Legitimacy as a Key Driver and Determinant of CSR

in Developing Countries

Paper for the 2007 Marie Curie Summer School on Earth System Governance,
28 May – 06 June 2007, Amsterdam

Ralf Barkemeyer
University of St Andrews &
Sustainable Development Research Centre (SDRC)
School of Management
The Gateway, North Haugh
St Andrews
Fife, KY16 9SS
Scotland, UK

Tel: +44 (0) 1334 850 899

Fax: +44 (0) 1334 462 812
[email protected]
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Legitimacy as a Key Driver and Determinant of CSR

in Developing Countries
Ralf Barkemeyer

Abstract
This paper aims to specify the conceptual limits of CSR in a developing country
context. Taking organisational legitimacy theory as a departure-point, it is argued
that two key shortcomings regarding the contribution of CSR towards
development can be identified: First, a multinational company operating in a
remote country mainly seeks to gain legitimacy from its primary stakeholders
which are typically based in its home market (e.g. customers, media), leading to
a bias towards short-term projects with a high visibility rather than longer-term
capacity-building initiatives. Second, differing perceptions of legitimacy in the
home and the host country can lead to a misjudgement of which kind of initiative
would be deemed appropriate in the host country and, subsequently, a
misallocation of resources occurs. Implications are presented regarding (a) the
strategic alignment of a corporation’s engagement in CSR as well as (b) the
conceptual limits of CSR in contributing towards (ecological) sustainability.

Key words: Corporate Social Responsibility, Organisational Legitimacy,

Institutionalisation, Developing Countries, Cultural Differences,
World Values Survey, Multinational Companies, CSR Business
Case, Governance, Stakeholder Concept

2
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

1 Introduction
Business has positioned itself as a key player on the international development
agenda. Despite mixed assumptions about the actual developmental impact of
private inflows into developing countries, it can be ascertained that the private
sector today has an unprecedented potential to contribute towards some of the
most pressing developmental needs. Although in actual terms, the rise of foreign
direct investment (FDI) into developing countries seems rather modest compared
to the respective financial flows among the so-called triad of North America, the
European Union and Japan (see e.g. Matten, 2000; Rugman, 2000), its relative
importance has risen dramatically: the share of FDI of total capital flows into
developing countries has risen from 30% to 82% between 1980 and 2002
(UNCTAD, 2004; UNED Forum, 2001), at the same time dwarfing official
development assistance which has declined in absolute figures in this period.
Both in the advanced economies and developing countries, a shift can be
observed towards the privatisation of formerly public goods and services (see
e.g. Weizsäcker, Young, Finger, & Beisheim, 2005). This shift is further
documented by the global dissemination of a multitude of new approaches such
as the Global Reporting Initiative (GRI), the UN Global Compact, the global
increase in the application of ISO14000, SA8000, AA1000, and other
environmental and social management systems, as well as the plethora of
corporate codes of conduct (for an overview see e.g. Leipziger, 2003).

Along these lines, public perception towards the role of business in society has
changed rapidly and markedly. Rather than seeing business as part of the
problem, it is increasingly seen as part of the solution (for a detailed account see
e.g. Pattberg, 2006, 11pp.). Accordingly, the development agenda has shifted
from the question how business causes poverty, to portraying the private sector
as part of the solution (see e.g. Prieto-Carron, Lund-Thomsen, Chan, Muro, &
Bhushan, 2006). This can be illustrated by the UN Global Compact and its direct
link to the UN Millennium Development Goals:

3
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

“The Compact’s relevance will lie in the decision participants make to either build
a sustainable society that offers opportunity to the world’s citizens or to condemn
millions of people to live riven with conflict, ravaged by disease and bereft by
hope. Right now, global players have a choice” (Kell, 2003: 47).

One key question regarding this statement by Georg Kell, the Executive Head of
the Global Compact office, will be whether businesses actually do have a free
choice – or whether their CSR activities are rather shaped by their institutional
settings as well as structural factors within these organisations. Recently, a
growing number of researchers have questioned the adequacy of current
mainstream CSR approaches to produce substantial outcomes in terms of
improved sustainability in a developing country context (see e.g. Blowfield &
Frynas, 2005; Fox, 2004; Newell, 2006; Prieto-Carron et al., 2006; Utting, 2003).

This paper aims to contribute towards a better understanding of the impact of the
current mainstream CSR agenda from a developing country perspective. The
analysis will be based on the diverse body of organisational legitimacy theory. In
the next section of the paper, a brief introduction to CSR and development is
provided. Subsequently, CSR in a developing country context is examined
through the lens of organisational legitimacy. The analysis is informed by the
strategic and the institutional arrays of organisational legitimacy theory. Based on
the analysis, hypotheses are formulated regarding the impact of organisational
legitimacy on CSR in a developing country context. The paper concludes with a
brief summary as well as some key implications derived from the analysis.

