Drivers or passengers? A taxonomy of multinationals’ approaches to corporate social responsibility implementation in developing markets

Abstract

Purpose

The purpose of this study is to conduct a systematic literature review that illuminates the current state of knowledge regarding the specific approaches by which multinational corporations (MNCs) implement corporate social responsibility (CSR) on the subsidiary level in developing countries.

Design/methodology/approach

Even though substantial scholarly work has been made to outline MNCs' activities in developing countries, this literature remains fragmented. To support the field in its theoretical as well as empirical advancements, this study conducts a systematic review of this body of literature and content analysis of relevant articles using insights from strategic marketing literature (market driving/proactive and market-driven/reactive approaches).

Findings

The authors synthesize our findings by presenting a taxonomy of proactive/reactive CSR approaches in developing markets along with propositions that can guide future research in this area.

Originality/value

Among the key contributions of this study's literature review is the development of a taxonomy of proactive/reactive CSR, bringing together different and fragmented streams of research and viewing them from strategic marketing (“proactive/reactive”) perspective. The taxonomy and the two ensuing propositions can advance future CSR-related studies with MNCs in focus by providing both theoretical and empirical guidance.

Citation

Tarnovskaya, V., Tolstoy, D. and Melén Hånell, S. (2022), "Drivers or passengers? A taxonomy of multinationals’ approaches to corporate social responsibility implementation in developing markets", International Marketing Review, Vol. 39 No. 7, pp. 1-24. https://doi.org/10.1108/IMR-05-2021-0161

Introduction

Multinational corporations (MNCs) are broadly acknowledged as the most powerful social constructs in the postmodern era by being drivers of globalization and accounting for the lion's share of international trade. For this reason, MNCs have become subjects of polarized debates about their responsibilities of running fair and sustainable global operations (Jamali, 2010). The debates have intensified calls for context-specific analysis of corporate social responsibility (CSR) and corporate sustainability (CS), implying an enhanced focus on developing countries where social and environmental challenges are rife (Jamali and Karam, 2016).

The growing stream of CSR-related studies with MNCs in focus has explored CSR strategies by examining the operations of MNCs' subsidiaries in developing countries (e.g. Hah and Freeman, 2014; Park and Ghauri, 2015; Reimann et al., 2012). However, there is still a mixed and unstructured understanding about the factors underlying MNCs' CSR involvement in developing countries. MNCs may, for example, develop CSR mainly as a response to the public discourse (i.e. a reactive approach), alternatively develop CSR as part of an economically or socially motivated strategy that enable them to become more embedded in local communities and stay ahead of competitors (i.e. a proactive approach). Hennes and Mauritz is a prominent example of a firm guided by an organizational vision, namely “to lead the change towards circular and climate positive fashion while being a fair and equal company” (https://hmgroup.com/sustainability). Even though substantial scholarly advances have been made to outline MNCs' CSR activities in developing countries, the literature remains fragmented and in need of explanations and, possibly, categorizations of the social or strategic dispositions of MNCs in these settings. In a recent study, Burritt et al. (2018) stressed that understanding what it means to operate sustainably across multiple business settings and facing a variety of local ethical dilemmas calls for a more systematic approach than the ones currently used in the literature.

We also acknowledge that discussing the proactive dimension of CSR has become increasingly relevant since managers and scholars alike often take on a system- and engineering approach when addressing sustainable business practices (Bansal and Song, 2017). CSR has often been elevated to the strategic level of companies' decision-making and is by and large treated as a marketing offer or value proposition to MNCs' internal and external stakeholders. Hence, in our study, the literature will be analysed through a theoretical perspective adopted from strategic marketing literature on market driving/market-driven and proactive/reactive approaches. The market driving perspective (Jaworski et al., 2000; Kumar et al., 2000) has been increasingly used to explore how firms can shape markets for competitive advantage via market actors/systems change (e.g. Jaworski et al., 2020) as well as for social change (e.g. Kullak et al., 2022). In this vein, the purpose of this study is to conduct a systematic literature review that illuminates the current state of knowledge regarding the specific approaches by which MNCs implement CSR on the subsidiary level in developing countries. Our focus is on three research questions: (1) How are MNCs' subsidiaries implementing CSR locally? (2) Which are the stakeholders addressed by the implementation of CSR? (3) What are the outcomes for local actors and societies?

In this study we are employing companies' CSR activities as the units of analysis.

Our paper makes three important contributions. First, we carry out a comprehensive review of the specific body of CSR and management literature featuring the topics of MNCs and CSR implementation in developing markets. Even though CSR is the key concept used throughout our study, we have also reviewed studies using the sustainability concept as these concepts are often used interchangeably. Second, the content analysis of this literature is cross-fertilized with the insights from strategic marketing literature to identify the specific patterns of activities aimed at different stakeholders. Third, we synthesize our findings with theory, resulting in a taxonomy of CSR approaches in developing markets along with propositions that can guide and advance future research in the field. As recommended by Post et al. (2020), we use a taxonomy to advance the theory of CSR implementation by exposing and consolidating the emerging perspectives in the existing literature.

Theoretical underpinnings

The concepts of CSR and sustainability in relation to the MNC

Researchers studying the intersection between business and society often struggle with conceptual choices. They either keep themselves strictly to one of the two key concepts of CSR and CS, and the corresponding literature, or use them interchangeably without reflecting about their different roots and paradigmatic origins. While emerging from different paradigms, the concepts of CSR and CS have gradually converged as the problems these research streams are grappling with have grown increasingly similar (Bansal and Song, 2017).

Many scholars (e.g. Bansal and Song, 2017) share the view that “both CSR and CS aim to balance economic prosperity, social integrity and environmental responsibility, regardless of whether they conceptualize environmental issues as a subset of social issues or as the third element of sustainability.” (Montiel, 2008, p. 260). In the last two decades, CSR and CS have been elevated to a strategic level and become viewed as constituents of a “business case” (Hahn et al., 2014) by a considerable number of scholars (Margolis and Walsh, 2003; Bansal and Song, 2017). Other authors have described CSR by adopting terms such as “win-win” (Du et al., 2010) and “shared value” (Porter and Kramer, 2011) strengthening the managerial approach to CSR/sustainability. Responsibility scholars argued that CSR “can be viewed as a form of investment” (McWilliams and Siegel, 2001, p. 119), build reputation, attract best employees and encourage innovation.

