Firm-Level Determinants of Political CSR in Emerging Economies: Evidence from India

Multinational companies (MNCs) frequently adopt corporate social responsibility (CSR) activities that are aimed at providing ‘public goods’ and influencing the government in policymaking. Such political CSR (PCSR) activities have been determined to increase MNCs’ socio-political legitimacy and to be useful in building relationships with the state and other key external stakeholders. Although research on MNCs’ PCSR within the context of emerging economies is gaining momentum, only a limited number of studies have examined the firm-level variables that affect the extent to which MNCs’ subsidiaries in emerging economies pursue PCSR. Using insights from resource dependence theory, institutional theory, and the social capital literature, we argue that MNCs’ subsidiaries that are critically dependent on local resources, have greater ties to managers of related businesses and to policymakers, and that those that are interdependent on the MNCs’ headquarters and other foreign subsidiaries, are more likely to be involved in PCSR. We obtain support for our hypotheses using a sample of 105 subsidiaries of foreign firms that operate in India. Our findings enhance our understanding of the factors that determine MNCs’ political CSR in emerging economies.     

Why do some multinational corporations relocate their headquarters overseas?

This paper examines the decision by a multinational corporation (MNC) to relocate its business unit and/or corporate HQ overseas. We argue that business unit HQs move overseas in response to changes in the internal configuration of their unit's activities and the demands of the product markets in which they operate, whereas corporate HQs move overseas in response to the demands of external stakeholders, in particular global financial markets and shareholders. Using data on 125 business unit HQs and 35 corporate HQs, we test and find support for these arguments. The research highlights important differences between corporate‐ and business‐level strategy, and it suggests ways in which the theory of the MNC needs to be reconsidered. Copyright © 2006 John Wiley & Sons, Ltd.     

New Findings on Firm Investment and Monetary Transmission in the Euro Area

In this paper we present comparative results on the determinantsof firms' investment and their link to monetary policy. Theresults have been obtained by the Eurosystem Monetary TransmissionNetwork. This network has produced a series of papers in whichthe use of micro data permits estimating and quantifying therelevance of two channels of monetary policy transmission: theinterest-rate and the broad-credit channels. The research findingsprovide evidence of an operative interest-rate channel in allcountries examined. Moreover, the results indicate that variableswhich proxy firms' financial conditions play a role. Firms characterizedby weaker balance sheets show higher liquidity sensitivity.     

Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective

Applying the sensemaking perspective in the field of corporate social responsibility (CSR) is a recent but promising development. Using an in-depth exploratory case study, we analyze and discuss the CSR character of British American Tobacco (BAT) Switzerland. Our findings indicate that BAT Switzerland does not follow traditional patters of building CSR. BAT Switzerland can be classified as a “legitimacy seeker,” characterized mainly by a relational identity orientation and legitimation strategies that might provide pragmatic and/or cognitive legitimacy. We conclude that understanding the cognitive processes underlying the CSR decision-making process is of fundamental value when analyzing and changing the CSR approach of a firm. We discuss boundary conditions of the CSR character framework and expand it by differentiating between process and product legitimacy, as both perspectives have important but possibly different implications for the firm.     

Panel estimation of state-dependent adjustment when the target is unobserved

Understanding adjustment processes has become central in economics. Empirical analysis is fraught with the problem that the target is usually unobserved. This article develops and simulates GMM methods for estimating dynamic adjustment models in a panel data context with partially or entirely unobserved targets and endogenous, time-varying persistence. In this setup, the standard first difference GMM procedure fails. Four estimation strategies are proposed. Two of them are based on quasi-differencing. The third is characterised by a state-dependent filter, while the last is an adaptation of the GMM level estimator.     

Guidelines issued by the consumer board: The Swedish experience

The Scandinavian countries have been concerned with the question of self-regulation over the past twenty years and their experiences demonstrate a fluid approach to the question of government intervention in the relations between consumer and business.This report highlights the movement which has taken place in Sweden from quasi private regulation by business in the sixties to the Ombudsman institution as a government supervisory agency in the seventies. Sweden itself has a very marked system of guidelines which serve as non-binding rules in informal negotiations between consumers and suppliers. Their impact is as great as that of formal rules, and examples of their use are illustrated in the article. The guidelines themselves are constantly being revised by the Consumer Board after discussion with the business community. Breach of the guidelines themselves, although not per se an offence, will probably justify an action being brought against the offending firm by the Consumer Ombudsman. The guidelines also appear to differ in their scope and number, and although severely criticized, appear to have fulfilled an important function.The report further shows that the means of negotiation and regulation are still not static: a further move towards self-regulation is being mooted, partly as a result of economic cut-backs. These proposals are, however, not yet fully developed.

