrini, Susan Schneider, Pamela Sloan, Antonio Tencati, and Maurizio Zollo for contributing to the data collection. I thank Subi Rangan, Javier Gimeno, JIBS editor Julian Birkinshaw, and two anonymous reviewers for their insightful comments and suggestions. All remaining errors and omissions are my responsibility.

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  1. London Business School, London, UK

    Donal Crilly

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Accepted by Julian Birkinshaw, Guest Editor, 25 August 2010. This paper has been with the author for two revisions.

Appendices

APPENDIX A

EXTRACT OF INTERVIEW PROTOCOL FOR MANAGERS

  • (1) What do you think the responsibilities of multinationals towards society are?

  • (2) Why do you think that is the case?

  • (3) What is the corporate responsibility of firms within your sector?

  • (4) Does corporate responsibility play any role in competing within this sector? Is it a strategic issue?

  • (5) Some see responsible behavior as a pure cost factor. What do you think?

The Relevance of Corporate Responsibility

  • (6) How is corporate responsibility relevant for your day-to-day work? How important an issue is it for you? If so, provide examples of how you integrate these issues in your day-to-day work.

The Firm's Stakeholders

  • (7) Name the most relevant stakeholders for your company or business unit.

  • (8) How would you rank them on their impact on your company (business unit)?

  • (9) How would you rank them based on your company's (business unit's) impact on their well-being?

Consider each stakeholder one at a time (repeat for each stakeholder):

  • (10) What is your company's responsibility vis-à-vis stakeholder X?

  • (11) How does your company (unit) try to meet its responsibilities with X? Which initiatives have been taken?

Day-to-Day Management Processes

  • (12) Are socially motivated decisions or initiatives recognized in your performance evaluation?

  • (13) In your part of the organization, is there a requirement to include an evaluation of the social impact of investment plans in order to decide on project proposals and resource allocation?

APPENDIX B

EXTRACT OF INTERVIEW PROTOCOL FOR STAKEHOLDERS

  • (1) What is the corporate responsibility of firms within sector X?

  • (2) Which standards should a multinational follow, home and/or country based?

  • (3) The firm in comparison with others:

    • (3.1) Benchmark how good firm X is in honoring its responsibilities.

    • (3.2) How do you evaluate the firm's ability to honor its responsibilities?

    • (3.3) Name the firm's most important competitors. Where would you position its competitors (or the industry average)?

    • (3.4) On what basis do you decide who is better or worse?

The Company and You

  • (4) How important is firm X to your organizational goals?

  • (5) Tell us the specific story of your interaction with firm X.

    1. a)

      What is your organization doing to impact the firm?

    2. b)

      How often do you interact with the firm? When did you last meet?

    3. c)

      Have you noticed any changes arising from this interaction?

The Internal Organization

  • (6) What are the strengths and weaknesses in the way firm X has organized to handle its responsibilities towards stakeholders?

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Crilly, D. Predicting stakeholder orientation in the multinational enterprise: A mid-range theory. J Int Bus Stud 42, 694–717 (2011). https://doi.org/10.1057/jibs.2010.57

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