CSR And Institutional Theory

Corporate Social Responsibility and

institutional theory: new perspectives on

private governance

Stephen Brammer1, Gregory Jackson2,*, and Dirk Matten3

1Warwick Business School, University of Warwick, Coventry, UK;

2School of Business and Economics, Freie Universita¨ t Berlin, Berlin, Germany;

3Schulich School of Business, York University, Toronto, Canada

*Correspondence: gregory.jackson@fu-berlin.de

Corporate Social Responsibility (CSR) has become a pervasive topic in the business

literature, but has largely neglected the role of institutions. This introductory

article to the Special Issue of Socio-Economic Review examines the potential contributions

of institutional theory to understanding CSR as a mode of governance.

This perspective suggests going beyond grounding CSR in the voluntary

behaviour of companies, and understanding the larger historical and political

determinants of whether and in what forms corporations take on social responsibilities.

Historically, the prevailing notion of CSR emerged through the defeat of

more institutionalized forms of social solidarity in liberal market economies.

Meanwhile, CSR is more tightly linked to formal institutions of stakeholder participation

or state intervention in other advanced economies. The tensions between

business-driven and multi-stakeholder forms of CSR extend to the transnational

level, where the form and meaning of CSR remain highly contested. CSR research

and practice thus rest on a basic paradox between a liberal notion of voluntary

engagement and a contrary implication of socially binding responsibilities. Institutional

theory seems to be a promising avenue to explore how the boundaries

between business and society are constructed in different ways, and improve

our understanding of the effectiveness of CSR within the wider institutional

field of economic governance.

Keywords: corporate social responsibility, corporate governance, institutional

political economy, transnational diffusion, internationalization, varieties of

capitalism

JEL classification: A13 relation of economics to social values, M14 corporate

culture, social responsibility, P16 political economy

# The Author 2012. Published by Oxford University Press and the Society for the Advancement of Socio-Economics.

All rights reserved. For Permissions, please email: journals.permissions@oup.com

Socio-Economic Review (2012) 10, 3–28 doi:10.1093/ser/mwr030

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1. Corporate Social Responsibility research and its strange neglect

of institutions

Talking to the participants of doctoral workshops on Corporate Social Responsibility

(CSR) research at major conferences these days, it is quite striking to

discover how many young scholars have discovered institutional theory as a

framework for their work. Institutional theory seems all the rage these days.

This, however, has not always been the case. Despite its recent growth, the application

of institutional theory to understand CSR-related phenomena is a rather

recent development. Only in the mid-2000s did a literature emerge which broadened

the array of conceptual tools used in CSR research (Aguilera et al., 2007;

Campbell, 2007; Matten and Moon, 2008). Given that C‘S’R includes the

aspect of ‘society’ already in its very label, one would have thought that institutional

theory would have been a core conceptual lens in understanding the ‘social’

responsibilities of business all along. After all, in its very definition, institutional

theory appears to be right at the centre of what CSR is all about, as this quote

from the introduction to The Oxford Handbook of Comparative Institutional Analysis

shows (Morgan et al., 2010, p. 3):

The field [in which] we are interested can be defined in how the forms,

outcomes, and dynamics of economic organisation (firms, networks,

markets) are influenced and shaped by other social institutions [. . .]

and with what consequences for economic growth, innovation,

employment, and inequality. Institutions are usually defined [. . .] as

formal or informal rules, regulations, norms, and understandings

that constrain and enable behaviour.

It is fair to say that the literature on CSR, most of it published in management

or business studies journals, has neglected the societal aspects of CSR by and

large. Most of the literature has treated the ‘social’ element as a black box, as a

set of external requirements which are translated into a functionalist, instrumental

and business case rationale for social engagement by companies (Margolis and

Walsh, 2003). This is certainly reflected by some of the meta studies of the CSR

literature (De Bakker et al., 2005; Lockett et al., 2006) as well as more critical analysis

of CSR as a subfield of management (Banerjee, 2007; Hanlon, 2008). As

Campbell (2007) argues, the CSR literature has been mostly either descriptive

or normative. In this vein, the bulk of empirical research has investigated the

relationship between CSR and its impact on the financial performance of the

firm (Orlitzky et al., 2003). The strong fascination with the business case for

CSR is a noteworthy phenomenon in itself—to the extent that social science

would be able to demonstrate the existence of a market for virtue (Vogel,

4 S. Brammer et al.

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2006), this evidence would also be a powerful normative argument for firms and

their managers to behave in more responsible ways.

The focus on the firm as the pivotal actor in initiating socially desirable behaviour

on the part of business has been institutionalized into the way of conceptualizing

and studying CSR, particular within business schools. While common

definitions of CSR include mandatory responsibilities, such as legal compliance,

or make reference to societal expectations (Carroll, 1999), a recurring theme in

the CSR debate is its grounding in the voluntary behaviour of companies. For

example, Vogel (2006) describes CSR in terms of ‘practices that improve the

workplace and benefit society in ways that go above and beyond what companies

are legally required to do’ (p. 2). This view reflects the dominance of agency

theory as a way of understanding the nature of the firm in business/management

studies (Garriga and Mele´, 2004) and the relegation of business ethics to the sidelines

(Khurana, 2007). This same emphasis on voluntarism is something that

recurs in policy documents of leading business associations (Kinderman,

2012). Indeed, even major public policy initiatives have not challenged this

core assumption. For example, the European Commission (2001, p. 6) Green

Paper defines social responsibility as ‘a concept whereby companies integrate

social and environmental concerns in their business operations and in their

interaction with their stakeholders on a voluntary basis’.

Over the last decade, the scholarly debate on CSR has slowly but steadily registered

a growing unrest about this rather limited approach to understanding the

social responsibilities of business. A first reservation has to do with the rather

limited value of a business-centred approach to CSR research. As a number of

studies have suggested, the results of this strand of research are, at best, inconclusive

(Orlitzky, 2008). The argument that businesses engage in CSR just as one of

many other ways of increasing the firm’s performance seems patently unfit to

explain why businesses engage or disengage in socially desirable outcomes.

This is closely related to a second aspect, namely the advent of globalization

and its influence on business studies. If CSR is just another way of increasing

profits, it begs the question of why forms of CSR differ so vastly among

regions and countries globally. Furthermore, it raises the question of why CSR

as a mostly North American or, at best, Anglo-Saxon idea has only rather recently

spread to other parts of the global economy. To explain this with a rather limited

set of arguments around efficiency and profit maximization appears to have

rather limited purchase, since many highly successful companies in Japan and

Western Europe continue to thrive without much serious ‘explicit’ (Matten

and Moon, 2008) attention to CSR and related concepts.

A third aspect, however, has to do with a growing scrutiny of the role of private

corporations in the public sphere over the last two decades. Interest in CSR has

been sparked by questions around the impact of corporations on indigenous

Corporate Social Responsibility and institutional theory 5

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people (Banerjee, 2000), working conditions in developing countries (Radin and

Calkins, 2006), the environment (Jermier et al., 2006) and political campaigns in

developed

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