Globalization, CSR and business legitimacy in local relationships

The business-society relationship is commonly viewed from a legitimacy perspective and refers to how society grants power over resources needed by business for survival and success. With globalization, business's need for traditional societal legitimacy has changed, which has made the social consequences of business actions more obvious. Corporate social responsibility (CSR) has emerged as a global trend, presenting various social motives and economic gains for business to voluntarily establish and maintain relationships with society. Confusion remains, as to whether corporations’ engagement in social issues is based on altruism or whether they act out of their own self-interest to increase profits. Because globalization has changed business’s need for societal legitimacy, this thesis proposes that economic motives play a central role in how businesses take social responsibility. The aim of this thesis is to investigate how globalization affects the local relationships that previously legitimated businesses, and how these changes initiate processes and responsibilities that affect both business and societal development. This thesis is based on case study research and central to the thesis is company towns with their long tradition of close socioeconomic business-society relationships, which are influenced by a new economic situation. For company towns, globalization with the ensuing reduced need of local labor has meant decreased economic motives for business to maintain local relationships. To contrast the findings regarding company towns, cooperative enterprises (CEs) cases are also looked at. For CEs, increased competition has meant increased economic motives to engage in CSR arrangements. The findings show that as long as the economic benefits of local relationships are positive, businesses engage in CSR to legitimate their business. If business economic motives and commitment to CSR cease to exist (legitimacy transformation), local relationships react passively (Paper I) and shift to philanthropic efforts and seek interests outside local community (legitimacy transition, Paper II). The more stable business and local relationships are, the easier it is for business and local stakeholders to collaborate and share experience to solve social issues (legitimacy maintenance, paper III). The more complex business economic motives are (Paper IV), the more collaborative and flexible efforts are required to take CSR (legitimacy differentiation). The findings in particular also show how business benefits from CSR collaboration since their economic resources can be directed and used more efficiently.