The Influence of National Culture on Corporate Social Responsibility Engagement. Impacts on Corruption and Stakeholder Perceptions

TABLE OF CONTENTS

CHAPTER ONE INTRODUCTION
1.0 Overview
1.1 Context of the study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Research Questions, Aims and Objectives
1.4.1 Research Questions
1.4.2 Research Aims
1.4.3 Research Objectives
1.5 Scope of the study
1.5.1 Geographical scope
1.5.2 Subject scope
1.6 Significance of the study
1.7 Outline of the study

CHAPTER TWO LITERATURE REVIEW
PART (A): CORPORATE SOCIAL RESPONSIBILITY AND THE INSURANCE INDUSTRY
2.0 Introduction
2.1 Historical background, Definitions and Conceptualisation of CSR
2.1.1 Historical background of CSR
2.1.2 Definition and Conceptualisation of CSR
2.1.2A General definitions and Conceptualisation of CSR
2.1.2B Adopted definition of CSR for this study
2.1.3 Layers of CSR
2.1.4 Motivation/Drivers of CSR engagement
2.1.5 Communicating CSR initiatives
2.1.6 Benefits of engaging in CSR
2.1.7 Scepticisms of CSR
2.1.8 Summary of key contributors to CSR
2.2 CSR and the Insurance Industry
2.2.1 CSR in the international industry
2.2.2 CSR in Uganda
PART (B): NATIONAL CULTURE AND CORRUPTION
2.3 National Culture
2.3.1 General perspectives and definitions of culture
2.3.2 National culture and CSR
2.3.3 Hofstede cultural dimensions-Their implications and empirical evaluation
2.3.4 Relationship between Hofstede’s cultural dimensions and CSR
2.3.5 Culture in the Ugandan context- Historical perspectives and position on Hofstede’s dimensions
2.4 Linking CSR with Corruption
2.4.1 General perception and definition of corruption
2.4.2 Adopted definition of corruption for this study
2.4.3 Impact of CSR on corruption
2.4.5 National culture and the perception of corruption-Hofstede dimensions

CHAPTER THREE THEORETICAL PERSPECTIVES, RATIONALE, RESEARCH FRAMEWORK AND HYPOTHESES DEVELOPMENT
3.0 Introduction
3.1 Theoretical perspectives
3.1.1 Stakeholder theory
3.1.2 Characterization of Stakeholders
3.1.3 Stakeholder view and CSR dimensions
3.2 Rationale of the study
3.3 Proposed theoretical framework
3.4 Hypotheses Development
3.4.1 National culture and CSR
3.4.2 National culture and corruption
3.4.3 CSR and corruption
3.4.4 Stakeholder perception of CSR

CHAPTER FOUR METHODOLOGY
4.0 Introduction
4.1 Research process
4.2 Research philosophy
4.2.1 Ontological perspectives
4.2.2 Epistemological perspectives
4.2.4 Ontological and Epistemological issues related with this study
4.2.5 Research Strategy
4.4 Research Design
4.5 Time horizon
4.6 Study Population
4.7 Sampling procedure
4.8 Sample Size
4.9 Sampling Techniques
4.9.1 Purposive Sampling Technique
4.9.2 Expert Sampling Technique
4.9.3 Simple Random Sampling
4.10 Research ethical considerations

CHAPTER FIVE DATA COLLECTION AND ANALYSIS PROCEDURES
5.0 Data collection methods
5.1 Mixed Methods approach
5.2 Sources of data
5.2.1 Interview design
5.2.2 Researcher’s role during Interviews
5.2.3 Questionnaire design
5.2.4 Content/Archival Analysis/Review
5.3 Data collection techniques
5.4 Data Analysis and Procedures
5.4.1 Quantitative Data Analysis
5.4.2 Qualitative data analysis
5.5 Reliability, validity and transferability issues

CHAPTER SIX EMPIRICAL ANALYSIS AND PRESENTATION OF RESEARCH FINDINGS
6.0 Introduction
6.1 CSR definitions among insurance companies in Uganda
6.2 Key Observations-CSR awareness and Conceptualisation among Insurance companies in Uganda
6.3 Motivation for CSR among Insurance companies in Uganda
6.4 CSR Practices among Insurance Companies in Uganda
6.4.1 Community-Related CSR Practices among Uganda Insurance Companies
6.4.2 Employee-Related CSR Practices
6.4.3 Environment-Related CSR Activities
6.5 Stakeholders’ perceptions of a socially responsible insurance company (INCO.)
6.7 Insurance Managers’ perceptions of irresponsible corporate behaviour or corruption in the Uganda insurance industry
6.8 Uganda Insurance Companies’ financial commitment to CSR

CHAPTER 7 DISCUSSION
7.0 Introduction
7.1 Hypotheses with significant relationships
7.2 Hypotheses with non-significant relationships
7.2.1 The Ugandan culture will have a significant and negative influence on managers’ CSR decisions and engagement
7.2.2 Low ethical standards will be observed among Uganda insurance companies.
7.2.3 CSR engagement will not actively and positively prevent irresponsible corporate behaviours among Uganda insurance companies.
7.3 Socio-Demographic characteristics of Identifiable Stakeholders
7.3.1 Gender characteristics of Identifiable Stakeholders
7.3.2 Age Structure of Identifiable Stakeholder Respondents
7.3.3 Educational Background of stakeholder Respondents
7.3.4 Commission and Bribery in Insurance business

CHAPTER 8 CONCLUSION AND RECOMMENDATIONS
8.1 Conclusion
8.2 Contributions of the study
8.2.1 Academic contribution
8.2.2 Contribution to practice
8.3 Recommendations
8.3.1 Resources allocation for CSR
8.3.2 Mitigation of irresponsible behaviours among insurance companies in Uganda
8.3.3 Supporting motor insurance third party claimants (Motor accident victims) through CSR
8.3.4 Consumer demographics
8.3.5 Strategic philanthropy
8.4 Limitations of the study
8.4.1 Methodological limitations
8.4.2 Resources limitations
8.4.3 Technical limitations
8.5 Areas for future research

References

APPENDICES

Abstract

Background: The Corporate world is increasingly facing the notion of Corporate Social Responsibility (CSR) wherever it turns nowadays, and on a wide range of issues, businesses are encouraged to behave socially responsibly. This study follows the popular assumption that CSR is influenced by national culture and attempts to put this theory to the test by means of empirical research.

Problem: Cross culturally, previous empirical studies on the influence of national culture on CSR, have revealed inconsistent results, prompting a need for further research.

Purpose: This study was conducted to address the question of how national culture influences CSR, its impact on corruption, and the stakeholder perception of firms’ behaviours among insurance companies in Uganda. Although numerous materials regarding CSR were locally available, none was explicit about the topic of this study. Thus, prompting the researcher to select the insurance sector as a focus for this study.

Method: During data collection, the study adopted a mixed methods approach. The validated 85 respondents (57%) of the questionnaire survey were the identifiable stakeholders. 5 Insurance companies and 3 regulatory and governance Insurance bodies including; IRA, UIA and UII, were also considered for the study. Semi-structured interviews were used to gather detailed information, and to fulfil the intended purpose of this study.

Findings: The study revealed that most Uganda insurance companies, are engaged in various CSR practices. However, some confuse marketing activities to be CSR. The stakeholders’ awareness of CSR is high, but there is some confusion as to what exactly CSR means. Communication of CSR through advertisements and promotional events, has resulted in some stakeholders perceiving it as more of a marketing tool, than strategic philanthropy.

Conclusion: The study revealed an increasing focus both by insurance companies on CSR, and by society on the actions and behaviours of businesses. However,the study also revealed that insurance companies use CSR practices to convince or even mislead stakeholders that the activities of the firm are carried out within the framework set by society. Ultimately, most insurance companies were not willing to fully reveal their CSR budgets, and by failing to prioritise transparency and the wishes of their stakeholders, organisations are reducing the end amount that is sent to cause, hence, negating the purpose of their CSR function.

DEDICATION

To my family for their love, prayers, and relentless support over the years, and particularly, during this academic journey.

ACKNOWLEDGEMENT

Firstly, I wish to thank the Almighty God for seeing me through all the huddles and circumstances during this academic journey.

