Peer conformity, attention, and heterogeneous implementation of practices in MNEs

Abstract

How do subsidiaries respond to normative demands from both their headquarters and local external constituents? We propose that subsidiaries pay varying levels of attention to demands depending on their peers’ norm-conforming behavior, resulting in heterogeneous practice implementation. We study the implementation of 25 practices, associated with three corporate social responsibility (CSR) issues in 101 worldwide subsidiaries of a multinational enterprise (MNE). Consistent with the idea that attention is limited and therefore selective, we find that external peers’ conformity to the CSR norm directs subsidiaries’ attention toward the CSR-related demands of external constituents at the expense of the demands from the headquarters. However, internal peers’ conformity increases attention to both external and headquarters’ demands related to CSR. As higher attention levels result in higher practice implementation, internal and external peers’ conformity drives the heterogeneity of practice implementation in the MNE. Our results suggest the need to rethink the influence of peers’ conformity on subsidiaries’ implementation of practices, as it not only triggers mimicry based on legitimacy but also and simultaneously a more strategic response based on internal and external competitive threats and attention allocation.

Abstract

Comment les filiales répondent-elles aux demandes normatives de leur siège social et de mandants externes locaux ? Nous suggérons que les filiales accordent des niveaux différents d’attention aux demandes en fonction de la conformité aux normes de comportement de leurs pairs, aboutissant à la mise en œuvre hétérogène de pratiques. Nous étudions la mise en œuvre de 25 pratiques, associées à trois questions de responsabilité sociale des entreprises (RSE), dans 101 filiales internationales d’une entreprise multinationale (EMN). En cohérence avec l’idée que l’attention est limitée, et par conséquent sélective, nous trouvons que la conformité des pairs extérieurs aux normes de RSE oriente l’attention des filiales vers les demandes liées à la RSE de mandants externes au dépend des demandes émanant du siège. Cependant, la conformité des pairs internes augmente à la fois l’attention aux demandes de RSE externes et à celles du siège. Comme les niveaux plus élevés d'attention se traduisent par une mise en œuvre plus élevée de la pratique, la conformité des pairs internes et externes entraîne l'hétérogénéité de la mise en œuvre de la pratique au sein de l’EMN. Nos résultats soulignent la nécessité de repenser l'impact de la conformité des pairs sur la mise en œuvre des pratiques par les filiales, car non seulement il déclenche un mimétisme fondé sur la légitimité mais aussi et simultanément une réponse plus stratégique fondée sur les menaces concurrentielles internes et externes et sur la répartition de l'attention.

Abstract

¿Cómo responden las filiales a las demandas normativas de su casa matriz y a las de los componentes externos locales? Proponemos que las subsidiarias prestan distintos niveles de atención a las demandas dependiendo del comportamiento conforme a las normas que tienen sus pares, lo que resulta en la implementación de una práctica heterogénea. Estudiamos la implementación de 25 prácticas asociadas con tres asuntos de responsabilidad social empresarial (RSE) en 101 subsidiarias de una empresa multinacional alrededor del mundo. En consonancia con la idea de que la atención es limitada y, por lo tanto, selectiva, encontramos que la conformidad con las normas de RSE de los pares externos dirige la atención de las filiales hacia demandas asociadas con RSE de los componentes externos a expensas de las demandas de la casa matriz. No obstante, la conformidad de los pares internos aumenta la atención que se le presta tanto a las demandas de RSE externas como a las de la casa matriz. Debido a que un mayor nivel de atención resulta en una mayor implementación de prácticas, la conformidad de los pares internos y externos impulsa la heterogeneidad de la implementación de la práctica en la empresa multinacional. Nuestros resultados sugieren la necesidad de repensar la influencia que tiene la conformidad de los pares en la implementación de prácticas en las empresas filiales, debido a que no solo desencadena imitación basada en legitimidad, sino que también y, de manera simultánea, genera una respuesta más estratégica basada en amenazas de la competencia interna y externa y en la manera como se asigna la atención.