While analysing MNCs' endeavours within the “broader CSR-domain” (henceforth simply referred to as CSR), we will be guided by the definition “instances where a firm goes beyond the firms' interests and legal compliance to engage in activities that are able to advance social good” (Hah and Freeman, 2014, p. 128). This definition mirrors the core idea of CSR, namely that societal and environmental outcomes are equally important as economic outcomes, e.g. manifested by the frequently used, but also criticized, concept of the triple bottom line (Norman and MacDonald, 2004). By considering the argumentation behind this critique in Bansal and Song (2017), which refers to the inherent tensions between economic, social and environmental goals and the corresponding strategic bias of CSR research, we will emphasize the need for more granular approaches to the goals and outcomes of CSR strategies for a focal firm and its local stakeholders.

Implementation of CSR in developing markets

MNCs' implementation of CSR practices has been described as a complex activity, largely explained by their global spanning organizations (Kostova, 1999). Scholars have discussed whether MNCs should implement globally standardized CSR strategies or whether they should localize these strategies in consultation with local stakeholders in developing markets. While the global/local dichotomy gives a valuable descriptive account of CSR implementation, it does not fully explain the variance of outcomes in CSR operations. Recent literature suggests that it can be beneficial for MNCs to opt for a strategic balance between local and global interests. This focus involves “glocal” (Arenas and Ayso, 2016), “transnational” (Bondy and Starkey, 2014; Husted and Allen, 2006) and “regional” strategies (Gruber and Schlegelmilch, 2015) that combine the elements of global and local approaches. Despite the emergence of these balanced CSR approaches, the tendency towards a push for global standards is evident in the literature (Barkemeyer and Figge, 2014). The alternative view, which emphasizes the influence of the local traits and cultures, appears under-represented (Burritt et al., 2018). Indeed, Barkemeyer and Figge (2014) argue that glocal and transnational strategies have failed to integrate the business goals of sustainability management strategies with the social goals of improving the living conditions of locals. One of the key concerns, according to Bondy and Starkey (2014), is whether corporate and host country views on sustainability issues are complementary or stand in conflict with each other, thus arguing that cultural distance matters in the implementation of CSR.

We assert that even though substantial scholarly advances have been made to outline MNCs' CSR activities in developing countries, the literature remains fragmented and is in need of further explanations of what it means to operate sustainably across multiple business settings and facing a variety of local ethical dilemmas. For example, Kostova et al. (2008) argue that MNCs can proactively shape the institutional environment at the local level in dynamic relationships with stakeholders and thus facilitate the adoption and diffusion of CSR. Based on the notion that MNCs can act as change agents in developing markets, we adopt a strategic marketing lens when systematically analysing how MNCs implement CSR in these settings with a particular focus on the roles of local stakeholders, the character of their relationships with the firm, and the outcomes for local actors and society as whole.

Proactive/reactive approaches to CSR

We use strategic marketing literature and theories of the market driving/shaping approach, broadly recognized as a viable and deliberate marketing strategy (Jaworski et al., 2000; Kumar et al., 2000), as a conceptual lens to analyse and theoretically substantiate different CSR approaches. Drawing on this literature, we specifically use the dichotomy of market-driving (i.e. proactive) and market-driven strategies (i.e. reactive) to categorize different CSR approaches. This theoretical angle builds on the solid and growing body literature on market driving/market shaping (Flaig et al., 2021; Ghauri et al., 2008, 2016; Humphreys and Carpenter, 2018; Jaworski et al., 2020) and proactive/reactive market orientation (e.g. Narver et al., 2004; Slater and Narver, 1999), which we have integrated to argue that markets can be shaped for social change.

A market driving approach is about proactively influencing a firm's market environment and orchestrating changes in the behaviours of market actors to deliver an enhanced value to customers and other firm's stakeholders while at the same time achieving the superior competitive advantage (Jaworski et al., 2020; Kohli and Jaworski, 1990; Narver and Slater, 1990). With regards to customers and other stakeholders, a firm pursuing a market driving strategy would strive to educate them and influence their values, beliefs and behaviours to prepare grounds for new unique benefits for stakeholders and will minimize adaptation (Jaworski et al., 2000; Kumar et al., 2000). Changing customers and other stakeholders' behaviours helps a firm to create new markets (Hamel and Prahalad, 1994) or shape the existing ones (Flaig et al., 2021; Kindström et al., 2018).

Recent research has broadened the focus from market driving to market shaping, the latter being viewed as a purposeful strategy allowing a firm to increase competitiveness, co-create value with multiple stakeholders and create new opportunities for the focal firm and its stakeholders (Flaig et al., 2021). However, few studies have shown how firms can transform markets for social change and sustainable growth (e.g. Kullak et al., 2022; Ottosson et al., 2020). To create a “theoretical lens” to guide this study, we have combined the key postulates of market driving (proactive) and market-driven (reactive) approaches from the literature (Jaworski et al., 2000; Narver and Slater, 1990) (see Table 1), which we will further refer to as proactive/reactive approaches.

We will apply the proactive/reactive lens to examine CSR practices and analyse them from the following aspects:

1. Stakeholder focus

2. Market environment as given/subject to change due to CSR norms

3. Adapting to customers and local stakeholders/educating stakeholders in CSR norms and teaching new behaviours

4. Using standard (global) CSR solutions/emerging (localized) solutions

5. Creating incremental change/radical change in life conditions, industry standards, working conditions, environmental impact

6. Making little/much (positive/negative) difference for local communities

By doing so, we will arrive at a taxonomy of CSR approaches that takes into consideration the roles of firm and local stakeholders in the process and outcomes of the chosen CSR strategy.

Method

Systematic literature review

This study departs from an understanding that the body of literature covering MNCs' implementation of CSR in developing countries is growing into a relatively mature research area. However, the literature is mixed and fragmented. We believe that conducting a systematic literature review of this body of research can help produce a more nuanced understanding about MNCs' implementation of CSR in developing countries.

There are some key advantages of systematic reviews over other review methodologies (Christofi et al., 2021; Pisani et al., 2017; Tranfield et al., 2003). A systematic literature review has been argued to provide the most efficient and high-quality method for identifying and evaluating extensive literature (Tranfield et al., 2003). Such a review is guided by a scientific and replicable procedure. A procedure that is protocol-driven, in order to be conducted in a rigorous and transparent manner (e.g. Christofi et al., 2021).

