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FOREIGN TRADE UNIVERSITYHO CHI MINH CITY CAMPUS---------***--------MID-TERM REPORTMajor: International Business EconomicsSubject: International BusinessEFFECTS OF CORPORATE SOCIALRESPONSIBILITY ON EXPORT PERFORMANCE INVIETNAMESE EXPORTING FIRMSClass: K57 CLC Student’s name Student ID Pham Vo Thuy Li...

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FOREIGN TRADE UNIVERSITY HO CHI MINH CITY CAMPUS ---------***--------

MID-TERM REPORT Major: International Business Economics Subject: International Business EFFECTS OF CORPORATE SOCIAL RESPONSIBILITY ON EXPORT PERFORMANCE IN VIETNAMESE EXPORTING FIRMS Class: K57 CLC3 Student’s name

Student ID

Pham Vo Thuy Linh Nguyen Thi Diu Hien Tran Thien Long Phan Tien Anh Phan Khuong Duy

1801015433 1801015291 1801015467 1801015123 1801015228

Supervisors: MA. Le Thi Thanh Ngan Dr. Nguyen Thi Phuong Chi Ho Chi Minh City, October, 2020

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TABLE OF CONTENT

INTRODUCTION .............................................................................................................. 1 PURPOSE OF RESEARCH .............................................................................................. 3 LITERATURE REVIEW .................................................................................................. 4 1.

2.

3.

CSR ......................................................................................................................... 4 1.1.

Definition ......................................................................................................... 4

1.2.

Characteristics of CSR ..................................................................................... 5

1.3.

Approach to CSR ............................................................................................. 7

Export performance ............................................................................................ 10 2.1.

Definition ....................................................................................................... 10

2.2.

Characteristics of Export performance .......................................................... 10

2.3.

Determinants of Export performance ............................................................. 13

2.4.

Measures......................................................................................................... 17

Relationship between CSR and Export performance ..................................... 24 3.1.

CSR to Export performance ........................................................................... 24

3.2.

Export performance to CSR ........................................................................... 25

3.3.

Sample review ................................................................................................ 26

3.4.

Methodology review ...................................................................................... 26

HYPOTHESIS .................................................................................................................. 29 REFERENCES ................................................................................................................. 31

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LIST OF TABLES Table 1: Characteristics of studies reviewed ...................................................................... 11 Table 2: Objective and Subjective measures ...................................................................... 18 Table 3: Economic versus Non-economic measures .......................................................... 21

LIST OF FIGURE Figure 1: Research model ................................................................................................... 29

LIST OF ABBREVIATIONS ABBREVIATIONS CSR SMEs MNCs CPTPP EVFTA FTAs S SM SML ML

MEANING Corporate Social Responsibility Small and Medium Enterprises Multinational Corporations Comprehensive and Progressive Agreement for Trans-Pacific Partnership European-Vietnam Free Trade Agreement Free Trade Agreements Small (Firm size) Small and Medium (Firm size) Small, Medium and Large (Firm size) Medium and Large (Firm size)

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INTRODUCTION An issue that emerges in the new era is that firms cannot just focus on economic performance and ignore social and environmental concerns. However, due to the increased global competitions and public awareness of sustainability, firms should act to be socially responsible and contribute to the local community and society at large, and it is increasingly unacceptable to engage in unethical business practices, including child labor, environmental pollution. Firms are now creating their CSR strategy as a competitive edge in the global market. The concept of CSR appeared many decades ago (from Bowen, 1953), it gradually became the focus of companies that emphasize the importance of sustainability in order to not only seek for profit but also protect the environment and social equity. Although it is gradually becoming the focus of firms from developed countries, corporate social responsibility (CSR) is still far from commonplace in Vietnam. In Vietnam, the CSR concept is mostly driven by MNCs, development agencies of Western donor countries and other international organizations (Hamm, 2012). However, more than 97 percent of registered enterprises are small and medium enterprises (SMEs) (Shinozaki, 2012). The implementation and application of CSR in Vietnamese enterprises is facing many difficulties and limitations because of the limitation in the financial resources, personnel and the size of the business. Moreover, Vietnamese SMEs focus more on maximizing profits than on social responsibility. Recent studies concluded that SMEs are playing an essential role in the national economy, especially in Vietnam. According to the report of the Asian Development Bank, Vietnamese SMEs account for up to 97.4 percent of all registered firms. Furthermore, recent researches have shown that CSR benefits both business and society, both large and small and medium enterprises (Udayasankar, 2007). However, awareness of CSR strategy of SMEs in Vietnam and their CSR activities are inadequate. In the context of increased globalization, many free trade agreements have been effective such as CPTPP and EVFTA. These new generation FTAs create many opportunities for exporting firms of Vietnam into big import markets. According to official

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statistics of the General Department of Customs, the total value of goods exchanged between Vietnam and the European Union (EU28) in 2017 reached USD 50.46 billion, accounting for 11.8% of the country's total import and export turnover. However, our exporting markets are mostly demanding countries with strict requirements on technical and the origin of the product. Therefore, Vietnam exporting firms should put CSR on the top priority to integrate into their business strategy in order to take the advantage from the FTAs. In the next session, the paper provides a comprehensive review of many approaches to analyze the CSR aspects and export performance of firms. Following this, the relationship between CSR and export performance of exporting firms in Vietnam are analyzed. Finally, the research concludes the hypothesis and makes judgement about CSR and export performance before ending with some recommended areas for further research.