I would like to express the deepest gratitude to my supervisor Dr. David Webb, who is a wonderful mentor and coach. He has enlightened me with a lot of insights throughout this humbling journey. He has guided me through numerous obstacles and has challenged me to excel in my study. He is professional, fair, reasonable, and extremely efficient. I could not have completed the work without the kindest guidance and relentless motivation from Dr. Webb. Thank you so much David from the bottom of my heart.

I would also like to thank Prof. Vikas Kumar, the Program lead and module leader for his invaluable comments, support and guidance especially during our classroom study sessions. Thank you Vikas.

My special thanks go to my beloved Partner Tesi and our children Robin and Ruby, for their enduring love, kindness, patience and understanding throughout this study. I am also grateful to my parents for their prayers, support and motivation.

Extended thanks go to Mr. Edward Nambafu for all the support given during the research study. Thank you, Edward, for being a loving and supportive brother. Let me take this opportunity to thank the Managers of all the selected Insurance Companies, Officers of UIA, IRA and UII for their cooperation and support during this study.

Finally, I recognize all those whose names are not mentioned in here but contributed in one way or another towards the successful completion of my course.

LIST OF TABLES

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LIST OF FIGURES

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LIST OF ACRONYMS

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GLOSSARY

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CHAPTER ONE INTRODUCTION

1.0 Overview

This chapter introduces the study context and environment, it explains why the insurance industry, national culture, and corporate social responsibility (CSR) were chosen as the topics of this study. As risk managers and investors, insurance companies are uniquely positioned to address social, environmental and governance challenges including; climate change and mitigation of corrupt practices.

The study further introduces the importance and intended contribution of the results of the study for corporate businesses, and their stakeholders. Basically, the author highlights the research questions, aims and objectives, as well as, the outline of the chapters and sections to be used for this research study.

1.1 Context of the study

Insurance companies operate as financial intermediaries in society, they price and value financial assets, monitor borrowers and manage financial risks, especially in circumstances and situations that people usually try to avoid (Greenbaum and Thakor, 2007). Moreover, by performing these functions, insurance companies impact on society, and in doing so, they usually require firms and households to adopt certain behaviours, to reduce the risk of moral hazard and adverse selection (Scott, 2003). Similarly, it is suggested that financial institutions play an important and positive role in economic development (Beck et al., 2010; Beck and Levine, 2004). Thus, as economic development is directly linked to human, social and environmental development, insurance companies are very likely to impact on sustainable development of other firms and households (Scholtens, 2006).

At the firm level, Elkington (1998) argues that sustainable development translates into Corporate social responsibility (CSR), and as such, due to the impact businesses have on society, firms including insurance companies have increasingly been called upon to adopt strategies beyond the financial scope of their operations, and to consider their social and environmental impact on society (Carrol, 1991; Carrol and Shabana, 2010). In response, most leading firms in diverse industries have demonstrated increased interest in CSR, and most recently, they have advanced their commitment for implementing CSR strategies (Penn, 2008). In fact, firms have already begun to announce their commitment to the implementation of environmental protection approaches aimed at reducing greenhouse gas emissions (Beasley, 2008). Likewise, large global insurance firms’ websites present diverse CSR programs (Tang and Li, 2009). From the stakeholders’ perspective, some studies have suggested that firms would eagerly respond to public concerns regarding their operations, and engage in socially responsible practices (Lantos, 2001). However, other than CSR ratings which are usually generic and done by specialised agencies, so far, there is no proper framework to assess firms’ CSR engagement (Chatterji and Levine, 2008; Chatterji et al., 2009). Nevertheless, based on the insight gained by the researcher from this study’s review of the literature, the study found it worthy of more empirical research effort to establish the relationship between national culture, CSR, and corruption, and to evaluate their impact on the firm.

To achieve its objectives, this study will adopt the Hofstede cultural dimensions model which has been used widely on a global scale, and hopefully it will help to answer this study’s research questions presented in section 1.4 of this paper. Ultimately, the results of this study, will enable MNCs and SMEs particularly in Uganda to value the importance of engaging in CSR activities (Turyakira, 2012), and hopefully, enable them to effectively allocate organisational resources, and to maximise their return on investment (Barnett, 2007).

1.2 Statement of the problem

As globalization continues to increase, the concern for the future of Africa and its quest for sustainable development of its nations, has become an important topic for businesses, and global agencies such as; United Nations (UN) and the World Bank. Importantly, this problem was robustly emphasised in the Brundtland Report titled “Our Common Future” (Brundtland, 1987). The report highlighted the diminishing capacity for the governments’ ability to provide for the whole society. One of the key advocacies from the Brundtland Report, was for improved governance and capacity-building, the pursuit of peace and security, investment in people, economic growth and poverty reduction, as well as, increased and fairer trade, which is one of the core principles of corporate governance.

Additionally, the increasing inability for governments to pursue this agenda has brought to the limelight, the crucial role that businesses can play in this transformation process, with much of the contributions of businesses capable of being framed in terms of CSR (Visser, 2006). The argument has been and still rages that business and society are not mutually exclusive (Carroll, 1979). In fact, the two phenomena are so knitted together, and therefore, are inseparable although, there are suggestions across studies which suggest that CSR could serve as an efficient tool to strengthen this relationship.

1.3 Purpose of the study

The purpose of this study was to further the CSR research agenda by bringing together multiple perspectives. It examined the influence of national culture on CSR, and its impact on corruption. The study also needed to examine the relationship between culture and corruption, and relatively evaluated individual stakeholder perceptions of CSR among insurance firms in Uganda.

1.4 Research Questions, Aims and Objectives

Based on the above analysis on the growing importance of the CSR phenomenon and its possible impact on the sustainability and competitive advantage of the insurance industry in Uganda, the following are this study’s research questions, aims and objectives:

1.4.1 Research Questions

This study sets out to investigate the influence of national culture on CSR engagement, the impact CSR has on corruption, as well as individual stakeholder perceptions of CSR among the selected insurance companies in Uganda. The study employs a mixed method approach, and it is guided by the following research questions:

RQ1: Does national culture influence CSR engagement among insurance companies in Uganda?

RQ2: To what extent does CSR positively or negatively impact on the levels and perceptions of corruption among insurance companies in Uganda?

RQ3 : Does a firm’s CSR engagement influence stakeholders’ perception of its business practices and behaviours among insurance companies in Uganda?

1.4.2 Research Aims

This study is aimed at examining the influence of national culture on CSR engagement, the impact CSR has on corruption, as well as stakeholder perceptions of CSR in the insurance industry. This will enable the Researcher to analyse managerial intentions and response, and the way this response has been translated into action and implementation.

1.4.3 Research Objectives

In general, the main goal of this study was to examine the influence of national culture on CSR, a phenomenon that has been widely discussed in the academic field (Ringov & Zollo, 2007). The study also examined the impact of CSR on corruption, as well as individual stakeholder perceptions of CSR among insurance companies in Uganda.

Despite the variety of approaches to the phenomena of national culture, corruption and CSR, there are no general definitions that are commonly considered to be valid for either of the three concepts (Francis and Mishra, 2009).

Additionally, there is no general theory that can be used for this study and there will be no attempt at providing definitions. However, to conduct this study, review of the theoretical perspectives will be needed, and the proposed research framework will be presented. To create this framework for the subsequent empirical research, a variety of concepts from prominent publications will be chosen to represent CSR, national culture, as well as corruption and stakeholder perceptions of CSR. It is consequently not the goal to draw conclusions on either CSR, national culture or corruption.

The task of coming up with a unified theory is beyond this study and will surely keep researchers occupied for the next decades. Instead, the focus of this paper will be limited to the influence of national culture on CSR engagement, the impact CSR has on Corruption, as well as the individual stakeholder perceptions of CSR. This will be based on a proposed research framework that only represents a small margin of the discussions on the three concepts.

1.5 Scope of the study

1.5.1 Geographical scope

The study was carried out in the Uganda’s capital city, Kampala, where all the selected Insurance firms, and the Uganda insurance bodies namely; IRA, UII, and UIA are headquartered. The study is limited largely clustered in different regions of Uganda, and strategically headquartered in the Uganda’s capital city, Kampala.

