Concepts of corporate social responsibility
The concept of CSR was firstly introduced during the Great Depression of the U.S. in the late 1920s. Since then, social and political impacts of business on society have grown enormously, whereas conflicts between two spheres also have deepened.
Along with the expansion of the scope and influence of the multinational enterprises, actions for CSR became pervasive. Specifically, sustainable development of business management asserted by the international communities drove CSR to become a prevalent research topic in academic and practical fields. Moreover, the spread of NGOs as supervisory agencies and the development of information and technology proliferated CSR as a part of critical strategies to incorporate into the business operation. Despite the increasing volume of researches on CSR, the sphere of the definition grew bigger, leaving loopholes for various interpretations by different perspectives, rather than boils down to a clear-cut explanation .
Carroll  elaborated the concept further with economic, legal, ethical, and discretionary responsibilities. He argued that the business institution is the basic economic unit in nature. Hence, its foremost social responsibility is to produce goods and services that society wants. Along with the economic responsibility, business units also need to fulfill legal requirements to operate within society. Although it is hard to define, ethical responsibilities embrace norms, the consensus of the customers, and society’s expectations that go over and beyond legal requirements. Finally, philanthropic responsibilities leave rooms for business units, which include volunteering activities at firms’ discretion. For example, firms can fulfill their philanthropic responsibilities by promoting community programs, providing financial supports for raising the humanitarian values of the society, and encourage employees to participate in philanthropic activities .
In the advent of the new century, a constellation of factors emphasized the importance of CSR and expanded the concept by applying CSR to overall business operation not only customer relations but also employees and external stakeholder management. Particularly, Porter and Kramer  linked the concept of CSR to the competitive advantage of firms. They argued that corporations should involve in society with a strategic CSR approach that would bring capabilities to improve salient areas of the firms in the competitive business environment. Soon, they expanded the strategic approach and proposed Corporate Shared Value (CSV) that ‘CSV can enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates’ . On the other hand, Kotler and Lee  aligned CSR with a marketing strategy that firms’ socially responsible activities would enrich the welfare of local communities through the business operation and resource allocation .
Theoretical developments of CSR
Many studies, which attempt to analyze CSR within theoretical frameworks, have become widespread, including agency theory, stakeholder theory, corporate citizenship, institution theory, and the resource-based view from strategic perspectives. Among the listed theories, the agency theory represented the opposite view against all. Davis  exemplified two economists who are against and for CSR. First, Friedman contended that carport’s main purpose is to maximize the shareholder values and any social demands that only impose a cost on the company without increasing shareholder value should be rejected. The agency theory  is the most popular way to explain Friedman’s assertion that is the shareholder value maximization must be the supreme criterion for corporate decision-making. They criticize that responding to social demand could expand the power of managers in an unproductive way when managers have a strong personal interest in social issues, they only increase agency costs in the economic system. On the other hand, Davis  commented about another distinguished economist, Paul A. Samuelson, in the same monograph to argue that the latter emphasized the social responsibilities of the corporation. Notably, Freeman  is known for establishing grounds of CSR upon the stakeholder theory by arguing back what Friedman asserted regarding business responsibility. He contended that firms should satisfy a variety of stakeholders including employees, customers, suppliers, and local community organizations. CSR activities engaging with these non-financial stakeholders are important because they could influence the firm’s outcomes. Therefore, it is not sufficient for managers to focus solely on the needs of stockholders’ interests, he argued. In the same vein, the current researchers have supported this idea through studies on interactions, integration, and building better relationships with various stakeholders [27, 41, 108]. Along with stakeholder theory, corporate citizenship theory also contributed to enhancing existing knowledge on CSR. Corporate citizenship theory expanded our views in that a firm bears responsibility as a member of society in nature so it should behave as a good citizen . Hence, corporate citizenship theory focuses on business rights, legal responsibility, and possible replacement of the traditionally most powerful institution, the government.
Porter and Kramer  ignited strategic CSR discourses that businesses should incorporate social responsibility into their core business strategy by presenting creating shared value (CSV) that integrates firms’ business profit and competitiveness with social responsibilities to communities. Firms leverage their expertise and unique resources to create economic value that can be earned from social values. The concept of sustainable competitive advantage has also been aligned with appropriate CSR strategies within a resource-based view in the previous studies [64, 67]. Building on the Resource-based view framework, issues were discussed regarding CSR’s strategic implications and its possible to earn a competitive advantage for firms . Theorists of RBV argue that firms pursue rare, non-substitutable, inimitable, and specialized resources, which introduce the value of non-market resources [9, 12, 42, 88]. Such capabilities are determined by a firm’s resource scarcity, uniqueness, durability, inimitability, and non-substitutability [11, 82]. Competitors fail to mimic or duplicate these resources due to hurdles above which are described as factor market imperfections. Factor market imperfections illustrate the imperfectly competitive factor markets where different firms implement different strategies to buy and sell resources with various expectations about values that would return to their strategies [11, 90]. Firms that obtain these resources can maintain its capacity to generate above normal economic rents, which will sustain their competitive position.
