corp citizenship & fdi jbe 1994

Corporate Citizenship Perspectives andForeign Direct Investment in the U.S.

Tammie S. PinkstonArchie B. Carroll

ABSTRACT. As foreign direct investment in the U.S.continues to become both more visible and controversial,the general public remains skeptical about the corporatecitizenship of these foreign afFiUates. Four dimensions ofcoqrorate citizenship — oricntarions, organizational stake-holders, issues, and decision-making autonomy — were usedto compare the inclinations of foreign affiliates with thedomestic firms operating in the U.S. chemical industry. Theonly significant differences between the U.S. sample andthose firms headquartered in other countries-of-origin werefound in the area of corporate citizenship decision makingautonomy.

The number of jobs generated by foreigncompanies is growing fast. In 1988, 3.7 millionAmericans worked for foreign subsidiaries inthe U.S. (percentages sbown in Table I). Thatnumber will rise to 4.6 million in 1991.(Hoerr, Spiro, Armstrong, and Treece, "Culture Shock

at Home: Working for a Foreign Boss", Business

Week. December 17, 1990, p. 8l)

In 1977, approximately 3.5 percent of thevalue-added and the employment in American

Tammie Pinkston is Assistant Professor of Strategic Management at

the University of Oklahoma. She is a recent recipient of Ameri-

can Brands Inteniational Business Scholar Award. Tammie is an

active member ofthe Academy of Management, the International

Association for Business & Society, the Southern Management

Association, and the Academy of International Business.

Archie B. Carroll is holder of the Robert W. Scherer Chair of

Management and Corporate Public Affairs at the University of

Georgia. He has published 11 books and over 65 articles in such

Journals as the Academy of Management Joumai, Academyof Management Review, Joumai of Business Ethics. He iscurrently on the Editorial Board o/Business Ethics Quarterly

and the board of the International Association for Business &

Society.

TABLE IiTie percentage of U.S. workforce employed by

foreign affiliates

BritishCanadianJapaneseGermanDutchFrenchOther countries

20%19%11%10%8%7%

2596

Data: Commerce DepartmentAdapted from Business Week, December i 7, 1990, p. 84.

manufacturing operations was contributed byforeign affiliates located within the VS. By1987, the percentage had increased to 8 percentand 11 percent in 1989 with foreign affiliatesemploying 3 million, or 10 percent of all Amer-ican manufacturing workers. In 1989, foreignaffiliates actually created more jobs within theU.S. than American-based and operated manu-facturers.

(Reich. "Who is Us?", Harvard Business Review,

January-February, 1990, p. 55)

Investigators for the House of Representativesreport that 36 foreign-owned firms achieved atotal of $329 billion in sales in 1977—1987 butpaid only $5 billion in American taxes.("America's Multinational Blues", The Economist,

July 21.1990, p. 12)

The growth rate of foreign direct investmentinto the United States (FDIUS) increased fromaround 4 percent in the 1960s to average annualrates of 30 percent in the 1970s. In the 1980s,the growth rate of FDIUS held around 10percent but climbed to roughly 8 times the

Joumai of Business Ethics 13: 157-169. 1994.

® 1994 Kluwer Academic Publishers. Printed in the Netherlands.

158 T. S. Pinkston and A. B. Carroll

growth rate of United States' finns directinvestment outward (USFDl) for 1983-1984,16.4 percent vs. 2.8 percent.(Kefalas, Global Business Strategy: A Systems Ap-

proach, 1990)

How does rhe general public respond to these rypesof statistics associated witb foreign affiliates locatingin the U.S.? Apparently, with a great deal of concernand paranoia. An opinion poll conducted in 1988 byThe Intemational Economy found that nearly 74percent of those surveyed felt that foreign directinvestment in the U.S. (FDIUS) led to an increase inU.S. dependence on foreign sources. Just over 78percent believed that foreign ownership of U.S.businesses and real estate should be limited by thegovernment and more than 80 percent of thosesurveyed indicated that at a minimum, foreigninvestors should be required to register with thegovernment (Shear, 1990).

International direct investment is nothing new.Since the early 1900s, both European and Japanesefirms have held significant amounts of land andresources in the U.S. In the early 1970s, largeamounts of foreign funds were drawn out ofthe U.S.market by foreign firms which began undertakingsignificant amounts of direct investment in marketsother than the U.S. For the first time, the generalpublic began to realize that FDIUS was becoming anincreasingly important component of the U.S. eco-nomic structure. The dependence of the U.S. onforeign funds was clearly exposed.

