Domestic Institutions As Mechanisms for Credible Commitment and Accountability: How Political Science Can Inform Management Studies Focusing on Corporate Social Responsibility (CSR)
Management scholarship and political science scholarship both explore the role of institutions as drivers of a variety of outcomes. However, their approach to exploring the role of national political and economic institutions is quite different. Management studies focus on institutions as constraints within which companies must navigate. The strength of management scholarship is its focus on the drivers and the nature of economic activities undertaken by firms. For example management scholarship has long focused on the role of domestic political and economic institutions in shaping national variation in company strategy (Porter, 1990) or corporate governance structures such as board composition (Aguilera and Jackson, 2003).
However, management scholarship does not consider the changing nature of institutions nor how institutions interact with corporations to shape particular corporate strategies. Management scholarship largely takes national rules as given and examines company strategic choices as the key outcome within a specific domestic context. Management scholarship thus does not focus on the dynamic nature of political institutions (i.e. changes in the regulatory capability of institutions) nor the mechanisms by which institutions contribute to shaping behavior. Moreover, management studies do not consider how national institutions may shape firm behavior as it operates across several countries. This paper seeks to elucidate how the political science literature can inform institutional theory in management. While the political science literature is less likely to explore corporate activities, we argue that it offers important insights into how specific domestic political and economic institutions shape distinct forms of government regulation that shape company activities. In particular we highlight how institutions offer firms ways in which they can commit to actions in a credible manner; government regulation can also constitute mechanisms of accountability whether in the form of soft or hard law; and finally, government regulation can shape company motivations for undertaking certain activities.
We explore the case of political corporate social responsibility (CSR). Management scholars have argued that companies and other actors such as civil society actors and international government organizations undertake CSR as a way to fill a governance gap that is due to an inability of governments to credibly regulate company activities in an increasingly globalized world. According to the management literature governments are also less able to ensure accountability such as in the form of legal liability. Finally, the management literature on CSR highlights the role of corporate morality and values as a driver for CSR while we argue that domestic political and economic institutions can promote certain norms and values.