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PURPOSE OF R ESEARCH This study is a contribution to the CSR and export performance literature in developing countries, particularly in Vietnam. First, it introduces an explicit approach to measure CSR and export performance. Second, it suggests that CSR has an important role in financial performance and sustainable development of exporting firms. Third, this study puts forward recommendations to raise awareness of CSR implementation among Vietnamese companies, especially exporting ones.

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LITERATURE REVIEW 1.

CSR

1.1. Definition There are many CSR definitions from different periods. These concepts come from a very narrow economic point of view that CSR is about maximizing profits for shareholders. However, there are also scholars who look at this issue more broadly. From 1950 to 1969: During this period, many academic studies about CSR were first announced. CSR develops mainly on words rather than action, the Administrators gradually exposed to the concept of CSR, but very few businesses implement CSR activities (Carroll, 2008). Bowen, 1953 developed one of the earliest concepts of "Corporate social responsibility Social'' that is Social Responsibilities of the businessmen. The research aimed at propagating and calling on the business not to invade the rights of others; call for business to carry on various charity campaigns to make up for the inequity in the society. The studies of 1963 McGuire referring to the idea of CSR is that a company must exceed the compliance of the Government and benefit the community. From 1970 to 1989: Carroll (2008) referred to this period as an acceleration of CSR awareness. This period still had many words say rather than action. But gradually there are some initiative regarding the legal aspects. There were some regulations to require business to establish institutional regulations to solve the environmental problems and the product safety. In 1970, Friedman’s studies concluded that there is only one responsibility of business that is to maximize the profit while shall not engage in misleading and cheating action. The research reassured the importance of CSR in the business environment. In 1971, CED (Sustainable Development Committee) defined CSR as the operation of business that serves the needs of the community and increases social satisfaction. Carroll’s research in 1979 indicated that

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CSR covered communal expectations in economics, law, ethics and charity campaigns in a certain time. Carroll (1979) developed the famous “pyramid” model that clearly describes the concept of CSR corresponding to four regions: Economics, law, ethics and charity. From 1990 to 1999: Some non-profit organizations that included A group of entrepreneurs had been established to urge companies to behave more responsibly. From 2000 to now: In this period, the concerns about CSR have significantly increased. There are more actual actions from business to engage in CSR. However, serious and long – term strategies are scarce. Many clear and solid definitions of CSR also appear in this period. According to Kotler et al (2015), CSR is a commitment by a company to improve the welfare of society by performing certain activities and increasing the availability of resources to perform them. ISO 26000 standard in 2010 established the concept of CSR that standards of social responsibility consist of 7 core elements: Corporate governance, child rights, employee rights, transparent organization’s structure, consumers and contributions to the society. On the whole, the above definitions of CSR indicate that, whether under which expressions, the connotation of CSR basically has a common point: Besides developing own interests, seeking profits, developing reputation, etc. Enterprises are always associated with the sustainable development of the social community. 1.2. Characteristics of CSR According to Hamidu et al, (2015) some main characteristics of CSR are summarized below: (i) Voluntary

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CSR was defined to be a set of corporate actions which are discretionary and extend beyond what the law has governed companies. Nowadays, many companies consider responsibilities as voluntary activities which comply with societal moral standards and strategically help to reduce or avoid additional regulation. (ii) Multiple stakeholder orientation The main focus of CSR is to benefit a variety of different stakeholders other than just shareholders. Stakeholders which can be defined as "any group or individual who can affect or is affected by the achievement of the organization's objectives" (Clarkson, 1995). Obviously, there are strong relationships between corporations and various stakeholders such as consumers, employers, suppliers, and local communities. In other words, the interests of all stakeholders form the basic of all goals pursued by management of businesses. (iii) Managing externalities: Externalities in CSR refers to all kinds of elements not expected in the decision-making process of businesses that impact a third party not directly related to the production or consumption of the product ... Environmental pollution is a typical example as a negative externality. Regulation can force firms to minimize or compensate for the cost of the negative externalities, such as pollution fines, but CSR can be a better solution of managing externalities like taking more safety measures and reduction of pollution by applying ecofriendly technology. Many other CSR activities can deal with externalities involving workers rights, employees’ welfare, relationship between corporates and stakeholders, ... (iv) Alignment of social and economic responsibilities Whilst CSR may represent the shift from a narrow focus on shareholders and profitability to a broader focus on the interests of various stakeholders, it should not, however, conflict with profitability. Many definitions of CSR emphasize that it is about finding a point where