Guided by previous systematic literature reviews (Christofi et al., 2021; Gallardo-Gallardo and Thunnissen, 2016), our search strategy is made up of some common, standardized steps that identifies the key methodological choices taken for our review. We have demonstrated our systematic literature review outlining five distinct steps, that shows how we ended up with the final sample of articles (see Figure 1). In the search process, we applied some exclusion and inclusion criteria, referring to common practices used in leading systematic reviews (Christofi et al., 2021; Pisani et al., 2017). As highlighted in Figure 1 and described in the steps, examples of excluding criteria adopted in our search are nonacademic peer-reviewed articles (i.e. book chapters, magazines), articles not published in the considered timeframe (January 1989 up to and including December 2020). Inclusion criteria adopted regards English-written articles and published in peer-reviewed academic journals in general management, CSR journals and international business journals. To ensure high standing of the research, we used a quality criterion in terms of only including journals with grade 3, 4 and 4* in the Association of Business Schools' Academic Journal Guide 2018 ranking.

The first step in our systematic literature review (see Figure 1) included setting the criteria for selecting studies. We restricted our search of articles to empirical and conceptual studies covering different combinations of themes about MNCs, CSR and developing countries. Even though CSR is the key concept used throughout our study, we have in the review selected studies using both the CSR and the sustainability concept, in the context of MNCs. Moreover, we restricted the search to articles that appeared in peer-reviewed academic journals in general management, CSR journals and international business journals (see Table A1). For this choice, we were guided by the list developed by Pisani et al. (2017) for systematic literature review of global CSR-research. This review is considered one of the most comprehensive so far as it is based on the plethora of earlier reviews on CSR. The list used by Pisani et al. (2017) is not exhaustive but provides a manageable scope for capturing the central discourse of MNCs' sustainability and CSR practices. Most of the journals included in the list developed by Pisani et al. (2017) are journals ranked as 3 or above on the AJG-list. In our search, we decided to exclude those journals ranked below 3 according to the AJG-list (2018) as a quality criterion. One exception was the journal: Business Ethics: A European Review, which is ranked as 2 on the AJG list (2018). We decided to include this journal as it in previous reviews has been identified as one of the leading, specialized CSR journals (Egri and Ralston, 2008; Pisani et al., 2017). In addition to those journals listed in Pisani et al. (2017), we did a manual article search to find out whether we had omitted publications on the subject. We found that relevant and contemporary studies on the topic also were, to a considerable extent, represented in two general management journals which were not included in our original list of journals, i.e. Management Decision and Long Range Planning. As these journals met our requirements of an AJG ranking score at the level >3, we decided to add these journals to our journal list to better account for published literature on the topic.

Given our intention to review contemporary literature on international CSR in the context of MNCs, we considered the period ranging from January 1989 up to and including December 2020. We used 1985 as a cut-off because the first article matching the keywords appeared in 1985. The end date is set because this reflects the endpoint for our data collection.

The second step in our systematic review included identifying relevant studies that concern the broader phenomenon under study – MNCs CSR implementation in the developing markets. This was done to collect the whole of CSR research in the context of MNCs and developing/emerging markets before conducting a more focused theory-led search into the proactive/reactive approaches to CSR implementation. We have used EBSCOhost's Business Source Premier Databases to search for articles. We ran a keyword search on the titles, abstracts and keywords provided by the authors. The usage of standard Boolean operators allowed for the creation of a single search algorithm. The keyword search algorithm performed was (“MNC” OR “multinational corporation” OR “Multinational enterprise” OR “MNE”) AND (“Ethic” OR “sustainability” OR “CSR” OR “corporate social responsibility” OR “stakeholder” OR “transparency”) AND (“emerging markets” OR “developing markets”). The keywords are carefully selected based on what terms have been used in earlier reviews to identify articles (see, e.g. Pisani et al., 2017).

As a result of the keyword search, we arrived at 91 articles. An initial, manual, analysis of these articles was done by two researchers, focusing on identifying the “proactive” and “reactive” streams of research and understanding their respective underlying dimensions. This was done by creating an EXCEL file with all 91 articles summarized by their titles, abstracts, key theories used as well as findings. In creating the EXCEL file, we manually reviewed each article and analysed if each article had either explicitly used the words “reactive” and “proactive” in relation to CSR goals, activities and/or strategic intent or any underlying dimensions. As a result of this initial analysis, we excluded 29 articles where no proactive or reactive dimension were found. Hence, we arrived at 62 articles and these articles were in a next step imported to the software program NVivo12. Using the NVivo software helped us to manage the data (i.e. the 62 articles) and analyse it in more depth. With the help of the NVivo software, we searched the prevalence of the terms “proactive” and “reactive” as well as their derivatives in all 62 articles. Even though NVivo facilitated our search, it is important to note that in this stage of our review we manually did an in-depth review of each article. In this search, 20 articles were excluded for the reason of not explicitly using the “proactive/reactive” terminology in either title, abstract or the body of the article.

Hence, in the third step of this literature review, we selected 42 articles that we deemed relevant for our content analyses. Within these final 42 articles, the proactive CSR approach was identified in 28 articles, the reactive CSR approach was identified in 9 articles (see Figure A1). Seven articles are categorized as mixed approaches, because both proactive and reactive CSR were discussed (see Figure A1). We have broadly defined proactive CSR as an approach taking a broad stakeholder perspective which is not delimited to immediate problems but involves the long-term pursuit of creating lasting positive change in the lives of civilians, thus possibly going beyond minimal levels of CSR compliance. It also involves a broader focus on communities and engagement of stakeholders in CSR activities. In contrast, reactive CSR keeps stakeholders at arm's length distance, recognizing stakeholders' interests only when they interfere with economic goals. Reactive CSR may therefore be exerted by symbolic change aimed at resolving immediate problems. We have placed the articles in either proactive or reactive streams if they have demonstrated several characteristics of one or the other approach as specified in Table 1. It should be mentioned, though, that not all identified approaches in the literature can neatly be placed in one of the categories (i.e. they are not mutually exclusive nor collectively exhaustive) and may contain a mixture of features. The literature review has also allowed us to roughly distinguish between two streams of proactive CSR: the stakeholder and strategic CSR.

