Keywords

1 Introduction

To date, theoretical and empirical investigations on the causes of the involvement of enterprises in corporate social responsibility (CSR) have focused primarily on the ethical and strategic explanations of such activities. However, these studies have failed to take into account the institutional conditions in which economic entities operate. It was only the most recent decade of research on CSR that has brought a change in this regard. Of special importance were the studies by Campbell (2007) and Matten and Moon (2008) that have inspired many further theoretical and empirical studies analysing the impact of a broader institutional, cultural and political context on the behaviour of economic entities, including the level and form of their involvement in corporate social responsibility (Gjolberg 2009; Grosvold and Brammer 2011; Brammer et al. 2012; Campbell et al. 2012; Ioannou and Serafeim 2012). The present work also refers to the institutional stream of CSR research and proposes an alternative explanation of the relationship between institutional environment and voluntary engagement in socially responsible activities. I argue that institutional conditions in a given country are a consequence of the adopted model of capitalism and, in particular, the model of the welfare state. In countries with a strong welfare state model (e.g. Western European countries), the state takes a large share of the responsibility for ensuring society's access to certain social services (e.g. universal, publicly-financed access to health care). To this end, it creates an institutional and legal system that ensures the creation and distribution of these services and obligates economic entities to be part of this process. This reduces the willingness of private actors to engage in voluntary activities in this area. In other words, strong institutional conditions “crowd out” CSR. On the other hand, in countries where the role of the state and the pressure of the institutional environment in this respect are smaller, the involvement of private entities in the provision of social services is greater. In short, the design of the institutional environment leads to a higher level (“crowds in”) of engagement in corporate social responsibility.

2 The Rise of the European and American Models of the Welfare State

The term “welfare state” emerged after the Second World War, when a debate was launched in countries of Europe and North America over the responsibility of the state for the broadly construed social welfare and its redistribution between all the members of a society (Szarfenberg 2007). Undoubtedly, the process of expanding the state's involvement in social security has a longer tradition than the post-war period. It is worth mentioning here, for example, the compulsory health and unemployment insurance introduced by Bismarck (Suchiecka 2010) or the Beveridge Plan in the UK, which promoted social insurance and introduced public health services (Abel-Smith 1992). However, the post-war reconstruction of states and the growing level of industrialisation and urbanisation leading to the commoditisation of labour, intensified the efforts of successive governments to expand the scope of public intervention in order to ensure a more equitable access to welfare. These developments stimulated researchers to distinguish between different models of the welfare state (Esping-Andersen 1990; Castles and Mitchell 1993; Bonoli 1997). One of the most common typologies was proposed by Esping-Andersen (1990), who, on the basis of decommodification and stratification indices, singled out three models of the welfare state: liberal (residual), conservative and social democratic. The level and scope of state involvement in the broadly understood social policy are one of the basic elements that help to differentiate between these models.

The USA (but also Canada and Australia) is most often seen as an example of a liberal welfare state, regardless of the criteria adopted for delimiting the types of welfare state (e.g. Castles and Mitchell 1993; Bonoli 1997; Esping-Andersen 1999). This type is characterised by both the dominance of the market as a mechanism for redistributing wealth among the members of society and individualism. State intervention in the creation and redistribution of goods and services is very limited and concerns persons who are in fact unable to participate in the labour market (Arts and Gelissen 2002). These countries are characterised by a relatively low level of decommodification and a fairly pronounced degree of social economic disparity. In turn, in the social democratic model, the state is the most generous from the point of view of social policy (Esping-Andersen 1990). The state offers universal provision of social services and a high level of protection in case of unemployment (high decommodification). Therefore, the role of the state is strongly interventionist and manifests itself e.g. in a very extensive fiscal policy. In the conservative model, too, the level of social security and social services provided by the public sector is high (Esping-Andersen 1990). Differences in institutional conditions between the USA and European countries are the result of their specific, unique paths of historical development. At the end of the nineteenth century, both the United States and European countries were characterised by a similarly minimal range of the welfare state (Skocpol 1992). However, certain historical events contributed to the fact that the paths of these two regions of the world diverged in terms of creating and redistributing wealth.

