Analysis of drivers of CSR practices’ implementation among family firms in India

Abstract

Purpose Differences in institutional environment and governance structures pave the way for heterogeneous nature of different businesses; this, in turn, shapes the way various sections of society act toward each other enacting their responsibilities. Taking into account the unique institutional environment and governance structures of firms in developing economies, this paper aims to build on the “stakeholder theory” to address the issue of the implementation of corporate social responsibilities (CSR) practices in these economies, particularly India. This paper also aims to uncover the saliency (legitimacy and power) of different stakeholder groups on different aspects of a firm’s CSR activities. Further, as most of the firms in developing economies are family-run firms, the paper examines role of organizational leadership in shaping firms’ CSR strategies. Design/methodology/approach Integrating literature on “stakeholder theory” and CSR, this paper examines the implementation of different CSR practices by family-run firms in India. This paper uses survey research to collect data from 80 privately held family firms operating in apparel and textiles industry in India. The data have been collected from respondents holding top leadership positions in the sample firms. Findings The findings indicate that pressure from primary stakeholders (i.e. customers, employees and shareholders) and CSR-oriented leadership belief significantly influence organizational implementation of CSR practices, whereas pressure from secondary stakeholder (i.e. community groups and non-governmental organizations) was found to be insignificant. Further, CSR-oriented leadership belief moderated the relationship between primary stakeholder pressure and organizational implementation of CSR practices. The findings equally highlighted lower saliency of secondary stakeholder’s legitimacy and power because of weak institutional mechanisms, while on the other hand, the primary stakeholders exert considerable power because of the direct nature of transactional legitimacy, further accentuated by the governance structure in family firms. Originality/value This paper is among the very few studies that address the issue of CSR among family-run businesses in developing economies. Existing frameworks on analyzing firm’s implementation of CSR practices does not recognize the inherent heterogeneity among different stakeholder groups. Recognizing that different stakeholders have different levels of influence over firms, this paper categorized the stakeholders’ groups into primary and secondary to analyze their differential impact over firms. Additionally, given the critical role of leadership belief in the implementation of CSR practices, this paper analyzed the moderated effect of CSR-oriented leadership belief toward developing a more robust model of CSR implementation.