Corporate Social Responsibility Behavior for Foreign-Funded Enterprise in China Market - Research Proposal Example

Corporate Social Responsibility Name Institution Course Lecturer Date 1. Introduction 1.1 Background During recent years, due to the economic globalization, China has attracted 5.77% more foreign direct investment (FDI) in the first 10 months of the year, compared to 2012.Investment from the EU increased to $6.4bn during the period - an increase of 22.3% - while $3bn came from the US, a rise of 12.4% (BBC news, 2013). FDI is widely seen by many scholars and policy makers alike as an important contributor to the development process of the developing and emerging economies (UNCTAD, 2011). However, Mercereau (2005) reported that FDI has had a negative effect on the social development in China. Narula (2012) thought that the growth of FDI has resulted in degradation of the environment. Additionally, rising food and water insecurity, climate change and the growing economic disparity have emerged as the major threats in this millennium. Besides, (Christmann, 2004) it is reported that large Western foreign-funded enterprises(FFE) were perceived as primarily exploiting low local labor rates for their own profit, which result in poor working standard(e.g. overtime work, child labor etc.). Above this situation, foreign-funded enterprises (FFE） started to be aware that their mission should go beyond mere profit generation. To make their success continued rather than earning profit only for a short period, they realize that some ethical standards should not be neglected (Tixier,2003). In other words, although they basically seek to maximize their earnings abroad, firms are increasingly acknowledging the value of corporate social responsibility (CSR) and treating CSR as a strategic tool to expanding the potential chances, which may benefit the corporation in the future (Polonsky & Jevons, 2009). CSR has its roots in stakeholder theory (Carroll, 1991 and Freeman, 1984). According to the central proposition of stakeholder theory, FFE’s subsidiary should focus on three basic points which may influence their CSR in foreign market: First, absorptive capacity, absorptive capacity is a firm’s ability to recognize and understand new knowledge, assimilate the knowledge within the organization, and use the knowledge to create commercial outputs. A firm’s absorptive capacity determines how much benefit the firm can realize from engaging in new activities. Second, financial performances, some neoclassical economists argue that, constrained by complementary resources and capacity, CSR engagement can trigger some financial problems such as disproportionally high cost, while stock market and product market returns are negligible. Third, the relationship with stakeholders, the improved firm–stakeholder relationships and enhance the firm’s reputation among customers, employees, regulators, and suppliers may help the corporation to achieve their CSR. (Jacob Brower - Vijay Mahajan, 2013) However, as the problem of absorptive capacity as well as financial performances has already been studied in other papers, this passage will take consideration into the influence of stakeholder pressure for CSR behavior in foreign market. Another major issue to consider as far as corporate social responsibility is concerned is to evaluate how the government and other regulators view foreign firms in the market. Recent reports indicate that most foreign companies in have been losing their market share in china due to the high levels of discrimination, as the European chamber of commerce in china reports. 1.2 Problem definition With the economic globalization, foreign companies started to explore Chinese market so as to expand their business. There are two main kinds of stakeholders when participating in the business operation: internal stakeholder (e.g. Employees, shareholders etc.) and external stakeholders (e.g. customers, suppliers etc.)The enterprises are always familiar with their internal stakeholders but unfamiliar with the local external stakeholders. When they enter into the Chinese market, for example, Chinese media coverage reported that “Apple has opened the doors to their Chinese ‘sweatshop’ factories where employees are paid as little as $1.12 an hour” (Mail Online News, 2014). This issue probably has negative influences on CSR behavior of Apple and harm to profitability. Therefore, it is necessary to explore the trait of external stakeholders in Chinese market and how the external stakeholders influence on CSR behavior in Chinese market. The goal of this research can be formulated in the following main and sub questions below: Main question What is the influence of external stakeholders on a foreign-funded enterprise to behave socially responsible in Chinese market? Sub question 1. What is the reason to expect a relationship between external stakeholders and corporate behavior in Chinese market? 2. What is the suggestion in literature on the relationship between external stakeholders and corporate behavior in Chinese market? 1.3 Objective This report emphasizes on the external stakeholders who are related to Corporate Social Responsibility. More specifically, the purpose of this thesis is to identify how external stakeholders influence Corporate Social Responsibility behavior for foreign-funded enterprise in China market. Besides, the findings will persuade manager to be aware of the important of external stakeholder especially those who can make great differences to the CSR of the corporation. 