The emergence of the USA as a federation of independent states restricted the possibility of establishing and conducting a central (nationwide) policy of wealth redistribution. According to Alesina et al. (2001), the political stability of the USA was the result of its eighteenth-century constitution, which guaranteed such a division of power between the federal government and the state authorities, protecting the latter from the influence and domination of the former. Researchers dealing with the American model of capitalism point out that elements of the welfare state in the USA began to emerge after the end of the Civil War in the form of pension schemes for war veterans (Skocpol 1992). Although this system was seen by some as the onset of a broader, universal system of social support, there were some factors that hindered its further development. These included social reluctance and mistrust of the central administration of the support system for veterans as well as the fact that the Civil War had deepened the internal divisions between the various states (Alesina et al. 2001). Court decisions, rejecting any legislative changes violating the rights of private entrepreneurs, also had a significant impact on limiting the development of the welfare state. Court jurisprudence in this area was a consequence of the American Constitution, whose primary objective was to protect private property rights (Alesina et al. 2001). The strength and independence of American courts were moreover important factors limiting the development of social legislation in the USA, which was not the case in the tradition and the legal systems of countries such as France or Germany (Alesina et al. 2001).

Given that a centrally managed, public system for redistributing wealth in the USA had not developed, the importance of private initiatives in this area began to grow, which is reflected in American culture to this day. Skocpol et al. (2000) have documented the role and importance of many NGOs (often nationwide), which since the beginning of American statehood have provided various social services benefiting their members and other target groups. These organisations have largely fulfilled the role played (to date) by European governments.

Alesina et al. (2001) moreover point to the fact that the USA has never developed an extensive and consistent movement safeguarding employees’ rights, which could have contributed to the emergence and development of broadly construed social policy. While in nineteenth-century Europe, in the wake of the class struggle initiated by the communists, a workers’ movement was created, American workers seemed to represent social Darwinism (Lipset and Marks 2000). In the USA, equality meant equality of opportunity, not equality of access to prosperity. The Great Depression of the 1930s was politically exploited by President Franklin Delano Roosevelt through the introduction of the New Deal programme of economic and social reforms, which made it possible to cater to the social demands of the traditional electorate of socialist parties, and which in effect prevented the emergence of such a political party in the USA (Alesina et al. 2001).

In turn, the European model of the welfare state was formed after the First World War, which completely reshaped the political order in Europe. The end of the war brought about the collapse of most of Europe's monarchies. This was accompanied by the development of workers’ movements and parties whose pre-war activities (and those caused by social unrest) in countries such as Germany, Austria and Italy were limited by the presence of strong armies in those countries. States weakened by war could no longer significantly control and restrict the development of labour movements. All these processes made the newly adopted constitutions in European countries focus on the democratisation of state systems (e.g. by introducing proportional representation in parliament) and much less so than the American Constitution on protecting property rights (Alesina et al. 2001; Alesina and Glaeser 2006). Moreover, in his work Esping-Andersen (1990) draws attention to the birth of the middle class, whose support was greatly coveted by politicians, who extended the scope of the welfare state.

A more detailed and comprehensive analysis of the historical conditions that influenced the shape of contemporary welfare states and their institutional conditions is beyond the scope of this paper. However, the historical events mentioned above indicate the reasons for the entry of countries (i.e. the USA and Western European countries) onto the paths leading to the birth of different models of the welfare state and the corresponding institutional conditions determining the production and redistribution of welfare (and the role of the state and private entities in this respect).

3 Selected Differences Between the American and European Models of Welfare State

Institutional comparative analysis of welfare state models usually goes beyond the examination of individual institutional conditions. Rather, it aims at capturing certain common conditionalities in different countries. As Lange and Meadwell (1991) observe, the benefit of such an approach is that it characterises entire political and economic systems, bearing in mind, however, that certain features of these systems are similarly interlinked. The types of capitalist systems proposed by Esping-Andresen (1990, 1999) and by other authors differ from one another in terms of institutional conditions analysed, the level of public and private sector involvement in financing and providing social services, and the degree of distributing wealth among the members of society. Attempts to distinguish some ideal types of welfare state (Esping-Andersen 1990; Bradshaw et al. 1993; OECD 1997; De Beer et al. 2001) usually examine institutional determinants of the labour market (e.g. involvement of the state in the conduct and financing of active labour market policies, protection of workers in case of job loss, role and scope of tripartite agreements), health care, economic support for the unemployed (e.g. unemployment benefits and their determinants), maternity and parental leave, pension insurance and support for families. A detailed analysis of these conditions has been presented in many earlier works and goes beyond the scope of the present study. However, it is worth presenting, even in a simplified way, the differences between the USA and European countries in relation to one of the above spheres of social and economic life in order to highlight the differences between liberal (especially American) and European models of the welfare state.