Regardless of whether one has serious or marginalconcerns over the benefits or costs associated withdirect foreign investment in "small-town U.SA", orwhether one has any concerns over the increasedforeign presence at all, opinions about the impact offoreign direct investment continue to be heard in thepopular press. Allegations against these foreignaffiliates include tax evasion, racial and sex discrimi-nation, technology transfer, unfair lobbying prac-tices, and failure ro adapt to local business practices.When combined with the statistics presented at rheoutset here, these issues take on even greater impor-tance.

The single common denominator uniting sup-porters and non-supporters alike in this heateddebate is that nationalistic emotions run liigh. Bothsides are primarily concerned with the welfare ofthe

host country. In essence, the critical question be-comes one of corporate citizenship. How do theseforeign affiliates locating in the U.S. compare totheir domestic counterparts as corporate citizens?

If the concern over rhe increasing foreign pres-ence in the U.S. is to be addressed, U.S. citizens needto be convinced that society in general has beenimproved or at a minimum, has not been harmed.This will be particularly relevant if the corporatecitizenship inclinations of the foreign affiliatesmatch or exceed the corporate citizenship inclina-tions of the domestic entities. If the inclinations ofthe foreign affiliates fall short of the domesticplayers, the concern by the general public, docu-mented through the popular press, may be proven tohave some merit.

The primary goal of this research was to helpascertain if the concerns expressed by the generalpublic are legitimate. In order to study the corporatecitizenship of chemical facilities operating in theU.S., a sample of subsidiaries with parent companiesheadquartered in foreign countries was taken andcompared with U.S.-based participants. A sample of591 subsidiaries received mail surveys which weredeveloped from previous hterature and through theassistance of industry experts. A total of 131 surveyswere returned and analyzed for the current study.

Corporate citizenship

The development of corporate citizenship into anidentifiable, researchable concept, might be attri-buted to its increasing use in the popular press. Asglobalization has continued, the corporate citizen-ship of business organizations has received specificattention, especially with respect to those facilitiesoperating outside their own domestic markets.MNCs have been under increasing pressure toexhibit "good corporate citizenship" in each one ofrhe countries or markets in which they participateand historically, MNCs have been more closelyscrutinized than home country firms. No doubt thiswill continue to be the case.

"Corporate citizenship" has received httle atten-tion in the academic community. Instead, the aca-demic literature alludes to Corporate Social Respon-sibility (CSR) and Corporate Social Performance(CSP). For the purpose of tliis research, corporate

Corporate Citizenship and Foreign Direct Investment 159

citizenship has been defined as being synonymouswith CSR. In order to be able to capture the essenceot corporate citizenship, four dimensions of cor-porate citizenship were investigated — orientations,stakeholders, issues, and decision-ma king autonomy.By observing orientations, one may better under-stand the inclinations or postures of rhe organizationwith respect ro corporate citizenship. The stake-holder dimension should better define to whom theorganization feels responsible as well as help toidentify where the corporate citizenship issues orsocial concerns are originating. The aspect of deci-sion-making autonomy was beheved ro illuminatethe perceived importance of corporate citizenship asone begins to determine ar whar level in the organi-zation corporate citizenship decisions are actuallymade. By considering these four dimensions collec-tively, a more comprehensive analysis of corporatecitizenship becomes possible.

Corporate citizenship orientations

According to Carroll (1979), there are four com-ponents of CSR — economic, legal, ethical, anddiscretionary (or philanthropic) — as illusrrated inFig. 1. The economic component of CSR representsthe fundamental social responsibility of business. It isrhe obligation to produce goods and services and sellrhem at fair prices which in turn allows the businessentity to make a profit and legitimately pursuegrowth. The legal component recognizes rhe obliga-tion of the enterprise to obey laws, while the ethicalresponsibilities have been considerably more diffi-cult to define and interpret. Referred to as the "grayarea", this component "involves behaviors and activi-ties that are not embodied in law but still entailperformance expected of business by society's mem-bers" (Carroll, 1979, p. 30). The fourth category ofresponsibilities is called discretionary, voluntary orphilanthropic, as used in this research. This categoryof social responsibility is totally dictated by the"discretion" of rhe organization as there are no lawsor codified expectations guiding the corporations'activities.