The fourth step focused on analysing the content of these articles and extracting the data necessary for this study. To do so, we developed a coding scheme based on the three research questions highlighted in the Introduction and our overall conceptual lenses on proactive/reactive approaches to CSR implementation. The coding categories, i.e. the coding scheme that was decided upon contained three generic categories; (1) goals and essence (e.g. orientations towards social and/or economic goals), (2) stakeholders involved (e.g. a delimited set or broad range of stakeholders, link between stakeholders and value-chain operations), (3) examples of practices and outcomes (e.g. social impact of activities). Each of the generic categories relates to the specific characteristics of market driving/driven approach and allows the more nuanced conceptualization of proactive/reactive CSR (see Table 2).

After discussing the coding categories, we divided the articles included in the sample among the authors. Each researcher content-analysed their allotted articles using the three coding categories. We used NVivo12 for coding the articles, and this software allowed us to track coded text and extract it, along with the corresponding coding categories. As a final step in this systematic literature review, guided by Post et al. (2020), we have synthesized the findings from the content analysis by presenting a taxonomy of CSR approaches.

Themes from the literature review

The themes below cover the streams of research categorized as “proactive CSR” and “reactive CSR” in accordance with the coding scheme in Table 2. Within the proactive stream, we have identified two groups of articles, stipulating two proactive approaches: stakeholder CSR approach (found in 18 articles) and strategic CSR approach (found in 15 articles), all of which are mapped in Figure 2 and Table 3. We will discuss each approach with its underlying dimensions to arrive at a final taxonomy of CSR approaches.

Proactive CSR

In our analysis, we identify two streams of proactive CSR, which differ in focus: (1) Stakeholder CSR broadly concerns achieving social and environmental impact through relationships with stakeholders and (2) Strategic CSR covers multiple issues that immediately concern business operations of MNCs and involve stakeholders to a lesser extent and selectively.

Stakeholder CSR

In this article, we refer to Stakeholder CSR as the highest degree of companies' commitment to social and environmental causes in the markets where they operate. The stakeholder CSR approach is the conceptualization that is closest to the initial definition of CSR, i.e. “going beyond the firms' interests and legal compliance to engage in activities that are able to advance social good” (McWilliams and Siegel, 2001).

Goals and essence

In the reviewed studies, a stakeholder focus when developing CSR has been described as a more “authentic” approach in comparison to programs that have a more instrumental view on CSR and lack authenticity in stakeholders' eyes (e.g. Beckman et al., 2009). Engaging with stakeholders reflects a “commitment to contribute to public goods and shape CSR agenda, irrespective of strategic value” (Baumann-Pauly et al., 2013). Moreover, some studies forward the idea of treating CSR as a management issue separate from economic management with its own reporting, discourse and targets (Beckman et al., 2009), thus suggesting that the primary goals of stakeholder CSR involve creating social value for the local stakeholders as opposed to economic value only visible on companies' own revenue-sheets.

Proactivity is prevalent in descriptions of CSR regimes that involve stakeholders. Proactivity has been defined as “the extent to which corporate social initiatives anticipate social trends” (Husted and Allen, 2009). Moreover, Husted and Allen (2009) measured proactivity by asking whether firms continually analyse their social environment to respond to pressures, adapt corporate practices to expectations, comply with the latest legislative changes and develop corporate standards that exceed regulatory requirements, thus contributing to shaping and transforming the market.

In a rare attempt to address the issue, Asgary and Li (2016) study the engagement of local stakeholders for the development of CSR as a proactive bottom-up approach, compared to a reactive and top-down approach. The bottom-up focus specifies where (e.g. which stakeholders to address) to implement CSR initiatives and when to do it (e.g. proactively addressing any ethical concern and having zero tolerance for CSR violations). The bottom-up approach, hence, zooms in on stakeholders close to the actual operations of the company (i.e. workers, suppliers and consumers) and decisions made on the ground. Conversely, a top-down approach focuses only on the “top” stakeholders (i.e. shareholders and top executives of MNCs) and the “top” management decisions (i.e. PR and immediate profit maximization decisions) and is less likely to have an impact on the structures that underlie business practices.

Some authors argue that the balance towards a reactive or proactive CSR regime depends on the nature of global institutional pressures, functioning as incentives for managers to cooperate with a variety of stakeholders (Child and Tsai, 2005). Others argue that different predispositions in this regard are the result of corporate ethics in practice (Barin Cruz and Pedrozo, 2009), corporate commitment to CSR, internal processes and embeddedness in local societies (Baumann-Pauly et al., 2013). Corporate governance issues, such as the degree of agency of foreign subsidiaries, also seem to play a critical role in this respect. For example, Hamprecht and Schwarzkopf (2014) discussed the ways in which proactive subsidiaries differ from their more reactive counterparts in the degree of direct interaction with local stakeholders allowing them to implement the climate change initiatives in Spain.

Stakeholders involved

A stakeholder approach takes a broad range of external stakeholders into account, irrespective of their strategic value for the firms. Engagement in local communities is a behavioural feature where stakeholders are viewed as equal partners in the firm's decision-making process (Baumann-Pauly et al., 2013). When orchestrating different groups and constellations of stakeholders, social value may take precedence over economic value. As demonstrated by the study of Chilean MNC suppliers (Beckman et al., 2009), the network of stakeholders extended beyond national borders and beyond primary stakeholders. It included NGOs, various levels of government, unions, activists, regulatory organizations, police and community organizations. Furthermore, the management of the entire network of relationships was important. Another study of Nestle in India (Asgary and Li, 2016) demonstrated how MNC reached out to the “bottom” stakeholders (local farmers) providing nutrition, medicine, education and technical assistance in interactions with NGOs and local governments. Moreover, the study demonstrated that MNCs need to work closely with stakeholders, to proactively implement CSR principles in their global supply chains. Pinkse and Kolk (2012) add that for tackling global challenges, such as climate change, MNCs need to interact with a variety of home, host and supranational institutions.

This means that CSR programs need to be tailored to the social needs of the country rather than rolling out standardized programs devised in the home country (Beckman et al., 2009). By taking local conditions into account, CSR programs can be conceived as authentic, connected and credible. Although tailoring solutions to stakeholder requirements partly alludes to a reactive approach, we consider stakeholder focus and priority given to social goals (as compared with the economic ones) innately tied to a proactive approach since they aim to exceed the norms and standards that companies are obliged to fulfil in these markets.

