Badry Multinational Companies in Low-Income Markets

An Analysis of Social Embeddedness in Southeast Asia
2009
ISBN: 978-3-8349-8330-5
Verlag: Betriebswirtschaftlicher Verlag Gabler
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 146 Seiten, eBook

'Alleviating poverty through the pursuit of profit' has become a catch phrase for many entrepreneurs and business people who started to focus their businesses on the lower incomes segments of the population at the 'Base of the Pyramid' (BOP). Despite such business interests, there is, as yet, insufficient theoretical and empirical work done in this emerging field. Social embeddedness, which facilitates the leveraging of local knowledge and expertise and the earning of the trust of the local people, is deemed essential for the successful implementation of a BOP strategy. What does social embeddedness mean? What does it entail for the businesses? How should businesses be embedded in the local networks? Dina Badry seeks to answer these questions in her excellent dissertation through her conceptualization and empirical research which examines the different strategic intentions of business units operation at the BOP level and their potential network partners, following social network theory. I have little doubt that this study has contributed to our understanding of social embeddedness and will prove itself to be invaluable for academics as well as practitioners. Prof. Dr. Li-Choy Chong VII Acknowledgements Writing this dissertation has been a significant academic and personal challenge in my life. Fortunately, I have received invaluable support, patience and guidance from many people to whom I want to express my sincere gratitude. I would like to thank my dissertation committee, Prof. Dr. Li-Choy Chong and Prof. Dr.

Dr. Dina Badry obtained her doctorate under the guidance of Prof. Dr. Li-Choy Chong and Prof. Dr. Günther Müller-Stewens at St. Gallen University's Institute for International Management in Asia.

Zielgruppe

Research

Autoren/Hrsg.

Badry, Dina

Inhaltsverzeichnis

1;Foreword;6
2;Acknowledgements;7
3;Table of Contents;8
4;List of Figures, Tables and Abbreviations;11
5;Abstract;12
6;Zusammenfassung;13
7;1. Introduction;14
7.1;1.1 Purpose and Relevance of The Research Project;18
7.2;1.2 Research Strategy and Method;20
7.3;1.3 Structure of this Study;21
8;2. Theoretical Perspectives and Literature Review;22
8.1;2.1 Social Issues in Business Activities;23
8.1.1;2.1.1 Corporate Social Responsibility and Corporate Social Responsiveness;24
8.1.2;2.1.2 Corporate Social Performance;25
8.1.3;2.1.3 Stakeholder Theory;27
8.2;2.2 Theories in Strategy Research on Developing Countries;28
8.2.1;2.2.1 Transaction Cost Theory;29
8.2.2;2.2.2 Resource-Based Theory;30
8.2.3;2.2.3 Institutional Theory;31
8.2.4;2.2.4 Social Network Theory;32
9;3. Specificities of Low-Income Markets in Southeast Asia;34
9.1;3.1 Definition and Characteristics of Low-Income Markets in Southeast Asia;35
9.1.1;3.1.1 Defining Low-Income Markets for this Study;35
9.1.2;3.1.2 Characteristic: Low Income and Poverty;38
9.1.3;3.1.3 Characteristic: Informal Economy;40
9.1.4;3.1.4 Characteristic: Deficient Infrastructure;41
9.1.5;3.1.5 Specific aspects of Asia;43
9.2;3.2 Conclusion: Importance of Social Relations;46
10;4. Theoretical Model and Hypotheses;52
10.1;4.1 Social Embeddedness;52
10.1.1;4.1.1 Defining Social Embeddedness;52
10.1.2;4.1.2 Typology of potential Network Partners;55
10.1.3;4.1.3 Dimensions of embeddedness;62
10.2;4.2 Contingency of Social Embeddedness in Low-Income Markets;66
10.2.1;4.2.1 Exploration-Exploitation as a Contingency Framework;67
10.2.2;4.2.2 Contingent Effects of Relational Embeddedness;69
10.2.3;4.2.3 Contingent Effects of Structural Embeddedness;74
10.2.4;4.2.4 Interdependence of Structural and Relational Embeddedness;77
10.2.5;4.2.5 Relative Importance of Structural and Relational Embeddedness;79
11;5. Methodology;80
11.1;5.1 Data Collection and Sample;80
11.1.1;5.1.1 MNC in Focus: Tetra Pak;81
11.1.2;5.1.2 Sampling Issues in Studies on Social Embeddedness;84
11.1.3;5.1.3 Sampling and Data Collection in this Study;85
11.1.4;5.1.4 Examination of Potential Biases;91
11.2;5.2 Measures;95
11.2.1;5.2.1 Validity and Reliability Issues;95
11.2.2;5.2.2 Dependent Variable;96
11.2.3;5.2.3 Independent Variables;98
11.2.4;5.2.4 Control Variables;105
11.3;5.3 Analysis;106
11.3.1;5.3.1 Multiple Hierarchical Regression Analysis;106
11.3.2;5.3.2 Required Sample Size;107
11.3.3;5.3.3 Preconditions for Multiple Regression;108
11.4;5.4 Results of the Regression;112
12;6. Discussion;115
12.1;6.1 Discussion of Findings;115
12.2;6.2 Contributions to Theory and Practice;118
12.3;6.3 Limitations;122
13;7. Conclusion;124
14;8. References;125
15;9. APPENDIX;152
15.1;9.1 Appendix 1: List of BOP markets;153
15.2;9.2 Appendix 2: Questionnaire;155