Abstract

Como as subsidiárias respondem às exigências normativas de suas sedes e do ambiente externo local? Propomos que as subsidiárias atribuem diferentes níveis de atenção às demandas entre si, e que esta diferença depende do comportamento de conformidade às normas das demais subsidiárias, o que leva à implementação de práticas heterogêneas. Nós estudamos a implementação de 25 práticas associadas a três questões de responsabilidade social corporativa (CSR) em 101 subsidiárias espalhadas pelo mundo pertencentes a uma empresa multinacional (MNE). Consistente com a ideia de que a atenção é limitada e, portanto, seletiva, encontramos que a conformidade com os pares externos às normas de CSR direciona a atenção das subsidiárias em direção às exigências relacionadas à CSR tanto do ambiente externo quanto das exigências da sede. No entanto, a conformidade às subsidiárias do mesmo grupo aumenta a atenção das demandas relacionadas à reponsabilidade social corporativa dos pares externos e da matriz. Como níveis mais altos de atenção resultam em aplicações práticas superiores, a conformidade interna e externa às demais subsidiárias impulsiona a heterogeneidade da aplicação prática nas MNE. Nossos resultados sugerem a necessidade de repensar a influência da conformidade com seus pares na implementação das práticas das subsidiárias, uma vez que isso não só provoca mimetismo com base na legitimidade, mas também, simultaneamente, uma resposta mais estratégica baseada em ameaças competitivas internas ou externas e alocação de atenção.

Abstract

子公司如何对其总部和当地外部机构的规范要求作出回应?我们提出子公司根据他们同行的规范附合行为对需求给予不同水平的关注, 从而导致了其实践实施的异质性。我们研究了25项实践的实施情况, 结合3个企业社会责任 (CSR) 问题针对全球跨国公司 (MNE) 101家子公司进行了调查。与我们的观点一致, 注意力是有限的, 因此也是有选择性的, 我们发现外部同行对CSR规范的遵守会指导子公司的注意力转向外部以总部需求为代价的CSR的相关需求。然而, 内部的同行规范一致性增加了兼顾外部和总部有关CSR的要求。由于较高的关注水平导致较高的实践实施情况, 内部和外部同行一致性推动了跨国企业实践实施的异质性。我们的研究结果表明, 需要重新思考同行一致性对子公司实践实施的影响, 因为它不仅引发了基于合法性的模仿, 而且同时也是基于内部和外部竞争威胁和注意力分配的更具战略性的回应。

Appendices

APPENDIX A

Survey Items

Implementation of CSR practices

Safety:

• 1 “We have a safety management system.”

• 2 “Our entity designated a health and safety coordinator.”

• 3 “We systematically use protective equipment (helmets, gloves, safety shoes, etc.).”

• 4 “Our entity has a policy that sets our ambition in terms of health and safety and defines progress paths.”

• 5 “There is communication on health and safety toward employees in our entity (written information, poster campaign, events, etc.).”

• 6 “Some work safety training is compulsory for employees in our entity.”

• 7 “Our entity has quantitative objectives for health and safety.”

• 8 “In our entity, there is a health and safety action plan that sets improvement objectives regarding prevention and protection.”

Women in management:

• 1 “We implement practices to favor gender equity in the recruitment of managers.”

• 2 “We implement practices to favor gender equity during annual performance interviews.”

• 3 “The equal pay between men and women is observed in our entity.”

• 4 “Our entity has quantitative objectives regarding the recruitment and employment of women among managers.”

• 5 “In our entity, work – life balance is favored (adapted working time, telecommuting, child day care).”

• 6 “Some awareness and communication campaigns to prevent gender discrimination take place in our entity.”

• 7 “We favor the access of our female employees to training dedicated to leadership.”

• 8 “There is an internal women network in our entity.”

Biodiversity:

• 1 “Our environmental management system includes measures to preserve biodiversity.”

• 2 “Biodiversity threats are analyzed when we screen new investment opportunities.”

