Abstract:
The mainstream research on institutional strategies related to corporate social
responsibility focuses on the context of developed economies, whereas limited attention
has been paid to the relevance of these strategies in developing countries (Marquis &
Raynard, 2015). China is a fast-rising transitional and developing economy, where market
mechanisms are incomplete and formal institutions (e.g., legal infrastructure) are
underdeveloped. Therefore, western theories related to institutional strategies might not
be applicable in China. As firms globalise, it is important to understand how firms
strategically handle different types of stakeholder pressures using various relational
strategies (one group of institutional strategies) to survive in an institutional context like
China.
This thesis examines corporate relational strategies associated with the practice of
Corporate Environmental Responsibility (CER) in China, which has been continuously
promoted by the Chinese government over the last 20 years. This thesis is comprised of
three related studies examining CER practice in China. Article 1 reviews both English
and Chinese literature on corporate social responsibility (CSR). Then it constructs a
general framework for CER practice that can be adapted for different contexts and further
develops an extended CER framework for the Chinese context. This article contributes to
the CSR literature by, first, showing the organisational journey a firm can take towards
environmental sustainability through proactive CER commitments to address legitimacy
pressures from key stakeholders and, second, by demonstrating how to adapt a general
CER framework to a different institutional context.
Given that the Chinese government is the primary stakeholder that drives CER activities
in China, Article 2 investigates when and why firms employ substantive or symbolic
strategies under the pressure imposed by the government regarding substantive reporting.
Drawing on the extended framework developed in Article 1, this article proposes a model
to test hypotheses related to the impact of political connections and levels of political
monitoring on firm environmental reporting. Using a sample of 306 Chinese listed
companies during the period 2014 – 2015, this study finds that a firm’s political
connections can buffer the firm from the need to pursue a substantive reporting strategy.
Moreover, compared with state-owned enterprises (SOEs), private firms are more likely
to employ substantive reporting strategies when they are subject to high levels of political
monitoring. Article 2 adds a political perspective to the CSR literature by showing that a
firm’s political ties and levels of political monitoring have different impacts on its
preference for symbolic or substantive reporting strategies.
Article 3 examines whether and how organisational visibility (company characteristic)
and environmental reporting (CER- based relational strategy) influence shareholders’
valuation of corporate environmental investment. Using a sample of 367 firm-years listed
on the Shanghai stock exchange during the period 2016-2019, higher levels of public
attention (one dimension of organisational visibility) and monetary environmental
reporting are found to be associated with lower short-term negative effects of
environmental investment on firm value. Further analyses show that for firms making
large environmental investments, both dimensions of visibility (i.e., public attention and
analyst coverage) and substantive emissions reporting are related to a lower negative
effect of environmental investment on firm value. In this regard, Article 3 enhances our
understanding of the theoretical links between corporate environmental efforts and firm
value creation as illustrated in the extended CER framework produced by Article 1. It
adds to the literature by showing that substantive environmental reporting, or strategies
that focus on improving organisational visibility, are useful relational strategies to handle
stakeholder pressures by enhancing shareholder management, which in turn positively
leverages shareholders’ evaluation of firm environmental investment.
In summary, this thesis adds to the literature on corporate institutional strategies in China
by demonstrating how the idiosyncrasies of the Chinese institutional context can be
incorporated into a framework for studying Chinese CER-based institutional strategies.
Moreover, the three articles jointly contribute to the understanding of CER practice in
China by showing the effects of CER-based relational strategies that firms undertake to
address legitimacy pressures from different stakeholders.