AIB 2012 Conference Proceedings - Academy of International ...

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It is acknowledge that attempts by tobacco companies to legitimise its activity through CSR have largely failed.
Stakeholders are not persuaded that tobacco is anything other than a ‘sinful' industry. Thus in this paper, we
set aside whether tobacco firms are either ‘good or bad' and instead examine institutional influences on tobacco
firms and the link between country level tobacco policy and firm level CSR. We do so by examining the
relationship between smoking bans and the propensity of tobacco firms to engage in FDI. Using a firm level
database of all tobacco firms, we employ the combined lenses of CSR and institution theory to show that
smoking bans at home are an important institutional intervention, as they appear to reduce the propensity of
FDI in developing countries. We subsequently examine the importance of a country not having any form of ban
in terms of the attractiveness of that country for FDI by tobacco firms. In addition to linking poor sales to the
desire of these firms to engage in FDI, We also show that a developing country is 50% more likely to attract
tobacco FDI if it does not have a smoking ban. We also show that smoking bans at home are effective as
institutional interventions in the industry, making FDI by firms to developing countries less likely. We finally
suggest however that higher proportions of the global tobacco industry will be dominated by firms from
countries without a smoking ban. (For more information, please contact: Nigel Driffield, Aston University, United
Kingdom: n.l.driffield@aston.ac.uk)
Stakeholder Capital and Performance in Tough Times
Sinziana Dorobantu, University of Pennsylvania
Witold Henisz, University of Pennsylvania
Lite Nartey, University of South Carolina
Corporate operations, and in particular the operations of foreign companies, are increasingly contested and
occasionally disrupted by opposition from political and social actors. We argue that stakeholder capital, which
we define as the level of mutual recognition, understanding and trust established by the firm with its
stakeholders, mitigates the adverse financial impact of these negative stakeholder events. Stakeholder capital
preserves a firm's social license to operate during times when the firm's actions and operations are being
challenged. The mechanism is two-fold: first, firms with higher levels of stakeholder capital are more likely to
get the benefit of the doubt when they become the target of criticism, lowering the risk that stakeholders will
rally against them; second, these firms are also more likely to see some of their stakeholders rise to defend
their activities, thus increasing the likelihood that the companies will maintain their social license. In this way,
investments in stakeholder capital can, like insurance, generate benefits or payoffs during adverse events. Using
an event study, we evaluate the stock market impact of adverse events affecting 19 gold mining firms between
2000 and 2008 and show that firms with higher levels of stakeholder capital fare better financially during tough
times. (For more information, please contact: Sinziana Dorobantu, University of Pennsylvania, USA:
sdor@wharton.upenn.edu)
Session: 1.3.8 - Competitive
Track: 3 - IB Theory, FDI, and Entry Mode
Adapting to Local Contexts
Presented On: July 1, 2012 - 13:00-14:15
Chair: Markus David Taussig, National University of Singapore
Inexperienced Firms and Foreign Operation Success
Ricardo Gabriel Flores, University of New South Wales
Victoria Jordan-Jones, ASB/University of New South Wales
Despite high failure rates, many firms still daringly fight against the daunting odds by establishing foreign
operations. Theory such as the Uppsala School, the OLI paradigm, and the Entrepreneurship stream seemingly
AIB 2012 Conference Proceedings
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