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social and economic benefits meet. This feature has raised difficult questions for managers of companies: “How can firms benefit economically from being socially responsible?” or “How to put the society’s progress at the heart of a company’s economic success?” (v) Beyond philanthropy CSR activities sometimes are misunderstood as philanthropic works or community development projects. CSR extends beyond philanthropy because of the impacts it has on profitability, human resource management, marketing, and logistic support which are all part of the core functions of business organizations. Moreover, CSR can be considered as an essential part of business strategy due to its potential capability to satisfy stakeholder expectations and to achieve organizational objectives simultaneously. 1.3. Approach to CSR According to previous research, strategic CSR is defined as instances in which companies go beyond compliance, engaging in actions that can advance social and environmental causes while seeking to capture value for the company through stakeholder management and by remaining consistent with their business strategy (Baron, 2001; Husted & De Jesus Salazar, 2006; McWilliams & Siegel, 2001; Porter & Kramer, 2006; Windsor, 2007). CSR could be conceptualized based on product - level differentiation and firm - level differentiation (McWilliams & Siegel, 2001; McWilliams, Siegel, & Wright, 2006; Porter & Kramer, 2006). Regards the firm-level CSR-based differentiation strategy, it refers to companies’ social and environmental actions that are valued by stakeholders while a product-level CSR-based differentiation strategy relies on technical product attributes (Barin Cruz et al., 2015). Barin Cruz’s study adopts product-level and firm-level CSR as the components of a CSR-based differentiation strategy of export firms to build and sustain their overall differentiation-based export strategies. In detail, this research investigates the effects of tripod strategy including internal resources, export intensity of market and institutional-based factors on a firm’s decision to adopt a product-level or firm-level CSR-

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based differentiation strategy in export firms. The research of Dirk Michael Boehe, however, only emphasizes on the impact of CSR strategy on product level differentiation, to be more specific, this paper pointed out the correlation between CSR product differentiation with product innovation and quality differentiation. By integrating CSR activities into a company’s differentiation strategy, firms can charge premium prices in some specific international market segments, thus leading to increased export performance. Another way of approach to CSR is considering CSR as a catalyst for technology-oriented companies to improve their export performance (C. Costa et al. - International Business Review (2015). According to this research, intense competition requires firms to differentiate based on intangible resources, and technology is particularly important since it provides the firm with an innovative capacity, important for the creation of competitive advantages. At the same time, technology is a means to address social issues, including environmental ones, employees, and customers and regulators while requiring greater care for employees and customers who demand better products at lower costs. However, the issues arising from technology can be solved by applying CSR principles to re-design products that are similar to traditional ones but have been re-designed to comply with established CSR activities. That the firm’s products accounting for stakeholders’ interests would be complementary to export activities. The stakeholder theory is now one of the most popular theory bases for CSR research. Stakeholders can be defined as "any group or individual who can affect or is affected by the achievement of the organization's objectives" (Clarkson, 1995). Zhang and Shengtian (2014) stated that the stakeholder model is more objective, convenient and straightforward, compared to other concept models. Mishra et al. (2013) argued that CSR is voluntary actions on the legal basis of firms to ensure benefits for stakeholders such as employees, communities, environment, investors, and customers, etc. Obviously, there should be strong relationships between companies and stakeholders which means that stakeholders' interests form the basis of all goals pursued by management of businesses. According to Vu et al,

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(2020), in order to have the most general assessment of CSR, businesses should identify CSR from the theoretical perspective of stakeholders. In regard to use stakeholder theory for CSR research, Vu et al, (2020) is one of the representatives: they aimed to explore the impact of corporate social responsibility (CSR) on the financial performance of textile and garment export enterprises in Vietnam. To be more specific, the impact of CSR on the financial efficiency was assessed by all 6 aspects of employees, the environment, customers, suppliers, investors, the community through 3 mediate factors: employee commitment, reputation of the business and government support. They considered the impact of CSR on mediate factors and then the impact of mediate factors on financial performance of exporting firms. Many other famous approaches of CSR have been introduced so far: Carrol in 1979 developed the CSR “pyramid” theory that suggested companies should undertake 4 types of business responsibilities: (1) Economic responsibilities: production of goods and services that consumers need and want; (2) Legal responsibilities: compliance with the law and state regulations in force; (3) Ethical responsibilities: to behave correctly, fairly, and reasonably, meeting certain ethical standards, and to minimize harm to related parties in society; and, (4) Philanthropic responsibilities: the involvement of companies in programmes that promote social welfare and improve citizens’ quality of life. Dahlsrud (2008), described CSR approach by a series of multi-dimensions: consideration of economic, social, and environmental issues, stakeholders, and voluntary nature. Porter and Kramer (2006, 2011) created a new look on CSR: creating shared value (CSV) which puts the society’s progress at the heart of a company’s economic success.

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2.

EXPORT PERFOR MANCE

2.1. Definition Export performance is the extent of the firm's strategic and financial objectives through operating export activities in export marketing strategy (Cavusgil & Zou, 1994). Measuring export performance is a key element in multiple researches. There are no exact methods or models to measure export performance of a firm (Robertson & Chetty, 2000). 2.2. Characteristics of Export performance 2.2.1.

Fieldwork characteristics

These reviewed studies were conducted from different ...