One of the elementary differences between the countries representing liberal and European models of the welfare state (conservative and social democratic) concerns institutional conditions governing access to and the scope of health care. In European countries, the creation and redistribution of free and accessible health care, usually financed through compulsory taxes and contributions, is one of the fundamental tasks of the state (Moran 2000; Mossialos et al. 2002). Legislators in these countries form a set of institutions (legal and financial regulations) which involve all employees (and members of their families) as well as non-employed persons, in the medical care system. Therefore, in these countries, the responsibility for the establishment of the health care system lies with public entities and companies are obligatorily integrated into the system through a scheme of fiscal burdens. Health care systems cover not only those insured but also their family members and offer a very broad spectrum of entitlements in terms of financing medical appointments, hospitalisation or reimbursement of medicines. In the United States, on the other hand, institutionalised and publicly funded healthcare is in fact limited to two programmes, Medicare and Medicaid, which focus on the elderly and low-income individuals. These programmes are most often addressed exclusively at persons who meet certain age or income criteria, but not their family members. In 2010, a mere 14.5% of American population made use of Medicaid, while ca. 15.9% were covered by Medicare (DeNavas-Malt et al. 2010). In the USA, fees for medical appointments, hospitalisation and reimbursement of medicines are almost entirely covered the patients themselves. However, this lack of an institutionalised, centralised system of universal health care in the USA is compensated for by the insurance policies that employers offer to their employees. Over 60% of people of working age have health insurance financed by their employers (despite the absence of such a legal obligation) (DeNavas-Malt et al. 2010). In the USA, voluntary health insurance coverage by companies is seen as one of the most important obligations of businesses towards both employees and society in general. For example, Starbucks Coffee has since 2004 pursued a policy of providing healthcare to all employees working 20 hours or more a week (Starbucks 2004).

Another example demonstrating the important institutional differences between the USA and the countries of Western Europe in terms of social policy is that of the remuneration received by the worker during his or her illness. In most European countries, when sick, workers are guaranteed remuneration, typically around 70–80% of their regular pay. In the USA, however, only five states have introduced such an institutional and legal solution (Alesina et al. 2001). Moreover, even in these five states, the period of receiving such remuneration is much shorter (a maximum of 52 days) than in Western European countries, and its amount ranges from 18 to 63% of regular pay (Alesina et al. 2001). Similar institutional differences between the USA and European countries also apply to regulations concerning, among others, the labour market, social security as well as the support of families, the elderly and persons with disabilities.

Esping-Andresen’s text referred to earlier (1990) triggered the emergence of many other empirical and theoretical works analysing different models of the welfare state in developed countries and promoting alternative typologies (e.g. Castles and Mitchell 1993; Ferrera 1996; Bonoli 1997). Without going into more detail on the differences between these proposals, it is reasonable to argue that research into welfare state models so far has led to some more general conclusions that are relevant to the issues addressed in this paper. First of all, it should be noted that the general dividing line runs between the USA and Western European countries (De Beer et al. 2001; Alesina and Glaeser 2004; Larsen 2008). Irrespective of some differences between them, European governments are much more inclined to centrally and institutionally redirect a significant part of the wealth generated in the country to the economically disadvantaged. In the USA, on the other hand, the government's share in this area is much smaller, which results from the conviction that people themselves are responsible for their own prosperity and that institutionalised assistance should be provided only to those who cannot be economically active (Bergqvist et al. 2013). Researchers point to a number of reasons for the above, including cultural and ethnic differences (Alesina et al. 2001; Larsen 2008; Jaeger 2009). Accordingly, the views and expectations of societies in these countries regarding the role of the public and private sectors in their involvement in the provision of certain social services are also different (Bielefeld et al. 2005; Jaeger 2009).