Specifically, the RBV theory is an effective tool for studying corporate social responsibilities as a business strategy. The theory has a strong focus on performance as the key outcome variable. Many practitioners and scholars adopted the RBV framework to question how CSR activities raise or are linked to a firm’s financial performance [36, 65, 77, 96]. Additionally, it acknowledges the importance of intangible assets of a firm such as research and development, human resources, corporate culture, and reputation, whose attributes can also be found in CSR literature . They argued that CSR could be a source of a firm’s competitive heterogeneity that influences customers or other stakeholders.
In the mid-2000s, the literature that adopted institutional theory to understand CSR-related phenomena emerged which broadened the range of conceptual tools in CSR research. Institutional theorists regard CSR not just a realm of purely voluntary actions, but rather collective forms of self-regulation affected by the market, state regulation, and social norms . Institution theory also acknowledges the importance of ‘social contexts’ such as normalcy, tradition, and culture . The process of institutionalization is strongly tied to history ; therefore institutions reflect values and norms which the society has struggled with to achieve. For example, Bondy et al.  witnessed that CSR is not only institutionalized in society, but it also appears as a form of the institution within the multinational enterprises. They interviewed professionals of UK firms and found that CSR became more ‘business as usual’ within the organizations.
In parallel to the acceleration of globalization, evidences are witnessed over the world that the rise of political CSR is bringing the integration of political and social domains for business entities such as self-regulation on labor and environmental areas operationalized by the multinational enterprises [22, 33, 52, 89]. Even though a government usually drives institutional arrangements for CSR as a form of top-down flow in many developing countries, ‘institutions are more open and pervious to the corporate strategic action than is often allowed for in the literature’ . The rise of political CSR and its conceptual novelty lies in integrating effort of a great stock of knowledge that has been piled up in separated and parallel ways from politics, and social domains of non-market literature [33, 99]. The rise of political CSR becomes a new reference to judge the level of trusted corporate governance in the globalized business world.
Taken together, firms refer to CSR now as context-specific actions and policies that take into account stakeholders’ expectations and touch the triple bottom line of economic, social, and environmental performance . In other words, CSR became a new paradigm for business to embrace and an important strategic factor for sustainable development.
The multinationals and CSR practices
The operation of MNEs in developing countries became a target of grassroots activities regarding human rights, labor, environment, and improved social conditions. Close surveillance by the international NGOs on MNEs caught a few well-known social incidents. In 1996, Nike was accused of using child labor in the production of its soccer balls in Pakistan. While Pakistan has laws against child labor and slavery, the government has taken very little action to combat it, and the supplier contracted with Nike exploited the loopholes of the government policy. The company regained credibility from markets only after formulating a Code of Conduct for its suppliers that required them to observe some basic labor and environmental/health standards. Started with this case, ethical problems, caused by the multinationals outsourcing their products in factories and countries where low wages, poor working conditions, and human rights problems were rampant and were discovered.
Until recently, dishonorable operations of a few multinational enterprises in foreign markets such as the indiscriminate development of natural resources and violating human rights have taken place. Nonetheless, there are a few successful cases that earned monetary compensations from the multinationals through persistent court debates and long-term campaigns, mostly led by NGOs. About the recent phenomena relating to the multinational corporation’s ethical misdeed in the West Amazon regions such as Ecuador and Peru, we could learn that these conflicts are associated with reckless developments of a natural resource. During Texaco’s (now Chevron) operation in the Oriente, the company intentionally released more than eighteen billion gallons of toxic waste into rainforest waterways, wetlands, and subsoil, threatening the lives of over twenty-five thousand affected individuals. Amazon Watch, the NGO organization, founded to protect the rainforests and advance the rights of indigenous peoples in the Amazon Basin, has been running several campaigns to call for practical actions from international citizens against the U.S. oil company, Chevron (former Texaco), in Lago Agrio region of North-East Amazon of Ecuador since 1996. After nearly two decades of litigation, the gigantic company has been found guilty by Ecuadorian courts, and the court ordered them to pay $9.5 billion to the damaged region. This is the first case that a U.S. oil company was sentenced by a foreign legal authority for paying orders. The lawsuit was filed in the U.S. Court of New York in 1993, but the U.S. court has dismissed the case in 2001 .