1.5.2 Subject scope

The study was limited to the CSR activities of the selected Insurance firms. It covered the relationship between the phenomena of CSR, national culture and corruption, supported by Hofstede cultural dimensions and cultural studies (Hofstede 1980, 1983, 1991 1998, 2001, 2005, 2010, 2011 and 2013). The study further examined stakeholders’ perceptions of CSR, and how it impacts on the firm’s corporate decisions particularly related to its stakeholder needs in the society. The identifiable stakeholders considered for this study were; managers, customers, employees and some members of the communities where the selected insurance firms operate and transact their businesses.

1.6 Significance of the study

The study was significant for diverse reasons. First, it helped to establish the influence and relationship between CSR, national culture and corruption, and, empirically highlighted individual stakeholders’ perceptions of CSR, and their impact on the firms’ business practices and behaviour particularly in the Uganda industry domain. Scholarly, literature reviewed suggests that most of the prior research work done that is related to CSR, is predominantly US-centric and Western European focused (Katamba, 2010), echoed by (Matten and Moon, 2008). Thus, this is the gap that this study addresses in a service industry context. Ultimately, the results of this study, will enable MNCs and SMEs particularly in Uganda, to value the importance of engaging in CSR activities (Turyakira, 2012), and hopefully, enable them to effectively allocate CSR resources, and maximise their return on investment (Barnett, 2007).

1.7 Outline of the study

There will be eight chapters in this report and the outline is shown in the figure 1.7. Chapter One introduces the study and provides an overview of the report and the research aims, objectives and problems. It will also briefly introduce the importance of CSR, intended contribution and the insurance industry. Chapter Two will incorporate a review of relevant literature of the key concept of CSR, and its importance, initiatives, and its motivation. It will also investigate the benefits of CSR, and scepticisms from scholars. Chapter Three will incorporate theoretical perspectives of the main topics of the study, proposed research framework, and research hypotheses will also be developed. These will be somehow linked to the relevant literature reviewed in chapter two. Chapter Four will discuss the research methodology, strategy, philosophy, and the analytical tools to be used. Chapter Five will describe and report the survey findings and explain how the learning from the study survey will be used to shape the main study. Chapter six will present and report empirical findings from the study, chapter seven will analyse and discuss the research findings. Lastly, chapter eight will analyse the main study limitations and areas for future research in this field of study.

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Source: Author’s own construct (2017)

CHAPTER TWO LITERATURE REVIEW

PART (A):CORPORATE SOCIAL RESPONSIBILITY AND THE INSURANCE INDUSTRY

2.0 Introduction

This chapter is made up of two parts. Part (A) provides a selection of literature relevant to the concept of Corporate Social Responsibility (CSR) and the insurance industry. It starts by giving a historical background of CSR and provides some definitions. It moves further to examine aspects like the Layers of CSR, CSR motivation and management. Some values and benefits of CSR, and the scepticisms related to the concept are also discussed. It concludes by reviewing CSR in the insurance industry. Part (B) separately, examines issues such as; national culture, and its related concepts and models such as; Hofstede’s cultural onion diagram and cultural dimensions, the influence of national culture on CSR, as well as the strong relations between CSR, culture and corruption. Significantly, empirical studies of the above concepts are discussed to identify the research gap for this study.

2.1 Historical background, Definitions and Conceptualisation of CSR

2.1.1 Historical background of CSR

The concept of Corporate Social Responsibility (CSR) emerged in the latter half of the 20th century when some scholars explored the idea that companies should be responsible not only to shareholders, but also to the public (Dodd, 1932). CSR postulates that business is part of society (Freeman, 1984), and it should therefore manage its operations in a manner that co-exists with the needs of the society’s various stakeholders (Freeman, 1999; Lantos, 2001; Freeman et al., 2004). According to Bowen (2013), CSR is an obligation for businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of society. Despite the existence of literature regarding the concept of CSR, some scholars have suggested that Bowen’s Social Responsibilities of the Businessman (Bowen, 1953), is the first work to discuss the relationship between corporations and society (Carroll, 1979; Wartick and Cochran, 1985). However, according to Lee (2008, p.53-73), the early roots of CSR can be traced back to 1917, when Henry Ford announced that the objective of the Ford Motor company was; “to do as much as possible for everybody concerned, make money, use it to provide employment and send out the car where people could use it”. Similarly, Meredith (1999, p. 157) suggests that the Ford company valued all stakeholders’ interests as well as the social welfare of employees and shareholders. Smith (2003) argues that in the aftermath of the industrial revolution, business leaders saw the need to build factory towns to provide housing and amenities for their employees and their families.

Today, and since its adoption, CSR has been used and widely debated on a global scale (Chapple & Moon, 2005; Crane and Matten, 2007; Lockett et al., 2006). Therefore, with the recent events like the UN Climate Conferences and other similar events held in different countries, issues of sustainable development and the diverse debates have energised the discussions on CSR (Bhattacharyya et al, 2008). Ultimately, CSR has today become a fundamental management phenomenon, especially given the current globalization and industrialisation trends. The impacts of businesses on society and the environment, have assumed a new moral dimension, particularly, given the significant global challenges affecting society and the environment, including; poverty, food and water shortages, and human rights violations (Zadek, 2001).

2.1.2 Definition and Conceptualisation of CSR

2.1.2A General definitions and Conceptualisation of CSR

Now days, the corporate world is facing the notion of Corporate Social Responsibility (CSR) wherever it turns. Specifically, on a wide range of issues, corporations are encouraged to behave socially and responsibly (Welford and Frost, 2006; Engle, 2007). However, in both the corporate and the academic world, there is uncertainty as to how CSR should be defined. Accordingly, Jackson and Hawker (2001) have gone to the extent of saying ‘We have looked for a definition of CSR, and basically there isn’t one’. However, according to Van Marrewijk (2003), this is not quite true. The scholar observes that the problem is rather, that there is an abundance of definitions, which are, often biased towards specific interests, and thus prevent the development and implementation of the concept. Crowther and Jatana (2005) argue that social responsibility is in vogue now but as a concept, it remains vague and means different things to different people. CSR presents not only a landscape of theories but also a proliferation of approaches, which are controversial, complex and unclear (Garriga and Mele, 2004). Therefore, despite a long history of the discussion concerning the CSR phenomenon, the debate has not yet yielded a single commonly accepted definition.

Bowen (1953) echoed by Carrol (1999), was the first to promulgate the term CSR. He believed that many large corporations had gained significant powers and their decisions had gained a profound influence on people’s livelihoods, and therefore owed certain obligations. Thus, the CSR concept was defined as ‘The obligations of businessmen to pursue those policies, to make decisions, or to follow those lines of action which are desirable in terms of the objectives and values of society’ (Bowen, 1953, p. 6). Frederick (1960) echoed Bowen’s view, he argues that corporations should manage their business operations to fulfil the public’s expectations and improve socio-economic welfare.

Importantly, since the 1960s, other scholars have started to refine the definition of CSR, making it more precise. Notably, some scholars have agreed and suggested that, corporations should have an obligation to society (Carroll, 1979; McGuire, 1988; Schwartz and Carroll, 2008; Schwartz and Saiia, 2012; Wood, 1991). These scholars have adopted a broader perspective on CSR by incorporating several fields like ethics, sustainability (or triple bottom line), stakeholder management, and corporate citizenship. However, Friedman (1970) echoed by (Schwartz and Carroll, 2008; Schwartz and Saiia, 2012) took a utilitarian approach (the greatest good for the most number of people) and used a narrower view to suggest that social responsibility for a company is only about maximising its profits in a legal and ethical way, which means the main focus remains shareholders’ interests.

Furthermore, many other scholars continued to elaborate on their belief that CSR is important to society (see appendix 2.1.2A).

2.1.2B Adopted definition of CSR for this study

Despite numerous efforts by various scholars and academics, to bring about a clear and unbiased definition of CSR (See section 2.1.2A), there is still some confusion as to how CSR should be defined. According to Van Marrewijk (2003), this is not quite true. The scholar observes that, “the problem is rather that there is an abundance of definitions, which are, often biased towards specific interests, and thus prevent the development and implementation of CSR”. However, it is argued that the claimed biases are not supported by empirical evidence (Dahlsrud, 2008).

