The Effect of Local Stakeholders Pressures on Responsive and Strategic CSR Activities: Evidence from Korean MNEs

Abstract

This study identifies the relationship between local stakeholder pressures and Korean foreign subsidiaries’ corporate social responsibility (CSR) from the stakeholder theory perspective. We classify local stakeholders into primary and secondary groups by their business relatedness as well as foreign subsidiaries’ CSR activities into responsive and strategic CSR by taking into account their willingness. By analyzing survey data of 177 Korean foreign subsidiaries, the key findings are as follows. First, local primary stakeholders, such as customers, employees and suppliers, have a positive impact on responsive CSR activities, but no influence on strategic CSR. In contrast, directly business related primary stakeholders have greater effect on responsive CSR activities rather than on strategic ones. Second, local secondary stakeholders in host countries, such as governments, non-government organizations (NGOs) and local communities, have strong influence on both responsive and strategic CSR activities, whereas secondary stakeholder groups have more influences on strategic CSR activities rather than responsive ones. This means that local secondary stakeholder groups have a strong expectation about subsidiaries’ aggressive social innovation and resource investment to solve issues with local involvement, while primary groups may have some defensive attitude toward business related strategic CSR. This exploratory study finds that foreign subsidiaries should exercise effective change management programs towards primary local stakeholders to practice business and innovation driven strategic CSR activities successfully.