On the other hand, Oxy, a local subsidiary of British conglomerate Reckitt Benckiser, produced and sold a toxic disinfectant for humidifiers in South Korea, causing 400 victims including 51 people who died after coming into contact with the product. Nonetheless, all Oxy products were boycotted from large and small markets in South Korea due to enormous public resentment .
To alleviate such activities international organization declares different guidelines. OECD was the first international organization that declared guidelines for CSR of the multinationals in 1976. While the guidelines went through several amendments in 1979, 1982, 1984, 1991, and 2011, the area of application has been expanded covering not only the member countries but also the foreign territories in which the multinational enterprises of the member countries operate.
Along with OECD guidelines, the international labor organization (ILO) established the international standards of CSR focused on labor issues. Nonetheless, the Tripartite Declaration of ILO became the first international document that applies CSR concepts to the broadest area of the multinational business and is most frequently used in interpreting international disputes regarding CSR issues .
The UN Global Compact was proposed by the United Nations Secretary-General in 1999 and seeks to advance socially and environmentally responsible business citizenship so that business can contribute to the challenge of globalization. Global Compact consists of nine principles based on The Universal Declaration of Human Rights, The International Labor Organization’s Declaration on Fundamental Principles of Rights at Work, and The Rio Declaration on Environment and Development. Global Compact intends to promote a network between various social stakeholders and business citizenship suggesting institutional learning practices among participants . It is very complex to measure and evaluate CSR performances regardless of their size or line of business. The International Organization Standardization (ISO) created ISO 26000 on social responsibility to guide all types of organizations through a myriad of approaches to social and environmental issues.
Firms’ strategic responses to CSR pressures
The mainstream of CSR literature regarding strategic responses have been discussed within the institutional theory [2, 46, 79] by limiting the span of CSR strategic responses to conformance and resistance. To explain more proactive CSR responses such as initiating environmental movement in the developing countries and value-creating activities, the convergent theoretical approach is necessary, such as a resource-based theory. In fact, some CSR scholars explored firms’ responses beyond conformance and resistance and had discussed typologies for the different spans of CSR strategic approaches. For example, Van Tulder et al.  have proposed a division among inactive, reactive, active, and pro-/interactive CSR approaches, while Heikkurinen  has suggested five levels of CSR responses: passive, reactive, proactive, entrepreneurial, and creative. Mirvis and Googins  divided corporate citizenship into five stages of analyzing a corresponding number of issue management approaches: defensive, reactive, responsive, proactive, and defining. Lee  proposed four different CSR strategies: obstructionist, defensive, accommodative, and proactive. O’Higgins  has made a distinction among skeptical, pragmatic, engaged, and idealistic company configurations. Misani  also differentiated convergent CSR that are CSR practices already adopted by other companies in the industry, and divergent CSR is a unique CSR approach used to gain competitive advantage. Together, CSR strategic responses in CSR literature are evolving from the limited span that used to refer conformance or resistance behavior to more comprehensive responses including proactive, competitiveness-creating responses to external pressures.
However, it is not clear whether the classifications illustrated above imply the same level of CSR involvement in business reality which could seriously harm the generalizability of the analyses. For example, about ‘reactive,’ Van Tulder et al.  used the word to describe a firm’s minimal participation in CSR by not violating any law or doing any harm, whereas Heikkurinen  described that a firm’s reactive CSR aiming at maintaining the firm’s competitive advantage which suggests the more proactive status of moral support in Heikkurinen’s adoption of the word. Moreover, on a ‘defensive’ response against CSR institutions, Lee  understood it as a strategy to reject broad ethical responsibility and limited corporate responsibility to protect their self-interest by abiding law and regulation. However, others employed the same term, ‘defensive,’ to describe how firms safeguard their reputation and satisfy employees and other stakeholders . Runhaar and Lafferty  pushed the boundary of ‘defensive’ toward a more ethical sphere.
Institutional theory in business studies focuses on the establishment of consensual understandings of organizational conformity. Therefore, firms may replicate their market strategy in the management of CSR  and the scope of a firm’s choice is restricted from resistance to conformance which implies a deterministic system while allowing little room for the agency . Resource-based theorists put more emphasis on the instrumentality in seeking social worthiness. To overcome limited and confusing terminology, based on institutional and RBV we attempted to visualize different CSR strategies by structuring two practices.
