The role of institutional pressures in shaping corporate social performance: understanding the decision to join and performance in the United Nations Global Compact

Abstract

Interest and engagement on voluntary CSR initiatives has grown substantially over the last decades. Such initiatives may offer an alternative to traditional command-and-control regulation, particularly relevant in the context of a globalised economy where regulating the behaviour of corporations in regards to corporate social performance (CSP) poses major challenges (Hess, 2008). These have thus been of increasing interest to firms, governments, civil society and other stakeholders, configuring what Waddock (2008) has termed an emerging institutional infrastructure for corporate responsibility. The United Nations Global Compact (UNGC) is the largest CSR initiative in the world. With over 8,000 participating firms from more than 140 countries and varied sizes and industries, the UNGC has a truly global and diverse coverage if compared to similar initiatives. Adding to its uniqueness, the UNGC is backed by the United Nations. However, despite the UNGC’s success in attracting participants, market willingness to reward responsible behaviour (Hull and Rothenberg, 2008), and mounting stakeholder pressure, a great level of variation can still be observed on firms’ engagement with the UNGC.

Equally, despite increasing interest, a number of gaps remain in the literature in the understanding of drivers for joining and for performance in the initiative. For one thing, only one study focused on speed of adoption in the UNGC; it was, however, restricted to the Spanish context. In the sphere of performance, studies have often used limited samples or measures of performance that do not encompass all the UNGC issues; in addition, results remain mixed generating an inconclusive body of knowledge. Applying institutional theory, this thesis evaluates the extent to which institutional pressures at firm, industry and national levels may influence firms’ decision to join the UNGC, their speed of adoption, and their performance in the issues advanced by the initiative. Using a dataset covering environment, social and governance data on over 4,000 global listed companies since 2002 in combination with relevant institutional data, this thesis addresses the gaps above.

Results suggest strong evidence that institutional forces at all levels are at play, influencing firms’ decision to join and performance in the UNGC principles. For one thing, mimetic forces were very important in driving both firms’ decision to join the UNGC and their performance. Being under greater stakeholder scrutiny due to large size or belonging to an extractive industry was also an important driver for joining the UNGC, arguably in views of protecting legitimacy seen to be at threat. Finally, looking into the UNGC as a source of institutional pressure as well, despite criticisms in regards to the UNGC’s “lack of teeth”, there is strong evidence to suggest that participants are improving performance more than non-participants in the UNGC principles. Even though more attention needs to be dedicated to the delivery of outcomes, there is strong evidence that the UNGC is making important strides in its aim of promoting a more sustainable and inclusive global economy.

This thesis makes important contributions to the academic literature by, among other things, using a measure of performance that encompasses all UNGC principles and builds on sound theoretical base, longitudinally covering all UNGC principles in the aspects of policies, processes of implementation and whenever feasible outcomes. It also contributes to a better understanding of speed of adoption across participants in different countries and of role of CSP and mimetic pressures in firms’ decision to join the UNGC. For practitioners, it provides valuable information for those trying to increase sign up or improve participants’ performance in voluntary CSR initiatives in general and in the UNGC in particular. Empirical evidence on drivers for joining and performing may help these professionals choose the more appropriate strategies to make these initiatives successful in achieving a more responsible corporate world.

Date of Award	1 Dec 2014
Original language	English
Awarding Institution	University of Bath
Supervisor	Steve Brammer (Supervisor)