This conceptual model is unique in that it recog-nizes that to some degree, economic responsibilitiesare not totally at the sacrifice of any other type ofsocial responsibility. Instead of a dichotomous eco-

nomic or social orientation, there is an economic andsocial orientation. This was the premise of thecurrent study.

Carroll (1979) proposed that although it was not aclearly dichotomous decision between an economicor social orientation, there was a clear ordering ofpriorities for the four components and that therelative importance of each responsibility was fairlyconsistent. The proposed approximate weightings ofthe four CSR components — economic, legal, ethical,and philanthropic — were 4:3:2:1 respectively. Oneof the primary objectives of tliis study was todetermine whether or not these orientations andtheir approximate weightings would be similar fordomestic and foreign firms alike.

Research has indicated that there are a number ofcultural factors that influence and differentiateorganizational behavior across various countries.Hofstede (1980) conducted one of the seminalsrudies on this subject. In his research across a sampleof fifty countries, Hofstede provided three reasonswhy nationahty was an important consideration formanagement. These three reasons are pertinent tothe current study. First, Hofstede acknowledged that"nations are poUtical units. . . witli their own formalinstitutions and informal means of using them"(Hofstede, 1983, p. 75). Second, "nationality has asymbolic value to citizens" (p. 76). Finally andperhaps most significantly, nationality has the poten-tial to at least partially condition people's thinking.

With these assertions by Hofstede in mind, onewould have reason to suspect that corporate citizen-ship would differ across countries. For instance,different nationalities would exhibit different sets ofcultural values, often unique to that particularcountry. These cultural values would derive rhesocio-cultura! environment within which the busi-nesses operate. In turn, the manner in which thebusiness relates to this social environment would beportrayed in its corporate citizenship.

Given this prior research, the implication wasthat an organization's orientation toward corporatecitizenship would be derived from its home countrybusiness environment. It was also expected thatthe home country business environment would beunique, i.e., the different home country environ-ments would demand different practices and priori-ties from its business participants. As a result, itwas beUeved that the priorities of corporate citizen-

160 T. 5. Pinkston and A. B. Carroll

Type ofresponsibility

Philanthropicresponsibilities

Ethicalresponsibilities

Legal

Economicresponsibilities

Societalexpectation

Desired ofbusiness bysociety

Expected ofbusiness bysociety

Required ofbusiness bysociety

Required ofbusiness bysociety

Examples

Corporate contributionsPrograms supportingCom in u tii ty/educa donCommunity involvement/improvcmcnr, volnntcerism

Avoid questionable practicesRespond to "spirit" oflawsAssume law is a floor ofbeliavior, operate aboveminimtmi required by law

ethical leadership

Obey all laws; adhere toregulationsEnvironmental lawsCoiisu liter lawsLaw affecciiig all employeesForeign Corrupc Practices ActFulfill all contracrualexpectations

Dc pro B tableMaximize sales revenueMinimize cosrs(administrative, production,marketiiig.distribution)Make wise strategic decisionsBe attentive to dividend policy

Source: Carroll, A. B. (1989). Business & Society: Ethics and Stakebolder Management, p. 31

Fig. 1. Four components of corporate social responsibility.

ship responsibilities would difFer across countries-of-origin.

H|. The relative importance of the four com-ponents defining corporate citizenship —economic, legal, ethical, and philanthropic— will differ across firms by countries-of-origin.

Organizational stakeholders

The stakeholder groups most consistently citedthroughout the hterature included owners, con-sumers, employees, commutiities, and government(Freeman, 1984; Tuleja, 1985). The priority of thesestakeholders may not be consistent for long periodsof time, but the literature implies some stability in


the pattern ofthe priority in the stakeholders for anyspecific industry.

One could also anticipate that businesses withindifferent countries experience different expectationsand degrees of involvement from its various con-stituencies. Additional literature has indicated thatdifferent countries are characterized by differentcorporate social environments which require dif-ferent orientations of its market participants. Englandhas been shown to emphasize economic responsi-bilities to owners in its business community. France,on the other hand, has been understood to focus oncompany employee relations, as has Germany. TheJapanese environment has appeared to nurture thebusiness-community relationships.

Since these relationships can be noticeably dif-ferent in any given business environment, the stake-holder priorities were expected to be different forthe sample organizarions.

