Creating Competitive Position through Ethical Behaviour: Swedish Firms in Emerging Markets.
This project focuses on the ethical managerial challenges that are faced by multinational enterprises (MNEs) while operating in emerging markets. Emerging markets are strategically important for many MNEs. There are, however, cultural and institutional differences between an MNE’s home market and emerging markets. The difficulties companies face are illustrated by incidents involving Swedish MNEs, where they acted in a way considered as unethical by stakeholders in the home and/or emerging markets. These events include corruption, child labour, environmental pollution, etc.
Research confirms a need for more empirical studies focusing on the ethical issues of MNEs’ activities in emerging markets. Our purpose is to investigate how different institutionalised norms and behaviour as well as different types of stakeholders influence the firm’s ethical behaviour in emerging markets. This involves two levels of analysis: i) We analyse the interaction within the firm between corporate headquarters and subsidiary/country management, focusing on how the codes of conduct developed at HQ are transferred, explained, and disseminated in the local market. Moreover, what capabilities and routines can support this process. ii) We analyse the interactions between MNEs and stakeholders in the local market. For the purpose of this project, we will conduct an empirical study of two Swedish MNEs. The two companies will be studied on corporate level as well as in three bigger emerging markets.
Final report
This project focused on the ethical managerial challenges that are faced by multinational enterprises (MNEs) while operating in emerging markets. These markets are strategically important for many MNEs. There are, however, cultural and institutional differences between an MNE’s home market and emerging markets. The difficulties companies face are illustrated by incidents involving Swedish MNEs, where they acted in a way considered as unethical by stakeholders in the home and/or emerging markets. These events may include corruption, child labour, environmental pollution, etc.
Research confirms a need for more empirical studies focusing on the ethical issues of MNEs’ activities in emerging markets. Our purpose was therefore to investigate how different institutionalised norms and behaviour as well as different types of stakeholders influence the firm’s ethical behaviour in emerging markets. This involved two levels of analysis: i) We analysed the interaction within the firm between corporate headquarters and subsidiary/country management, focusing on how the codes of conduct developed at HQ are transferred, explained, and disseminated in the local market. Moreover, what capabilities and routines can support this process. ii) We analysed the interactions between MNEs and stakeholders in the local market.
The implementation
We started the project and were successful in getting access to Swedish MNEs with operations in emerging markets. Two MNEs, operating in two different industries, gave their consent to participate in our study. This meant that we got access to MNEs operating in two different industries, which was our plan.
Interviews were conducted during 2019 and 2020 at the corporate offices in Stockholm. There were major changes in methodology and execution of the project due to the Pandemic and lockdowns. We were not able to travel, which delayed the data collection. However, as things were not improving, we had to change our method. Instead of face-to-face interviews, we had to settle for online interviews over Zoom or Teams. Although we were hesitant at first, we experienced that the digital mode facilitated the coordination and collaboration, both at headquarters and at partners/subsidiaries in the emerging markets.
In addition to conducting interviews, we have collected and analyzed written documents, including media reports, internal company plans and material on institutional policies. To manage the large amount of interview and secondary data, we have use NVIVO11, text
reduction and data analysis software.
The project’s main scientific results
The results from our research can be summarized in accordance with the following main areas:
One concerns how different ethical standpoints and sustainability codes are transferred and supported in the interactions between head office and different local actors – external as well as internal ones. The role of the internal organization was found to be of critical importance. The project shows how interactions between head office and subsidiaries can be further developed as well as how ethical norms and codes can be transferred, in order to increase the internal support for sustainability. Our results also show how an MNE can work with ethical and sustainability issues in interactions with different stakeholders, and through the support of relevant structures and processes. In the project we identified how norms and values can be transferred from corporate level to local markets and accepted there through a set of bridging capabilities.
Furthermore, the results shed further light on how MNEs can become drivers of sustainability and ethical issues on different markets by systematically working with certain groups of stakeholders, and institutional dimensions that were identified. Here, the project recognized differences between markets based upon cultural and structural factors and discusses how they can be managed by an MNE. Our publications have also stressed how MNEs have a responsibility and an opportunity to contribute to many of the Sustainable Development Goals identified by the United Nations. The publications have discussed several ways to achieve this.
Theoretically, our research particularly discusses the role of institutional theory in understanding how ethical aspects can be understood and accepted on markets with different cultural and structural characteristics. We also stress the importance of considering networking aspects and how close relationships to different cultural stakeholders can support sustainability commitments.
New research questions
The study has generated and shed light on several new research questions, such as:
• How can MNEs orchestrate changes in ecosystem at global level? What external and internal factors play a positive role in this process?
• We also see a need to delve deeper into the issue of market conflicts that could surface between MNEs’ principles and local norms (which we observed to some extent).
• What are the challenges in practice to combine economic and social goals for MNEs?
• What kind of transformation of MNEs’ business models and processes is needed to fully embrace the stakeholders’ interests and solve real societal problems in developing markets?
