1. Introduction
In an organization’s aspirations to internationalize, international joint ventures (IJVs) are considered pivotal and are therefore seen as a more preferable alternative in seeking ways to expand foreign markets [
1]. Multinational corporations (MNCs) have engaged in the usage of IJVs as a strategic alternative to successfully enter foreign markets by means of a more cooperative strategy in order to partially deal with the liability of foreignness faced within new markets [
2,
3]. The incorporation of stakeholders from the home and host markets often requires paying close attention to the local activities of MNCs as a result of reports on corrupt dealings, unacceptable conducts, and other factors [
4]. Failure to do so potentially results in further complex and vocal reactions to the behaviors of firms both locally and internationally.
For similar reasons, stakeholders and researchers have adopted corporate social responsibility (CSR) as a means of establishing the ethical practices and responsibilities of firms that operate in foreign markets [
5,
6]. The research on CSR has received much focus and has expanded over the past few years. It has progressed from a basic study of ethical behavior in foreign environments, to an evaluation of the means to yielding positive influences in the local environment. Eventually, this adds to the development of the local economy by enhancing the standard of living of the labor force, community members, and the society as a whole [
7]. According to Galbreath [
8], IJVs and CSR are suggested ways by which firms can become rooted in the local community or reduce undesirable views towards foreign firms. As stakeholder expectations of organizations to undertake CSR grow, foreign members of the IJVs should pay close attention to what engenders the implementation of local CSR practices. Nonetheless, in the case of an IJV, stakeholders that influence management decisions to adopt CSR practices are not apparent.
Existing research on CSR practices of multinational companies in host countries focuses on large developing countries such as China and other emerging markets. There is a general lack of focus on African countries such as Ghana [
9]. The literature on joint ventures in Ghana focuses on the formation and requirements of joint ventures and their capital structure, ignoring the research on CSR practice of joint ventures [
10,
11]. In fact, Ghana is among the fastest growing economies in Africa. Over the past decade, Ghana has had enormous Foreign Direct Investment (FDI) flowing into the country as a result of gaining the attention of large MNCs, especially from developed countries. This has been achieved through the introduction of the Ghana Investment Promotion Centre which has promoted and facilitated investment activities in the country. The favorable regulations concerning joint relationships with local firms have seen an increase in the creation of IJVs between foreign and local firms. As a developing country, Ghana is witnessing active strong collaborative relationships among both foreign and local organizations in the market. Ghana is also going through ethical management and CSR transformation processes. Therefore, there is a research gap, and we need to pay closer attention to the CSR practices of multinational companies in African countries (such as Ghana) that have active economies and a growing foreign interchange.
On the other hand, the existing literature on CRS practice mainly focused on the activities of MNCs and their subsidiaries [
12,
13]. The CRS practice of joint ventures has not been considered as a potential area of study. This is due to the ostensible supposition that studies on MNCs apply to IJVs as well. This also reveals a gap in the existing literature. In fact, a joint venture has a unique organizational structure [
4], and the CSR orientation involved may be different from that of a wholly owned subsidiary of a multinational company. Hence, existing research assumes that CSR practices based on MNC are also applicable to IJV, ignoring the differences caused by its structure and operation. Therefore, it is necessary to further examine the CSR practices of MNCs’ joint ventures in Ghana, which are economically active in African countries, in order to determine the special issues related to them.
To bridge the gaps identified, we seek to answer the following research question: which stakeholders have positive impacts on an IJV’s pursuit of CSR activities in Ghana? Investigating the influence of various stakeholders and the interaction among them helps MNCs to identify and understand the drivers of CSR for IJVs when venturing into new market environments such as Ghana. This study adds to existing literature on CSR as it gives a vivid evaluation of the impact of each stakeholder group in the IJV. Also, unlike others, our research is unique as it focuses on Ghana, a West African country with an active economy and a growing foreign interchange. Furthermore, this paper seeks to examine how the ownership structure of the IJV affects its pursuit of CSR. We compare IJV against wholly owned subsidiaries (WOSs) and attempt to determine whether there is a difference in the pursuit of CSR between the two types of companies. Using analysis of variance (ANOVA) techniques and regressions, we discovered that pressure from stakeholders drove CSR engagement. Notably, we found out that consumers, competitors, and the local community are influential stakeholders in stimulating CSR in IJVs. We also discovered that given the various ownership types of an IJV, the IJV with foreign dominant ownership would be a channel leading to good corporate citizenship. On the other hand, we found that when subsidiaries finally become WOS, they seem to focus more on acting responsibly and ethically so as to gain legitimacy in the market and establish stronger local relationships.