Indeed, as stressed by some scholars, there are multiple examples of MNCs that instead of resisting or evading new state-based regulations chose to take the lead in the creation of new rules to govern international activities. In areas ranging from intellectual property to labour and environmental standards, MNCs have over the last decade often led, rather than followed, state-based governance efforts (e.g. Detomasi, 2015). Many MNCs have indeed recognized the need for greater levels of regulation and chosen to contribute to this area because states often could not or would not do it. Stricter governance does not only generate competitive advantages for MNCs as they become viewed as trusted business partners but, more importantly, it contributes to enhanced income and greater participation of the world's poor in the global economy, thus leading to a more sustainable form of globalization (Detomasi, 2015).

Examples of practices and outcomes

The literature provides specific examples of MNCs applying a proactive stakeholder approach with a bottom-up focus. Among them are Starbucks in China with its Farmer's Support Centre and IKEA in India with its better cotton initiative. These companies have not only ensured eco-friendly harvesting but also delivered better quality products and services, increasing the wellbeing of employees and customers (Asgary and Li, 2016). An important outcome of this CSR approach is the long-term benefit to local communities from development initiatives (Eweje, 2006). As demonstrated by several studies, corporations can cultivate a supportive community which creates a safe environment for business (Eweje, 2006; Kawai et al., 2018). Financial outcomes may correlate with proactive stakeholder approaches. For example, through a proactive approach, ethical operations become a norm in the supply-chain, decreasing operational costs and the need for control (Asgary and Li, 2016).

Proactive CSR practices covered numerous areas, including the following: selective choice of suppliers, monitoring practices, supplier training and improvement of working conditions, developing strong relationships among supply chain partners, CSR education in local community schools, employees' CSR training (Asgary and Li, 2016), empowering women in management, occupational safety improvements, environmental biodiversity (Durand and Jacqueminet, 2015; Lorenzo et al., 2010), and broad development initiatives including educational and social welfare initiatives in local communities (Eweje, 2006). As stressed by several scholars, a common feature of these proactive initiatives was that they required investments and continual learning to enable proper implementation. Once implemented, proactive CSR has the potential to create a virtuous value-creation spiral, ultimately leading to diminishing costs and more efficient operations. Other studies address the different types of partnerships with local and global NGOs and the activities aimed at improving the diversity of the workforce through the inclusion of young people, often with problematic backgrounds (Barin Cruz and Pedrozo, 2009). The guiding principle for these stakeholder-aimed practices was engagement. For example, in the study by Beckman et al. (2009) on Chilean MNCs, the firms worked closely with stakeholders to learn about their problems and eventually engaged them to co-create solutions to social challenges. Notably, this collaboration occurred in conjunction with the UN program for the Environment and other global and international organizations.

Overall, Wettstein et al. (2019) advocated a stronger role of MNCs in the global political economy. In the global context value chains are expanding beyond the regulatory reach of any government. In this “ungoverned” space there is no clear separation between the public and private sphere. CSR that involves stakeholders is, according to many authors, the only orientation that would allow MNCs to address the grand challenges that cross national borders and have effects on large numbers of people, communities and the planet as a whole (Wettstein et al., 2019).

Strategic CSR

In our analysis, we see that companies pursuing strategic CSR may proactively evaluate a broad range of issues related to CSR where they can outperform competitors, e.g. human rights, workplace safety, wages, environmental standards, as well as combating corruption (Baumann-Pauly et al., 2013). We find that strategic CSR covers delimited issues that immediately concern business operations of MNCs. Following the categorization of this study, strategic CSR differs from stakeholder CSR in the sense that it firmly emphasizes CSR compliance issues as part of the business strategy while not paying equal attention to the pursuit of social mission per se, for example via establishing long-term commitments to broader communities. As MNCs become more embedded in local markets, however, their aptitudes may gradually shift into more stakeholder-oriented approaches where business practices are more embedded into local economic systems.

Goals and essence

Strategic CSR has been captured by the concept of sustainable development orientation, where CSR is described as an integral part of the company's strategy and integrated into corporate schemata, routines and procedures (Barin Cruz and Pedrozo, 2009). Sustainability development orientation is conceptualized by three Ps – prosperity, people and planet – which involve economic, social and environmental aspects, akin to the triple bottom line advocated by CSR scholars (Yin and Jamali, 2016). CSR is about balancing economic success, environmental stewardship and social progress to create benefits for society. In the study by Baumann-Pauly et al. (2013) it was suggested that CSR policies could be integrated in all aspects of the business and best practices shared with industry peers. The reason that we consider this orientation as a part of the strategic CSR is the combination of three goals at once, where economic goals, arguably, are bound to take precedence in sharp situations.

Child and Tsai (2005) treat the concept of political CSR as an utterance of a strategic orientation of the MNC. From the political vantage point of this study, companies proactively choose attractive environments to operate in and use their resources as leverage in bargaining situations, for example, by threatening to move operational resources away from an institutionally hostile environment. An important aspect of the political approach is that MNCs are shaping the institutional norms and rules in host countries rather than viewing them purely as organizational constraints.

The most important feature of strategic CSR is, arguably, the reconciliation of societal impact and business effectiveness through the creation and implementation of social projects (Husted et al., 2016; Porter and Kramer, 2006; Yin and Jamali, 2016). Strategic CSR reflects a shift in corporate practices from passive compliance to externally imposed expectations to proactive engagement in social or environmental matters to future-proof economic value generation (Husted and Allen, 2009; Yin and Jamali, 2016). This convergence of social and business interests is rooted in the work of Porter and Kramer (2002, 2006, 2011). The core of Porter and Kramer's argument is that CSR is to be considered central for a company's competitive positioning. Porter and Kramer differentiate between strategic CSR and responsive CSR, where the latter involves acting as a good corporate citizen, being attuned to evolving societal concerns, and mitigating the adverse effects of corporate activities (thus close to what we here categorize as reactive CSR). In contrast, strategic CSR goes beyond best practices by carving out a distinctive competitive niche. A similar view of strategic CSR can be found in Zhao (2012) who argues that CSR can contribute to MNCs' sustained competitive advantage.

Stakeholders involved

Strategic CSR implies a directionality that prompts MNCs to focus their attention on carefully selected stakeholder groups and on particular focus areas for CSR engagement. Recent studies provide empirical evidence that MNCs also can use CSR as a vehicle to promote market penetration, alleviate uncertainty and reduce costs. This is achieved by developing a network of relationships with both private and public entities and obtaining their support for generating value to customers, suppliers and other stakeholders (Elg et al., 2015; Yin and Jamali, 2016; Zhao, 2012).