2 CSR in developing countries: an overview

The concept of Corporate Social Responsibility (CSR) has been extremely
successful in recent years, and has become increasingly relevant in areas that
had previously been dominated by official development assistance (see e.g.
Blowfield et al., 2005). In summary, CSR can best be described as an umbrella
term, referring to the responsibilities of business towards society (see Note

4
1). CSR is not an entirely new concept in most parts of the world. Albeit often
termed differently, there have been similar approaches towards business
responsibility in many different countries (Blowfield et al., 2005; Prieto-Carron et
al., 2006); (for an illustration of the evolution of CSR in the Indian context see e.g.
Mohan, 2001). However, the current dissemination of CSR instruments is
somewhat different in that it stems from the Anglo-American tradition, highlighting
the voluntary nature of CSR as well as focusing especially on Northern
multinational companies (MNCs) (see e.g. Fox, 2004). In doing so, it follows the
trend of a diffusion process of policy instruments from North to South and
therefore of a global convergence of policy structures (on the diffusion of
environmental policy innovations see e.g. Jänicke, Kern, & Jörgens, 2000; Tews,
Busch, & Jörgens, 2003; Weidner & Jänicke, 2002).

As pointed out above, the dramatic rise in importance of CSR from a developing
country perspective is based on both the multitude of new large-scale CSR
approaches, as well as the new role that has been assigned to the private sector
vis-à-vis official development assistance. “Doing well by doing good” has gained
a large and growing number of advocates. A plethora of best practice examples
of CSR in developing country contexts has evolved, to a large extent highlighting
the “business case of CSR”. Several studies highlight the economic potential for
MNCs tapping into developing country markets (see e.g. Kirchgeorg & Winn,
2006; Prahalad, 2005; Thorpe & Prakash-Mani, 2003; World Business Council on
Sustainable Development, 2004). Regardless of the question whether these new
CSR initiatives are effectively producing viable outcomes in terms of
(sustainable) development, CSR has proven to be an attractive option vis-à-vis
regulative approaches: (a) business can increase its regulatory autonomy; (b)
host governments can devolve responsibility to business and therefore save
scarce resources; and (c) non-governmental organisations can raise their profile
and funding opportunities (see e.g. Michael, 2003).

One tangible result that has certainly been achieved by the current CSR
“movement” is that it “has got people talking about worker rights, global
governance, sustainable enterprise and all manner of topics that have relevance
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

to the well-being of the poor and marginalized” (Blowfield, 2005b: 515). However,
one central theme regarding Corporate Social Responsibility in a developing
country context is that current practice is outpacing research on the broader
implications of this increased reliance on business self-regulation. As a
consequence, the CSR and development agenda is shaped and consolidated
while failing to address a number of substantial shortcomings of the concept itself
(see e.g. Blowfield, 2005b; Blowfield et al., 2005; Prieto-Carron et al., 2006). In
his analysis of the relationship between companies and poorer local
communities, Newell concludes that “mainstream CSR approaches assume a set
of conditions that do not exist in most of the world. CSR can work, for some
people, in some places, on some issues, some of the time” (2005: 556).

Critical issues that have been raised regarding the current mainstream practice of
CSR and development are e.g. (a) the predominance of the “CSR business
case”, leading to an overemphasis on corporate reputation and a detraction from
the actual problems that should be addressed by CSR (e.g. Frynas, 2005; Klein
& Harford, 2005; Utting, 2005); (b) the pivotal role of the stakeholder concept,
leading to a bias towards a company’s primary stakeholders (see Note 2) (e.g.
Blowfield, 2005a; Pedersen, 2006; Prieto-Carron et al., 2006); (c) the inadequacy
of the CSR agenda, reflecting a “Northern” understanding of CSR while at the
same time neglecting developmental issues (e.g. Fox, 2004; Fox, Ward, &
Howard, 2002; Utting, 2001; Ward, 2004; Ward & Fox, 2002); and (d) the
governance dimension of CSR, pointing to an enabling environment which would
be essential for effective self-regulation, and the crowding out of alternative
(regulatory) policy instruments (e.g. Fox, 2004; Ite, 2004; Newell, 2006; Utting,
2002).

6
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

3 CSR in developing countries viewed from the

perspective of organisational legitimacy
The explanatory power of organisational legitimacy theory in the context of CSR
in developing countries is twofold: first, its capability to address more than profit-
maximising motives creates a more complete picture of companies’ motives to
engage in CSR, not merely focusing on the so-called business case of CSR.
Second, organisational legitimacy is able to embrace cultural factors, which form
different institutional pressures in different contexts.

Organisational legitimacy has not evolved as one contingent theory but as an

umbrella of concepts stemming from a variety of disciplines, ranging from
resource dependence theory over new institutionalism to management theory (for
an overview see e.g. Hahn, 2005; Suchman, 1995). Depending on their
respective disciplinary backgrounds, these concepts vary in the ways legitimacy
is defined as well as the analytical perspective that is taken. In general, a
distinction can be made between the strategic tradition and the institutional
tradition of organisational legitimacy. From a strategic view-point, the focus rests
on the organisation (“managers looking out”) and assumes a relatively high
degree of managerial control over the legitimating process (see e.g. Ashforth &
Gibbs, 1990; Dowling & Pfeffer, 1975; Lindblom, 1994; Maurer, 1971; Perrow,
1961; Pfeffer, 1981; Pfeffer & Salancik, 1978; Richardson, 1985). In the
institutionalist tradition, a broader perspective is taken (“society looking in”),
focusing on how organisations or groups of organisations adapt to their
institutional environments in order to manage legitimacy. Here, legitimacy is not
seen as an operational resource, but rather as a set of external constraints,
forming the actions of the organisation (see e.g. DiMaggio & Powell, 1983;
Elsbach, 1994; Hahn, 2005; Suchman, 1995; Zucker, 1987) (see Note 3).