1.4. Methodology During the research process, we mainly focus on three methods to collect and analyze the information, including data collection method, literature review method and inductive research approach. This chapter will describe how this research is carried out. 1.4.1 Research approach Generally, there are two kinds of research approaches namely: inductive and deductive (Saunders et al., 2009). According to this research, inductive will be used as a main tool to analyze the collected information. Furthermore, the purpose of using inductive approaches is to gather the extensive and various raw data to develop concepts, themes; to establish clear links between the research objectives and the summary findings. (David, 2006) Questionnaires will also be administered to some companies to evaluate how they treat various publics. The companies will be chosen randomly within the country for the study. The collected data will also be analyzed using several statistical analytical tools for example statistical package for social sciences, regression analysis to determine the correlation between the CSR and the firm’s performances among others. 1.4.2 Secondary literature resource According to Carroll (1991), the level of corporate social responsibility may be determined by several factors such as the peoples level of income, corruption as well as the culture practiced in that country. The study shows that the level of CSR is quite low among the companies in china. This is because there is also relatively low level of income, high levels of corruption and the four dimensions of culture are also lowly practiced in the country. Campbell (2007) posits that “socially responsible corporate behavior may mean different things in different places to different people at different times”. This has been evidenced in the recent studies such as Mercereau (2005). For example this study shows that the foreign direct investment in china as compared to the local firms, they are expected to practice corporate social responsibility in their dealings in the market. The study further reveals that there are different perceptions of the CSR in different countries. For example CSR features such as charitable donations, employee’s relations, and environmental protection among others are highly practiced in most Chinese companies than among western countries. A study done by Polonsky & Jevons (2009) showed that there is a close relationship between the performance of foreign firms and the CSR application in china. Though the Chinese government has not been very kind to foreign firms in the country due to the issue of discrimination, recent studies reveal that several organizations have been established to foster foreign investment in the country. This study also indicates that the application of CSR has in long way promoted this business. 1.4.3 Identification of key words Economic globalization, FDI, FFE, China, Chinese market, foreign market, corporate social responsibility, corporate social responsibility behavior, stakeholder, external stakeholder 1.4.5 Conclusion To sum up, this research methodology has been described briefly. Inductive approach, secondary literature resource and literature review will be utilized to analyze the research question and sub-questions. 1.5 Chapter structure Chapter 1 describes the introduction of this report, including research background, problem definition, research objective and methodology which will be utilized to answer the main-question and sub-questions. Chapter 2 of this report gives the overview of these subjects, which will be presented based on literature. This chapter started with an introduction: 2.1 CSR definition; 2.2 CSR in Chinese market; 2.3 external stakeholder classification. Chapter 3 of this report states external stakeholders who influence on CSR behavior in Chinese market. Chapter 4 of this report provides conclusion and research limitation. Reference BBC News (2013, November 9). Foreign investment in China up 5.8% in first 10 months. Campbell, John, 2007, “Why Would Corporations Behave in Socially Responsible Ways? An Institutional Theory of Corporate Social Responsibility,” Academy of Management Review 32, 946-967. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48. Dawkins, J. And L. Stewart: 2003, ‘CSR in Stakeholder Expectations: And Their Implication for Company Strategy’, Journal of Business Ethics 44, 185-193. Kluwer Academic Publishers. Jacob Brower - Vijay Mahajan - Journal of Business Ethics - 2013 Mail Online News (2013, January 25). Revealed: Inside Apple’s Chinese ‘sweatshop’ factory where workers are paid just $1.12 per hour/ Mail Online. Retrieved May18, 2014, from: http://www.dailymail.co.uk/news/article-2103798/Revealed-Inside-Apples-Chinese-sweatshop-factory-workers-paid-just-1-12-hour.html Mercereau, B. (2005). FDI flows to Asia: Did the dragon crowd out the tigers? IMF Working Paper No. 189. Performance in organizational identification, adjustment and job performance’. Journal of Management Studies, 44, 972–92. Polonsky, M., & Jevons, C. (2009). Global branding and strategic CSR: An overview of three types of complexity. International Marketing Review, 26(3): 327–347. Responsibility. Thunderbird International Business Review, 45(1): 71–91. Sociaal-Economische Raad (SER): 2000, De winst van waarden (Social Economic Council, The Hague) Tixier, M. (2003). Note: Soft vs. hard approach in communicating on corporate social United Nations Conference on Trade and Development (UNCTAD) (2011). World investment report. New York: United Nations. Read More