Thus, for clarity, focus, analysis and discussion of the findings for this study, the researcher shall adopt the following commonly accepted definition of CSR; ‘Business-decision making linked to ethical values, compliance with legal requirements, and respect for people, communities and the environment’ (Business for Social Responsibility, 2003a). Based on this definition, insurance companies are expected to treat their employees fairly and with respect, operate in an ethical way and with integrity, respect basic human rights, sustain the environment for future generations, and be a responsible neighbour in their communities (Business for Social Responsibility, 2003b).

The study will also explore, the understanding of whether Ugandan managerial decisions for CSR engagement, are influenced by values, norms and rules set by institutions (implicit CSR), or because of deliberate, voluntary and strategic decisions regarding issues that are perceived as social responsibilities of corporations (Explicit CSR) (Matten and Moon, 2008).

2.1.3 Layers of CSR

According to Schwartz and Carroll (2003), CSR is considered as a four-layered concept that encompasses the economic, legal, ethical and philanthropic expectations shown on figure 2.1.3, that society has of organizations at a given point in time.

Figure 2.1.3: The Pyramid of CSR

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Source: Carroll (1991, p.42)

I placed the four layers of the firm’s social responsibility in the above pyramid to show the strong connection between them. He concluded that if one kind of responsibility in the pyramid model is absent then the ones above cannot be achieved (Carroll, 1991). For the continued review of the literature related to the layers of CSR and extensions in Carroll’s CSR pyramid ( see appendix 2.1.3 for further review and analysis related to this sub-section).

2.1.4 Motivation/Drivers of CSR engagement

In this section, the researcher looks at what motivates or drives corporations to engage in CSR activities (see appendix 2.1.4).

2.1.5 Communicating CSR initiatives

Today, it is suggested that it is fundamental for corporations to communicate and report their CSR initiatives to their stakeholders (Matten & Moon 2004; Morsing et al., 2008). Recent studies suggest that communicating CSR initiatives to consumers is believed to affect the overall influence of the company and the product, which would help increase its revenues (Brown and Dacin, 1997; Luo and Bhattacharya, 2006; Porter and Kramer, 2006; Standaland et al. 2011). Tench and Yeomans (2006) argue that even small to medium-sized enterprises are publishing their community engagement and CSR activities. More importantly, CSR is believed to address several issues including; diversity, environment, and human rights (Crane et al., 2013), and it can be conducted in various forms such as; cause-related marketing, socially responsible business practices and employee participation (Kotler et al. 2012). Literature suggests that, customers who are exposed to a firm’s CSR information, tend to have significantly more positive attitudes and stronger purchasing intentions, and this results in better economic performance (Handelman and Arnold, 1999; Herremans et al. 1993; Pirsch et al. 2007; Wigley, 2008).

2.1.6 Benefits of engaging in CSR

Early interest in CSR was reinforced by research on corporate views towards CSR, in which 93.5% of corporations researched in 1950’s agreed with the notion that corporations should have responsibilities on top of an organisation’s profit and loss (Bowen, 1953; Carroll, 1999). According to (Maignan and Ferrell 2004), CSR initiatives are very important in the context of business ethics. For further review of literature related to this sub-section, (see appendix 2.1.6).

2.1.7 Scepticisms of CSR

As examined above, and despite the effortless attempt by numerous scholars to justify the value and benefits of CSR, the CSR phenomenon has not escaped sceptical views from academics and business experts. For example, in a review of the past CSR studies, it was discovered that 44% of the reviewed 109 studies did not show any clear relationship between CSR and financial performance (Margolis and Walsh, 2003). Some research confirmed that corporate philanthropy did not contribute to better financial performances or profitability (Moore, 2001; Seifert, Morris, and Bartkus, 2003; Seifert et al., 2004). For the continuation of this sub-section, (see appendix 2.1.7).

2.1.8 Summary of key contributors to CSR

This section summarises the key scholars who have contributed ideas, definitions and empirical research to the concept of corporate social responsibility (See appendix 2.1.8).

2.2 CSR and the Insurance Industry

2.2.1 CSR in the international industry

Insurance companies operate as financial intermediaries in a society. They price and value financial assets, monitor borrowers, manage financial risks, and most importantly, they cover for the financial consequences of circumstances and situations that people usually try to avoid (Greenbaum and Thakor, 2007). According to (Scott, 2003), by performing these functions, insurance companies impact on society, and they usually require firms and households to adopt specific behaviours to increase their chances of getting their interest and amortizations paid by lenders. Additionally, they ensure that policyholders will not operate their businesses under risky environments without insurance protection. Chassagnon and Chiappori (1997) argue that this measure is meant to reduce the risk of moral hazard and adverse selection. Beck and Levine (2004) identified that the financial system appears to play an important and positive role in economic development. Ward and Zurbriggen (2000) argue that economic development is directly linked to human, social and environmental development, and that insurance companies are highly likely to impact on sustainable development.

In contrast to most other industries, the impact of financial institutions on development is mostly indirect because they facilitate growth and development of other firms and households (Scholtens, 2006). Elkington (1998) argues that, at the individual firm’s level, sustainable development translates into corporate social responsibility. Waddock and Graves (1997) opine that CSR is a concept used to relate a firm’s operations to the various dimensions of sustainable development. Other recent studies have indicated that firms’ have attempted to use CSR to take care of the needs of their employees, customers and other stakeholders (people), natural environment (planet), and prospects of the firm (profit) (Elkington, 1998; Smith, 2003).

Scholtens (2011) opines that, despite their well-documented relationship with CSR, a general and natural weakness of insurance companies when it comes to impacting on sustainable development is that their activities are of an indirect and intermediate nature). This is because, by providing insurance protection, insurance companies contribute to the realization of all kinds of activities and projects, although in the end, the entrepreneur is accountable for the success or failure of the project (Scholtens, 2011).

2.2.2 CSR in Uganda

Corporate Social Responsibility (CSR) is generally perceived as an old practice in Uganda (Katamba, 2012). According to these scholars, the concept was branded ‘CSR in Uganda shortly after 1950’s when formal businesses effectively started to operate (Nkiko & Katamba, 2010). Literature suggests that during the 1950’s, one of the well renown Ugandan poet (Okot P’bitek) vehemently campaigned for societal ethical values, thus giving limelight to the meaning and values of CSR (Nkiko & Katamba, 2010).

Literature suggests that Uganda’s CSR origin rests in the African culture, notably the African Traditional Society (ATS) (Katamba et al. (2012). These scholars further suggest that, in the ATS era which dates centuries back from the year 1900, CSR was largely skewed to the community dimensional concerns. For example, if one society or family had a bad harvest, or a calamity during the agricultural season, another society or family, was traditionally compelled to help and support it.

Further studies reveal that if a family member died in a community, the relatives had to assume responsibility of upbringing the children/orphans (Imbo, 2001). Moreover, such responses to societal concerns saw Uganda’s elders (in the ATS) forming the famous ‘muno mukabi’ (loosely meaning, clubs responding to concerns of the needy fellows). For the continued review of the literature related to CSR in the Ugandan context (see appendix 2.2.2).

PART (B): NATIONAL CULTURE AND CORRUPTION

2.3 National Culture

2.3.1 General perspectives and definitions of culture

Looking at the concept of national culture, it is evident that the major consensus in the academic world, is a focus on certain values that supposedly make up national culture. Independent of the specific model that is used to define the concept of national culture, all authors assume that national culture has a relevant impact on individuals within a society and the way they act and think. Due to this relevance, national culture offers great opportunities for research, specifically when looking at the scope of the influence, the aspect has on different diverse domains. This is also reflected by the immense attention national culture gets in the academic field.

Thus, for this research, national culture is defined by means of Hofstede’s Cultural dimensions model (Hofstede, 1980, 1983; 1991, 1999 2001 and 2005). This choice is justified by the model’s popularity and its frequent citation, as well as its approach to measuring culture in a numerical way, which is required for the subsequent empirical research of this study.

Hofstede (2005) defined culture as the collective programming of the human mind that distinguishes the members of one human group from those of another. Other scholars have equally contributed to the study of national culture and have provided their own definition of culture. For instance, Taylor (1871), defined culture as “that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society”.

Similarly, Kroeber and Kluckhohn (1952) defined culture as a unit of patterns, explicit and implicit, of and for behaviours acquired and transmitted by symbols, constituting the distinctive achievements of human groups.

