Why Do Some Countries Get CSR Sooner, and in Greater Quantity, than Others? The Political Economy of Corporate Responsibility and the Rise of Market Liberalism Across the OECD: 1977-2007

Abstract

How can we explain the historical and trans-national variation of Corporate Responsibility - business's voluntary engagement for social and environmental ends above legally mandated minimum standards - and how are we to understand this amorphous and essentially contested phenomenon? In this paper, I propose a political-economic explanation for the variation of Corporate Responsibility [Corporate Social Responsibility (CSR) and Corporate Citizenship]. I posit that Corporate Responsibility’s temporal and cross-national variation is linked to its function of legitimating economic liberalization and market liberalism. Both employers and state officials have an interest in compensating for the hardships of liberalization and the weakening of institutionalized social solidarity. One way in which they seek to legitimate the market vis-à-vis their 'stakeholders' and the electorate, and justify themselves vis-à-vis their own conscience, is through Corporate Responsibility. CSR inoculates firms against burdensome regulation and justifies a light regulatory touch; it facilitates business-friendly institutional reforms; it helps to satisfy employers' needs and compensate for market failures and deficiencies in public provision. But CSR cannot be understood in purely rational-instrumental let alone cynical terms. One of its most essential functions is to constitute businesspeople as responsible moral agents. Those in the engine rooms of contemporary capitalism - whether owners, managers, or employees - want to perceive themselves as serving the common good. This is true irrespective of capitalist 'varieties'. In the place of Milton Friedman's assertion that the business of business is business, employers chant: ‘Free us up so we can do some Corporate Responsibility! Using national Corporate Responsibility associations and their membership levels as a proxy for the institutionalization of CSR, this paper develops and tests a political-economic explanation for the temporal and trans-national variation of CSR. Using Corporate Responsibility associations, a novel proxy for the state of CSR in a given country at a given time, I hypothesize that Liberal Market Economies tend to 'get' CSR earlier, and get more of it, than Social / Coordinated Market economies. Furthermore, Corporate Responsibility co-evolves with the decline of institutionalized social solidarity, 'embedded liberalism' and 'organized capitalism'. Empirical evidence from more than twenty OECD countries and from the CSR 'leader' United Kingdom and ‘laggard’ Germany support these hypotheses and illustrate the co-evolution of CR and market liberalism during the past thirty years. In sum, this paper suggests that CR functions as a material and symbolic substitute for institutionalized forms of social solidarity.

Keywords: CSR, liberalization, market liberalism, quantity of CSR, timing of CSR, Varieties of Capitalism