• 3 “There is communication about biodiversity toward employees in our entity.”

• 4 “We engage in projects to limit the impact of our activities on biodiversity.”

• 5 “We measure the impact of our activities on biodiversity.”

• 6 “Our entity has measurable objectives for biodiversity preservation.”

• 7 “We collaborate with environmental organizations on biodiversity preservation and restoration.”

• 8 “Financial means are dedicated to the management of our impact on biodiversity.”

• 9 “We perform a regulatory watch on biodiversity issues.”

APPENDIX B

External Peers’ Conformity, from Asset 4

Peers’ safety performance:

• 1 “Does the company have a policy to improve employee health & safety within the company and its supply chain?”

• 2 “Does the company describe the implementation of its employee health & safety policy through a public commitment from a senior management or board member or the establishment of an employee health & safety team? AND does the company describe the implementation of its employee health & safety policy through the processes in place?”

• 3 “Does the company monitor or measure its performance on employee health & safety?”

• 4 “Does the company set specific objectives to be achieved on employee health & safety? AND does the company comment on the results of previously set objectives?”

• 5 “Does the company report on policies or programs on HIV/AIDS for the workplace or beyond?”

• 6 “Is the company under the spotlight of the media because of a controversy linked to workforce health and safety?”

Peers’ gender diversity performance:

• 1 “Does the company have a work – life balance policy? AND does the company have a diversity and equal opportunity policy?”

• 2 “Does the company describe the implementation of its diversity and opportunity policy?”

• 3 “Does the company monitor the diversity and equal opportunities in its workforce?”

• 4 “Does the company set specific objectives to be achieved on diversity and equal opportunity?”

• 5 “Does the company promote positive discrimination? OR has the company won any prize or award relating to diversity or opportunity?”

• 6 “Does the company claim to provide generous vacations, career breaks, or sabbaticals? OR does the company claim to provide flexible working hours or working hours that promote a work-life balance?”

• 7 “Does the company claim to provide day care services for its employees? OR does the company claim to provide generous maternity leave benefits? OR has the company won a family friendly prize like a ‘Working Mother Award’?”

Peers’ environmental biodiversity performance:

• 1 “Does the company have a policy for reducing environmental emissions or its impacts on biodiversity? AND does the company have a policy for maintaining an environmental management system?”

• 2 “Does the company report on initiatives to protect, restore or reduce its impact on native ecosystems and species, biodiversity, protected and sensitive areas?”

• 3 “Does the company report on partnerships or initiatives with specialized NGOs, industry organizations, governmental or supra-governmental organizations that focus on improving environmental issues?”

• 4 “Does the company report or provide information on company-generated initiatives to restore the environment?”

• 5 “Does the company report on initiatives to reduce the environmental impact of transportation of its products or its staff?”

• 6 “Is the company directly or indirectly (through a supplier) under the spotlight of the media because of a controversy linked to the spill of chemicals, oils and fuels, gases (flaring) or controversy relating to the overall impacts of the company on the environment?”

• 7 “Does the company report on initiatives to reduce, avoid or minimize the effects of spills or other polluting events (crisis management system)?”

• 8 “Does the company have a policy for reducing the use of natural resources? AND does the company have a policy to lessen the environmental impact of its supply chain?”

• 9 “Does the company describe the implementation of its resource efficiency policy through a public commitment from a senior management or board member? AND does the company describe the implementation of its resource efficiency policy through the processes in place?”

• 10 “Does the company have environmentally friendly or green sites or offices?”

• 11 “Does the company report on initiatives to reuse or recycle water? OR does the company report on initiatives to reduce the amount of water used?”

• 12 “Does the company report on initiatives to reduce the environmental impact on land owned, leased or managed for production activities or extractive use?”

APPENDIX C

List of Identifying Variables

To measure subsidiary’s size, we logged its number of employees on 30 September 2012 as there was great disparity in the sizes of the entities.