In an attempt to synthesise the different arrays of research to one contingent

body of legitimacy theory, Suchman provides the following generic definition of
organisational legitimacy: “Legitimacy is a generalized perception or assumption
that the actions of an entity are desirable, proper, or appropriate within some

7
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

socially constructed system of norms, values, beliefs, and definitions” (1995:

574).

Depending on the different theoretical arrays, a number of subtypes of

organisational legitimacy can be identified. A distinction can be made between
pragmatic legitimacy, moral legitimacy, and cognitive legitimacy (Suchman,
1995). While the first type is grounded in the self-interest of the organisation’s
stakeholders, aiming for influence or a tangible return in exchange for granting
legitimacy, moral legitimacy is based on a conscious judgement of the audience
whether the actions of the organisation are granted moral approval or not. In
contrast to pragmatic legitimacy, the decision is not merely based on self-interest
calculations (e.g. for an analysis of reciprocal stakeholder behaviour on the basis
of organisational legitimacy see Hahn, 2004, 2005). The third type, cognitive
legitimacy, is fundamentally different from the former two in that it is not the result
of a communicative discourse between the organisation and/or its stakeholders
(e.g. Aldrich & Fiol, 1994; Scott, 1995). Instead, it is based on cognition, either
because the organisation itself or its actions are comprehensible or are taken for
granted (see e.g. Hahn, 2005; Suchman, 1995). Along these lines, institutional
theory differentiates between postconscious and preconscious institutionalisation:
while the former refers to approval based on an evaluation process, the latter is
based on cognitive approval or taken-for-grantedness (see e.g. DiMaggio, 1988;
Roberts & Greenwood, 1997).

In their task to manage the legitimacy of their environments, organisations have a

number of different means at their disposal. In the strategic school, a
considerable body of literature exists on the strategies organisations can employ
in order to gain, maintain, or repair legitimacy (see e.g. Hahn, 2005; Suchman,
1995). In general, an organisation can employ “substantive” or “symbolic” means
to seek legitimacy. While the substantive management produces actual change
by or within the organisation, symbolic management refers to the attempt to
appear consistent with one’s external expectations in order to be able to continue
business as usual (see e.g. Ashforth et al., 1990; Richardson, 1985).

8
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

By definition, organisational legitimacy is not a universal concept. Rather, the

judgement whether an organisation and its actions are perceived as legitimate is
socially constructed – and therefore subject to change depending on the social
environment the organisation is based in. This becomes especially acute in
multinational entities that span over a number of countries and hence
simultaneously face multiple social systems. To think of an MNC as a single
entity that faces a global environment, i.e. a global competitive domain, a global
political domain, etc. “introduces an unrealistic assumption of a homogenous and
monolithic environment” (Rosenzweig & Singh, 1991: 343). Instead, Rosenzweig
and Singh regard an MNC “as a set of differentiated structures and processes,
and each of these structures and processes exists in the many subunits of the
organization. (They) are affected by a variety of environmental forces, some of
which are specific to the host country and some of which are global in nature.
They face, at the same time, a pressure for conformity to conditions in the local
environment and an imperative for consistency within the multinational
enterprise” (Rosenzweig et al., 1991: 344). In this regard, they follow well-
established findings of the field of international business strategy (Bartlett, 1986;
Bartlett & Ghoshal, 1989; Ghoshal & Nohria, 1989; Prahalad & Doz, 1987).
Looking at an MNC, one can therefore distinguish between a global “meta-
environment” it operates in, and the various environments in which the subunits
of the MNC are based (Kostova & Zaheer, 1999; Zaheer, 1995). International
media or large NGOs would be part of the meta-environment an MNC is
embedded in, whereas local media or residents would be typical stakeholders of
the latter category.

As pointed out above, key features of the current CSR approaches are their
voluntary nature as well as the focus on Northern multinational companies (see
e.g. Fox, 2004). Consequently, a Northern MNC conducting a CSR initiative
abroad – either through a subsidiary or in the form of a supply chain relationship
– can be confronted with a discrepancy in the judgement over the nature of
legitimacy in its home country and the local host environments it operates in.

9
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

The UN Global Compact’s ten principles are backed by universal declarations

such as the UN Declaration of Human Rights or ILO Labour principles, and refer
to “global values”. However, even the most basic human rights have been subject
to interpretation. This can be illustrated by the longstanding debate around “Asian
values” and the reluctance to embrace individual human rights in a number of
Asian countries (see e.g. Sen, 1997). Even if individual human rights are
generally endorsed by a given society, there may be different perceptions about
the human rights situation within this society in general. In this regard, results of
the World Values Survey (WVS, 2006) (see Note 4) can serve to illustrate
differing perceptions about the human rights situation in a number of European
and South Asian countries.

