RESPONSE - Insead

Findings: External factors and cognitive alignment (Objective 2) The impact of industry on cognitive gaps
in dealing with uncertainty (Spender, 1989). Where there is such a prevailing way of doing things,
managers may be less disposed to obtain specific feedback from stakeholders. Consequently, where
institutional norms are largely responsible for driving CSR compliance, firms may be moved to copy
competitors’ actions rather than make sense of their own stakeholders’ demands. This leads to the
following hypothesis:
The greater the importance of institutional factors in motivating CSR, the wider the
cognitive gaps (i.e. there will be lower levels of cognitive alignment observed).
Table 16 below shows the magnitude of average cognitive gaps for firms whose CSR activities are
motivated to a significant degree by institutional norms compared with those with a low level of
institutional motivation (split around the approximate median).
Table 16. Impact of institutional motivation (IM) on cognitive alignment
40%
30%
20%
10%
0%
Gap 1 Gap 2 Gap 3 Gap 4
HIGHER IM 22% 25% 36% 5%
LOWER IM 27% 31% 29% 6%
As can be seen, the evidence is inconclusive. Only gap 3 clearly supports the hypothesis. That is,
cognitive alignment is greater for firms with lower levels of institutional motivation on this criterion
alone. Gaps 1 and 2, however, point in the opposite direction and gap 4 is too narrow to draw
meaningful conclusions from.
Overall, the evidence is mixed along the different types of cognitive gaps analysed. No clear
association can thus be found in the data between the degree to which the company invests in CSR
as a consequence of external norms and pressures, and the magnitude of cognitive alignment.
The complicated nature of the institutional case is perhaps best highlighted in the natural resources
sector. The International Council on Mining and Minerals (ICMM), which is comprised of the world’s
largest mining and metals companies, has its own Sustainable Development Framework. All
members are required to implement this. As such, it represents a clear case of coercive isomorphism
– i.e. large firms become similar in their behavior without necessarily selecting optimal practices.
However, a closer look at the ICMM suggests that sustainability guidelines are developed in co­
operation with members (and representatives from relevant interest groups). It may even be argued
that membership allows firms insight into best practice. Voluntary industry codes were also
mentioned by managers in the food sector; managers believed that some difficult problems could only
be tackled by several industry players in unison. In short, where the institutional motive for CSR is
taken to mean that firms implement practice uncritically or as window dressing, cognitive alignment
between managers and stakeholders may be low. On the other hand, where it means that firms have
shared understandings about suitable ways to implement sustainable development, alignment may be
high if firms are able to tap into expert knowledge and the experience of competitors.
5.4 The impact of industry on cognitive gaps
We are also interested in how cognitive alignment differs across industries. A naïve hypothesis may
be that rapid change in the environment impedes learning, and that more stable industries would be
characterised by higher alignment. Recently, however, evolutionary theory has recognised that
cognition offers adaptive value in dynamic and complex environments (Godfrey­Smith, 1996). In
simple terms, “the function of cognition is to enable the agent to deal with environmental complexity”
(p. 3), where complexity refers to the diversity of states that the environment can assume. On the
other hand, firms in stable environments potentially stand to gain less from scanning their
environments, and efficiency requirements may lead managers in such firms to pay less attention to
RESPONSE: understanding and responding to societal demands on corporate responsibility
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