Is the perception of CSR country bound? A CSR based reputation study of Spanish companies in Latin America.

Author:Farber, Vanina Andrea
Position:Articulo en ingles - Corporate social responsibility
  1. Introduction

    Spanish companies play a vital and pervading role in Latin American economies. As Latin American nations celebrate 200 years of independence from Spain and Portugal, the debate becomes more passionate about the service that foreign companies provide to the society in which they operate, also known as their markets. In general, Spanish companies observe international regulations, have large foundations committed to social issues, and progressively phase corporate social responsibility (CSR) into their operations, although they still have not met the expectations of the Latin American people.

    The concept of CSR provides a coherent framework for defining the relationship between companies and society (Wood, 1991). According to Marin (2004), CSR helps to achieve legitimacy and, at the same time, promotes business excellence. CSR is a fundamental dimension of corporate reputation (Karake, 1998). Executives consider corporate reputation to be one of the most substantial drivers of success (Dunbar & Schwalbach, 2000). A study by PricewaterhouseCoopers (2003) based on 43 Spanish firms showed that 91% of executives believed that improving a firm's reputation is the motivation for investing in social responsibility, and 74% of the managers interviewed noted that practices aimed at improving CSR are extremely positive for long-term corporate performance strategy.

    A report prepared by Fundacion Carolina (2009) indicated that nearly all large Spanish companies operating in Latin America had a CSR department (or a specific unit in charge of CSR), had an ethics code in place, and had shaped their mission and vision with CSR concepts. Many of the companies that own foundations with large budgets focused on social and cultural issues, and most published social and sustainability reports. Fundacion Carolina showed that, in general, Spanish companies observe the main global regulations, but such action is not enough to meet the region's expectations. The people of Latin America may believe that Spanish companies should do more to contribute to the region's main challenges: social cohesion and sustainable development.

    No formal work exists to address the differences in country perceptions regarding the behavior of multi-national companies (MNCs) in Latin America, even less about the behavior of Spanish companies specifically.

    The purpose of this paper is to explore differences in country perceptions of the corporate social responsibility behavior of Spanish companies in Latin America. We used CSR criteria to understand how individuals from different countries (Argentina, Brazil, Chile, Mexico and Peru) value the behavior of Spanish companies. Further analysis is related to whether a common Latin American view of how Spanish companies operate exists based on CSR core issues as defined in ISO 26000 (International Organization for Standardization, 2010).

    We evaluated the role of national differences in perception when valuing the behavior of Spanish companies. Our findings highlight a number of significant cross-country differences in CSR criteria that allow us to discriminate among country perceptions. Few formal attempts to analyze cross-country differences in CSR perception are evident, and, until now, no formal comparative analysis of CSR in Latin America exists. The identification of particular CSR criteria that discriminate among countries' perceptions could help Spanish companies to improve their corporate reputation according to the country's dependent customers' priorities. Martin de Castro et al. (2006) state that corporate reputation results from a social legitimization process and therefore is highly specific to each firm and context. This research is valuable because managers and companies can use the information to establish tailor made CSR strategies.

    Organization of the paper is as follows. First, a literature review is necessary to prove that a positive relationship exists between the corporate reputation and the CSR behavior of companies. A discussion of the data and discriminant analysis methodology follows. Next, we show how CSR core subjects are important in discriminating among countries' perceptions of the behavior of multinational Spanish companies. Finally, we discuss the findings and implications for managers and present future research opportunities.

  2. Literature Review

    Since the late 1990s, Spanish companies have endured a negative perception in Latin American societies (Noya, 2009).

    CSR has become a key component of a firm's reputation (Argenti & Druckenmiller, 2004; Fombrun, 2005). Peloza et al. (2006) suggested that the pressure for CSR (due to the related vulnerabilities from a lack of CSR) is perhaps greatest among multinational firms with business activities across countries and cultures. A company's CSR strategy fulfills two objectives in practice: to strengthen the global corporate reputation and identity as well as to satisfy the local needs of the countries in which the company operates (Sandulli, 2008).