Theoretical Perspectives and Literature Review.- Specificities of Low-Income Markets in Southeast Asia.- Theoretical Model and Hypotheses.- Methodology.- Discussion.

Leseproben

1. Introduction (p. 1)

For decades, economic and social development in low-income countries has been almost exclusively on the agenda of selected institutions. Universities and think tanks have studied development issues on the academic side, while governments, related organisations, such as development banks, and non-governmental organisations have been fostering development in practice.

Until recently, both sides have widely ignored the role of private business in the development of low-income countries (World Business Council for Sustainable Development 2007). Lately, however, both academia and governments have begun incorporating the influences businesses can assert on economic and social development. The engagement of MNCs in low-income developing countries not only holds opportunities for the individual company but also impacts positively on the economic and social development of the specific country (Prahalad 2005).

More and more, private enterprises are considered promising future drivers for alleviating global poverty in developing countries (e.g., Prahalad and Hammond 2002). Actions towards fighting poverty were traditionally based on philanthropic approaches enabled by the charitable donations of companies, organisations and governments.

The major pitfall of such development aid is the uncontinuous flow of means that makes it nearly impossible to feed development projects steadily and thus to ensure ongoing progress and sustainable development (Lodge and Wilson 2006). Therefore, charity and foreign aid are not able to exhaustively overcome poverty, but can at the most provide temporary relief or partial support (Yunus 1998).

By contrast, a market-based approach is distinct from charity or philanthropy as the benefits for the poor are generated through business activity. The company’s social engagement, thus, becomes part of its main corporate activity.

Addressing social issues is not peripheral to strategy but rather central to it.While traditional approaches base their action on the assumption that the poor are unable to help themselves, the market-based approach is derived from the recognition that low-income does not eliminate market processes as practically all poor households are involved in the trade of cash or labour to tackle everyday life (Hammond, Kramer, Katz, Tran and Walker 2007).

Thus, the market-based approach considers people as consumers and producers rather than helpless sufferers. The potential for large-scale social impact and wealth creation offers opportunities to low-income communities, citizenship sector organisations and businesses. As Mohammed Yunus states, "Charity is limited.

Business in unlimited" (Frankfurter Allgemeine Zeitung 2006). This new economic approach could replace the current one, wherein a wide gulf exists between a capitalist system driven by profit maximisation and charity to those who lose out in this capitalist system (Yunus 1998).

Thus, the market-based approach in lowincome markets should be perceived as a promising means of poverty alleviation, for both policy makers and MNCs because of the enormous opportunity for future growth, new market share and rising customer share. Since the bi-polar model with profit maximisation at the one end and charity at the other is “inadequate and particularly ill-equipped to address the problem of poverty” (Yunus 1998, p.65), Yunus (1998, p.63) claims that this new approach is “social consciousness driven capitalism”.

The operations of MNCs in BOP markets can have two distinct impacts depending on the company’s focus. First, operating in developing countries in general impacts the overall economic growth of that country. Opinions regarding the exact impact of such growth remain divided, as some researchers doubt that it benefits the poor tiers of the population (Roemer and Gugerty 1997), while others have shown that overall economic growth can reduce poverty to a large extent (Ravallion and Chen 1997, World Bank 2000, Dollar and Kraay 2002).

Besides this general effect of business activities in developing countries, the focus on providing products and services to low-income markets in developing countries, which I refer to as the market-based or BOP approach, provides even more diversified benefits.

Über Autor(innen)

Dr. Dina Badry obtained her doctorate under the guidance of Prof. Dr. Li-Choy Chong and Prof. Dr. Günther Müller-Stewens at St. Gallen University’s Institute for International Management in Asia.