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What drives corporate social performance? The role of nation-level institutions

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Abstract

Based on Whitley's “national business systems” (NBS) institutional framework, we theorize about and empirically investigate the impact of nation-level institutions on firms’ corporate social performance (CSP). Using a sample of firms from 42 countries spanning seven years, we construct an annual composite CSP index for each firm, based on social and environmental metrics. We find that the political system, followed by the labor and education system, and the cultural system are the most important NBS categories of institutions that impact CSP. Interestingly, the financial system appears to have a relatively less significant impact. We discuss implications for research, practice and policymaking.

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Notes

  1. We thank an anonymous reviewer for suggesting this point and this example to us.

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Acknowledgements

We thank ASSET4 (Thompson Reuters) for providing us with the data for this paper, and we are particularly grateful to Dr Christopher Greenwald and Ms Caroline Harrison at ASSET4 for their help and cooperation. We thank Costas Markides, Donal Crilly, Sandra Waddock and Olga Hawn for valuable comments. We also thank participants at the Cass International Strategy Workshop 2011. Ioannou acknowledges financial support from the Research and Materials Development Fund (RAMD) at the London Business School. All errors remain our own.

Author information

Authors and Affiliations

  1. London Business School, Regent's Park, London, UK

    Ioannis Ioannou

  2. Harvard Business School, Boston, USA

    George Serafeim

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  1. Ioannis Ioannou
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  2. George Serafeim
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Additional information

Accepted by Ishtiaq Mahmood, Area Editor, 17 August 2012. This paper has been with the authors for three revisions.

APPENDIX

APPENDIX

Description of Asset4 Pillars and Categories

Table A1

Table A1 Overview of ASSET4 Data 2002–2008
Full size table

Description of ASSET4 Categories (from ASSET4 Documents)

Environmental performance pillar

The resource reduction category measures a company's management commitment and effectiveness towards achieving an efficient use of natural resources in the production process. It reflects a company's capacity to reduce the use of materials, energy or water, and to find more eco-efficient solutions by improving supply chain management.

The emission reduction category measures a company's management commitment and effectiveness towards reducing environmental emission in the production and operational processes. It reflects a company's capacity to reduce air emissions (greenhouse gases, F-gases, ozone-depleting substances, NOx and SOx, etc.), waste, hazardous waste, water discharges, spills or its impacts on biodiversity, and to partner with environmental organizations to reduce the environmental impact of the company in the local or broader community.

The product innovation category measures a company's management commitment and effectiveness towards supporting the R&D of eco-efficient products or services. It reflects a company's capacity to reduce the environmental costs and burdens for its customers, thereby creating new market opportunities through new environmental technologies and processes or eco-designed, dematerialized products with extended durability.

Social performance pillar

The workforce employment quality category measures a company's management commitment and effectiveness towards providing high-quality employment benefits and job conditions. It reflects a company's capacity to increase its workforce loyalty and productivity by distributing rewarding and fair employment benefits, and by focusing on long-term employment growth and stability by promoting from within, avoiding lay-offs and maintaining relations with trade unions.

The workforce health and safety category measures a company's management commitment and effectiveness towards providing a healthy and safe workplace. It reflects a company's capacity to increase its workforce loyalty and productivity by integrating into its day-to-day operations a concern for the physical and mental health, well-being and stress level of all employees.

The workforce training and development category measures a company's management commitment and effectiveness towards providing training and development (education) for its workforce. It reflects a company's capacity to increase its intellectual capital, workforce loyalty and productivity by developing the workforce's skills, competences, employability and careers in an entrepreneurial environment.

The workforce diversity and opportunity category measures a company's management commitment and effectiveness towards maintaining diversity and equal opportunities in its workforce. It reflects a company's capacity to increase its workforce loyalty and productivity by promoting an effective life–work balance, a family-friendly environment and equal opportunities regardless of gender, age, ethnicity, religion or sexual orientation.

The society human rights category measures a company's management commitment and effectiveness towards respecting the fundamental human rights conventions. It reflects a company's capacity to maintain its license to operate by guaranteeing the freedom of association and excluding child, forced or compulsory labor.

The society community category measures a company's management commitment and effectiveness towards maintaining the company's reputation within the general community (local, national and global). It reflects a company's capacity to maintain its license to operate by being a good citizen (donations of cash, goods or staff time, etc.), protecting public health (avoidance of industrial accidents, etc.) and respecting business ethics (avoiding bribery and corruption, etc.).

The customer/product responsibility category measures a company's management commitment and effectiveness towards creating value-added products and services upholding the customer's security. It reflects a company's capacity to maintain its license to operate by producing quality goods and services integrating the customer's health and safety, and preserving its integrity and privacy also through accurate product information and labeling.

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Ioannou, I., Serafeim, G. What drives corporate social performance? The role of nation-level institutions. J Int Bus Stud 43, 834–864 (2012). https://doi.org/10.1057/jibs.2012.26

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  • DOI: https://doi.org/10.1057/jibs.2012.26

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