70%
60%
50%
40%
30%
20%
10%
0%
Bangladesh China (2001) Spain (2000) Great Britain
(2002) (1999)

There is a lot of respect for individual human rights

There is some respect
There is not much respect
There is no respect at all

Figure 1: Perceptions of Human Rights Situation in selected Countries (based on WVS, 2006)

One astonishing insight of the above survey results is that on average,

Bangladeshi and Chinese respondents were in fact more satisfied with the
human rights situation in their countries than their Spanish and British
counterparts. It is neither the purpose of this example to discuss the above
results in detail, nor to discuss the multitude of factors which may have
influenced the respondents in their decisions (e.g. freedom of speech or the
respondents’ expectations relative to the previous record of human rights in their

10
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

respective country). Instead, the above example is merely intended to illustrate

that local perceptions can vary greatly depending on the respective (cultural)
context.

A similar example refers to the trade-off between different values, which might be
judged differently in different societies. Blowfield & Frynas refer to a survey
carried out by the World Business Council for Sustainable Development
(WBCSD), asking respondents from different countries what CSR meant to them:
it turned out that there were considerable differences between e.g. Thai and
Ghanaian respondents, stressing environmental issues or community
empowerment respectively (Blowfield et al., 2005; World Business Council on
Sustainable Development, 2000). The above mentioned discrepancy between a
“Northern” industrialised country agenda and its “Southern” developing country
counterparts in terms of the priorities within sustainable development also points
towards an inherent discrepancy in the respective norms and values.

Research on cross border environmental management of large MNCs suggests

that a key driver for the enhancement of environmental management in the local
developing country context is the pressure created by the headquarters (see e.g.
Hansen, 1999; Jeppesen & Hansen, 2004; Ruud, 2001, 2002). These findings
are in line with organisational theory, where the resemblance in the
organisational structures of a corporation’s headquarters and its foreign
subsidiaries has been labelled “mirror effect” (Brooke & Remmers, 1978;
Rosenzweig et al., 1991). It follows that from the perspective of a local
(developing country) subsidiary or supplier, problems can be posed by the
simultaneous existence of external local demands and internal “coercive
pressures for isomorphism” created by the parent company (DiMaggio et al.,
1983; Rosenzweig et al., 1991: 347). In the case of mere supply chain
relationships, some of these coercive pressures such as the technologies
employed and the organisational structures (Rosenzweig et al., 1991) may be
weaker than in the case of an MNC subsidiary, or even non-existent. However, a
Southern supplier that is involved in a code of conduct might face a similar
mismatch of local perceptions and obligations imposed by a code of conduct.

11
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Home Market Legitimacy

Host Market Legitimacy

Figure 2: CSR in Developing Countries from the Perspective of Organisational Legitimacy

Figure 2 illustrates the peculiarities of a typical CSR initiative from the

perspective of organisational legitimacy. As mentioned above, current large-scale
initiatives can to a considerable extent be characterised by MNCs initiating
activities through a subsidiary or through its supply chain. Instead of assuming
that both the MNC and its subsidiary/supplier are facing the same global
monolithic environment, it is more appropriate to acknowledge that they are
involved in their own nets of local stakeholders, respectively. Therefore, two
distinct publics are involved in the CSR process. This leads to a set of
hypotheses regarding the nature of this relationship in terms of organisational
legitimacy.

12
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Hypothesis 1: CSR is mainly used as a means of managing primary

(Northern) stakeholders.

A multinational company operating in a remote country mainly seeks to gain

legitimacy from its primary stakeholders. These are typically based in its home
market (e.g. customers, media). Since the company mainly targets those
stakeholders that actually have a crucial stake in the operations, the discourse
around the company’s activities takes place in the North. There is a danger of a
detachment of the company’s CSR activities from the actual problem the
activities aim at in the host country. Furthermore, if CSR is used as a means of
legitimacy management, the company has to produce tangible results to prove
their engagement to their primary stakeholders. This can result in a bias towards
short-term projects with a high visibility rather than longer-term capacity-building
initiatives. As Frynas points out, “PR needs may, for instance, prioritize media-
friendly projects such as donating medical equipment or helping to construct a
new hospital, rather than slow local capacity-building or the training of village
nurses” (Frynas, 2005: 585). At the far end of the scale, this can lead to “green-
washing” (see Greer & Bruno, 1996), i.e. businesses solely focusing on symbolic
legitimacy management and disregarding the actual impact of their activities.

Hypothesis 2: Differing perceptions of legitimacy in the home and the host

country can lead to a misjudgement of which kind of initiative would be
deemed appropriate in the host country.

This issue points to the process of preconscious institutionalisation mentioned

above. A CSR agenda that is initiated in a Northern context inevitably reflects
Northern values. Those elements of legitimacy that are deeply rooted in cultural
traits of a society are not subject to a discourse between stakeholders over what
is right or wrong, but are rather taken for granted. There can be a different
understanding of what is right or wrong based on different cultural backgrounds
(e.g. deeply embedded business practices in countries such as Indonesia or
Nigeria, which would clearly be identified as corruption in other countries).
Different perceptions of the trade-off between environmental and economic goals

13
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

in developed and less developed countries can also be named here.

Consequently, when carrying out CSR activities abroad, a company is at risk of
merely transferring their social construction of legitimacy into the host country
context, leading to a misjudgement of which kind of initiative would actually be
deemed appropriate in the local context.