The above institutional differences between the USA and Western European countries are also reflected in the level of public and private social spending. According to Organisation for Economic Cooperation and Development (OECD 2019), the total European expenditure in this area, measured as a share of GDP, is in all cases higher than in the USA. The European countries presented here spend much more on social welfare goals than the average for OECD countries (21% of GDP), with France (31.7%), Finland (30.6%), Belgium (29.2%) and Italy (28.9%) spending the most, and Norway (23.9%) and the United Kingdom (21.5%) spending the least. The USA spends only 19% of its GDP on social purposes. On the other hand, an examination of private spending in this area shows that USA outlays (11.1%) are significantly higher than those in all European countries and more than 6 times the OECD average (1.8%). The level of spending on healthcare from public sources for all the countries discussed is quite similar and ranges from 5.5% (Norway) to 8.6% (France). However, a huge difference occurs again in the level of private expenditure, which in most European countries (except France and Germany) does not exceed 0.5% of GDP. In turn, in the USA it reaches 5.8% and is almost 10 times higher than the OECD average. A similar trend can be observed when comparing the level of public expenditure and private support for the elderly. The USA spends far less public money on this than European countries, while private money is spent many times higher. Finally, as regards to public expenditure on support and activation of the unemployed and support for families, this level is much higher in European countries than in the USA.

Hacker (2002) draws attention to another important difference between the two models under discussion (i.e. the American model and the European one): a dissimilar level of involvement of NGOs in the financing and delivery of social services. In more liberal systems, the importance and participation of these organisations are much greater. NGOs perform some quasi-public functions by providing social services to the general public (largely financed by the private sector). This was particularly visible in the USA in the 1980s, when the level of public goods and services provided to the society by the government dropped significantly. Salamon (1990) estimated that in this period NGOs provided about 50% of all social services and their activity was financed to a large extent from private funds. Therefore, the importance of these organisations in liberal models of capitalism is vital as they enable private entities to provide certain social services to society through the third sector, without the need to produce them themselves. This does not mean, of course, that such organisations do not perform similar functions in European countries, but their importance in this respect is significantly lower (Hacker 2002).

The above body of literature and examples clearly show that the USA and Western European countries represent divergent models of the welfare state, which are in turn accompanied by different institutional conditions. In Western Europe, the role of the state in the creation and financing of social services is far greater. Therefore, the governments of these countries create institutional and legal environment guaranteeing universal and wide access to social services financed from public funds. This environment obligatorily involves private entities (first of all enterprises) in financing social welfare. In the United States, on the other hand, the share of the state in the creation and redistribution of social services is much smaller than in the countries of Western Europe, which also results in the fact that economic entities operating in the USA are subject to less institutional pressure to in this regard.

4 Institutional Crowding of the Private Provision of Social Services

The institutional differences in the provision of social services between the USA and Western European countries and the differences in the level of social spending clearly indicate that the production and redistribution of certain social services in European countries is mostly the domain of the state and is strongly codified and institutionalised. Business entities operating in these countries are subject to institutional conditions that determine the form, level and scope of mandatory involvement of the private sector in pro-social activities. These conditions reduce the willingness and actual involvement of enterprises in voluntarily, socially responsible activities, for example in the field of private provision of public collective goods. This results in a small participation of the private sector in the process of creation and redistribution of specific social services. On the other hand, in more liberal models of capitalism, such as the American one, the level of state involvement in this area is much lower, which is reflected in the fact that the pressure of institutional environment on enterprises as regards their obligatory participation in the provision of social services (e.g. through the tax system and the system of obligatory health insurance) is lower than in European countries. This means that private entities have far greater opportunities to voluntarily engage in socially responsible activities. Thus, when comparing institutional environments in these two regions of the world, one can see that these differences may serve to explain the relationship between institutional conditions and the level of CSR engagement. The stronger the institutional conditions determining universal access to publicly funded social services, the smaller the range of opportunities and the lower the willingness of enterprises to voluntarily engage in social activities such as health care, pension schemes, funding for education, research, higher education, social assistance, etc. In other words, strong institutional environment “crowd out” corporate social responsibility. Such a model of corporate behaviour is present in Western European countries, which engage in CSR much less frequently than American enterprises. On the other hand, in countries where the pressure of institutional environment in the area in question is lower (such as the USA), we are dealing with “crowding in” of CSR, i.e. a situation in which enterprises much more often engage in voluntary social activities.