In a study focusing on MNCs in a Chinese context, Yin and Jamali (2016) showed that CSR was designed with a close fit to the company's mission and objectives. MNCs were proactive in assessing economic, technological, social or political trends. In these endeavours, MNCs proactively engaged with the government, customers, suppliers and NGOs to design and evaluate CSR programs. Hadjikhani et al. (2016) also studied a Western MNC in China and demonstrated that the company developed relationships with both business and non-business stakeholders (hospitals, schools, universities, village communities) but applied a marketing logic rather than a stakeholder approach in its interaction with these organizations. In essence, the MNC targeted end-customers with the overarching goal to enhance competitiveness and brand image. The MNC also worked vigilantly to align its CSR efforts with the Chinese government.

Examples of practices and outcomes

Specific CSR practices involve training staff on environmental issues (Child and Tsai, 2005), developing external partnerships with other firms and civil society, and negotiate regulations with local authorities (Child and Tsai, 2005; Dang et al., 2020) It also includes making social investments in local communities covering, e.g. education, the environment and social responsible marketing to local consumers (Hadjikhani et al., 2016). Furthermore, MNCs make investments in their supply-chains involving training, capacity building and knowledge sharing with suppliers (Yin and Jamali, 2016). The firms’ CSR initiatives have also become key instruments to recruit and retain motivated talent in developing economies (Reimann et al., 2012). In comparison to Stakeholder CSR, Strategic CSR implies closer integration between CSR activities and a corporate strategy, connecting directly to the business goals set for a certain country or market area. Many activities like construction of schools, education, medical care and community building were closely connected to the firm's business relationships with suppliers, customers and distributors, thus creating valuable outcomes of direct relevance for MNCs' business development.

Scholars have discussed the connection between CSR performance and business performance since the convergence of social and business goals lies at the heart of strategic CSR. However, as argued by Yin and Jamali (2016), although MNCs invest in CSR, few of them acknowledge the bottom-line implications of CSR, i.e. how social/environmental, and economic goals mutually reinforce each other. Overall, as argued in Husted and Allen (2006), “given the diversity of academic research regarding the strength and direction of causal links between CSR and firm financial performance, it is not surprising that there are conflicting perceptions as to the strategic importance of CSR”. This implies that Strategic CSR might lack a firm foundation for enhancing business performance while at the same time prove insufficient for solving global challenges prevalent in certain developing countries.

Reactive CSR

Goals and essence

We describe reactive CSR as approaches where companies act upon externally imposed social and environmental laws, mostly to satisfy immediate wishes of customers or shareholders (Barin Cruz and Pedrozo, 2009). External demands on heightened CSR standards may be considered as a business risk and the purpose of corporate action is to alleviate risks and guarantee short-term financial benefits.

Theoretically, the reactive approach is rooted in the institutional perspective postulating that firms act under institutional constraints, which are especially salient in emerging economies where companies are subjects of significant levels of governmental or political interference (Child and Tsai, 2005). The institutional perspective assumes that firms seeking social legitimacy will abide by all essential environmental regulations both formal and informal. Another way to frame reactive CSR is by applying the notion of social adaptation (Zhao et al., 2014) which is similar to economic adaptation of products and services. Social adaptation is about selectively engaging with stakeholders and social issues with a purpose of lowering the risks of public crises by mitigating risks or negative perceptions of the firm. Although it addresses the broader social challenges, it is predominantly focused on responding to existing problems.

Stakeholders involved

In terms of stakeholder identification, reactive CSR focuses on the selected critical stakeholders that lead the public discourse (i.e. shareholders and top executives) and the key decisions that allow companies to adapt to this discourse (i.e. improving image and cutting costs) (Asgary and Li, 2016). In this study, relationships with suppliers were characterized by motivations to reduce operational costs to gain competitive advantages quickly (Asgary and Li, 2016). As demonstrated in another study of five Swiss MNCs, external stakeholders were involved at a superficial level, or on an ad-hoc basis, in situations of crisis. Interactions with stakeholders were not managed in a systematic way (Baumann-Pauly et al., 2013).

Examples of practices and outcomes

Reactive CSR is referred to as a “top-down” approach aimed at identifying potential threats to the company's public images in the most cost-efficient manner (Asgary and Li, 2016). In the case study of three Western MNCs in China, reactive strategies were determined by the ways in which companies interact with suppliers, typically pushing for low purchasing prices to sustain cost-efficient operations. However, supply-chain partners grew resentful, which eroded their motivations to make strong CSR commitments. Asgary and Li (2016) also demonstrated a striking negative outcome of the reactive approach manifested by the so-called bullwhip effect when a “minor” unethical decision in the supply chain resulted in significant economic loss of a company's reputation and revenue, forcing the MNCs to switch suppliers. This conduct proved inefficient, implying long-learning curves and associated costs.

Other common practices mentioned by other authors are different risk mitigation practices such as managing alertness, portraying good behaviour, navigating the state of comfort and active mediation with local governments, as for example, demonstrated by the study of MNCs in Vietnam (Dang et al., 2020). However, Egels-Zandén (2014) provides a credible case to show that even minimal implementation of codes of conduct by suppliers improves workers' rights and life conditions implying that the reactive CSR provides good start for more developed and fair approaches.

Altruistic (philanthropic) CSR

By probing deeper into the categories generated by the Nvivo categorizations (see Table 3), we have also identified an additional approach labelled altruistic (or philanthropic) CSR that is mostly reactive but may contain elements of a will to actively drive environmental or social change. This approach is less accentuated in the literature and was identified in our systematic review by a range of activities compensating from negative externalities of the MNC. These activities can be exemplified by food donations and/or poverty alleviation measures to combat the most acute problems in the markets and aimed at the most vulnerable groups of society (Husted and Allen, 2009). Altruistic CSR is driven by intrinsic motivations of giving back to communities in host markets (Yin and Jamali, 2016). While companies using this approach may have a clear vision of social goals, the actual means used to reach those goals tend to be underdeveloped or misconstrued. At this stage companies are guided by CSR ideals, but lack routines and local anchorage to effectively enable shifts that can deliver lasting social and economic value. This means that CSR activities are not aligned to the context in which they are exerted and social benefits become delimited in scope. For example, a company may develop standards for safer worksite conditions to benefit local employees but fail to address flawed underlying structures that perpetuate these conditions which could result in lasting change and positive spillovers to other facets of society.