To achieve the objectives of this study, the structure will consist of the following parts: The next section presents a literature review on CSR and the stakeholder theory, and then the study will discuss the hypotheses. This is then followed by an outline of the methodology, then a presentation of the findings. This study will proceed to discuss the findings and then conclude with a summary and point out the managerial implications of the study.
2. Theoretical Background
Organizations do not operate in a vacuum. In the course of operation, they interact with various entities, which either impact their actions or are impacted by their activities. These entities are termed as stakeholders. Freeman [
14] (p. 46) developed the stakeholder theory, he defined stakeholder as “any group or individual that may influence or be affected by the realization of organizational goals.” Over the past few decades, many researchers have conducted extensive research based on Freeman’s views. According to the stakeholder theory, the continuity and stability of an organization is largely dependent on its capacity to create wealth, value, or satisfaction for its stakeholders [
15,
16]. The entities whose interaction with the organization are critical to and directly affect the fulfilment of its mission are referred to as primary stakeholders. They possibly include (1) local government, (2) investors, (3) suppliers, (4) internal managers and employees, and (5) consumers [
16,
17]. On the other hand, secondary stakeholders constitute those political and social agents who aid the organization in pursuing its mission through their endorsement of business operations. They perhaps include (1) local community, (2) local media, (3) non-governmental organizations (NGOs), and (4) competitors [
16,
18].
The underlying concept of the stakeholder theory is that organizations produce externalities which impact various stakeholder groups. According to Sarkis et al. [
19], these externalities account for the stakeholder pressures that organizations face. These pressures are exerted to reduce the negative impacts and increase those that are positive. Likewise, multinational enterprises face perpetual pressures from local government, non-governmental organizations, employees, and local community groups. This in turn necessitates the incorporation of their concerns and demands into organizational strategies and pursuits, allowing the MNCs’ subsidiaries, particularly IJVs, to effectively carry out their business activities in the foreign market. Through foreign direct investment (FDI), MNCs venture into foreign markets, and unlike local firms, their relationship with stakeholders is essential for the subsidiary, especially the foreign parent of the IJV to surmount the institutional dilemmas it suffers in the foreign market [
20].
Institutions are surrounded by systems which influence organizational activities and their behavior towards society [
21]. There are institutional environments; firms need to conform to in their pursuit of gaining social acceptability and legitimacy [
22]. Institutional theory suggests that there are three categories of institutional isomorphic changes [
23]. These are (I) coercive isomorphism, caused by pressure applied by influential firms, (II) mimetic isomorphism, caused by uncertainties in the environment which push firms to emulate other successful competitors in the same industry, and (III) normative isomorphism, as a result of professionalization. Scott [
21] further extended the three aspects into regulatory, cognitive, and normative domains. To apply the aforementioned viewpoints to the field of international business, multinational corporations may be required to conform to institutional factors in order to minimize uncertainty and ambiguity in the local market. The decision-making process of MNCs needs to pay greater attention to the institutional variations, in terms of the regulatory, normative, and cognitive domains, between the host and home countries. Campbell et al. [
24] suggests that the larger the distance between the host and home countries, the organization will suffer more liabilities of foreignness (for example, unfamiliarity and discrimination risk in the foreign market), leading to an increase in their need to obtain legitimacy in the local market. According to the authors of Reference [
25], MNCs especially encounter a number of hardships proceeding from the implication of normative and cognitive institutions. For firms to surmount these hardships, they will need to adopt CSR practices which have proved to be an effective means of overcoming the institutional distance [
13,
26].