    Consensus exists on the idea that corporate reputation contributes significantly to the long-term competitive advantages of organizations and that their management is of critical importance to companies (Dowling, 2004; Fombrun, 1996; Griffin, 2008; Rose & Thomsen, 2004). However, opinions vary on the processes by which reputational capital is built or destroyed. An important element of the literature is the focus upon the role of social responsiveness in influencing perceptions of organizations in the eyes of their stakeholders (Brammer & Pavelin, 2005). Garcia and Rodriguez (2011) find that social responsibility does influence global service evaluation and must be taken into account by companies. Cognitive consistency theories indicate that people strive to maintain psychological harmony among their beliefs, attitudes, and behaviors (Heider, 1946; Osgood & Tannenbaum, 1955). When customers attribute a good image to a company, they likely have belief-consistent form of goodwill to express towards that company (Bettencourt, 1997; Zeitham et al., 1996). Image is the perception that external observers have about a company while reputation is the net result of the aggregation of these perceptions (Fombrun & Van Riel, 1997). Therefore, negative (or positive) perceptions of the CSR behavior of a company will affect the overall image of that company, and finally--when aggregated-- corporate reputation.

    Determining how individuals from different countries perceive the CSR behavior of MNCs (Spanish companies, in this case) could help to address the lack of reference in the literature about developing countries.

    As in any relationship, the CSR practices of companies and the perception individuals form of them are inherently process phenomena (Gassenheimer et al., 1998) and may differ among countries with different cultures (Aaronson, 2003; Chapple & Moon, 2005), economic development (Chapple & Moon, 2005), corporate governance (Kimber & Lipton, 2005; Ryan, 2005), institutions (Campbell, 2006; Sassen, 2002), and normative frameworks (Blasco & Zolner, 2010). Enderle (1996) showed how cultural differences between the United States, France and Germany produce different expressions of CSR. While the United States uses CSR for communication purposes, its European counterparts interpret CSR as a way to humanize businesses. Although researchers agree that the treatment of CSR issues differs among companies from different regulatory regimes, such as the United States or Europe (Brammer & Pavelin, 2005; Doh & Guay, 2006; Guillen et al., 2002), evidence is vague for Latin American countries. According to Blasco and Zolner (2010), cross-country analysis of the practice of CSR in different contexts is an underinvestigated dimension of globalization processes. While corporate reputation refers to its appeal to external stakeholders (Fombrun, 1996), organizational identity is what insiders think of their organization (Gioa & Thomas, 1996). According to Kyoko et al. (2007) customer perception is a key component of identity management including the creation of a corporate image and its maintenance. In order to manage its image effectively a company should understand the perceptions of the stakeholders in the specific environment where they operate. Social reputations vary (Castaldo et al., 2009).

    The focus of this research is on identifying core CSR issues that differentiate the perception that people have of Spanish companies in Latin America. We concentrated our research on the perception of individuals from different Latin American countries (Argentina, Brazil, Chile, Mexico, and Peru) using ISO 2600 CSR criteria. We aggregated their opinions to research which criteria differentiated the reputation of Spanish companies by country in Latin America.

  3. Methodology

    3.1. Sampling Design and Process

    Instrument. In the process of developing the instrument, the exploratory research design was useful to clarify the thoughts and opinions about the research problem and to provide insight into the research. Questionnaires are the most frequently used data collection method in educational and evaluation research. We conducted a pilot survey to qualify the instrument (questionnaire). The questionnaire consists of three sections, totaling 17 closed-ended questions. The first section (three questions) relates to the knowledge of the respondent about CSR in general and the Spanish companies that operate in each of the countries. If the respondent knew at least one company, he or she could continue with the questionnaire. The second section (seven questions) refers directly to the valuation of Spanish companies in general and of specific CSR core subjects. Two additional questions relate to the respondent's perception about the role of the government on CSR issues. The third section concludes the questionnaire with five traditional demographic questions (gender, age, education, occupation, and income).


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