Discussion

The purpose of this study is to identify the current state of knowledge about the specific approaches by which MNCs' implement CSR in developing countries. We materialize the findings from our content analyses by developing a taxonomy of various proactive/reactive approaches to CSR (see Figure 3). This taxonomy brings together four different CSR implementation patterns answering research question (1) The taxonomy is built along two axes: value outcomes (focus on economic or social outcomes) and breadth of impact (narrow or broad range of stakeholders affected, narrow or broad scope of CSR operations) – in this way covering research questions (2) and (3). Finally, Figure 3 points at interesting avenues for future research involving concepts related to proactive CSR that could be further explored.

Reactive approaches are characterized by the involvement of a narrow range of stakeholders, just enough to ensure CSR compliance so that economic goals are not compromised. Because operations of companies are not shaped by community needs, companies pursuing these approaches are likely to engage in CSR matters only when issues are directly influencing business and economic goals.

As described in the section discussing the themes emerging from our literature review, a variation of reactive CSR is captured by altruistic CSR approaches, displayed in the top left corner of the graph in Figure 3. Unlike reactive CSR, MNCs engaged in altruistic CSR are actively trying to compensate for negative externalities stemming from firm operations by compensatory actions. Altruistic CSR, thus, reflects the effort to reduce harm by addressing pressing CSR matters by involving a selection of stakeholders. The effects of these initiatives may, however, be limited in scope since they are not aspiring for a shift in the core business activities and value-chain operations of the MNC. These efforts may, therefore, not have a lasting impact on local communities.

When taking stock of extant literature, we can discern a research opportunity to focus on more proactive strategies, closely tied to the business operations of MNCs. From this perspective, MNCs pursue CSR agendas with the ambition to bring about fundamental change in social and economic structures – exemplified by CSR approaches at the right end of the stakeholder axis. We will thus formulate propositions regarding these approaches and their outcomes for MNCs and local markets. Proactive CSR approaches that take into account a relatively broad range of stakeholders are exemplified by strategic CSR and stakeholder CSR. Strategic CSR implies an aspiration for shared values among MNCs where they seek to reconcile economic and social goals in their value-chain operations. In practice, however, economic outcomes tend to take precedence over social agendas. Social objectives may be proactively pursued only when short-term business objectives allow for it. Strategic CSR involves the application of CSR in business-relevant areas to position firms competitively. It usually considers a set of stakeholders that are engaged to address urgent and definable CSR issues. As such, this approach serves to proactively engage a broad set of business-critical stakeholders (e.g. customers, suppliers, governments, NGOs) to reach strategic targets related to productivity, profitability and growth in local markets. However, because this approach is based on an inherent trade-off between social and economic goals, it may prove sub-optimal both in relation to economic efficiency and social progress. Thus, we suggest the following propositions:

Proposition 1a.

Strategic CSR approaches will have relatively weak social impact because of a narrow scope of CSR-operations and prioritization of economic outcomes.

Proposition 1b.

Strategic CSR approaches will have a relatively weak economic impact because of trade-off between the social and economic outcomes of CSR-operations.

The stakeholder CSR approach implies a maturing CSR-organization that seek the concerted action of a broad range of stakeholders for social impact. This approach is enabled by ethical grounding, corporate commitment to CSR and embeddedness in local societies. In stakeholder CSR approaches even the “bottom-level” stakeholders such as workers, suppliers, community members may be called upon and orchestrated. Based on our examples from the literature review, the stakeholder CSR approach manifests itself on a spectrum, meaning that companies can be more or less developed in this regard (for example, different groups of “bottom-level” stakeholders are approached with different degrees of engagement). In other words, the stakeholder CSR approach may not be uniform within the realm of a MNC. In essence, it is possible that stakeholder approaches will be exerted differently by MNCs' subsidiaries in different markets. All else equal, stakeholder CSR approaches have vast potential for social impact, while the impact on business performance cannot be readily captured conventional short-term performance indicators.

Hence, we propose the following:

Proposition 2a.

Stakeholder CSR approaches will have strong social impact because of a broad scope of CSR-operations.

Proposition 2b.

Stakeholder CSR approaches will have weak economic impact because of a low focus on economic outcomes of CSR-operations.

To pursue CSR, MNCs arguably need to decouple social value objectives from economic ones and downplay the growth and profit motives. The call for change into current CSR practice and the importance of making a real difference in people's lives by meeting local needs and aspirations has been evident in the critical CSR studies (e.g. Jamali and Sidani, 2011).

In our taxonomy we identify research opportunities in extending current frameworks by pursuing truly proactive CSR that goes beyond risk mitigation and compliance. This could, for example, involve global citizenship geared at addressing grand challenges such as climate change, migration, poverty and inequality, not to mention the pandemics, thus bringing the concept of CSR back to its roots. From this vantage point, MNCs do not only tackle CSR-related problems in their immediate business environment but function as orchestrators of social and environmental change by engaging local stakeholders in solving real problems, cultivating their support and pledging long-term commitments to societal goals. These types of commitments are aimed at improving underlying structures in societies and the objective is thus to create long-term effects that can benefit these societies. Although these ideas might seem impossible to implement, there is some recent evidence (see, e.g. Kallis et al., 2020) that supports the feasibility of this alternative approach to CSR.

A fruitful theoretical approach which has already gained a strong foothold in inter-disciplinary communities worldwide is the notion of sustainable degrowth. Coined at the first international degrowth conference in 2008, it was defined as a “voluntary transition towards a just, participatory, and ecologically sustainable society” (https://degrowth.org/). One of the central principles is that of decoupling of economic growth from environmental preservation and social justice activities based on evidence that economic and social goals are deemed incompatible within the present capitalist system. These ideas are highly resonant with the findings of our study on the need for decoupling of social and economic value objectives of MNCs' CSR strategies in the developing markets where most environmental impact and injustice takes place.

Conclusion and contribution

The main conclusion of this study is that the stakeholder CSR represents a promising and theoretically rooted approach that can be further developed through true proactiveness through stakeholder engagement, orchestration of change-oriented activities involving local stakeholders, focus on grand challenges that they face and firms' long-term commitment to societal goals. Among the key contributions is the development of a taxonomy of proactive/reactive CSR, bringing together different and fragmented streams of research and viewing them from strategic marketing (“proactive/reactive”) perspective. By applying this perspective, we have also contributed to the market driving/shaping research by identifying the particular patterns of proactive and reactive CSR approaches and arguing that even non-marketing activities such as CSR have adopted the marketing logic.