Hypothesis 3: Companies benefit from the identification of different

legitimacies in the home and host countries they operate in.

Regardless of whether CSR is carried out in an instrumental manner or on the

basis of “enlightened self-interest”, the identification of the cultural contexts is of
high relevance for multinational operations. In both cases the acknowledgement
of the different cultural contexts the company operates in will decrease the risk
that is associated with a failure of CSR initiatives. Investments in CSR initiatives
that do not produce the intended results due to a mismatch of legitimacies at
home and abroad are clearly a misallocation of scarce resources. Moreover,
CSR initiatives that do not produce the intended outcomes can cause
reputational damage. Increased integration of local stakeholders and the creation
of feedback loops between host country operations and the company’s
headquarters can contribute to a reduction of these risks, since they can help to
couple the legitimation processes in home and host country.

The degree of centralisation of a company’s CSR policies will to a certain extent

determine the company’s ability to adapt to different cultural contexts. A highly
decentralised CSR regime will be more likely to identify the local host country
peculiarities which might limit the effectiveness of voluntary initiatives.
Consequently, the degree of headquarters’ control over the company’s CSR
activities and therefore its short-term potential as a public relations tool will
decrease. However, it can be argued that in the long run the coupling of
legitimacies leads to more viable outcomes of CSR activities, since they lead
towards increased local appreciation of the company’s operations.

14
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

4 Conclusions
The purpose of this article is not to reject the current mainstream CSR and
development agenda as a whole – there are clearly both a multitude of highly
excellent initiatives as well as CSR activities that are failing miserably. The
purpose is rather to tackle the question of what the current CSR agenda can
realistically achieve. There is clearly a need to gain a better understanding of
CSR in a developing country context in order to create a better fit with other
instruments.

A considerable amount of literature has been produced on the impact of strategic

legitimacy management on CSR, especially in the field of corporate
environmental disclosure (see e.g. Deegan, Rankin, & Tobin, 2002; Gray, Kouhy,
& Lavers, 1995; Guthrie & Parker, 1989; Patten, 1992; Woodward, Edwards, &
Birkin, 1996). This has shed light on some of the underlying mechanisms
determining a company’s engagement in CSR. Main findings include the bias
towards large companies with high brand visibility (which is tantamount to the
neglect of small-scale operations), the essential role of civil society pressure, as
well as the limitations of CSR regarding its use as a public relations channel,
focusing on the business of CSR and thereby largely ignoring those aspects of
CSR which do not directly contribute towards a company’s financial bottom-line.
However, regarding CSR in a developing country context, the explanatory power
of organisational legitimacy goes beyond its strategic tradition. The institutional
array of organisational legitimacy proves as a useful body of theory to inform
CSR in a developing country context, since it is able to address cultural factors
and goes beyond business case considerations.

For several decades, cultural differences have been acknowledged in

international management studies (see e.g. Hofstede, 1980; Hofstede &
Hofstede, 2005; Trompenaars & Hampden-Turner, 1997) – it is surprising that a
context-sensitive issue such as corporate social responsibility has up to now to a
certain extent been reluctant to address cultural factors more prominently. The
institutional branch of organisational legitimacy theory is well suited to contribute
towards a closure of this gap. It can identify some of the main obstacles

15
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

regarding CSR in a developing country context as well as its strengths and

limitations vis-à-vis other policy instruments.

A number of implications both on the company and policy level can be derived
from the above analysis. From a company perspective, CSR initiatives that do
not match the local understanding of legitimacy can lead to failure and therefore
result in a misallocation of resources. If an action is not perceived as relevant
locally, it will be likely that the aimed-for goals will go beyond a company’s
capacity. As a result, even those “self-enlightened” companies who are pursuing
a proactive approach to CSR can face situations in which a misallocation of
(CSR) resources occurs through a different preconscious institutionalisation in
home and host country. As a consequence, regarding CSR programmes or
initiatives planned by Northern corporations but carried out in a remote country,
we can subsequently follow organisational legitimacy theory in that we have to
“recognize how local subsidiaries of MNEs come to reflect values, norms, and
locally accepted practices” of the societies in which they operate (Rosenzweig et
al., 1991: 345; Westney, 1989: 12). Feedback loops and more decentralised CSR
structures can be vital for a CSR initiative, in order to gain a better understanding
of the actual impact and local perceptions of the initiative.

From a policy perspective, it is clearly advisable to put measures in place that

ensure a better integration and acknowledgement of Southern stakeholders.
Feedback loops that strengthen the interlinkages between home and host
country publics can reduce both the misallocation of resources of proactive
companies and the tendency of reactive companies to employ CSR measures as
a mere public relations tool. It is important to note that the underlying
mechanisms of a predominantly voluntary CSR agenda do not apply to a vast
number of businesses globally. Especially in the absence of structural framework
conditions such as independent media or a conscious consumer base, it is
unlikely that a critical mass can be reached that creates new, more sustainable
behavioural norms, as e.g. envisioned by the UN Global Compact (see e.g. Kell,
2005: 72). Moreover, questions have to be raised about the relationship between
mainstream CSR and governance issues in the South. Increased involvement of

16
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

large businesses in development to correct for local lack of capacity may well
further weaken local authorities – and subsequently lead to a further erosion of
framework conditions that would in turn enable the functioning of voluntary CSR
approaches. In this regard, it also has to be questioned whether the current CSR
agenda leads to a crowding out of potentially more effective regulatory
approaches.