Hj. The perceived relative importance of theorganizations' stakeholder groups — owners,consumers, employees, communities, andgovernment — will differ across firms bycountries-of-origin.

Corporate citizenship issues

If the priorities of the stakeholder groups wereexpected to be different across countries-of-origin,the issues that each group brings to the organizationcould also be argued to differ across nationalities.Recently, a 1990 conference sponsored by VesperInternational, "Just Profits: Wending Our WayThrough the Moral Maze," focused on the socialresponsibilities of international businesses. The aca-demicians and practitioners in attendance, collec-tively drafted guidelines for the responsible opera-tions of international corporations as they operatewithin the global marketplace. Nearly half of theissues of concern centered around employees —employee safety, employee rights, employee welfarein the form of job security, nondiscriminatorypracrices, few layoffs, or plant closings. Other issuesincluded cooperarion with host governments, dis-closure of information, environmental protection,product safety, profitability, fair pricing, communityinterest, and legal and ethical behavior. The over-

riding theme of the imperarives translated from theconference into the need for genuine responsibilityon behalf of international corporations to improvethe conditions of host communities. The conditionscould be improved either by the corporation'sadaptation to local practices or upholding the bene-ficial practices and policies of their own valuesystems. This decision would be contingent onwhich set of operating principles was most beneficialto the host community.

In a recent study conducted by Bob (1990) on thecorporate citizenship of Japanese organizations inAmerica, several specific issues were cited as beingthe most pervasive concerns of U.S. citizens relatedto FDIUS. These issues included (in order of impor-tance); environmental protection, American repre-sentation in top management positions, the purchaseof goods/services from U.S. suppliers, the creation ofjobs, the education of Americans on the reasons forJapanese companies' successes, pbilanthropy, andaccess to Japanese culture. While the particularissues were cited in the context of concerns overJapanese investment in the U.S., these issues havebeen reiterated as concerns in the debate over FDIUSin general, not only that investment originating fromJapan.

In his 1977 study ofthe multinational pharma-ceurical industry, James employed an attitude surveyto determine specific issues which industry partici-pants believed to have potentially significant impactson their future operations. The initial question posedby James asked participants to indicate which envi-ronmental sector — economic, social, political, com-mercial, or technological — was perceived to poten-tially have the greatest impact on the future ofthe industry. Both European and North Americanrespondents indicated the political environment tobe most important, while Asian respondents tendedto cite the technological and social environments asbeing more critical. With respect to the commercialenvironment, the respondents cited a wide variety ofissues having the potential co impact the industry'sfuture. However, there appeared to be no issuescommon to respondents across national origins. Thisled the author to infer that "the respondents haveviewed the future in terms of their own countriesrather than in an international context" Qames, 1977,p. 195).

162 . S. Pinkston and A. B. Carroll

What this body of research has highlighted is thefact that there are multiple issues with which busi-nesses must contend. The list of allegations againstorganizations often varies with each addidonal study.For the purpose of this research, the list of issuesinvestigated had to be narrowed down. Using previ-ous research, the authors looked for issues cited withthe greatest consistency as being critical to anorganization's corporate citizenship. Once identified,these issues became the focus of the study. Theassumption made with respect to corporate citizen-ship orientations differing across nadonalities wascarried through the derived list of corporate citizen-ship issues. As a result, the assumption was made thatcorporate citizenship issues appear to vary frotncountry-to-country. The question then becomeshow those differences are translated for the foreignaffihates, of different nationalities, operatii^ in theU.S.

Hy The priority of corporate citizenship issueswill differ across firms by countries-of-origin.

Corporate citizenship decision-making autonomy

Several research studies have looked directly at theissue of corporate citizenship decision-making, whileother studies have examined the issue of MNCdecision-making without focusing on the citizenshipaspect. Blake (1980, 1981) found no clear pattern oforganization with respect to the location of cor-porate cirizenship decision-making. Neither theheadquarters nor the subsidiaries he studied ap-peared to be in direct control of the corporatecitizetiship decision-making responsibility. Behr-mann (1988) indicated that headquarters would takethe leading responsibility only if the policies devel-oped at headquarters would in no way interfere withthe competitiveness of the subsidiary.

Bob (1990) observed that only the largest Japaneseorganizations had significant autonomy. Over fiftypercent of the other Japanese organizations werecited as beheving the primary corporate citizenshipdecision making responsibility, either directly orindirectly, to reside at their headquarters located inJapan.