We claim that the taxonomy and the two ensuing propositions can advance future CSR-related studies with MNCs in focus by providing both theoretical and empirical guidance. The taxonomy has allowed us to highlight the inherent tensions among proactive CSR approaches, where strategic CSR approach, on the one hand, predominantly focuses on market impact and stakeholder CSR approach, on the other hand, puts focus on societal impact. This categorization underscores the inherent trade-off between economic and social objectives in MNCs' CSR operations. To some extent, the taxonomy also reveals the inadequacies of the triple bottom as a guiding principle for CSR strategy by suggesting that in practice, MNCs may rank-order objectives and prioritize economic outcomes. We have suggested ways to loosen the straitjacket of the triple bottom line by decoupling social goals from economic goals through the development and application of a stakeholder CSR approach.

Limitations and avenues for future research

Our research comes with limitations stemming from its nature and the focus of the study. In our systematic review, we were guided by the list developed by Pisani et al. (2017) with an addition of two journals, which potentially constitutes a limitation as relevant articles could have appeared in other IB and/or marketing journals which are increasingly featuring CSR/sustainability studies. As the field grows and the journal quality (i.e. the AJG guide) develops, we recognize that future systematic literature reviews may need to include a wider scope of journals.

Also, our study was quite narrow in scope, basing the search on the dichotomy of proactive/reactive CSR approaches. Other strategic postures besides reactive/proactive dichotomy that are related to the implementation of CSR in developing markets are certainly possible and could be explored in future studies. Such strategic stances could include CSR innovation, CSR benchmarking and regional development hubs for CSR.

For future research we also suggest further development of stakeholder CSR by cross-fertilization of the IB literature with other fields of research, for example, degrowth, ecology and sociology. Our study points towards an alternative way to enrich stakeholder CSR by drawing parallels between key features of this approach and the degrowth concepts of decoupling, fair distribution of resources, reduced environmental impact through reduced consumption, convivial and participatory societies, etc. In this way our paper calls for an extension of CSR and sustainability research in international business based on an economics of growth logic by applying a degrowth perspective.

Among possible questions to consider might be the following: What does it mean in practice to decouple economic and social goals for MNCs? What kind of transformation of MNCs business models and processes is needed to fully embrace the stakeholders' interests and solve real societal problems in developing markets? What can be the new roles of MNCs in the transition from an overly materialistic to a convivial and participatory society? As it has been beyond the scope of this literature review to answer any of these questions, we call for more empirical studies of CSR at MNCs and other types of companies to capture the on-going shift towards a post-growth logic.

Figures

Figure 1

Scoping the five steps of the systematic literature review

Figure 2

Stakeholder CSR approach and strategic CSR approach identified among the reviewed articles (developed using Nvivo12)

Figure 3

A taxonomy of proactive/reactive CSR approaches

Figure A1

The proactive and reactive CSR approach identified in the final sample of articles (developed using Nvivo12)

Table 1

The market driving (proactive) and market-driven (reactive) approaches

Characteristics	Market driving approach	Market-driven approach
Market characteristics	The market is malleable	The market is stable
Market scope	Broad market environment	Narrow market environment
Stakeholder focus	All relevant stakeholders	Customers and competitors
Relationships with market actors	Educating market actors	Adapting to market actors
Degree of innovativeness in the value proposition	New solutions	Existing solutions
Development of the market	Radical change in actors' behaviours, norms, values	Incremental change in actors' behaviours, norms and values

Table 2

The coding scheme for proactive and reactive CSR approaches

Generic categories	Market driving/driven characteristics	Proactive CSR	Reactive CSR
Goals and essence	Driving the development of markets	Instigate positive lasting changes for markets and the broader society	Incremental change directed at specific transactions
Stakeholders involved	Stakeholders involved in current and future transactions	Creating engagement among stakeholders of relevance for value-chain operations to create permanent context-specific CSR solutions	Involving a selected set of stakeholders to ensure compliance with (global) CSR standards
Examples of practices and outcomes	New market logic with established new rules of engagement among stakeholders	MNCs educating stakeholders in CSR norms and teaching new behaviours	Adapting to stakeholders needs for urgent problem solving

Table 3

Content analysis of reviewed articles

		Proactive CSR		Reactive CSR
Authors	Year	Stakeholder CSR	Strategic CSR
Andersson et al.	2005	X
Asgary and Li	2016	X		X
Barin Cruz and Pedrozo	2009	X	X	X
Baumann-Pauly et al.	2013	X	X	X
Beckman et al.	2009	X
Child and Tsai	2005		X	X
Christmann	2004		X
Clark and Brown	2015	X
Dang et al.	2020		X	X
Detomasi	2015	X
Durand and Jacqueminet	2015	X
Egels-Zandén	2014			X
Eweje	2006	X
Hadjikhani et al.	2016		X
Hamprecht and Schwarzkopf	2014	X
Husted and Allen	2009	X	X
Husted et al.	2016		X
Husted and Allen	2006		X
Jamali	2010		X
Kawai et al.	2018	X		X
Kolk	2010		X
Lorenzo et al.	2010	X
Pinkse and Kolk	2012	X
Reimann et al.	2012		X
Riikkinen et al.	2017		X
Rodriguez et al.	2006	X
Wettstein et al.	2019	X
Yin and Jamali	2016	X	X	X
Zhao	2012	X	X
Zhao et al.	2014			X

Table A1

Journals included in the keyword search

Management journals	CSR-journals	International business journals
Administrative Science Quarterly	Business and Society	Global Strategy Journal
Academy of Management Journal	Business Ethics Quarterly	International Business Review
Academy of Management Review	Business Ethics: A European Review	International Marketing Review
British Journal of Management	Business Strategy and the Environment	Journal of International Business Studies
Human Relations	Corporate Governance: An International Review	Journal of International Management
Industrial Marketing Management	Journal of Business Ethics	Journal of International Marketing
Journal of Business Research		Journal of World Business
Journal of Applied Psychology		Management International Review
Journal of Management
Journal of Management Studies
Journal of Occupational and Organizational Psychology
Journal of Organizational Behaviour
Long Range Planning
Management Decision
Management Science
Organizational Behaviour and Human Decision Processes
Organization Science
Organization Studies
Personnel Psychology
Strategic Management Journal