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Theoretical framework

In document Empirical evidence from Sri Lanka (Page 147-152)

Theoretical framework

5.4. Theoretical framework

Theoretical framework

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5.3.3.3. Institutional theory’s predictions about CSR motivations

According to institutional theory, various forces influence organisations to adopt CSR practices. Here, managers try to conform to norms that are substantially imposed upon them. Thus, in line with the institutional theory, an organisation’s predicted CSR motivation is the desire to become similar to other organisations, by adopting those of their practices which society or particularly powerful groups consider as “normal”.

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Second, all three theories are considered as “system-oriented theories” (Gray et al., 1996). Gray et al. (1996), indicate that a system-oriented perspective

“permits us to focus on the role of information and disclosure in the relationship(s) between organisations, the state, individuals and groups” (p. 45).

Overall, corporate disclosure decisions are considered to establish a strategy to enhance the relationship between an organisation and its stakeholders with which it operates, according to these three theories.

Further, within these theories, organisations are considered as an important part of the wider social system. Stakeholder theory considers stakeholders of an organisation as an individual form and assumes a high stakeholder resolution view. Legitimacy theory considers a holistic view and assumes a low stakeholder resolution, while institutional theory considers generally accepted social norms and/or institutional practice which are indirectly influenced by the organisation’s stakeholders. The stakeholder and legitimacy theories explain why managers of an organisation embrace a particular strategy such as voluntary CSR disclosure, whereas institutional theory tends to hold the broad macro view to explain why an organisation adopts a particular structure or particular reporting practice. Furthermore, the first two theories explain how managers try to legitimise and/or account to a particular set of stakeholders or to all the stakeholders, whereas the latter theory “typically embraces a view that managers are expected to conform with norms that are largely imposed on them” (Deegan, 2009, p. 365). All three theories concern the relationship between an organisation and the society within which it operates. Thus, these theories are directly or indirectly related to each other and should be considered be complementary rather than competing with each other. The following quotation from Berrone and Gomez-Mejia’s study (2009) succinctly highlights the interconnection of these three theories: “The main thesis of institutional theory is that organizations enhance or protect their legitimacy (Scott, 1995) by conforming to the expectations of institutions and stakeholders (Aldrich &

Fiol, 1994; DiMaggio & Powell, 1983)” (p. 104).

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Table 5.4-1 summarises the basic features of the theories. Based on these features, as illustrated in Figure 5.4-1, a comprehensive theoretical framework is constructed, by integrating legitimacy theory, stakeholder theory, and institutional theory.

Figure 5.4-1: Theoretical framework

This theoretical framework shows the convergent organisational behaviour or motivations, convergent motivations of CSR practices, and CSR behaviour or outcomes. In line with these three theories, the following broad convergent predictions of organisational behaviour or motivations are derived:

1. An organisation seeks survivability and stability of its business.

2. An organisation seeks legitimacy of its business or social worthiness of its existence.

3. An organisation tries to be accountable to its stakeholders.

4. An organisation tries to conform to procedures and structures of other organisations which are within a particular organisational field that share common values and beliefs of society in which they operate.

Integrated theories Convergent predictions of organisational behaviour

and motivations

Convergent motivations of CSR practice

Legitimacy theory

Stakeholder theory

Institutional theory

1. An organisation seeks survivability and stability of its business.

2. An organisation seeks legitimacy of its business.

3. An organisation tries to be accountable to its stakeholders.

4. An organisation tries to conform to procedures and structures of other organisations which are within a particular organisational field

1. To legitimise the business or organisation (Legitimacy motive) 2. To perform accountability to the organisation’s stakeholders, sometimes based on the extent of the stakeholders’

power (Accountability motive)

3. To conform to social norms and beliefs those are largely imposed on an organisation, which ultimately leads to homogeneity in organisations in the same field (Isomorphic motive)

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Table 5.4-1: Basic features of theories