Similarly, the foreign entrants’ structures and CSR practices are generally affected by the institutional processes emanating from pressure from influential local entities. These interactions include relations with other local firms in the foreign market, the expertise of internal members and their perspective of CSR, and the value and tendency of local community members [
27], all of which encompasses local stakeholders’ expectations. Hence, CSR management and direction must be distinguished according to each foreign market and the various stakeholder demands. Local legitimacy and stakeholders’ acceptance may be obtained by foreign entrants through the adaptation of their CSR policies and structures subject to the prevalent conditions in each environment. Local legitimacy is important for the sustenance of a business and is gained by conforming to the belief systems and principles of local stakeholder groups [
28]. Following this line of reasoning, there is a strong link between stakeholders’ demands and institutional pressures [
28,
29], therefore foreign entrants need to engage in proactive stakeholder dialogues in order to successfully execute CSR and thus become entrenched in host economies.
According to Udayasankar [
30], CSR engagement is customarily inspired by the various demands of stakeholders. In line with the development of the stakeholder approach, the authors of Reference [
31] suggest that the restructuring of CSR from a stakeholder’s viewpoint opens up new ways of evaluating CSR. The majority of organizations, inclusive of MNCs, operate by intending to create high value for shareholders by conducting activities that maximize profits. Nonetheless, firms who want to create corporate value are often obliged to acknowledge the views of other interest groups on ethical matters and pursue socially responsible activities. In this way, it will transcend legal and economic requirements in the environment where they operate. This particularly holds true for IJVs in that control and leadership sharing structures allow for stakeholder effects to be varied, which transcends a WOS as regards direct engagements within the local environment. Therefore, MNCs may incline, but for IJVs, require taking on philanthropic or ethical obligations towards each stakeholder in host countries and expecting to be society-oriented, undertaking voluntary activities to enhance the general welfare of the local community [
32].
6. Discussion
This research provides a detailed examination of how various stakeholders and the ownership structure impact the level of CSR in IJVs. Consumers are certainly key stakeholders that influence CSR behavior, comparable to prior CSR research [
31]. When consumers reckon that a firm is acting in an undesirable manner, particularly when they have easy access to readily available and unrestricted information, they tend to exert pressure on that firm. They also react similarly when they have access to a large number of alternative sources to choose from. Firms can increase the loyalty of consumers, resulting in consumers becoming ambassadors of the company when firms position themselves as responsible members of society [
75]. This study confirms that the role of consumers is principal regarding a company’s direction and its choice to actively undertake CSR activities in the local market.
Internal managers and employees were also predicted as influential stakeholders and this hypothesis was partially supported, as per our results. The role of internal managers and employees is significant in Model 1, but insignificant in Model 3. In Model 4, we conducted further tests to find the reason for the insignificance of their role and we find that this occurred due to competitors’ pressure. Although an IJV is essentially two or more companies, there might be the instance where employees may lack the desire to implement ethical and responsible behavior. However, they might respond to corporate social responsibility in the face of pressure from fierce competition. This may be due to the fact that in an IJV, employees associate themselves with their parent organization rather than the IJV itself, and act mainly in the competitive environment [
4].
The next stakeholder our studies found to be influential on IJV CSR was competitors as it displayed statistical significance. A firm would not want to give its competitors any advantage over itself and therefore, if a competitor practices CSR, the firm (including IJVs) would respond in a like manner. This act of emulation propels the growth of CSR, making sure that the CSR practices of a firm cannot emerge as a distinguishing factor in the local market, according to Laudal [
50]. Likewise, Bondy et al. [
51] advance that MNCs are likely to recognize their current CSR definitions as well as practices and to analyze competitor behavior in order to retain market share by tracking the CSR strategies of the competitor.
Another influential stakeholder on the CSR of IJVs was local community, as we found support for its prediction in our studies. In Ghana, local communities put pressure on organizations, which operate within the community, to act ethically and responsibly as well as to pay attention to the needs of the community. This is consistent with studies carried out by Amponsah-Tawiah and Dartey-Baah [
76], which suggested that CSR in some industries (for example in the mining industry) began as a reactive measure to the complaints and demands of community members and have now evolved into a proactive strategy of engagement. This infers that firms, including IJVs, now design strategies that incorporate the concerns of the local community where they operate, being suggestive of an influence of the local community on the firm’s behavior and decisions.