Although the research is clearly mixed in this area

of decision-making autonomy, it does appear thatthe subsidiary's degree of autonomy will vary. Coun-try-of-origin is believed to be one of the factors thatdetermine the degree of autonomy that a subsidiarycan anticipate having with respect to corporatecitizenship decision-making.

H .̂ The degree of autonomy provided to sub-sidiaries for corporate citizenship decision-making will differ across firms by countries-of-origin.

Research methods

The present study was designed as a comparativeanalysis of subsidiaries whose parent companies wereheadquartered in one of seven countries-of-origin:(1) England, (2) France, (3) Germany, (4) Japan, (5)Sweden, (6) Switzerland, and (7) United States. Thedata tor the study was obtained from a survey of 591subsidiaries operating within the U.S. chemicalindustry. The preliminary questionnaire was devel-oped in part from Aupperle's (1982) mail survey o{corporate social responsibility orientation andBlake's (1981) survey of public affairs management,in addition to extensive literature searches. Thequestionnaire was revised after a group of 8 industryexperts from foreign and domestic firms participatedin a pilot study, commenting on and completingquestionnaires or undertaking telephone interviews.For the final sample, 400 firms with foreign head-quarters and 191 firms (which were randomlysampled) with U.S. headquarters were identified asparticipants in the U.S. chemical industry and takenfrom The International Directory of Corporate Affiliations1990/91.

Within the sample organizations, the question-naires were mailed to the CEO/President of theheadquarters-level firms and/or the plant managersof the subsidiaries. If these individuals could not beidentified, the surveys were mailed to the Director ofCorporate Communications or External Affairs.Within the sample of foreign affiliates, it was desir-able for the highest ranking foreign nationals tocomplete the survey followed in preference by theCEO/President and/or plant manager, and then bythe directors for corporate communication or exter-nal affairs. This preferential order was communi-


cated in the cover letter which accompanied thequestionnaires sent to the foreign-afHliates.

From the total 591 surveys mailed in the winterof 1991, 131 "useable" surveys were returned ofwhich 49 were from U.S. firms and 82 were fromnon-U.S. firms. Tliis provided an overall responserate of 22 percent.

Findings

The central purpose of this study was to determine ifdifferences in corporate citizenship existed acrosscountries-of-origin. With respect to corporate citi-zenship, there were four primary areas of concern:(1) corporate citizenship orientations, (2) organiza-tional stakeholders, (3) corporate citizenship issues,and (4) corporate citizenship decision-making au-tonomy. Overall, tbe study found that country-of-origin did not appear to significantly influence anydifferences in corporate citizenship orientations orany differences which existed in the perceivedrelative importance of an organization's stakeholders.According to the mean scores of the corporatecitizenship issues, country-of-origin did not appearto affect their priorities. However, country-of-origindid appear to have a significant impact on the degreeof corporate citizenship decision-making autonomy.

not found to be significantly different from onecountry to another (/j-value — 0.3984). Overall, H,could not be supported by the survey data. Nopatterns developed across the countries so that onecould generalize, for example, that Country Awould predictably put a greater emphasis on eco-nomic orientations at the expense of the other threewhile Country B would focus on philanthropicefforts.

Organizational stakeholders

Table II presents the mean scores provided by thesample data. The scores were derived from a rankingprocedure in which a "1" indicated the greatestdegree of importance and a "5" indicated the leastdegree of importance. There were no significantdifferences in the perceived relative importance ofthe stakeholder groups attributed to the organiza-tion's country-of-origin {p-va\uc — 0.7146). Instead,the stakebolder groups appeared to be prioritized inthe same order across all the sample organizationsand countries in the sample, with communities andgovernment ranked lower than the other threestakeholder groups employees, consumers, andowners. Therefore, Hj could not be supported by thefindings.

Corporate citizenship orientations

According to Carroll's four-part definition of CSR,the responsibilities were expected to have approxi-mate relative weightings of 4:3:2:1 for economic,legal, ethical, and philanthropic responsibilities re-spectively. Respondents were asked to allocate up to10 points to statements representing these fourorientations in fifteen different situational questionsets. According to the mean scores calculated for thecurrent sample and shown in Fig. 2, it appeared thatthese four components were perceived in differentrelative priorities by all respondents. In fact, Ger-many and Sweden placed legal responsibilities in ahigher priority than economic responsibilities. Inevery case, however, economic and legal responsi-bilities took clear precedence over ethical and phil-anthropic responsibilities.

