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Corporate Stakeholder Orientation in an Emerging Country Context: A Longitudinal Cross Industry Analysis

Abstract

This study examines corporate stakeholder orientation (CSO) across industries and over time prior to the introduction of mandatory CSR. We argue that CSO is a legitimacy signal consciously employed by firms to demonstrate their shareholder and specific non-shareholder orientations in the midst of institutional pressures emerging from country and industry contexts. Using a 7-code index of CSO on CEO–shareholder communications from India, we find that in general large firms in India exhibit a pre-dominant, significant and rising trend of pro-shareholder orientation in the six-year period immediately preceding the CSR law. Yet, we uncover significant industry differences in CSO potentially driven by four key factors: the degree of competitive dynamics, nature of products and services, extent of negative externalities and social activism, and exposure to international markets. Our findings support the view that while some minimum threshold of regulatory intervention is required to balance the interests of business with society, legislation raises questions in relation to the usefulness of a uniform one-size-fits-all CSR across all industries.

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Notes

  1. 1.

    Under this law, all companies in India, public and private, domestic as well as foreign, having a net worth of at least US $83 million or a turnover of US $160 million or a net profit of US $830,000 will have to contribute 2 % of their net profits to CSR in India for activities such as promoting poverty reduction, education, gender equality, health, vocational skills development, and environmental sustainability. As per a PWC report (2014), this law is likely to impact about 16,000 companies across all industries operating in India. It is expected that this law could change the course of CSR approaches of large firms. Our study is based on a six-year period preceding this legislation.

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Acknowledgments

The authors gratefully acknowledge guest editors Thomas Beschorner and Thomas Hajduk, and the two anonymous reviewers for their detailed feedback and constructive comments on this article. They are grateful to Peter Li and Michael Hitt for their helpful suggestions during the Vth Emerging Market Consortium at Rice University and Andrew Crane for his constructive comments during the 2015 International Association of Business and Society. The first author thanks M. M. K. Jain for his generous help as the second coder of the study and Tanushree Dutta (IIM) for her guidance with data analysis. A previous version of this paper received the best paper award in the CSR track during CLADEA 2014.

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Jain, T., Aguilera, R.V. & Jamali, D. Corporate Stakeholder Orientation in an Emerging Country Context: A Longitudinal Cross Industry Analysis. J Bus Ethics 143, 701–719 (2017). https://doi.org/10.1007/s10551-016-3074-1

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Keywords

  • Corporate stakeholder orientation (CSO)
  • Corporate social responsibility (CSR)
  • Industry CSR
  • Mandatory CSR
  • Institutional theory
  • Emerging country