There are a number of empirical studies confirming the above mechanism. Namely, high institutional pressure in the form of e.g. universal, institutionalised access to social services decreases the tendency of private entities, including enterprises, to voluntarily engage in this type of activity. Conversely, the reduction of this pressure leads to an increase in the involvement of private entities. The results of selected empirical studies documenting this phenomenon will be presented below with respect to health care, education and culture as well as social welfare. Indication will also be made of some phenomena accompanying “crowding out” and “crowding in”, which may have an impact on the level and scope of the involvement of enterprises in corporate social responsibilities.

Numerous empirical studies analyse the phenomena of “crowding out” and “crowding in” in health care. For example, Cutler and Gruber (1996) tried to estimate the extent to which the extension of Medicaid in the 1987–1992 period “crowded out” the involvement of private entrepreneurs in the provision of health insurance to the workforce. Medicaid was launched in the USA in 1965 and introduced health insurance to the indigent section of the population, especially to low-income women and children in single-parent families. In time, however, the eligibility criteria for the program got laxer and covered also pregnant women, children from more well-to-do families and those brought up by both parents (Cutler and Gruber 1996). Therefore, at the beginning of the 1990s, one third of all children in the USA and over 40% of women of childbearing age were entitled to Medicaid. Estimates made by Cutler and Gruber (1996) show that these changes had an impact on the percentage of the population that received private insurance. The results of their research may justify the conclusion that the expansion of the public health system has “crowded out” about 30–40% of the private insurance offered by companies to people for whom Medicaid has been extended. A similar survey was also conducted by Gruber and Simon (2008) who, using data from the Survey of Income and Program Participation 1996–2001, identified a 60% decline in the share of private insurance among those who were covered by public insurance. Hudson et al. (2005), in turn, studied the impact of the State Children's Health Insurance Program (SCHIP) on public and private insurance coverage of children and the proportion of children not covered by any insurance. They showed that the extension of eligibility to SCHIP increased the proportion of children insured under SCHIP, decreased the proportion of uninsured children, and significantly decreased the proportion of privately insured persons. The above and other studies (Aizer and Grogger 2003; LoSasso and Buchmueller 2004; Busch and Duchovny 2005) have shown that when the state institutionally changes its public health coverage, it can affect access to and coverage of private health insurance.

It can therefore be concluded that the strong institutional conditions prevailing in most European countries codifying in a formal and obligatory way the specific obligations of private entities with regard to, inter alia, healthcare and social security, significantly reduce the scope for voluntary involvement of economic entities in this respect. American companies, on the other hand, which are less exposed to this type of institutional environment, are more willing and have more flexibility to take voluntary actions towards workers and society in general. The above cited studies imply that the strong institutional conditions regarding health care “crowd out” voluntary action of companies which would go beyond the legal obligations of companies. Similar conclusions can be drawn from empirical studies concerning other spheres of social and economic life.

A review of studies carried out by de Witt and Bekkers (2016) demonstrates that ca. 2/3 of them confirm the negative relation between the strength of domestic institutional involvement and the level of provision of social services by the private sector. Scholars moreover indicate that residents of countries which represent dissimilar welfare state models demonstrate a different level of support for the state’s extensive provision of social services (Svallfors 1997; Andress and Heien 2001). In countries where residents are accustomed to a high level of state involvement, their expectations concerning the role of private actors (individuals, businesses and NGOs) are relatively limited. In countries where the provision of social services is seen as a joint responsibility of public and private actors, the residents’ expectations towards businesses in this regard are much higher (Svallfors 1997; Andress and Heien 2001).

There are also historical studies that explore the discussed mechanism over a longer period of time. For example, Gruber and Hungerman (2007) as well as Roberts (1984) analysed the impact of state intervention in the form of increased levels of goods and services provided to society during the Great Depression of the 1930s. Both studies confirmed the phenomenon of “crowding out” and Roberts (1984) pointed to the almost complete “crowding out” of private donations as a consequence of the overly excessive level of social protection financed and organised by the state. Similar conclusions were drawn by Abrams and Schmitz (1984).