The Government’s role in predicting IJVs’ CSR activities was not supported in our studies. It remained insignificant in all models, which is suggestive of the government’s choice to stimulate FDI by creating open doors for MNCs, without loading IJVs with too much pressure regarding CSR. This is consistent with the findings by Park and Cave [
4] that put forward the argument that though regulations exist and are generally observed, there seems to be less sternness regarding the conditions of establishment and the collaboration between the foreign and local firms to participate in CSR. They also state that while governments in developing countries may require lower levels of CSR, MNCs may decide to pursue some level of CSR activities, thereby annulling the obligation of governments’ need to interfere and enforce mandatory ethical actions. Although there are some laws regarding CSR in Ghana, these laws are not enforced by regulatory agencies, thereby leading to CSR mostly being a voluntary action [
77].
Suppliers remained insignificant in both models, hence unsupported in our studies. Some research [
4] suggests a negative relationship between CSR and suppliers. However, our findings suggest that suppliers have insignificant influence on the CSR activities of IJVs. According to studies carried out by Williams et al. [
78], the majority of MNCs in Ghana established working relationships with local suppliers primarily to have easy access to inputs and local production techniques. An additional reason was in order to build the capacity of firms as well as to create market opportunities for actors along the production chain within the firms. In Ghana, it seems that most suppliers generally do not pay attention to the CSR activities of joint ventures, nor are they inclined to put pressure on organizations dealing with them to take responsible or ethical actions. The suppliers tend to focus ultimately on maximizing sales and yielding maximum profits [
79,
80]. Furthermore, with the growing competitiveness among suppliers in the Ghanaian market, business survival and continuity are of paramount interest as opposed to monitoring and influencing the activities of IJVs.
Investors were also unsupported in our study as it showed insignificance in all models. This result infers that investors in IJVs are not so much interested in how ethical the IJV is or whether it engages in CSR, but instead they are more focused on prospective earnings and the potential to generate profit. Most of the developed countries are where philanthropic culture is valued [
17], which might not be the case in Ghana. Similar to the ideology of investors in some developing countries, Ghanaian investors are generally more inclined to creating wealth for their children and families only and seldom participate in philanthropy. This may well be a direct result of the local environment where ethical and social needs, as well as philanthropy, are viewed as trivial to investors as compared to the creation of wealth (considering the limited lifespan of IJVs).
According to the results of our study, media as a stakeholder displayed a lack of significance, inferring that it is not influential on the CSR activities of IJVs. The media is often perceived as extremely important when it comes to negative reviews and its ability to control consumers’ perception about a firm or its products and services. The insignificance of media in our study possibly derives its reasoning from the structure of the IJV itself. According to O’Riordan and Fairbrass [
52], they point out that because the local media is generally interested in large MNCs and corporate powerhouses, it is less likely to establish big cases against IJVs which are mostly smaller in size. Our research further identified that the influence of media is not significant. This is because Ghana’s joint ventures are inherently small and therefore can avoid media attention or censorship. Another reason may be that the media is not professional and powerful enough, so its impact on IJVs is limited.
Finally, to our surprise, we found that NGOs are an uninfluential stakeholder in predicting an IJV’s CSR activities. This contradicts existing research [
81] which suggests that NGOs serve as civil society representatives who promote MNCs to meet societal expectations for beneficial strategies which will impact their transaction costs and foreign operational efficiency. It is imperative to note the importance of NGOs in social development. The insignificance of NGOs in our study could be that NGOs in Ghana are generally undeveloped and too small; or, it could be that they mostly liaise with companies for funds to engage in their activities. Thus, in the main, they do not actively exert pressure on firms, including IJVs, to be socially responsible but rather act as a form of conduit for firms to fulfill their expectations from society.
The second phase of our research examined how CSR activities relate to the structure of the IJV. In this paper, IJVs are categorized into three types: local parent majority ownership, equally shared ownership, and foreign parent majority ownership. Our results, as highlighted in
Table 4, are in line with our expectations that IJVs with foreign majority ownership will pursue the highest level of CSR, followed by those with equally shared ownership, and the local parent majority ownership recording the least. Hence, H10 was supported in our study. Because of the level of advancement and the higher level of standards required in the home markets where the foreign parent comes from, the foreign parent is more accustomed to the practice of CSR, and hence its active pursuit of CSR in the host market. Also, we see IJVs with local dominant ownership engage in CSR at a much lower degree. From our data, we realized that the size of IJVs with local majority ownership was relatively smaller compared to IJVs with foreign majority ownership. This could mean a strain on the company’s profits and therefore potentially limit its ability to actively engage in CSR.