Note 1. An overview of CSR definitions is provided by e.g. Carroll (1999) or Moir (2001). For the
purpose of this article, the current mainstream initiatives, such as the UN Global
Compact, SA8000, the Fair Labour Association (FLA), the Global Reporting Guidelines
(GRI), ISO14001, or the multitude of codes of conduct, serve as a proxy for CSR. Instead
of defining a target state of corporate responsibility, the focus is on understanding the
contemporary mainstream CSR regime that is already in place today.
Note 2. Clarkson’s distinction between primary and secondary stakeholders is followed in that
primary stakeholders are “those without whose continuing participation the corporation
cannot survive”, whereas secondary stakeholders are “those who influence or affect, or
are influenced or affected by, the corporation (…) but are not essential for its survival)”
(Clarkson, 1995: 106-107).
Note 3. Legitimacy theory has played a considerable role in work on corporate social and
environmental disclosure (see e.g. Deegan et al., 2002; Gray et al., 1995; Patten, 1992;
Woodward et al., 1996). However, all of these approaches mainly follow the strategic
tradition, focusing on how an organisation manages its legitimacy vis-à-vis its
stakeholders.
Note 4. The World Values Survey is a large-scale survey of human values covering respondents
from more than 80 societies. It focuses on sociocultural and political change (see
http://www.worldvaluessurvey.org).

17
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

5 References
Aldrich, H. E., & Fiol, C. M. 1994. Fools rush in? The institutional context of industry
creation. Academy of Management. The Academy of Management Review,
19(4): 645.

Ashforth, B. E., & Gibbs, B. W. 1990. The Double-Edge of Organizational Legitimation.

Organization Science, 1(2): 177.

Bartlett, C. A. 1986. Building and managing the transnational: The new organizational
challenge. In M. E. Porter (Ed.), Competition in global industries: 367-401.
Boston: Harvard Business School Press.

Bartlett, C. A., & Ghoshal, S. 1989. Managing across borders: The transnational
solution. Boston: Harvard Business School Press.

Blowfield, M. 2005a. Corporate Social Responsibility - The Failing Discipline and Why it
Matters for International Relations. International Relations, 19(2): 173-191.

Blowfield, M. 2005b. Corporate Social Responsibility: reinventing the meaning of

development? International Affairs, 81(3): 515-524.

Blowfield, M., & Frynas, J. G. 2005. Editorial. Setting new agendas: critical perspectives
on Corporate Social Responsibility in the developing world. International
Affairs, 81(3): 499-513.

Brooke, M. Z., & Remmers, H. L. 1978. The strategy of multinational enterprise:

Organization and finance (2nd ed.). London: Pitman.

Carroll, A. B. 1999. Corporate Social Responsibility. Evolution of a Definitional Construct.

Business and Society, 38(3): 268-295.

Clarkson, M. B. E. 1995. A stakeholder framework for analyzing and evaluating

corporate social performance. Academy of Management. The Academy of
Management Review, 20(1): 92-117.

Deegan, C., Rankin, M., & Tobin, J. 2002. An examination of the corporate social and
environmental disclosures of BHP from 1983-1997. A test of legitimacy theory.
Accounting, Auditing & Accountability Journal, 15(3): 312-343.

DiMaggio, P. J. 1988. Interest and agency in institutional theory. In L. G. Zucker (Ed.),

Institutional patterns and organizations: 3-22. Cambridge, MA: Ballinger.

DiMaggio, P. J., & Powell, W. W. 1983. The Iron Cage Revisited: Institutional
Isomorphism and Collective Rationality in Organizational Fields. American
Sociological Review, 48(2): 147.

Dowling, J., & Pfeffer, J. 1975. Organizational Legitimacy: Social Values and
Organizational Behavior. The Pacific Sociological Review, 18(1): 122.

Elsbach, K. D. 1994. Managing organizational legitimacy in the California cattle.

Administrative Science Quarterly, 39(1): 57.

18
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Fox, T. 2004. Corporate Social Responsibility and Development: In quest of an agenda.

Development, 47(3): 29-36.

Fox, T., Ward, H., & Howard, B. 2002. Public Sector Roles in Strengthening Corporate
Social Responsibility: A Baseline Study: Corporate Social Responsibility Practice,
Private Sector Advisory Services Department, The World Bank.

Frynas, J. G. 2005. The false developmental promise of Corporate Social Responsibility:

evidence from multinational oil companies. International Affairs, 81(3): 581-598.

Ghoshal, S., & Nohria, N. 1989. Internal Differentiation Within Multinational Corporations.
Strategic Management Journal, 10(4): 323.

Gray, R. H., Kouhy, R., & Lavers, S. 1995. Corporate social and environmental reporting.
A review of the literature and a longitudinal study of UK disclosure. Accounting,
Auditing & Accountability Journal, 8(2).

Greer, J., & Bruno, K. 1996. Greenwash: the reality behind corporate
environmentalism. New York: Apex Press.

