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Seeking Legitimacy Through CSR: Institutional Pressures and Corporate Responses of Multinationals in Sri Lanka

Abstract

Arguably, the corporate social responsibility (CSR) practices of multinational enterprises (MNEs) are influenced by a wide range of both internal and external factors. Perhaps, most critical among the exogenous forces operating on MNEs are those exerted by state and other key institutional actors in host countries. Crucially, academic research conducted to date offers little data about how MNEs use their CSR activities to strategically manage their relationship with those actors in order to gain legitimisation advantages in host countries. This paper addresses that gap by exploring interactions between external institutional pressures and firm-level CSR activities, which take the form of community initiatives, to examine how MNEs develop their legitimacy-seeking policies and practices. In focusing on a developing country, Sri Lanka, this paper provides valuable insights into how MNEs instrumentally utilise community initiatives in a country where relationship-building with governmental and other powerful non-governmental actors can be vitally important for the long-term viability of the business. Drawing on neo-institutional theory and CSR literature, this paper examines and contributes to the embryonic but emerging debate about the instrumental and political implications of CSR. The evidence presented and discussed here reveals the extent to which, and the reasons why, MNEs engage in complex legitimacy-seeking relationships with Sri Lankan host institutions.

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Notes

  1. The National Chamber of Commerce of Sri Lanka’s ‘Business Excellence Awards’ are designed to recognise local enterprises who have built sustainable market competitiveness (i.e. sustainable growth) together with CSR.

  2. The Ceylon Chamber of Commerce’s annual award scheme for the ‘Ten Best Corporate Citizens’ raises awareness about CSR and encourages the adoption of CSR practices among companies in Sri Lanka.

  3. The MDGs established quantitative benchmarks to halve extreme poverty in all its forms in the world through the achievement of eight goals consisting of eradicating extreme poverty and hunger, achieving universal primary education, promoting gender equality and empower women, reducing child mortality, improving maternal health, combating HIV/AIDS and other diseases, ensuring environmental sustainability and developing a global partnership for development (UN 2009).

  4. The term can be translated as meaning ‘prosperity’.

  5. In 2006, the government enacted a Tobacco Control Act in 2006 for comprehensive tobacco control and established the National Alcohol and Tobacco Authority (NATA) to implement the Act (NATA 2010), and the price of tobacco products are decided in conjunction with the Ministry of Finance in Sri Lanka, making it 100 % price controlled.

  6. As the domestic milk production only constitutes about 17 % of the requirement of the market, the rest is imported, import taxes are imposed and Full Cream Milk Powder is specified as an essential commodity by the Minister of Trade, Commerce & Consumer Affairs Section 18 of the Consumer Affairs Authority Act No. 09 of 2003 and the prices of FMCP products are determined by the Consumer Affairs Authority (CAA, 2010)

Abbreviations

CSR:

Corporate social responsibility

GOSL:

Government of Sri Lanka

MNE:

Multinational enterprise

SADP:

Sustainable Agricultural Development Project

SLA:

Sri Lanka Apparel

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Beddewela, E., Fairbrass, J. Seeking Legitimacy Through CSR: Institutional Pressures and Corporate Responses of Multinationals in Sri Lanka. J Bus Ethics 136, 503–522 (2016). https://doi.org/10.1007/s10551-014-2478-z

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Keywords

  • Corporate social responsibility
  • Community initiatives
  • Developing country
  • Government
  • Political behaviour
  • Legitimacy
  • Multinational enterprises