The second phase of this study also compared IJVs to WOSs in terms of CSR practices. We expected WOSs, as compared to IJVs, to pursue higher levels of CSR in the local market. From
Table 5, we find support for this hypothesis as we found significant differences in all but two items of the CSR scale. That is to say that there were differences between IJVs and WOSs in 10 items. The first half of the items used in measuring CSR are generally connected with code of conduct, whist the second half is linked to contributions made in the short-term and philanthropic efforts or important long-term community development investments. Research by Amponsah-Tawiah and Dartey-Baah [
76] indicates that MNCs pioneered CSR initiatives in Ghana have been instrumental in the country’s social development. This means that not only do MNCs serve as a vehicle for the creation of an ethical atmosphere, but they also actively pursue CSR activities as in the case of Ghana.
7. Conclusions
As one of the fastest-growing economies in Africa, Ghana actively promotes the investment activities of MNCs in the country and is undergoing a process of ethical management and CSR transformation. Existing MNC-based CSR research focuses on large developing countries and ignores African countries such as Ghana; in addition, existing research lacks attention to the CSR practices of IJVs. Since the institutional environment in Ghana is different from that of developed countries, at the same time, an IJV has a unique organizational structure different from a WOS of a MNC, which makes the CSR practices of IJVs in emerging developing countries such as Ghana important and worthy of study.
Initially, our study began by assessing how impactful stakeholders are on the CSR practices of IJVs in a developing market. Then, it continued to find possible structural differences in the IJV and the effects of ownership on its adoption of CSR strategies. Finally, we compared IJVs to WOSs in terms of CSR. We found that IJVs are influenced by significantly positive pressures exerted by consumers, competitors, and the local community. We see that from a Ghanaian viewpoint, in that not every stakeholder has a significant influence on the activities of the joint venture. In Ghana, the influence of the government, suppliers, investors, media, and NGOs on the CSR activities of joint ventures is not significant. We examined the reasons for these results in the discussion section. The structure analysis result revealed that IJVs with foreign majority ownership pursue CSR at the highest rate, followed by the equal ownership, and the local majority ownership having the least rate. Comparing IJVs against WOSs, WOSs pursued CSR at a higher rate.
Our study makes further contributions to stakeholder theory by revealing the main elements stimulating CSR activities in IJVs. Stakeholders in a given business environment can apply enormous pressure on the CSR activities of a firm by exercising direct control over an organization’s resource allocation. Stakeholders’ influence could be a significant institutional setting which IJVs operate in. Therefore, what stimulates an IJV to adopt CSR practices can be linked to the requirements and concern of all local stakeholders involved. To this end, it has important research value to understand the impact of stakeholders on the CSR activities of IJV in a specific region (such as Ghana), identify which stakeholders have a significant influence and which stakeholders have no significant influence, and analyze the reasons leading to these results. Along these lines of thinking, our research has provided support for the host country to promote the development of IJV-related stakeholders. In addition, our research has contributed to the literature related to joint ventures. Currently, IJVs have become a strategy to curb the basic problems faced by MNCs (such as foreign responsibilities and insufficient market knowledge). Our study establishes a potential framework for any MNCs exploring new markets and looking to set up an IJV. This research can help multinational companies determine the appropriate organizational structure for joint ventures and improve their relationships with stakeholders by implementing CSR strategies.
This study is not without some limitations. First and foremost, our research was carried out in a single geographical location, hence a possible limitation to how universally applicable the results can be. Pressure from stakeholders and environmental issues resulting in decreasing or intensifying pressure on CSR may differ compared to other countries and the potential difference could be considerable. Additionally, this study does not differentiate between subsidiary age and size, which may play roles in determining the firm’s orientation toward CSR. The subsidiary’s age and size variations may be linked to the energy levels channeled into the pursuit of CSR as they pursue market expansion or may entail other facets like codes of ethics. Equally, this research did not consider industry variations while examining IJVs, which could reveal a greater understanding of how stakeholders influence IJVs’ CSR activities in different industries.