The four corporate citizenship orientations were

Corporate citizenship issues

In the area of corporate citizenship issues, H3 was notstatistically tested thereby limiting the conclusionsdrawn by the researcher. Although rigorous statis-tical procedures could not be applied due to thelarge number of issues as compared to a sample sizeof 131, a great deal of insight can be gained on thepriorities of corporate citizenship issues. Mean scoreswere calculated from a 4 point Likert scale in which"I" was considered "not important" and "4" was con-sidered "critically important". The issues appeared tobe prioritized in a relatively similar manner fromcountry to country as illustrated in Fig. 3. In general,there were three issues whicb were ranked as the toppriorities across every country-of-origin — employeehealth and safety in the workplace (#1), regulatorycomphance (#11), and environmental protection(# 6). From the graph, it is clear that every country


I

Mi

!

1

1

Engiaiid France Germany Japa Sweden Switzerland U.S.

Country-of-origin

*' There were residual values where respondents chose not to allocate the total 10 points allowed.

Fig. 2. Corporate citizenship orientation hy country-of-origia

perceived those issues similarly atid of the greatestdegree of importance. Figure 4 provides the 16 issuesin overall rank order, based on the mean scores forthe total internarional sample.

By looking at the ranking of corporate citizenshipissues overall, those issues primarily related to em-ployees were perceived as having the greatest degreesof importance. For the most part, community-oriented issues appeared to receive a little lessattention. With the exception of issue #6, environ-mental protection, and issue #11, regulatory com-pliance (in the general sense, not only related toemployee-oriented regulation), the top ranked issueswere considered to be employee-oriented issues.These results appear to be consistent with thefindings in the priorities of the organizational stake-holders. Recall that the results in the stakeholderarea indicated that employees, consumers, and

owners were of higher priority than communitiesand government.

With respect to country-of-origin, Japan ap-peared to exhibit the greatest concern for all cor-porate citizenship issues overall; however, on themost critical issues — employee health and safety inthe workplace (# I), environmental protection (# 6),and regulatory compliance (#11) —Japan ranked atthe low end ofthe sample countries.

Interestingly, the strategic lobbying efforts ofJapanese affiliates described in the popular press(Averyt, 1990; Choate, 1990), were not evident in thecurrent study. Neither representation in Washingtonnor "grass-rots" lobbying appeared to be of criticalinterest to the sample organizations from Japan orfrom the other countries. A word of caution must beemphasized here as the current study has been basedon self-reported data; neither the research of Averyt


TABLE IIOrganizadonal stakeholder priorities by country-of-origin

Country-of-ongm

EnglandFranceGermanyJapanSwedenSwitzerlandUS

Employees

2.132.092.431.561.711.892.29

Communi ry

4.134.273.614.114.434.004.12

Government

4.004.094.264.444.004.114.16

Consumers

2.132,452.352562.432^2231

Owners

2.612.092352332.432.782.12

KEY: 1 — greatest degree of importance5 — least degree of importance

MANOVA test criteria and F approximation.s for the hypothesis of no overall country effect with respect to organizational

stakeholder

Statistic

Wilk's UmbdaHotelling-Lawley Trace

0.81800.8160

P value

0.71460.717.5

or Choate was self-reported by instead, based onobservation.

Corporate citizenship decision-making autonomy

Table III presents the mean scores calculated forcorporate citizenship decision making autonomy. A5 point Likert scale on which "1" represented solesubsidiary decision making responsibility, "S" indi-cated sole headquarter decision making responsi-bility, and "3" represented shared decision makingresponsibility. Significant differences were found forthe sample firms across the countries-of-origin {p-value < 0.05), thereby supporting H .̂ The U.S.appeared to be the most highly centralized, withheadquarters holding the primary responsibility forcorporate citizenship decision-making. The foreignaffiliates of Swedish companies indicated the greatestdegree of subsidiary autonomy with respect tocorporate citizenship decision-making. The remain-ing countries fell somewhere in between these twoextremes. The U.S. and France appeared to be similarin maintaining primary responsibility at headquar-

ters while Germany was relarively close to Sweden inthe degree of autonomy that the subsidiary receivedfrom headquarters in corporate citizenship decision-making.