Legitimacy theory Stakeholder theory Institutional theory

Ethical perspective Managerial perspec-tive

1. Enriched by political economy theory

1. Enriched by political economy theory

1. Enriched by political economy theory

1. Enriched by political economy theory

2. A system-oriented theory 2. A system-oriented theory

2. A system-oriented theory

2. A system-oriented theory

3. Social contract 3. Accountability – to all stakeholders, regardless of their power

3. Accountability – to economically most powerful stakeholders

3. Emphasises survival value of conformity

4. Organisational legitimacy 4. Individual stakeholder view (high resolution view)

4. Selected individual stakeholder view (high resolution view)

4. All organisations are socially constructed and tend to conform to social norms and beliefs, and adherence to institutional rules and norms

5. Survivability – When legiti-macy gap exists, legitimating strategies are implemented

5. An organisation tries to balance stakehold-ers’ with competing interests

5. An organisation tries to manage critical stakeholders’ competing interests and pressures

5. Isomorphism – the process of ho-mogenization – through coercive, mimetic and normative ways

6. Holistic Stakeholder view (low resolution view)

6. Responsibility driven than power or pressure driven

6. Stakeholders’ power or pressure driven than responsibility driven

6. May occur decoupling – the exter-nal expectation gap in organisa-tional practice

7. Implicitly expects stakeholder pressure and tries to respond through legitimating strategies

7. Implicitly expects or-ganisational legitimacy, survivability, and sta-bility among all stake-holders by performing accountability

7. Implicitly expects organisational legit-imacy, survivability, and stability among powerful stakeholders by performing account-ability

7. Implicitly expects organisa-tional legitimacy, survivability, and stability, especially through isomorphism

References: References: References:

(Archel et al., 2009; Branco &

Rodrigues, 2008; de Villiers

& van Staden, 2006; Deegan, 2002; 2006, 2009; Deegan et al., 2000; Deegan & Samkin, 2009; Deephouse & Carter, 2005; Gray et al., 2010; Lind-blom, 1994; Tilling, 2004)

(Bayoud et al., 2012; Belal & Owen, 2007; Branco

& Rodrigues, 2007; Carroll & Buchholtz, 2009;

Clarkson, 1995; Deegan, 2009; Donaldson &

Preston, 1995; Freeman, 1984, 1994; 2005; Gray et al., 2010; Islam & Deegan, 2008; O’Riordan &

Fairbrass, 2008; Roberts, 1992; Russo & Perrini, 2010; Ullmann, 1985; Weiss, 2009)

(Amran & Siti-Nabiha, 2009;

Archel, Husillos, & Spence, 2011; Berrone & Gomez-Mejia, 2009; Campbell, 2007; Carpenter

& Feroz, 2001; Deegan, 2009;

Deephouse & Carter, 2005;

DiMaggio & Powell, 1983; Gray et al., 2010; Moll et al., 2006; Ra-haman et al., 2004; Scott, 2004)

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Within these broad organisational behavioural predictions, an organisation may be motivated to engage in CSR practices such as involvement in CSR activities, publishing CSR disclosures, maintaining a stakeholder dialogue, and/or strategising the organisational behaviour by integrating CSR activities with the organisation’s business strategy. Drawing on these convergent predictions or assumptions of organisational behaviour and organisational CSR behaviour, legitimacy theory, stakeholder theory, and institutional theory predict the possible reasons for an organisation’s engaging in CSR activities:

1. Need to legitimise the business or organisation

2. Need to perform accountability to the organisation’s stakeholders, sometimes based on the extent of the stakeholders’ power.

3. Need to conform to legitimate norms and beliefs those are largely imposed on an organisation, which ultimately leads to homogeneity in organisations in the same field.

This theoretical framework is employed in analysing and explaining interview data of CSR practices and to check the extent to which these theories help to explain Sri Lankan CSR practices. The framework is focused, mostly, on the main research question of this thesis: Why do Sri Lankan companies adopt CSR initiatives and why do these companies choose or not choose to disclose voluntary CSR information?

Summary and conclusion

136

In document Empirical evidence from Sri Lanka (Page 147-152)