CSR, competitiveness, embeddedness 1 Concept of CSR

The past decades have seen many definitions of corporate social responsibility, thus the comprehensive introduction of the concept is not an aim of the study, however, I introduce some definitions which briefly summarise the essence of the concept. The first approaches to CSR came up in the first half of the 20^th century, but the definition occurred in Howard Bowen’s book (Social responsibilities of the businessman) published in 1953. In this book the author emphasised the responsibility of businessmen in reaching social aims and values. In the 1960s and 1970s more and more critiques related to the concept of CSR came up, and it was Milton Friedman, economist, who criticised CSR the most. In his book of 1962 he discusses how a businessman can even know what needs arise in the society, which require help. Later, in an article of 1970, he writes that a company is an artificial person, thus its responsibility cannot be measured in a sense like that of a real person. Goodpaster and Matthews’ article of 1982 (Can a corporation have a conscience?) meant the beginning of the interpretation of the term in its present sense. The next milestone was the pyramid model of Carroll (1991), in which four levels of corporate responsibility were distinguished. The message of the model is that the basic responsibility of companies is related to business, and further responsibilities are solely built upon this.

The concept of CSR spread at a rapid pace both in theory and in practice in the past decades, since more and more companies started to apply it in some form, and more and more pieces of research and studies dealt and still deal with the topic. It is common in the CSR definitions of recent years (e.g. McWilliams, Siegel, 2001; Whetten, Rand and Godfrey, 2002; Kotler, Lee, 2005; Angyal, 2009) that they see CSR as an activity within the frames of which the company is attentive to its business interests and profit meanwhile it behaves in an ethical

way, pays attention to its employees and supports within its capabilities local or even national issues and communities.

The question may arise what a company responsible for society does. There is no unified answer to this since the different pieces of research and literature identified various activities, and out of these the most general is donation and charity work. Based on theory and my previous empirical experience, CSR activities can be divided into the following two groups:

 Internal CSR: responsibility towards colleagues;

 External CSR

• Responsibility for environmental issues, sustainability;

• Helping those in need, promoting good issues (donation, sponsorship);

• Support for volunteering;

• Cooperations;

• Other activities (e.g. making a presentation, providing discounted services).

The type of CSR activity of a company may be affected by several factors, inter alia:

 company size,

 type of ownership,

 activity,

 financial performance,

 location of operation,

 ownership attitude,

 etc.

One of the most determining factors is company size (Reisinger, 2018). Even in the English name of CSR, the word ‘corporate’ refers to that this type of activity is rather the activity of bigger companies. However, responsible behaviour does not depend on size, since, for instance, a small company can also be ethical and behave in a responsible way towards its employees apart from the fact that e.g.

whether it supports local communities and groups in need. The only difference is that the bigger the company, the more the CSR activity is institutionalised and built into the corporate strategy and either a particular colleague or even a separate department comes into being to coordinate the activities. The type of ownership can also be a factor of importance, since it does matter whether e.g. it is a family firm or a multinational company, and it also matters how the owners and leaders of the company mean CSR activity and what motivates them. The issue of motivation leads us to the topic of CSR and competitiveness which is described in more details in subsection 2.4.

2.2 Competitiveness

As a result of the past years and decades, competitiveness now has enormous literature, however, in this chapter I only focus on some major aspects.

Competitiveness can be interpreted in various ways as we can talk about the competitiveness of countries, industrial sectors and of organisations (companies) as well. The present study puts the emphasis on the competitiveness of companies.

What does the competitiveness of a company mean? When it comes to com-petitiveness, the most cited author is perhaps Porter, who defined the competitive-ness of both nations, industrial sectors and companies. In connection with the latter, he wrote the followings (Porter, 1985: 4): “…the rules of competition are embodied in five competitive forces: the entry of new competitors, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers, and the rivalry among the existing competitors.”

According to János Varga (2017, 726), “…organisational competitiveness is the complex of those organisational potentials, which the firm can use and utilise to reach its aims, to realise profit and to meet consumer demands.” Profitability is in the centre of Imre Lengyel’s definition (2003), according to which a company is competitive if it can satisfy market needs. Czakó and Chikán (2007, 3) interpret competitiveness as it follows: “we see corporate competitiveness as the ability of the company to permanently provide consumers, while respecting the standards of social responsibility, with products and services that they are rather willing to buy than the competitors’ products under conditions that ensure profit for the company. The condition for this competitiveness is that the company is capable of perceiving environmental and intra-company changes as well as adapting to these by meeting market competition criteria that are consistently more favourable that those of its competitors.” This latter definition contains the term, social responsibility which refers to that if a company is competitive, it is socially responsible too. Meanwhile the question arises whether CSR activity may contribute to competitiveness; whether this question is relevant. I describe this topic in subsection 2.4.

2.3 Embeddedness

The conceptual system of embeddedness is quite new in corporate literature. It is not easy to define its meaning since on the one hand, it does matter what the size of the company is, and on the other hand, it also matters whether we approach the concept from a social, economic, natural or other point of view. In her book about the topic, Viktória Józsa (2019) basically writes about big companies’

embeddedness, since the term can be interpreted primarily in their case: so how a big company (set up mainly through foreign direct investment) is able to get

integrated into the environment where it was set up or where it set up its sub-sidiary.