• What can be the new role for MNEs when they shift their focus from profit maximisation towards a more responsible business and considerations for the society?
• How can MNEs act proactively, and shape markets based on stronger ethical values? What are the roles of local stakeholders in this process?
Dissemination of research
The findings of the project have been disseminated through scientific peer-reviewed journal articles, a scientific book, conference presentations and publications, and seminar presentations. We have targeted journals that offer Open Access under the CCBY licence.
Our studies have in particular been presented at the following international academic conferences; EIBA (European International Business Academy), and CiMAR (Consortium for International Marketing Research). We have presented research findings both as competitive paper presentations but also in terms of panel participation and presentations. In the panels, practitioners and policy institutions have also joined the discussion. The results have also been presented at our home universities, and in discussions with students Our dissemination activities have therefore enabled us to disseminate research findings also to stakeholders such as companies, and policy institutions.
Research confirms a need for more empirical studies focusing on the ethical issues of MNEs’ activities in emerging markets. Our purpose was therefore to investigate how different institutionalised norms and behaviour as well as different types of stakeholders influence the firm’s ethical behaviour in emerging markets. This involved two levels of analysis: i) We analysed the interaction within the firm between corporate headquarters and subsidiary/country management, focusing on how the codes of conduct developed at HQ are transferred, explained, and disseminated in the local market. Moreover, what capabilities and routines can support this process. ii) We analysed the interactions between MNEs and stakeholders in the local market.
The implementation
We started the project and were successful in getting access to Swedish MNEs with operations in emerging markets. Two MNEs, operating in two different industries, gave their consent to participate in our study. This meant that we got access to MNEs operating in two different industries, which was our plan.
Interviews were conducted during 2019 and 2020 at the corporate offices in Stockholm. There were major changes in methodology and execution of the project due to the Pandemic and lockdowns. We were not able to travel, which delayed the data collection. However, as things were not improving, we had to change our method. Instead of face-to-face interviews, we had to settle for online interviews over Zoom or Teams. Although we were hesitant at first, we experienced that the digital mode facilitated the coordination and collaboration, both at headquarters and at partners/subsidiaries in the emerging markets.
In addition to conducting interviews, we have collected and analyzed written documents, including media reports, internal company plans and material on institutional policies. To manage the large amount of interview and secondary data, we have use NVIVO11, text
reduction and data analysis software.
The project’s main scientific results
The results from our research can be summarized in accordance with the following main areas:
One concerns how different ethical standpoints and sustainability codes are transferred and supported in the interactions between head office and different local actors – external as well as internal ones. The role of the internal organization was found to be of critical importance. The project shows how interactions between head office and subsidiaries can be further developed as well as how ethical norms and codes can be transferred, in order to increase the internal support for sustainability. Our results also show how an MNE can work with ethical and sustainability issues in interactions with different stakeholders, and through the support of relevant structures and processes. In the project we identified how norms and values can be transferred from corporate level to local markets and accepted there through a set of bridging capabilities.
Furthermore, the results shed further light on how MNEs can become drivers of sustainability and ethical issues on different markets by systematically working with certain groups of stakeholders, and institutional dimensions that were identified. Here, the project recognized differences between markets based upon cultural and structural factors and discusses how they can be managed by an MNE. Our publications have also stressed how MNEs have a responsibility and an opportunity to contribute to many of the Sustainable Development Goals identified by the United Nations. The publications have discussed several ways to achieve this.
Theoretically, our research particularly discusses the role of institutional theory in understanding how ethical aspects can be understood and accepted on markets with different cultural and structural characteristics. We also stress the importance of considering networking aspects and how close relationships to different cultural stakeholders can support sustainability commitments.
New research questions
The study has generated and shed light on several new research questions, such as:
• How can MNEs orchestrate changes in ecosystem at global level? What external and internal factors play a positive role in this process?
• We also see a need to delve deeper into the issue of market conflicts that could surface between MNEs’ principles and local norms (which we observed to some extent).
• What are the challenges in practice to combine economic and social goals for MNEs?
• What kind of transformation of MNEs’ business models and processes is needed to fully embrace the stakeholders’ interests and solve real societal problems in developing markets?
• What can be the new role for MNEs when they shift their focus from profit maximisation towards a more responsible business and considerations for the society?
• How can MNEs act proactively, and shape markets based on stronger ethical values? What are the roles of local stakeholders in this process?
Dissemination of research
The findings of the project have been disseminated through scientific peer-reviewed journal articles, a scientific book, conference presentations and publications, and seminar presentations. We have targeted journals that offer Open Access under the CCBY licence.
Our studies have in particular been presented at the following international academic conferences; EIBA (European International Business Academy), and CiMAR (Consortium for International Marketing Research). We have presented research findings both as competitive paper presentations but also in terms of panel participation and presentations. In the panels, practitioners and policy institutions have also joined the discussion. The results have also been presented at our home universities, and in discussions with students Our dissemination activities have therefore enabled us to disseminate research findings also to stakeholders such as companies, and policy institutions.