The effects of the CSR isomorphism on both CSP and CFP

Abstract

Purpose - The purpose of this study is to contribute to the understanding of the interrelationships between corporate social responsibility (CSR) isomorphism of headquarters (HQs) and their subsidiaries as well as corporate social performance (CSP) and corporate financial performance (CFP) at the subsidiary level. Design/methodology/approach - This study tested these relationships through canonical correlation analyses. The data used were drawn from corporate HQ and 63 subsidiaries, which were publicly listed on the Istanbul Stock Exchange in 2007. Both qualitative and quantitative techniques were used in the study. Findings - The results generally indicated that the isomorphism between the CSR practices of the HQ and those of their subsidiaries could impact both the CSP, especially the product and employee dimensions, and the CFP. No relationship was found to exist between the CSP and CFP. Originality/value - Despite extensive interest by scholars and practitioners in the subject area, relatively little is known about the management of CSR by the multinational enterprises (MNEs) (Meyer, 2004), as the literature does not systematically examine the effects that occur on employee performance following the diffusion of CSR among the MNEs subsidiaries. Extending earlier literature on CSR, by integrating the effect of the CFP, the present study focuses on the effects of isomorphism between the CSR practices of the MNEs and those of their subsidiaries on both CSP and CFP. Further, the study examined the interrelation of CSP and CFP from the perspective of international management. Given the increased interest in corporate governance matters at the international level, CSR plays a central and fundamentally important role in the corporate governance of the MNEs because of both globalization forces and the pressures exerted by stakeholders. In this context, this paper is one of the first to explore the transfer of CSR practices from the MNEs to their subsidiaries. The effect of CSR on performance is an important research question, especially for emerging markets (Ibrahim and Angelidis, 1995; Waddock and Graves, 1997; Ghazali, 2007; Johnson and Greening, 1999). Despite the importance of this issue, however, until recently, only a limited discussion has been evident in the literature on CSR in the international arena with particular reference given to the emerging economies. Studying the effects of the CSR isomorphism on the performance in Turkish context is justified in three ways. First, Turkey is the largest emerging economy in Eastern Europe, the Balkans and the Middle East (Tatoglu et al., 2003, p. 7). It presents the emerging nature of the market and the transitional characteristics of the institutional environment (Cavusgil et al., 2002). Second, the drivers for CSR in Turkey, such as the other emerging markets whose institutional characteristics and economic fundamentals is similar, are exogenous and institutional rather than endogenous factors (Ararat and Gocenoglu, 2006, p. 11). Excluding the philanthropic activities, the very first manifestations of CSR were observed in the business conduct of MNEs in Turkey (Ararat and Gocenoglu, 2006, p. 11). MNEs have a dominant and leader role in Turkey for CSR practices. Finally, the subsidiaries operating in Turkey are less likely to resist the transfer of the organizational policies and practices such as human resource management policies (Sayim, 2010, 2011) and organizational culture (Ilhan, 2008). In fact, they want to even transfer the policies and practices from MNEs (Sayim 2010, 2011; Ilhan, 2008). Therefore, Turkish context provides a good case to test the effects of the CSR isomorphism on the performance.