Additionally, Taras et al. (2009) argues that culture is shared among several people belonging to one group or society, and that it evolves over a relatively extended period, and it is stable over time. These scholars further suggest that culture is a multi-level concept, which can be represented through an ‘onion’ diagram with basic assumptions and values forming the inner layer and practices, symbols and artefacts representing the outer layer (Taras et al., 2009), echoed by Hofstede (1991; 2001), (see figure 2.3.1 below):

Figure 2.3.1 The Onion diagram representing culture

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Source: Hofstede (1991:9, 2001:11)

Following on from the diagram above, Triandis (2004) argues that up to the 1980s, culture remained a topic and a major concern for anthropologists. He sees Hofstede (1980) as one of the authors that contributed to the mind-set change in the field. This view was cited by Black (2003) who argues that even though a variety of cultural frameworks have been developed and discussed in the academic world, the most widely used and cited remain Hofstede cultural dimensions.

Black (2003) further emphasised that Hofstede’s model possesses an extraordinary position in literature due to his numerical measurement of national culture that has brought him an enviable worldwide recognition. Other scholars have equally suggested that the possibility of calculating cultural dimension scores, and putting them in relation, has given numerous researchers the opportunity to describe the national culture of countries, and compare different nations in a more practical way (Matten and Moon, 2008; Rarick, 2009).

Thus, by using Hofstede’s dimensions and considering the unbalanced development of CSR theory, this study will be able to put more emphasis on exploring how the culture influence firms’ CSR policies and practices among Uganda insurance firms.

2.3.2 National culture and CSR

The present study aiming to empirically examine the cultural antecedents of CSR leads the researcher to review the key literature related to the issues such as; “what are the main drivers of CSR?” (Campbell, 2007; Chih et al., 2010), “what kind of relationship does national culture have with the CSR phenomenon?” (Ho et al., 2012; Ringov & Zollo, 2007), and whether for over decades, national culture has changed or not” (Hofstede, 2001). McAdams & Nadler (2005) suggest that “laws and mandatory regulations have a strong influence on establishing social expectations about responsible corporate behaviour, and that this social expectation works as a ‘focal point’ around which firms structure their behaviour”. Several studies investigated a relationship between CSR and national culture in the general industry context. For example, Welford (2005) suggests that CSR policies vary according to both regions and countries with different national cultures.

Miras-Rodríguez et al (2015) argues that national culture moderates the relationship between CSR and firm performance. Further literature suggests that each stakeholder group’s perceptions, responses and interests regarding CSR, depends on their national culture (Rawwas, 2001; Rawwas et al, 2005).

Similarly, Singh and Del Bosque (2008) identified cultural differences in consumers’ attitudes towards CSR and for the impact of CSR on consumers’ perception of a firm. In contrast, other studies proposed that consumer ethics vary from one cultural group to another because of different religious affiliations (Babakus et al., 2004), norms and values (Rawwas et al, 2005), all of which are components of national culture.

From the management perspective, Egri et al (2004) opine that the perspectives of managers on corporate environmental and social responsibilities, depend on the degree of economic development of each nation and its culture. These scholars further emphasized that managers from medium and GDP countries are more individualistic and accord less attention to corporate environmental responsibilities than the opposite.

Lastly, Maignan and Ralston (2002) suggest that stakeholder issues that attract the attention of businesses vary from one country to another depending on national cultural differences.

2.3.3 Hofstede cultural dimensions-Their implications and empirical evaluation

The most discussed and operationalised variables for national culture framework especially in culture-related studies are the Hofstede (1980) cultural dimensions. Literature suggests that Hofstede conducted one of the most comprehensive studies of how values in the workplace are influenced by culture (Hofstede 1980, 1983, 1991 1998, 2001 and 2005). He developed the now familiar values of power distance, individualism, masculinity, uncertainty avoidance and Long-term orientation. These dimensions are outlined and briefly explained in table 2.3.3 below:

Table 2.3.3: Hofstede’s cultural dimensions

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Source: (Hofstede, 2001, p. 29)

Following on from the brief explanation given in table 2.3.3 above, these cultural dimensions have been explained further to better understand how culture influences a firm’s CSR engagement (see appendix 2.3.3).

2.3.4 Relationship between Hofstede’s cultural dimensions and CSR

As reviewed and empirically analysed in the two preceding chapters, it is evident that culture is a very important variable in relation to the management and implementation of the organisations’ objectives, aligned with societal issues and needs, which includes CSR.

Literature suggests that Hofstede (1980, 1991, 2001 and 2005) did a great job of examining and interpreting diverse cultural dimensions, which have had a great global impact on firms’ engagement in CSR (Vitell et al, 1993; Moon and Franke, 2000; Blodgett et al, 2001, Ringov and Zollo, 2007). However, suggestions and arguments regarding relations between Hofstede dimensions of national culture and CSR are conflicting.

For example, some scholars have suggested a positive relationship between power distance and CSR, arguing that individuals in societies with high power distance are more likely to demonstrate commitment and loyalty to a firm’s success, thereby acting more ethically, by focusing more on customers’ interests than self-interests (Blodgett et al, 2001; Moon and Franke, 2000; Vitell et al, 1993).

Similarly, in a society with a higher power distance, firms, considered to be noble, have an obligation to promote the society’s prosperity, thereby inducing the pursuit of CSR issues more actively (Waldman et al, 2006). In contrast, other researchers (Ringov and Zollo, 2007; Williams and Zinkin, 2008) have suggested a negative effect from power distance on CSR. These scholars argue that a high degree of power distance may hamper employees’ involvement in open discussions and decision-making processes for CSR engagement. Similarly, Cohen et al (1996) argue that people in a culture of high-power distance are less likely to detect and uncover ethically questionable business practices. For further review of the literature related to this sub-section, (see appendix 2.34).

2.3.5 Culture in the Ugandan context- Historical perspectives and position on Hofstede’s dimensions

As international business ponders on its future, it is evident that Africa has become an important region for world trade and development (Leke and Lund (2010) cited by (Leke et al, 2012). Literature suggests that Africa has continued to experience increased business development, and therefore prospects for further growth look rather more promising (Rarick et al (2013). In the case of Uganda (UG), since it gained independence from Great Britain in 1962, it has at times, experienced major social instabilities.

For example, during the regime of Idi Amin (1971-1979), UG suffered major political and social instabilities, and this resulted in one of the longest civil wars in the country’s history (McDonough, 2008). In fact, at one-time, UG had a more heterogeneous population because of colonization and the importation of Indians into the country to facilitate British rule (Katamba, 2010). However, in 1972 all “Asians” were expelled from the country, and the population became more homogeneous (Asiimwe, 2012).

While Hofstede and associates did study some countries in Africa (Hofstede, 1990), their model lacks an empirical evidence regarding their findings on the cultural classification of Uganda (Rarick et al, 2013). Instead, Hofstede and his associates gave composite values of the cultural dimensions to the East African region, of which Uganda belongs to (see table 2.3.5 below).

Table 2.3.5: Uganda’s position on Hofstede dimensions

Abbildung in dieser Leseprobe nicht enthalten

Based on the above Hofstede scores, it can be suggested that the Ugandan society’s culture is of moderately high-power distance, low masculinity and a collectivist culture, with relatively high in uncertainty avoidance, and with its people associated with a short-term orientation towards time (Hofstede, 1990). In contrast, data from a study conducted by Rarick et al (2013), revealed somewhat inconsistent results to Hofstede dimensions (see figure 2.3.5 below). It shows the scores related to Uganda on all five cultural dimensions using the Hofstede-Bond model (Bond and Hofstede, 1988).

Figure 2.3.5: Plot of the five cultural value dimensions in Uganda

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Source: Adopted from Rarick et al (2013).

While these scholars’ study was not unlike the original Hofstede work in terms of its sample heterogeneity, it is reasonable to suggest that the somewhat unique characteristics of the sample they used was not fully representative of the greater Ugandan population. Hence, following the inconsistent results from the two studies, this study adopts to use Hofstede’s dimensions considering its wider recognition, and to help the researcher find answers to the questions raised in chapter one of this study.