To capture subsidiary autonomy, an item in the survey (adapted from Bouquet & Birkinshaw, 2008) read: “In the following propositions, please select the answers that best describe the decision-making process in your subsidiary,” with five items: “To discontinue a major existing product/service or product/service line,” “To invest in major plant or equipment to expand production capacity,” “To formulate and approve your entity’s annual budgets,” “To increase (beyond budget) expenditures for research and development,” and “To subcontract out large portions of the production.” Respondents chose among six potential answers: “The entity’s opinion is not asked; decision is explained to the entity by the Branch,” “Proposal by the Branch, but the entity’s opinion carries little weight,” “Proposal by the Branch, and the entity’s opinion carries a lot of weight,” “Proposal by the entity, decision made by the Branch,” “Decision made by the entity without much consultation with the Branch,” and “Not applicable.” The various items reflected measures of the entity’s autonomy, so we calculated a Cronbach’s alpha value across the five items, which resulted in a coefficient of 0.74, indicating good internal consistency of the scale. We generated a single autonomy variable per respondent by averaging their scores across the five items (the few not applicable responses were replaced by the average response among all respondents who answered one of the five first items).

The ownership variable represented the level of the Group’s control over the entity, equal to 1 when the MNE owned less than 50% of the focal entity (i.e., minority stake), 2 when it owned between 50% and 99% (majority stake), and 3 for more than 99% ownership (i.e., full control).

The subsidiary’s Group history corresponded to the time the subsidiary had been part of the Group as of 2012, equal to 1 for less than 10 years, 2 for less than 20 years, and 3 otherwise.

APPENDIX D

Mediation Analysis

Tables D1 and D2 present the results of the linear regression models we used for our mediation analysis; we clustered the regressions by practice and country.

Table D1 Clustered linear regressions estimating the effect of peers’ conformity and attention on CSR practices implementation

Table D2 Clustered linear regressions estimating the effect of peers’ conformity on attention to demands related to CSR

Model 5 is the reference model and includes all the control variables. To test the mediating role of attention to different demands on the relationships between peer conformity and practice implementation, we followed Baron and Kenny’s (1986) approach. In Model 6, the conformity of both types of peers (independent variables) had positive and significant impacts on the implementation of practices (dependent variable), consistent with the first step of their approach. In Models 11–14, we completed the second step by looking at the impact of the independent variables on the mediators. Conformity of external peers had a positive, significant impact on attention to the demands of external constituents in Model 11 and a negative, significant impact on attention to headquarters’ demands in Model 12. Conformity of internal peers exerted a positive, significant impact on attention to the demands of external constituents in Model 13 and a positive, significant impact on attention to headquarters’ demands in Model 14. With Model 7 in Table D1, we completed the third step, showing that the mediators (attention to demands from external constituents and from headquarters) both significantly affected the dependent variable (level of implementation of CSR practices). Finally, we performed the fourth step in Models 8 and 9 by introducing the independent variables and the mediators at the same time. In Model 8, introducing attention to the demands of external constituents decreased the impact of the conformity by both types of peers. The effect of conformity on the implementation of practices was partly and simultaneously due to the increased attention to the demands of external constituents. In Model 9, introducing attention to the demands of the headquarters decreased the impact of internal peers’ conformity but increased the impact of external peers’ conformity. Model 10 was the full model. The coefficients of the two independent variables and the two moderators remained positive and significant when we included them all simultaneously.

We ran Sobel–Goodman mediation tests (Sobel, 1982) that confirmed the fit of the partial mediation models. For external peers’ conformity, the indirect effect through attention to external demands was significant, representing 43.71% of the total effect, and the indirect effect through attention to headquarters’ demands also was significant, representing −17.87% of the total effect. For internal peers’ conformity, both the indirect effects through attention to headquarters’ demands and to external demands were significant, representing 27.32% and 25.79% of the total effect, respectively.

We computed the indirect effects simultaneously and calculated their standard error (with a seemingly unrelated regression). The percentages mediated in each case decreased slightly, whereas the signs, ordering, and significance of the effects remained very similar.

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