Influence of CSR Activities on Stakeholders in Foreign Markets

Influence of CSR Activities on Stakeholders in Foreign Markets

Andrija Barić (KONČAR – Power Plant and Electric Traction Engineering Inc., Croatia), Mislav Ante Omazić (Faculty of Economics and Business, University of Zagreb, Croatia), Ana Aleksić (Faculty of Economics and Business, University of Zagreb, Croatia) and Mirjana Pejic-Bach (University of Zagreb, Croatia)
DOI: 10.4018/978-1-7998-2347-6.ch002

Abstract

Corporate social responsibility (CSR) can be seen as an important differentiation strategy for organizations operating in foreign markets, as it helps organizations to gain legitimacy, transfer their positive reputation, gain visibility and easily adapt to a new environment. The implementation of CSR activities in foreign markets is often different from the local markets. Beside institutional and legal framework, shareholders' interests can also significantly vary. Therefore, in order to achieve competitive advantage in foreign markets by using CSR, it is necessary to identify the interests of key stakeholder groups and to identify the most efficient activities and communication channels towards them. This chapter provides insight into the importance of CSR activities and communication on stakeholders' management on foreign markets, based on the empirical research on a sample of medium and large export organizations in Croatia. Results of the research indicate the importance and positive influence of CSR activities and communication on stakeholders' management in foreign markets.
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Introduction

The globalization of the business world over the last few decades forced a large number of organizations within the global economic network to look for business opportunities in various foreign markets (Aulakh, Rotate, & Teegen, 2000). During this globalization process, on the one hand, there is a reduction in transport costs and strong development of information technology, while on the other hand, exports, direct foreign investment and transfer of capital and knowledge are rapidly expanding (Lee, & Vivarelli, 2006). In general, globalization has created a new world of opportunities for organizations, but also higher levels of competition and uncertainty (Thoumrungroje, & Tansuhaj, 2007). In their search for a new market, resources, and profit, many companies are increasingly engaging in export-related activities, setting their business activities in new foreign markets, and becoming significant players on an international level. Export activities are perceived today as an extremely important and globally accepted indicator of the business performance of companies of different sizes and activities, and export organizations have a significant role in the global economy.

Besides quality products and services, in their market positioning on the foreign market, export companies can achieve their competitive advantage also through differentiation based on a higher degree of social responsibility in business compared to other competitors (Cruz, & Boehe, 2008; Cruz, Boehe,, & Ogasavara, 2015.). Due to various forms in which corporate social responsibility (hereafter CSR) can occur, it has been recognized as a potentially important factor for company differentiation (Bhattacharya, Sen, & Korschun, 2008). As stakeholders across the global community are increasingly aware of the growing number of social, economic, ecological, cultural, security and health challenges that can significantly affect the way of life we know today, corporate differentiation based on CSR is increasingly becoming a strategic model of business differentiation in the global economic network (Boehe, & Cruz, 2010). Following the expansion of business to new foreign markets, the concept of CSR presents a perfect tool for export companies to transfer their positive reputations onto these new foreign markets. Moreover, as export organizations operate in a culturally different environment, CSR helps them to adapt to these new environments, earn legitimacy, and reinforce competitive advantage on the international stage (Godos-Díez et al., 2018). The fact that the concept of CSR has a global nature and that the concept of CSR continues to spread daily within the global economic network (Gjoberg, 2009) contributes to this process.

To achieve a competitive advantage in the export market by differentiation based on CSR activities, it is necessary to identify the interests of key stakeholder groups and to identify the most efficient activities and communication channels towards stakeholders from the global economic network (Scherer, & Palazzo, 2008). Better relations with primary and secondary stakeholders in export markets build a more positive reputation of the company, which directly influences the export activities and the overall business of the company (Scherer, & Palazzo, 2008).

Key Terms in this Chapter

Internationalization: The process of moving beyond the domestic market, where organizations in search for new markets or resources set their business operations and activities on foreign markets.

Corporate Social Responsibility: (Also known as corporate responsibility) is the integration of socially and environmentally beneficial programs and practices into a corporation’s business model. It is a form of corporate social and environmental self-regulation integrated into its business model or how companies manage the business processes to produce an overall positive impact on society.

Export: A form of internalization strategy where an organization has produced in the domestic market but offers products or services on foreign markets.

Stakeholder: All individuals or organizations that can have an effect on the organization, and are directly or indirectly influenced by business processes and activities of an organization.

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