2.4 Linking CSR with Corruption

2.4.1 General perception and definition of corruption

Corruption is “shameless” and is a major problem worldwide (Caiden et al, 2001). For example, in recent years, in India, when foreign entrepreneurs were setting up factories, they refused to give illegal bribes to city officials. Ultimately, the foreigners’ own residences were burglarized and stripped of valuables in retaliation (Johnson and Sharma, 2004). Holistically, corruption has become one of the forefront managerial challenges at the national and international levels, and corrupt practices in international business are widespread and growing (Greenberger, 1995). According to Tanzi (1998), corruption is not a new phenomenon and in recent years, it has attracted a lot of attention around the world (Johnson, 1997). The Independent Commission against Corruption (1998) describes corruption as the dishonest or partial exercise of official functions by the public official. Similarly, Transparency International (2003) defines corruption as the ‘misuse of entrusted power for private gain’. Importantly, this study aims to examine perceptions of corruption in relation to CSR practices among UG in insurance companies. It emphasizes that firm level corruption directly impacts on the company’s revenue performance and may as well limit its participation in the community’s social and environmental initiatives.

Further, corruption in emerging markets is viewed as a key social concern as well as a bottom-line issue that affects a corporation's ability to compete (Remme, 2013). About a firm-level framework, corruption is defined as the illegitimate exchange of resources involving the use or abuse of public or collective responsibility for private ends (Luo, 2005). Recent studies investigating governance quality and its impact on firm-level corruption concluded that corruption harms economic growth as it favours the state sector at the expense of the private sector (Nguyen and van Dijk, 2012), echoed by (Wu, 2005). It is further suggested that better governance can be used as a strategic management factor to reduce corrupt activities, including; bribery within firms (Wu, 2005). He utilised Transparency International's Corruption Perception Index (CPI) of 2002 as a measure of corruption. His study found that improved corporate governance leads to higher dividend payments. However, this effect only occurs in countries with elevated levels of corruption.

According to Watson and Hirsch (2010), insufficient corporate governance can lead to information asymmetries and conflicts of interest within firms and thus foster corporate corruption. Therefore, their study concluded that well-governed firms show a lower risk of engaging in corruption. Luo (2005) argues that firm-level corruption is actually performed by managers or employees on behalf of firms. He further observed that illicit actions by managers or employees are particularly frequent when corporate morale and transparency are both low. Koehler (2014) identified that, engaging in anti-corruption strategies is an opportunity for corporations to improve their competitiveness. Similarly, Tanzi (1998) argues that costs and other negative impacts of corruption are typically thought to be borne by a country’s economy, and that corruption is a major factor that distorts the efficient operation of free market allocation of resources. Some studies have revealed that corruption reduces investment and therefore economic growth (Mauro, 1995; Wei, 1997). Hence, based on the above thoughts, and as part of the research objectives of this study, the researcher intends to empirically examine the impact of CSR on corruption in the Ugandan context with a brief reference to TPI’s corruption perceptions index (CPI) (2016). For Uganda’s CPI scores, (see table 2.4.1).

Abbildung in dieser Leseprobe nicht enthalten

Source: Adopted from Transparency International (2016)

The table above represents perceived levels of public sector corruption on a scale of 0 (Highly corrupt) to 100 (less or no corruption at all). Based on the CPI scores, it is evident that Uganda is one of the highly corrupt countries with a score of 25/100 (Transparency International (2016). However, this study is aimed at finding answers for research questions such as; how does CSR impact on corruption? And does culture influence irresponsible behaviours and perceptions of corruption among insurance companies in Uganda?

2.4.2 Adopted definition of corruption for this study

According to Langseth (2016), corruption is a major problem worldwide, and can hardly be measured. Caiden et al (2001) argue that corruption is “shameless”, and that one major challenge in understanding the phenomenon, is how to define it, which ultimately delimits its measurement. Nevertheless, while there is no consensus on an ideal definition of corruption, Transparency International’s use of the formulation ‘the misuse of entrusted power for private gain’, provides a broad framework for purposes of assessment.

Johnson and Sharma (2004), argue that, there is no single, comprehensive, universally accepted definition of corruption. Some scholars have argued that any attempts to develop such a definition invariably encounters legal, criminological and, in many countries, political problems (Langseth, 2016). However, according to Caiden et al (2001), many specific forms of corruption are clearly defined and understood and are the subject of numerous legal or academic definitions. Thus, for purposes of assessment and discussion of this study’s findings, the researcher shall adopt the definition of corruption as crafted by Transparency International (2003).

2.4.3 Impact of CSR on corruption

Concerns about corporate corruption have been of practical significance for as long as firms have existed. However, only recently has corruption become a major global regulatory issue for governments. According to Wu (2005), better governance can be used as a strategic management factor to reduce corrupt activities, including bribery within firms. Wu (2005) utilizes Transparency International’s CPI of 2002 as a measure of corruption and finds that improved corporate governance leads to higher dividend payments. However, this effect only occurs in countries with elevated levels of corruption.

Watson and Hirsch (2010) argue that insufficient corporate governance can lead to information asymmetries and conflicts of interest within firms, and thus foster corporate corruption. Similarly, Luo (2005) argues that firm‐level corruption is performed by managers or employees on behalf of their companies. He further suggests that illicit actions by managers or employees are particularly frequent when corporate morale and transparency are both low. Further, Luo (2011) identifies that, these structures should be based on an ethical corporate culture, a sustainable firm structure, and an effective compliance system. Indeed, to effectively prevent these risks and especially the risk of engaging in corruption, Luo (2011) suggests that firms must implement a strategic management structure that monitors and rectifies all illegal behaviour. According to Kaplan and Zingales (1997) a firm’s CSR performance helps to mitigate its exposure risk to corruption. Hence, the belief that good CSR performance may support the firms’ fight against the risk of engaging in corrupt activities (Hansen, 2011).

2.4.5 National culture and the perception of corruption-Hofstede dimensions

Culture is a pervasive component of the environment in which business operates (Getz, and Volkema, 2001). A key issue in cross-national business operations is understanding, and perhaps adapting to, diverse cultures (Gomez-Mejia and Palich, 1997). For international business, culture is important because it affects individual and organizational behaviour (Schneider, 1989). In the study of corruption, cultural values are important because they influence decisions about whether to engage in corrupt transactions (Husted (1999). Although this study does not wish to perpetuate the myth that corruption is merely a matter of culture, it is true that in some cultures there are social norms that may lead individuals to place less emphasis on avoiding corruption (Tanzi, 1994).

Hofstede (1980, 1991) describes four work-related dimensions of culture, each of which might affect the occurrence of corruption. These dimensions are power distance, uncertainty avoidance, individualism and masculinity (see table 2.3.3 above). Furthermore, there is an agreement among numerous scholars in different fields of research that distinctive societal cultures influence a wide variety of social phenomena (House et al., 2002; Hofstede, 1983). According to Vitell et al (1993), cultural dimensions may influence an individual’s perception of ethical situations, and therefore, national cultural differences are expected to influence corruption. Previous studies have shown that national culture is a key factor that may explain corruption, although, until recent years, this had not been investigated across different countries (Davis and Ruhe, 2003; Park, 2003; Husted, 1999). Moreover, empirical studies that have used Hofstede’s measures to explain different phenomena assume that cultural values are stable and are applicable to present-day ethical situations (Myers and Tan, 2002; Park, 2003; Davis and Ruhe, 2003).

According to Mead (1998), Hofstede’s findings are invaluable with regards to applying cultural analysis to practical management problems, even though they were initially reported some many years ago. Similarly, studies that address the antecedents of corruption from a cultural perspective are rather limited to Hofstede’s classification (Park, 2003; Davis and Ruhe, 2003). Hofstede (1991) distinguishes between cultural values and cultural practices and suggests that national cultural differences consist of differences in values and, to a small extent, to differences in practices. Husted (1999) argues that effective fighting of corruption is dependent on culture. He further suggests that countries with high scores on power distance or high individualism or collectivism will require different strategies to combat corruption, in contrast to countries with low scores on these dimensions. Husted (2002) argues that uncertainty avoidance is the cultural dimension related to the way that individuals in a society respond to vagueness and uncertain situations. Davis and Ruhe (2003), argue that in a society that has a high-level of uncertainty avoidance, people tend to be less corrupt and more concerned about following rules and procedures. In contrast, Getz and Volkema (2001) argue that in high uncertainty avoidance cultures, people prefer institutions with well-established norms, rules, policies, and procedures. However, this leads to some conditions that promote corruption, since bureaucratic structures encourage managers to behave unethically (Getz and Volkema, 2001).