Hiss (2009) uses the example of Germany to illustrate interesting institutional changes and their impact on corporate behaviour. In the 1950s and 1960s, Germany adopted a socio-economic development model that combined economic growth with relatively evenly distributed social welfare with a high level of corporate commitment. A significant range of economic activities was strictly regulated in order to promote social justice and a relatively equal participation by members of society in the welfare created. What has distinguished Germany from other countries is, among others, a significant share of the banking sector in financing the activities of enterprises (which gives preferences to long-term investments), the development of vocational education and a co-participation mechanism (with the participation of employees and their representatives) during the drafting and amending of the labour law (Hiss 2009).

The model based on institutionalised social solidarity (Kinderman 2012) described by Hiss (2009), as a result of increasing integration of the world economy, liberalisation of financial markets and growing deregulation of economies, began to erode slowly since ca. the mid-1980s. This led to the weakening of institutional conditions which guaranteed relatively universal access to social services for all members of the public and the role of the public sector in the provision of these services. This led to a weakening of the trade unions, which previously had safeguarded workers’ rights, a weakening of collective labour agreements and an increase in dividends paid to shareholders at the expense of taxes paid to the state budget (Hiss 2009).

As a result, more and more German companies started to take voluntary measures that went beyond legal regulations (earlier attributed to the government and its agendas) in order to improve working conditions and establish work and environmental standards in the production chain. Summing up, the example described by Hiss (2009) implies that the weakening of institutional conditions and the role of the state in the creation and redistribution of social services triggers a heightened involvement of private enterprises in this respect, i.e. their involvement in corporate social responsibility.

5 Conclusions

In light of the arguments presented in this chapter, the involvement of enterprises in voluntary activities promoting social welfare is a function of the institutional environment which, in turn, is a consequence of the capitalism model adopted, in particular of the welfare state model. Specifically, the presented relationship implies that strong institutional pressure reflecting a high level of state involvement in the provision of social services reduces the level of voluntary engagement of economic entities in socially responsible activities (“crowds out” CSR), while low pressure increases this level (“crowds in” CSR). It seems that this relationship can effectively explain the level of CSR engagement of enterprises and the differences between developed countries, such as the USA and Western Europe, in this respect.

It seems that the explanation proposed in this chapter for the relationship between the institutional environment and the involvement of enterprises in CSR may be an interesting alternative to the theoretical considerations on the subject, dominant in the relevant literature, and may effectively explain the reasons for CSR implementation and the differences between countries and the world's regions in this regard. The phenomenon of institutional “crowding out” and “crowding in” of CSR described in this chapter is part of empirical research on corporate social responsibility and explains why in countries with a liberal welfare state model, such as the American one, the level of involvement of enterprises in CSR is much higher than, for example, in European countries.

The link between institutional determinants and CSR discussed in this chapter concerns only highly developed countries. Their capitalism models and existing institutional settings are stable and have developed as a result of a long process. The behaviour of enterprises is a consequence of these models and conditions. However, in countries other than highly developed ones (e.g. developing countries and countries undergoing a systemic transformation) it is difficult to clearly distinguish consistent models of capitalism which would be comparable with other models (e.g. Western European or American ones). It may be assumed that they are a combination of the existing institutional conditions and new institutions “imported” from highly developed economies, and therefore these countries cannot be the subject of comparative analysis in one group with highly developed countries (Ebbinghaus 2012). It is therefore necessary to explain in a different way how and under the influence of which conditions enterprises in developing countries and countries undergoing a systemic transformation undertake organisational practices in the field of CSR.

Interestingly, institutional changes leading to the state's withdrawal from the creation and distribution of certain social services (as presented for example by Hiss 2009) do not necessarily lead to automatic and unconditional filling of this gap by private sector entities. It should be borne in mind that institutional conditions are permanent, stable and less susceptible to change. Therefore, the current institutional landscape in market economy countries (regardless of the adopted capitalism model) is a consequence of a very long and slow process of institutional development, often unique and determined by the socially accepted development model and certain historical and political events. This does not mean that it is impossible to replace the role and position of the state by the private sector, but it is a rather slow process, determined by the current institutional conditions.