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Richtlinien der Verbraucherbehörde — das schwedische Beispiel

Zusammenfassung Schweden hat als Vorreiter der Nordischen Staaten seit Anfang der siebziger Jahre sein System des Konsumentenschutzes von der Selbstkontrolle auf eines der staatlichen Kontrolle umgestellt. Dadurch ist allerdings die Selbstregulierung durch Verhaltenskodices, z.B. im Direktvertrieb, nicht gänzlich beseitigt worden. Eine größere Rolle spielen allerdings die vom Ombudsmann bzw. der Verbraucherbehörde erlassenen Verhaltensrichtlinien. Deren Funktion ist kürzlich von einer staatlichen Kommission untersucht worden, an der der Autor mitgewirkt hat. Die Kommission kommt zu einer im Prinzip positiven Einschätzung des Systems, fordert aber stärkere Berücksichtigung von Selbstregulierungsmaßnahmen auch unter budgetären Gesichtspunkten. Richtlinien werden zwischen der Behörde und den Unternehmensverbänden ausgehandelt. Rechtlich stellen sie sich nur als Empfehlungen dar, und sie binden die Unternehmen ebensowenig, wie sie den Konsumenten Rechte geben. Faktisch beinhalten sie eine Konkretisierung der generalklauselartigen Informationsgebote, Lauterkeitsregeln und Sicherheitsbestimmungen des Handelspraktikenrechts. Die Unternehmen befolgen sie meistens freiwillig. Verstöße werden vom Marktgericht in der Regel als unlauter angesehen. Inhaltlich befassen sich die Hälfte der 36 bisher erlassenen Richtlinien mit Informationsfragen, die andere Hälfte mit der Produktsicherheit. Die Regelungsdichte variiert. Nach anfänglicher Kritik vor allem von Unternehmensseite hat das System inzwischen hohe Akzeptanz gefunden.

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Ulf Bernitz is Professor of Private Law, especially Consumer and Market Law, Institute for Intellectual Property and Market Law, University of Stockholm, S-10691 Stockholm, Sweden.     

A Meta-analysis of Loss Aversion in Product Choice

Loss aversion is a behavioral phenomenon with game-changing implications for economic theory and practice. We conduct a meta-analysis of 33 studies (providing 109 observations) investigating loss aversion in random utility models of brand choice. Specifically, we use multilevel modeling techniques to examine potential moderators of preference asymmetries as well as the variability of loss-aversion effects within and between studies. We find that loss aversion is manifest in product choice, but that it exhibits substantial variation across research contexts. Product-related variables (e.g., the category type), consumer characteristics (e.g., reference-point mechanisms), and particularly methodological decisions (e.g., model specifications) determine the observed degree of loss–gain disparity. Practical implications of the specific findings and opportunities for future research are discussed.     

‘Beautiful Serbia’ ‐ objective and subjective outcomes of active labour market policy in a transition economy

This paper studies the causal impact of participation in the Beautiful Serbia programme providing training and temporary work in the construction sector in Serbia on labour market outcomes as well as on measures of subjective well‐being approximating individual welfare. According to our estimates, the positive impact of this particular programme appears much stronger when judged by subjective well‐being than when judged by the immediate labour market effect.     

The complexity of the business network context and its effect on subsidiary relational (over-) embeddedness

Many studies have focused on the effects of MNC subsidiaries’ external relational embeddedness. Little attention has been given to its antecedents and especially to the potential effect that the business network context might have. We try to fill this gap and attempt to explain variation among subsidiaries’ degree of relational embeddedness. Our results show a strong and robust effect of the business network context – i.e. the network context in which the direct business relationships between the subsidiary and its partners are embedded – on the degree of relational embeddedness. However, contrary to previous literature, we find an inverted u-shaped relationship. We discuss our findings with regard to the issue of over-embeddedness and the literature on the strength of weak vs. strong ties.