The current study is consistent in its finding rhatU.S. MNCs were the most centralized of the coun-tries sampled. Using the U.S. as the host country mayhave impacted the results in this area, given theprocess used to contact difFerent organizationallevels of the sample organizations. All of the sub-sidiaries for the U.S. companies were located in thesame country as their headquarters. Recognizing thesignificance of this fact, the researchers conductedthe same statistical test on the sample, excluding thedomestic firms. The second run, excluding the U.S.sample, found similar results. The degree of cor-porate citizenship decision-making autonomy expe-rienced by the remaining sample firms did notchange.

Conclusions

This study attempted to determine if various coun-


15 16

*2Employee liealtli and safety in the workplace

Rcpresentation/participarionof minoririesJob security of employeesPayment of a fair living wageProtection of personal privacyEnvironmental protectionContributions topliiianchropyCommuiiity outreach programmingEmployee voluntecrismMinority developmentRegulatory compliancePolitical action contributionsAdaptation to local business practicesLocal government ineentivesRepresentation in Washington, D.C."Grass-roots" lobbying

Eng

Jap

Fra

Swd

Ger

Swt

Kg. 3. Corporate citizenship issues hy county of origin.

tries-of-origin have difFerent perceptions of corpo-rate citizenship and the role of the host marketenvironment in the foreign afHUates corporate citi-zenship. The foreign affihates sampled in this studywere found to have quite similar corporate citizen-ship orientations and prioriries in the organizadonalstakeholders in question to the domestic players inthe U.S. chemical market. Along these two dimen-sions, there appeared to be no cause for concern overthe increasing foreign presence in the U.S. Givenprior research, there is little explanation for this fact.The most apparent explanation might be that theforeign affiliates conform to the expectations andneeds of the market or society in which they arelocated. In fact, the stakeholder groups which areidentified as active participants in any given industry

might exert their power or exercise their stakes onall industry competitors irrespective of an organiza-tion's country-of-origin. Those stakeholders cited asbeing most important — employees, consumers, andowners — are also considered to be more directconstituents, most likely, irrespective of country-of-origin.

Although the corporate citizenship decisions weresometimes made in the home country, very little canbe interpreted as threatening to the U.S. communi-ties, given that the U.S. subsidiaries reported thegreatest degree of centralization. For the most part,the literature indicates that multinational corpora-tions have the tendency to operate from their homeenvironment and assume that the host countryenvironment would be similar in its demands and


CO

o

Issues

Fig. 4. Corporate citizemliip issues in rank order mean scores.

expectations. This idea, coupled with the priorresearch which found the preference of some coun-tries to maintain tighter controls on their operations,sheds some light on the findings of the currentstudy. If headquarters holds the primary responsi-bility for corporate citizenship decisions, therewould be an even greater tendency for foreignaffiliates to have delegated to them decisions orpolicies that reflected the home country's environ-ment and rhe foreign headquarters' perceprions. Inthe current study, this tendency did not appear tohave a significant impact on the corporate citizen-ship of the sample organizarions. Again, as head-quarters delegates corporate citizenship decision-making autonomy, the opportunity to adapt moreeffecrively to local market conditions has beenillustrated by the sample firms.

There does appear to be a slight cause for concernin the area of corporate citizenship issues. However,there was notable consistency across the sample onthe three primary issues of concern — employeehealth and safety in the workplace, environmentalprotection, and regulatory compliance. Recognizingthat these issues are all mandated under legal restric-

tions, the assumption can be made that any businessenrity operating in the U.S. would have to abideby these regulations. The message is relarively clearfor those corporate citizenship issues which havereceived supportive legislarion. But, what can be saidtor those issues not yet supported by legal require-ments? As corporate cidzenship issues are relarivelynew in the "issues life cycle", business organizationsmay not be so proacrive, but might instead, await thelegal mandates. This research offers no clear disrinc-rion on this issue between the foreign affiliates andthe domestic players. Based on the similarity in cor-porate citizenship orientarions, overall, the foreignaffiliates should not be assumed to be any less con-sumed by corporate citizenship than their Americancounterparts.