Therefore, we propose the broader frameworks for the empirical test in this study, which are exploring and exploiting CSR Strategies adopted from March . Influenced by internal and external orientations, the multinationals may choose their CSR activities that challenge existing policies with assertive attitudes, hence implement innovative solutions on social-environmental issues, or pursue a passive strategy within an established policy structure, such as resource allocation.
The explorative strategy may seek to discover an innovative solution while not expecting an immediate result. Firms which follow a path of exploration are searching for new ways of doing things and like to experiment by incorporating what they have discovered within the existing business operation. They want to be on the frontiers of the industry. Therefore, exploring strategies render CSR practices to be innovative and creative in seeking solutions to social and environmental concerns. On the other hand, exploiting strategy drives firms to be more adaptive to existing institutions. Firms who adopt an exploiting strategy tend to utilize what they already possess instead of creating something new. Hence, the CSR practices they perform usually include allocating resources to external necessities, such as donation, and philanthropy activities through a partnership with the host government by supplying materials that the government demands. Exploiting CSR may include reactive, convergent, and inactive responses [70, 94].
CSR and MNEs insight in Ethiopia
Ethiopia is one low-income sub-Saharan country, and one of the oldest nations in the world, and Africa’s second-most populous nation. The current population of Ethiopia is 116,160,214 as of 2020, based on World meter elaboration of the latest United Nations data. Ethiopia has 1,140,331 sq. km total land area and the population density in Ethiopia is 115 per Km2 (298 people per mi2).
From mid-1991 onwards, the economy has evolved toward a decentralized, market-oriented economy, emphasizing individual initiative, which was intended to reverse a decade of economic decline. In 1993, gradual privatization of business, industry, banking, agriculture, trade, and commerce was underway. In Ethiopia, industries related to food processing, beverages, textiles, leather and footwear, wood and furniture, paper and printing, chemicals, metals processing, cement are contributing significant contributions to the country’s GDP.
The Ethiopian government has put attractive admission and regulatory incentive schemes in place for foreign investors. Foreign investors can invest on their own or in partnership with domestic investors in areas open for FDI. In recent years, policymakers, have concluded that foreign direct investment (FDI) is needed to boost the growth in their economy. It is claimed that FDI can create employment, increase technological development in the host country, and improve the economic condition of the country in general.
Ethiopia has no identified proclamation or regulation regarding the CSR independently but the country is carrying out a Climate Resilient Green Economy (CRGE) strategy to identify opportunities and entry points for green industrialization, to develop an economy-wide green growth vision.
Ethiopia ranked as the second-largest FDI host economy among the developing countries in 2016, supported by its large market, strategic location, and cheap labor, and growing economy . According to data from UNCTAD , despite a 24% fall in investments to USD 3.1 billion in 2018, Ethiopia maintained its top rank in East Africa, with investments in petroleum refining, mineral extraction, real estate, manufacturing, and renewable energy. The main investor countries are China, Canada, Saudi Arabia, the United States, India, and Turkey .
Ethiopia’s industrialization approach has strongly focused on developing specialized industrial parks, maintaining environmental sustainability, building vertically integrated industries, and enhancing skills development—through strong collaboration with the private sector. The Ethiopian Investment Commission and the Industrial Park Development Corporation as well as the Ministry of Industry are key players in this process.
The Industrial Parks Development Corporation (IPDC) was established in 2014 with a mandate to develop, operate and administer a wide range of industrial parks in the country through lease, transfer, and sale of land and construction. IPDC is designated to prepare a detailed national industrial park master plan based on the national master plan. Currently, three industrial parks- Bole Lemi I, Mekelle, and Hawassa are operational and an additional four—Kombilcha, Dire Dawa, Adama, and Jimma—will soon be inaugurated. Social and environmental issues are crucial for the sustainability of Ethiopia’s development to ensure that industrialization benefits the entire society and has minimal negative impacts on the environment. Corporate Social Responsibility (CSR) guidelines are currently lacking, both for the park developers as well as for the industries. Industries residing in the industrial parks are expected to operate ethically and transparently that contributes to the welfare of society and the environment, complying with applicable national laws and with international norms of behavior such as the United Nations Universal Declaration of Human Rights, the International Labor Organization’s core conventions on labor practices, and other Corporate Social Responsibility Standards.