Guthrie, J., & Parker, L. D. 1989. Corporate social reporting: a rebuttal of legitimacy
theory. Accounting and Business Research, 19(76): 343-352.

Hahn, T. 2004. Why and when companies contribute to societal goals: the effect of
reciprocal stakeholder behavior. Paper presented at the Best Paper
Proceedings of the 2004 Annual Conference of the Academy of Management
'Creating Actionable Knowledge', New Orleans.

Hahn, T. 2005. Gesellschaftliches Engagement von Unternehmen. Reziproke

Stakeholder, ökonomische Anreize, strategische Gestaltungsoptionen.
Wiesbaden: Deutscher Universitäts-Verlag.

Hansen, M. W. 1999. Environmental management in transnational corporations in Asia:

Does foreign ownership make a difference? Preliminary results of a survey of
environmental management practices in 154 TNCs, Cross Border
Environmental Management in Transnational Corporations. Copenhagen:
Copenhagen Business School, UNCTAD.

Hofstede, G. 1980. Culture's Consequences: International Differences in Work-

related Values. Beverly Hills, London: Sage.

Hofstede, G., & Hofstede, G. J. 2005. Cultures and organizations: software of the
mind. Intercultural cooperation and its importance for survival (rev. and
expanded 2nd edition ed.). New York, London: McGraw-Hill.

Ite, U. E. 2004. Multinationals and Corporate Social Responsibility in Developing

Countries: A Case Study of Nigeria. Corporate Social Responsibility and
Environmental Management, 11(1): 1-11.

Jänicke, M., Kern, K., & Jörgens, H. 2000. Die Diffusion umweltpolitischer Innovationen.
Zeitschrift für Umweltpolitik (ZfU)(4): 507-546.

19
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Jeppesen, S., & Hansen, M. W. 2004. Environmental Upgrading of Third World

Enterprises through Linkages to Transnational Corporations. Theoretical
Perspectives and Preliminary Evidence. Business Strategy and the
Environment, 13(4): 261-274.

Kell, G. 2003. The Global Compact. Origins, Operations, Progress, Challenges. Journal
of Corporate Citizenship(11): 35-49.

Kell, G. 2005. The Global Compact. Selected Experiences and Reflections. Journal of
Business Ethics, 59(1-2): 69-79.

Kirchgeorg, M., & Winn, M. I. 2006. Sustainability marketing for the poorest of the poor.
Business Strategy and the Environment, 15(3): 171-184.

Klein, M., & Harford, T. 2005. Corporate Responsibility. When Will Voluntary Reputation
Building Improve Standards? In S. Smith (Ed.), Public Policy for the Private
Sector. Washington, D.C.: World Bank.

Kostova, T., & Zaheer, S. 1999. Organizational Legitimacy under Conditions of

Complexity: The Case of the Multinational Enterprise. The Academy of
Management Review, 24(1): 64.

Leipziger, D. 2003. The corporate responsibility code book. Sheffield: Greenleaf

Publishing.

Lindblom, C. K. 1994. The Implications of Organisational Legitimacy for Corporate

Social Performance and Disclosure. Paper presented at the Critical
Perspectives of Accounting Conference, New York.

Matten, D. 2000. Umweltmanagement und Globalisierung - Konzeptionelle

Ueberlegungen aus betriebswirtschaftlicher Sicht, EBMS Working Papers.
Swansea: University of Wales, Swansea.

Maurer, J. G. 1971. Readings in Organization Theory: Open-System Approaches.

New York: Random House.

Michael, B. 2003. Corporate Social Responsibility in International Development: An

Overview and Critique. Corporate Social Responsibility and Environmental
Management, 10(3): 115-128.

Mohan, A. 2001. Corporate Citizenship. Perspectives from India. Journal of Corporate

Citizenship(2): 107-117.

Moir, L. 2001. What do we mean by Corporate Social Responsibility? Corporate

Governance, 1(2): 16-22.

Newell, P. 2005. Citizenship, accountability and community: the limits of the CSR
agenda. International Affairs, 81(3): 541-557.

Newell, P. 2006. Beyond CSR? Business, Poverty and Social Justice, Critical
Perspectives on Corporate Social Responsibility in the Developing World.

20
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Pattberg, P. 2006. The Transformation of Global Business Regulation, Global

Governance Working Paper. Amsterdam et al.: The Global Governance
Project.

Patten, D. M. 1992. Intra-industry environmental disclosures in response to the Alaskan

oil spill: a note on legitimacy theory. Accounting, Organizations and Society,
17(5): 471-475.

Pedersen, E. R. 2006. Introduction. In E. R. Pedersen, & M. Huniche (Eds.), Corporate

Citizenship in Developing Countries. New Partnership Perspectives: 7-25.
Copenhagen: Copenhagen Business School Press.

Perrow, C. 1961. The Analysis of Goals in Complex Organizations. American

Sociological Review, 26(6): 854.

Pfeffer, J. 1981. Management as symbolic action: The creation and maintenance of

organizational paradigms. In L. L. Cummings, & B. M. Staw (Eds.), Research in
organizational behavior, Vol. 13: 1-52. Greenwich, CT: JAI Press.

Pfeffer, J., & Salancik, G. R. 1978. The external control of organizations: a resource
dependence perspective. New York: Harper & Row.