Additionally, since social and cultural rules define and limit behaviour, individuals may then perceive it as necessary to work through informal channels to achieve personal objectives (Getz and Volkema, 2001). These scholars further argue that this would encourage people to offer, pay or accept bribes. Getz and Volkema, 2001) suggest that once corrupt patterns are established, they tend to perpetuate because breaking out of the pattern would create uncertainty. Empirical studies have found a positive and significant correlation between Hofstede’s uncertainty avoidance and corruption (Davis and Ruhe, 2003). These scholars suggest that, uncertainty avoidance may prevent deviations, unethical behaviours, and control over the acts of individuals, which diminishes the degree of corruption in a society.

CHAPTER THREE THEORETICAL PERSPECTIVES, RATIONALE, RESEARCH FRAMEWORK AND HYPOTHESES DEVELOPMENT

3.0 Introduction

The review of the CSR literature in Chapter 2 revealed some gaps in the available pool of knowledge. Thus, there is uncertainty regarding what influences firms’ behaviour to engage in CSR activities; controversy over what activities exactly translate into CSR and corruption. Thus, building on the literature reviewed in the preceding chapters, this chapter seeks to empirically review relevant theoretical perspectives to this study including; stakeholder theory, and will conduct a holistic analysis of the perceptions of stakeholders on CSR. A theoretical framework will be developed, and this will enable this study to empirically scrutinize theory and produce findings that advance existing knowledge on the topic. The researcher introduces a set of testable hypotheses, which will create a conceptual background for the empirical analysis implemented in the later sections.

3.1 Theoretical perspectives

3.1.1 Stakeholder theory

The idea of stakeholder theory was first coined by Johnson (1971). It suggests that a stakeholder can exercise influence on a company’s CSR attitude and practices by deploying strategies such as; Withholding strategy (by stopping the flow of resources to the firm) and usage strategy (by limiting the way in which the firm can use resources (Frooman, 1999). Johnson (1971) described CSR of a socially responsible firm as the one that balances multiple interests, such that while striving for larger profits for its shareholders, it also considers its stakeholders. Importantly, the stakeholder theory was later re-defined by (Freeman, 1984), and he opines that managers bear a fiduciary relationship to stakeholders. Moreover, stakeholders were described as groups or individuals who can affect or can be affected by the achievement of the organization’s objectives (Freeman, 1984). Donaldson and Preston (1995, p. 65) also observed that stakeholders have legitimate interests in the procedural and/or substantive aspects of corporate activity, and that their interests must be considered on their own merits. Post et al (2002, p. 8) contributed to the understanding of stakeholder theory, they defined stakeholders, as individuals and constituents that contribute to; either voluntarily or involuntarily, to the wellbeing of the firm.

Significantly, in selecting the stakeholder theory for this study, the researcher reviewed previous research that adopted a stakeholder approach and selected stakeholders on two criteria: First, the study considered the stakeholder as salient to CSR engagement among insurance companies in Uganda because of the stakeholders’ legitimacy (contractual or legal obligation) (Donaldson and Preston, 1995, p. 65), power (ability to influence a firm’s behavior), and urgency (the degree to which a claim calls for immediate attention) (Mitchell et al., 1997). According to Yang and Rivers (2007), characteristics of stakeholders will differ across borders, hence the formidable list of stakeholders that have been studied previously. For example, Donaldson and Preston (1995) recognize governments, investors, political groups, customers, communities, employees, trade associations, and suppliers as influential stakeholders. Similarly, environmentalists, the media, and NGOs are also included in numerous studies (Prebble, 2005). Significantly, this study has identified key stakeholder groups that have salient influences on CSR engagement among insurance companies in Uganda. Namely; Employees, the community in which the companies operate or serve, customers, suppliers, shareholders and the firm itself, and their characteristics will be explained in sub-section 3.1.2 below.

3.1.2 Characterization of Stakeholders

Following the above empirical analysis of the stakeholder theory, it should also be noted that Clarkson (1995), provided a description of stakeholders, and classified them into two categories. He identified typologies of stakeholders and classified them into two categories namely: Primary and Secondary Stakeholders. Ultimately, from the scholarly point of view, these have been widely cited in the stakeholder discourse (see appendix 3.1.2).

However, in this study, and following the above analysis, the researcher will focus on primary stakeholders of the corporation, and this will be represented by figure 3.1 below.

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Figure 3.1.2: Primary stakeholders of the corporation

Source: Adopted from Clarkson (1995:102)

3.1.3 Stakeholder view and CSR dimensions

Management literature confirms the relationship between CSR initiatives and the financial performance of the firm (Margolis et al., 2007), and that sstakeholders have a notable role to play in an organization’s CSR engagement (Homburg et al., 2013). The importance of corporate social responsibility was well-recognized and understood as a company’s effort to voluntarily consider both internal and external stakeholders’ concerns (Homburg et al., 2013).

Additionally, the stakeholder’s model holds that all persons or groups with legitimate interests to participate in an organization will do so to gain benefits, and the model explains and guides the structure and operation of an established corporation (Donaldson and Preston, 1995). Similarly, Smith & Alcorn (1991) opine that switching to a new brand should be in support of the community, as equally as, change in attitudes towards the firms’ stakeholders (Brown and Dacin, 1997; Barone et al., 2000; Sen and Bhattacharya, 2001). For further analysis and review of literature related to this sub-section (see appendix 3.1.3).

3.2 Rationale of the study

The service sector including the insurance industry, is essential to the welfare of many global economies including the United Kingdom (UK). It is an important contributor to the GDP generated from services. For example, in 2016, the service sector contributed 80% of GDP for the UK, and 54.6% for UG (Central Intelligence Agency, 2016). Thus, in this study, five insurance companies were chosen, and with widespread acceptance of the importance of CSR for corporations in the western world, the author wanted to investigate whether National culture influences CSR, and whether, and how CSR impacts on corruption.

The study further needed to examine stakeholder perceptions of CSR and how they impact on firm behaviour. Most importantly, the study needed to empirically understand the cultural antecedents of CSR and the benefits of engaging in CSR. This would help propel financial and reputational performance among insurance companies in Uganda. Additionally, it would help to solve the mystery of whether CSR is merely a window dressing stunt, or whether it brings in more profit for an organization, or should we adhere to Friedman’s utilitarian view on profit maximization, or is Freeman correct, that organizations need to fulfil the Expectations of various stakeholders (Freeman, 1984; Friedman, 1970).

Again, companies have been trying to discover ways to invest in the most effective means of generating more profit. Therefore, this study will be highly important for management to understand, why different forms of CSR, cross-culturally, differ in different industries, and how that impacts on irresponsible behaviour among insurance companies in UG. The study will also create a platform for future research, and will help firms to effectively allocate resources, and make appropriate investments.

3.3 Proposed theoretical framework

After reflecting on the literature presented in the preceding sections, the following theoretical framework was developed for the subsequent empirical research (see figure 3.3 below):

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Figure 3.3: Theoretical framework for the study

Source: Author’s own construct (2017)

The research essentially concentrates on four main aspects. The independent variable in this case is national culture, as defined by commonly shared values. As previously mentioned, it is beyond this study to provide general definitions for national culture. However, to come up with a theoretical framework, the phenomenon must be defined in some way. Since most well-known authors in the field explain national culture based on values. Thus, this assumption is adopted for this research (Trompenaars and Turner, 1998, Schwartz, 1999, Hofstede and Hofstede, 2005).

Specifically, Hofstede’s Cultural Dimension model is used to define national culture in empirical research (Hofstede and Hofstede, 2005). Thus, following the research questions presented in chapter 1, and the review of the relevant literature in chapter 2, the next section for this study will develop hypotheses, and these will help the researcher to formulate an empirical and conceptual argument for this study.

3.4 Hypotheses Development

This study has examined and presented Hofstede cultural dimensions in the country specific context with a view to establish the relationship between national culture, CSR and corruption, as well as, the stakeholder perceptions of CSR (see sections 2.3, 2.4 and 3.1 above).

3.4.1 National culture and CSR

Empirically, literature suggests that national culture influences CSR (Rawwas, 2001; Rawwas et al., 2005). Thus, according to Hofstede cultural dimensions scores allocated to East Africa (see table 2.3.5 above), it indicates that the culture of the Ugandan society is of a high-power distance nature, and this indicates that managers among insurance companies in Uganda are expected to be noble, have an obligation on society, and to pursue CSR more actively and aggressively (Waldman et al., 2006).