The situation is different in case of smaller companies or family firms, because there may be other reasons for choosing a seat. Thus, e.g. the owner of a family firm will obviously set up a company in the city/area where he lives, and this can be the deciding factor besides location factors; however, in case of a non-family firm location factors play the key role, but in another dimension than in case of a multinational company. To my mind, the setting up of a company ab ovo may involve the how the when and the wherefore of the question of embeddedness and regional, local engagement. It is the production which is basically important for a multinational company and the place only provides opportunity for this, while e.g.

in case of a family firm, it is the spirit of the place that provides the extra factor because of which it can conduct an activity right there; furthermore, the family history is also a determining factor, that’s why they may feel it is important to support the place, the area, as they may feel that they can provide something else to the local society besides job creation, products, and services.

2.4 CSR and competitiveness Török (2002) distinguishes two CSR motives in his study:

 Remunerative or in other words interest-based responsibility: here the determining factors is whether the CSR activity will affect profitability.

 Autotelic or value-based responsibility: in this case, the own ownership or management goals are decisive and even such activities can be undertaken which do not affect profitability in a positive way.

Török’s thoughts can be linked to the concept of competitiveness, since in the first case the company is engaged in CSR activity to be able to gain competitive advantage, whereas in the other case the aim is different, rather e.g. to provide help, which of course may have an impact on competitiveness, but this is not the focus. It is completely in alignment with external and internal motives identified by Graafland and his co-author (2012). With reference to more international pieces of research they state that one of the most significant external motives may be the increase in profits. Companies, by being engaged in CSR activity, may increase their popularity as CSR activity may make them different from other companies, they also may increase their sales, and all these may positively affect profit. Internal motive is principally based on the values of the owners and managers of the company, and if they are open to social processes, it will appear in the activity of the company as well.

Of course, it is also an important question what the companies think about the connectivity of CSR and competitiveness, and whether this connection can be interpreted in daily activities. In this regard, Szabó-Benedek (2014) highlights that

nowadays some CSR activities are the basic requirements of a competitive company, thus today it is not enough “just” to give work and pay, employees turn to firms with more demands e.g. appropriate working environment, innovative work, manifoldness, flexibility, training opportunities, which are all areas of CSR activity. It may also be an important question whether the increase in competitiveness can be a result of only some given CSR activities or CSR itself can be a competitiveness factor.

Based on the above, I think that there may be a connection between CSR and competitiveness by all means, and it does matter whether the company is active in the field of CSR to gain competitiveness, or because it is motivated by providing aid which may as well “incidentally” induce competitiveness. This thought may arise at all, because although earlier CSR was considered to be absolutely voluntary and not linked to profit, today the view is that CSR is not altruistic, so it is not a completely selfless activity as companies will engage in activities that will benefit them in some wise. Nevertheless, it may be different how openly and consciously company will do so. This is how Csonka et al. (2013, 182) think about it: “No firm can be expected to conduct any of its activities in a completely non-profit way, entirely casting away its non-profit maximisation and wealth growth goals.”

Thus, it can be stated that CSR activity can serve individual interests as well, e.g. a company supports education institutions because it needs appropriate labour supply, or it supports sport facilities so that its employees could be in good health so hopefully they can stay the employees of the company in the long run. There are several other examples, however, the message of this contexture is that it does not matter whether companies carry out CSR activities due to social pressure or for their own sake, the increase in the own corporate welfare also appears in some way besides the increase in social welfare. This also indirectly contributes to the increase in wealth since companies’ effective operation generates economic growth.

2.5 CSR and embeddedness

Bigger companies use CSR in higher rates to increase image and reputation, whereas for smaller firms, especially family firms, embeddedness to local communities, the admittance of local communities, is also an important aspect (Matolay, Petheő and Pataki, 2007 – cited by Balogh et al., 2014). “Embed-dedness, in fact, gives the basic dimensions of responsibility: the conscious, responsible entrepreneur produces product, provides services, creates jobs, and does all these in a natural way for the sake of his own, well-understood interest and long-term survival by considering the interests of the parties concerned and

protecting the environment, since they are interdependent.” (Balogh et al., 2014, 21)

A related thought is that CSR activity primarily means local responsibility and activity, thus this activity strengthens local embeddedness as well. András and his co-author (2014) point out that today it is not the global thinking and local action which is important, but local thinking and action, since we cannot solve the problems of the world, however, if we aim to solve local problems and support local issues, it will sooner or later create a globally liveable world. Only local problems can be solved locally, not the global ones.

Complementing and reflecting on the above thoughts, to my mind, the issue of CSR and embeddedness can be approached from two directions:

 Does a company become locally, regionally embedded, because it is active in the field of CSR?

 Or does it carry out CSR activity locally, regionally, because it operates in the given area and is committed to enhance the quality of life of those who live there?

I think that both can happen in the life of a company. Nevertheless, the company size, its activity, the range of its activity, and the ownership attitude may highly influence the aspect on the basis of which local embeddedness, commitment and CSR are linked in a company. Furthermore, the more a company is part of the local community and economy, the more the local actors expect the company to help its environment in some form, with products, services beyond its main goals. The relation can be definitely strong in case of family firms, since in their case local bonding is ab ovo stronger because of the family ties, thus the need to support and help local community may be more powerful as well.

3. Family firms and CSR in Győr and around Győr