Prahalad, C. K. 2005. The Fortune at the Bottom of the Pyramid. Pennsylvania:

Wharton School Publishing.

Prahalad, C. K., & Doz, Y. L. 1987. The multinational mission: balancing local
demands and global vision. New York: Free Press.

Prieto-Carron, M., Lund-Thomsen, P., Chan, A., Muro, A. N. A., & Bhushan, C. 2006.
Critical perspectives on CSR and development: what we know, what we don't
know, and what we need to know. International Affairs, 82(5): 977-987.

Richardson, A. J. 1985. Symbolic and Substantive Legitimation in Professional Practice.

Canadian Journal of Sociology, 10(2): 139-152.

Roberts, P. W., & Greenwood, R. 1997. Integrating Transaction Cost and Institutional
Theories: Toward a Constrained-Efficiency Framework for Understanding
Organizational Design Adoption. The Academy of Management Review, 22(2):
346.

Rosenzweig, P. M., & Singh, J. V. 1991. Organizational Environments and the

Multinational Enterprise. The Academy of Management Review, 16(2): 340.

Rugman, A. M. 2000. The End of Globalization. London: Random House.

Ruud, A. 2001. Transnational corporations and environmental concerns in less

developed countries. Can cross border environmental management
systems achieve public policy goals? , University of Oslo, Oslo.

Ruud, A. 2002. Environmental Management of Transnational Corporations in India - Are

TNCs Creating Islands of Environmental Excellence in a Sea of Dirt? Business
Strategy and the Environment, 11(2): 103-118.

21
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Scott, R. 1995. Institutions and organizations. Thousand Oaks: Sage.

Sen, A. 1997. Human Rights and Asian Values, Morgenthau Memorial Lecture. New
York: Carnegie Council on Ethics and International Affairs.

Suchman, M. C. 1995. Managing Legitimacy: Strategic and Institutional Approaches.

Academy of Management Review, 20(3): 571-610.

Tews, K., Busch, P.-O., & Jörgens, H. 2003. The diffusion of new environmental policy
instruments. European Journal of Political Research, 42(4): 569-600.

Thorpe, J., & Prakash-Mani, K. 2003. Developing Value. The Business Case for
Sustainability in Emerging Markets. Greener Management International(44):
17-32.

Trompenaars, F., & Hampden-Turner, C. 1997. Riding the Waves of Culture.

Understanding Cultural Diversity in Global Business (2nd ed.). New York:
McGraw-Hill.

UNCTAD. 2004. Development and Globalization: Facts and Figures. Geneva: United
Nations.

UNED Forum. 2001. Foreign Direct Investment: A Lead Driver for Sustainable
Development? In R. Gardiner (Ed.), Towards Earth Summit 2002. Economic
Briefing Series No. 1. London: United Nations Environment and Development
Forum.

Utting, P. 2001. Promoting Socially Responsible Business in Developing Countries. The

Potential and Limits of Voluntary Initiatives, Report of the UNRISD Workshop
23-24 October, 2000. Geneva: United Nations Research Institute for Social
Development.

Utting, P. 2002. The Global Compact and Civil Society: Averting a Collision Course.
UNRISD News, 25(Autumn/Winter 2002): 31-34.

Utting, P. 2003. Promoting development through corporate social responsibility - does it

work? Global Future(3): 11-13.

Utting, P. 2005. Corporate responsibility and the movement of business. Development

in Practice, 15(3 - 4): 375.

Ward, H. 2004. Public Sector Roles in Strengthening Corporate Social Responsibility:

Taking Stock: Corporate Social Responsibility Practive of the World Bank Group.

Ward, H., & Fox, T. 2002. Moving the Corporate Citizenship Agenda to the South,
Words into action. Johannesburg 2002.

Weidner, H., & Jänicke, M. 2002. Capacity Building in National Environmental

Policy. A Comparative Study of 17 Countries. Berlin, Heidelberg, New York:
Springer.

22
 Legitimacy as a Key Driver and Determinant of CSR in Developing Countries

Weizsäcker, E. U. v., Young, O. R., Finger, M., & Beisheim, M. 2005. Limits to
Privatization: How to Avoid too Much of a Good Thing. A Report to the Club
of Rome. London: Earthscan.

Westney, D. E. 1989. Institutionalization theory and the multinational enterprise,

Workshop on organizational theory and the MNC. INSEAD.

Woodward, D. G., Edwards, P., & Birkin, F. 1996. Organizational Legitimacy and
Stakeholder Information Provision. British Journal of Management, 7(4): 329-
347.

World Business Council on Sustainable Development. 2000. Corporate social

responsibility: Making good business sense. Geneva: WBCSD.

World Business Council on Sustainable Development. 2004. Doing business with the
poor - a field guide. Geneva: World Business Council on Sustainable
Development.

WVS. 2006. World Values Survey: http://www.worldvaluessurvey.org.

Zaheer, S. 1995. Circadian Rhythms: The Effects of Global Market Integration in the
Currency Trading Industry. Journal of International Business Studies, 26(4):
699.

Zucker, L. G. 1987. Institutional Theories of Organization. Annual Review of

Sociology, 13: 443-464.

23