However, other scholars have proposed a negative effect on CSR from this cultural dimension (Ringov and Zollo, 2008; Williams and Zinkin, 2008). These scholars argue that a high-power distance culture hampers employees’ involvement in open discussions and decision-making processes which may derail firms’ CSR engagement and implementation.

Regarding the individualism dimension, and Uganda’s low individualism score suggests that the culture of the Ugandan society is collectivist in nature, which indicates that groups among Uganda insurance companies are expected to serve a useful role in the organization of its people, and achievement of the organisational goals (Hofstede, 2001).

Matten & Moon (2008) identified a firm’s social responsibility and described it as implicit or explicit CSR. These scholars defined proper obligations of corporations based on collectivist rather than individualistic terms. However, they argue that, in an individualistic society, firms are more likely to undertake explicit CSR activities in response to perceived expectations by a wider range of stakeholders. In other words, in more individualistic cultures, managers are more likely to make their mark by choosing explicit decisions and actions, both in the CSR engagement domain, and more broadly (Matten and Moon, 2008).

In contrast, these scholars argue that in less individualistic societies, firms are more likely to undertake implicit CSR. This consists of values, norms and rules which results in mandatory and customary requirements for corporations to address stakeholder issues. Thus, given Uganda’s collectivist culture, this study expects insurance companies in Uganda to practice implicit CSR, and should demonstrate more concern for their stakeholders’ and other societal needs.

Significantly though, Uganda’s moderately high uncertainty avoidance score, indicates that Ugandans are expected to exhibit lower levels of care for societal/environmental performance (Shane (1995). Again, the masculine nature of the Ugandan society suggests that insurance companies in Uganda are expected to be less innovative and would generally find it more difficult to adapt to social and environmental demands, and practices including CSR (Shane, 1995).

Thus, regarding the influence of national culture on CSR, aligned with the statements and review of the literature above, the researcher proposes the hypotheses for this study as follows:

H1 : Implicit CSR will be observed among insurance companies in Uganda.

H2: The Ugandan culture will have a significant and negative influence on managers’ CSR decisions and engagement.

3.4.2 National culture and corruption

With respect to corruption, several authors have proposed that collectivism is associated with lower ethical standards (Banfield, 1958; Hooper, 1996; Husted, 1999). This element of culture is likely to affect whether a public official would demand or accept a bribe (Husted, 1999). Some scholars argue that in collectivist cultures, a person’s allegiance to a social group may be emphasized over his responsibility to act as a rational bureaucrat (Ekpo, 1979; Gould & Amaro-Reyes, 1983; Tanzi, 1994). In contrast, in individualist cultures people tend to set their objectives based on what is good for themselves, whereas collectivist cultures emphasize group objectives. Some authors suggest that individualism is linked with lower ethical standards (Vitell, et al., 1993), and others suggest the opposite, that individualism is linked with higher ethical standards (Armstrong, 1996). A recent study suggests that the relationship of individualism-collectivism to the evaluation of a practice as ethical is dependent on the specific practice in question (Cohen et al., 1996).

Thus, following the statements above, and the review of relevant literature, the study proposes the hypothesis for the influence of national culture on corruption as follows:

H3: Low ethical standards will be observed among Uganda insurance companies.

3.4.3 CSR and corruption

To effectively prevent the risk of engaging in corruption, Luo (2011) suggests that firms must implement a strategic management structure that monitors and rectifies all illegal behaviours. Additionally, the scholar, emphasises that these structures should be based on an ethical corporate culture, a sustainable firm structure, and an effective compliance system. According to Kaplan and Zingales (1997) a firm’s CSR performance helps to mitigate its exposure risk to corruption. Hence, the belief that good CSR performance may support the firms’ fight against the risk of engaging in corrupt activities (Hansen, 2011). Accordingly, based on the statements above, and pertinent to the impact of CSR on corruption, this study hypotheses as follows:

H4: CSR engagement will not actively and positively prevent irresponsible corporate behaviours among Uganda insurance companies.

3.4.4 Stakeholder perception of CSR

Stakeholders have a notable role to play in an organization’s CSR engagement (Homburg, 2013). Traditionally, some studies have suggested that each stakeholder group’s perceptions, responses and interests regarding CSR, depends on their national culture (Rawwas, 2001; Rawwas et al., 2005), and that national culture also contributes to the cultural differences in consumers’ attitudes towards CSR, and for the impact of CSR on consumers’ perception of a firm (Rawwas et al., 2005). As such, given Uganda’s low individualism culture, aligned with mandatory and customary requirements for corporations to address stakeholder issues (Matten and Moon, 2008), it can be suggested that stakeholder groups among Uganda insurance companies would serve a useful role in the organization of its people, achievement of the organisational goals (Hofstede, 2001), and should therefore demonstrate more concern and support for firms’ response to societal needs (Matten and Moon, 2008). In light of the above, the researcher proposes the hypothesis for the stakeholder perception of firms’ CSR engagement as follows:

H5: Stakeholders among insurance companies in Uganda will have a positive perception of CSR engagement

CHAPTER FOUR METHODOLOGY

4.0 Introduction

Methodology is a major aspect of a research. It refers to the rationale and the philosophical assumptions that underlie a study, whereas a method is a specific technique for data collection under those philosophical assumptions (White, 2000). Hence, the choice of methodology shapes not only what the researcher does but also how he/she understands the phenomenon under investigation. Scholars believe that deciding on methodology influences the way data will be collected and how it will enable the research to meet its aim and objectives (Gill & Johnson, 2010).

Chronologically, this chapter begins with a research process, followed by a research philosophy, a brief introduction to the epistemological and ontological principles used in social sciences and their application in the study. It further discusses this study’s research strategy and the research design, and the setting of the study, data collection issues and the variables used for the empirical analysis of data. In conclusion, the chapter examines the ethical considerations related to this study.

4.1 Research process

The research process outlines the stages through which the researcher must pass whilst formulating an effective methodology (Saunderset al. (2007). Thus, for this study, the research process adopted is presented on the diagram below (see figure 4.1).

Abbildung in dieser Leseprobe nicht enthalten

Figure 4.1: The Research Process

Source: Authors own construct (2017)

4.2 Research philosophy

A research philosophy refers to the set of beliefs concerning the nature of the reality being investigated, and it is the underlying definition of the nature of knowledge (Bryman, 2012). Similarly, Flick (2011) observes that the assumptions created by a research philosophy provide the justification for how the research will be undertaken. According to Goddard & Melville (2004), research philosophies can differ on the goals of research and on the best way that might be used to achieve these goals. May (2011) argues that, these research philosophies are not necessarily at odds with each other, but the choice of research philosophy is defined by the type of knowledge being investigated in the research project. Moreover, the use of an appropriate paradigm or philosophy goes a long way to assist in reducing the implications of factors such as; time constraints, budget constraints, availability of data and the social phenomena being investigated.

According to Bryman (2004), the foundation of every research study lies upon a variety of factors including; Ontology, Epistemology and Methodology (see figure 4.1). Therefore, understanding the research philosophy being used can help explain the assumptions inherent in the research process and how this fits the methodology being used.

Figure 4.2: The research paradigm-Relationships and Terminologies explained

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Source: Adopted from Crotty (1998).

4.2.1 Ontological perspectives

The Ontological perspectives of a research must do with the nature of the social phenomena, and their concern, is whether social reality is external to social actors or constructed by them (Burrell & Morgan, 1979). Smith (2003) suggests that ontology seeks to provide a definitive and exhaustive classification of entities in all fields. Thus, two thoughtful positions are identified in this respect namely; objectivism and subjectivism.

The subjectivists (constructionists) view suggests that there is no real world but rather the world as it is socially and discursively constructed, hence, it is perceived as a product of time and culture (Marsh and Furlong, 2002). Bryman (2004) argues that the social phenomena can be handled and accomplished by social actors, and individuals that create their own reality. Hence, prompting Perry et al. (1999) to suggest that even though reality may have been formulated with time and experience, it is shaped by social, economic, ethnic, political, cultural, and gender values as they become assimilated over time.

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