The concern over the increasing foreign presenceis difficult to explain based upon the current study;however, since the phenomena of FDIUS is reladvelynew to the general pubhc and gaining momentum,the concern exhibited by individuals outside thebusiness community may be a result of the mediaattention surrounding the entrance of foreign busi-ness enrities into our local conimunides. The focus

168 T. 5. Pinkston and A. B. Carroll

TABLE UlCorporate citizenship decision making autonomy by

country-of-origin( H - 131)

Country-of-origin

EnglandFranceGermany

JapanSwedenSwitzerland

USA

Mean score

3.113.132.222.771.922.713.40

KEY: 1 — Subsidiary is solely responsible2 — Subsidiary is primarily responsible;

headquarters contributes3 — Subsidiary and headquarters are equally responsible4 — Headquarters is primarily responsible;

subsidiary contributes5 — Headquarters is solely responsible

Summary Table: ANOVA for Coqxirate CitizenshipDecision-Making Autonomy

Sourcevalue

CountryError

DF

6124

Sum ofsquares

031.48799561147.21726309

Meansquare

5.247999271.18723599

F

4.42

** significant at alpha — 0.05

has been shifted away from the U.S. investmentabroad and onto the rapidly growing investments in"small-town" USA.

Continued attention to corporate citizenship inthe popular press ensures that this is truly a timely,critical, and "real" concern to practitioners. To thispoint, it appears that foreign affiliates do not differsignificantly from domestic firms with respect tocorporate citizenship inclinations.

Given the limitations of this study — a singleindustry focus, small sample size, and a lack ofoverall statistical power — the reader is cautionedagainst overgeneralizing the findings. Multiple in-dustries should be investigated. This would be onemeans of increasing the sample size as well asproviding a larger base for statistical analysis.

More empirical research is needed to determine if

these entities "put their money where their mouthsare." It should be determined which pohcies, proce-dures, and activities merit the greatest attention,time, and resources in both foreign affiliates anddomestic entities. The question then becomes: howdo foreign affiliates operationalize corporate citizen-ship and does this differ substantially from thedomestic entities?

As the business world moves steadily towards thestate of globalization, the issue of corporate citizen-ship can be expected to receive more attention anddemand an even greater understanding. No doubt, astbe business world evolves, so too can we expect therole of corporate citizenship to change as will itsbasic subissues. This will prompt business organiza-tions — foreign affiliates and domestic entities alike— to respond in redefining its corporate citizenship.

References

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Averyt, W. F.: 1990, 'Managing Public Policy Abroad: For-eign Corporate Representation in Washington', ColumbiaJournal of World Business, Fall, 32—41.

Behniiann, J. N.: 1988, Essays on Ethics in Business and theProfessions (Prentice-Hall, Englewood Cliffs, NJ).

Blake, D. H.: 1980. 'The Management of Sorial Policy byMultinational Corporations: A Research Agenda', in L. E.Preston (ed.). Research in Corporate Social Performance andPolicy, uol. 2 QAl, Greenwich, CT}, pp. 103-124.

Blake, D. H.: 1981, 'Headquarters and Subsidiary Roles inManaging International Public Affairs — a PreliminaryInvesrigation', in L. Otterbeck (ed.). The Management ofHeadquarters-Subsidiary Relationship in Muhinalional Cor-porations (St. Martin's Press, New York), pp. 319—336.

Bob, D. E., and SRI International: \99Q, Japanese Companies inAmerican Communities — Cooperation, Conflict, and the Roleof Corporate Citizenship (Japan Society, Inc., New York).

Carroll, A. B.: 1979, 'A Three-dimensional Model of Cor-porate Performance'. Academy of Management Review 4,497-505.

Choate, P.: 1990, 'Political Advantage: Japan's Campaign forAmerica', Harvard Business Review, Sept.—Oct., 87— 103.

Freeman, EJ 1984, Strategic Management — A StakeholderApproach (Pitman, Marshfield, MA).

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rional Practices and Theories', Jountal of hiU'mtilional Tuleja, T.: 1985, Beyond the Bottom Line {Facts on File, NewBusiness Studies, Fall. 75-89. Yotk).

Hofstede, G.: 1980, Culture's Consequences: huemational Differ-ences in Work-related Values (Sage Publications, Beverly Division of Environmental Analysis and Policy,Hills, CA). University of Oklahoma,

James, B. G.: 1977, The Future ol ihe Mullinationa! Pharrnaceu- Norman OK 73019tical Industry to /990 (John Wiley & Sons, New York). ' Tj SA

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Department oJ Management,University of Georgia,

Athens, GA 30602,USA.

corp citizenship & fdi jbe 1994

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