2017-19
Introductory analysis of sustainable consumption andproduction: Factors of corporate social responsibility
management in Japan
Michiyuki Yagi Katsuhiko Kokubu

Introductory analysis of sustainable consumption and production:
Factors of corporate social responsibility management in Japan
Michiyuki Yagi* and Katsuhiko Kokubu*
Abstract
As an introductory analysis of sustainable consumption and production, this paper examines what
factors influence corporate social responsibility management in Japan. Following some underlying
theories (management control system; the neo-institutional theory; performance measurement
systems; the stakeholder theory; the resource dependence theory), this paper conducts empiricalstudies using firm-level data. The first three studies examine what factors encourage corporate social
responsibility management, using questionnaire survey dataset for Japanese companies. Thesestudies examine the corporate social responsibility factors from the viewpoints of Simons’ four
levers of control, isomorphism in neo-institutional theory, and the role of organizational culture inmanagement control system. The last two studies use archival data, examining how corporate social
responsibility performance and related disclosure score are affected by ownership structure andcorporate social responsibility directors.

Keywords: Corporate social responsibility; Japan; levers of control in management control
systems; the neo-institutional theory; performance measurement systems; thestakeholder theory; the resource dependence theory*

Graduate School of Business Administration, Kobe University, Japan
657-8501, 2-1, Rokko-dai, Nada-ku, Kobe, Japanyagi@ruby.kobe-u.ac.jp (corresponding author)
1Preface

Against the backdrop of 17 Sustainable Development Goals (SDGs) adopted by UN
member states in 2015, this paper focuses on goal 12: sustainable consumption and production(SCP) (United Nations Development Programme, 2015). SCP t increases net welfare (fromeconomic activity) by reducing degrees of resource use and environmental burden, and improving
quality of life. Especially focusing on Target 12.6 ‘Encourage companies, especially large andtransnational companies, to adopt sustainable practices and to integrate sustainability information
into their reporting cycle,’ this paper examines factors that influence corporate social responsibility(CSR) management in Japan, taking over from the previous study of Yagi and Kokubu (2016) in theSoutheast Asia and Japan. Following some underlying theories (management control system; theneo-institutional theory; performance measurement systems; the stakeholder theory; the resource
dependence theory), this paper conducts empirical analyses using firm-level data.
This paper consists of five studies, which can be divided into two parts. The first threestudies examine factors that encourage CSR management, using questionnaire survey data forJapanese companies of Kim (2017). This survey was conducted in 2016 to understand the current
situation of CSR management in Japan, receiving 175 respondents in total. Using the data, thesestudies examine different aspects of CSR from the viewpoints of Simons (1995) four levers ofcontrol (Chapter 1), isomorphism in neo-institutional theory (Chapter 2), and the role oforganizational culture (Chapter 3) in management control system. The last two studies use archival
data such as Bloomberg Professional and Toyokeizai CSR data. They examine how CSR
performance and related disclosure score are affected by ownership structure (Chapter 4) and CSR
directors (Chapter 5).

2

References
Kim, J., 2017, “Kigyou no CSR keiei ni okeru Manejimento Kontororu Shisutemu no kenkyu (Astudy of Management Control System in CSR management of firms)”, Ph.D thesis,
Graduate School of Business Administration, Kobe University, Japan [Japanese].
Simons, R., 1995, “Levers of Control : How Managers Use Innovative Control Systems to Drive
Strategic Renewal,” Harvard Business School Press, Boston, MA.
United Nations Development Programme, 2015, “Sustainable Consumption and Production: A
Handbook
for
PolicyMakers(GlobalEdition).”<https://sustainabledevelopment.un.org/content/documents/1951Sustainable
Consumption.pdf>.
Yagi, M. and Kokubu, K., 2016, “Introductory analysis of sustainable production in Southeast Asia
and Japan: Corporate disclosure, green purchasing, and macro situation,” Discussion
paper of Graduate School of Business Administration, Kobe University, 2016-13. <https://www.b.kobe-u.ac.jp/paper/2016_13.html>

3

Acknowledgments

This study was carried out as part of the SESAMI program’s project in Kobe University
and was supported by research grant from the Research Institute of Advanced Management (RIAM)(in Kobe University) and the Environment Research and Technology Development Fund (S-16) of
the Environmental Restoration and Conservation Agency. We thank Prof. Hirofumi Matsuo, Prof.
Chieko Minami, Dr. Jittima Tongurai, Dr. Gustavo Tanaka, Dr. Shinya Horie (all in Kobe
University), and Dr. Jaehong Kim (Kanto Gakuen University) for cooperation for this project andfor constructive comments and suggestions. We also thank Md. Shahid Ullah and Qi Wu forsupporting our research and proofreading this paper.

4

Table of contents

Preface............................................................................................................................................... 2
Acknowledgments............................................................................................................................. 4
Table of contents ............................................................................................................................... 5
Chapter 1. Effects of Simons’ Four Levers of Control on CSR Performance (Intan Sartika Eris
Maghfiroh, Michiyuki Yagi, and Katsuhiko Kokubu) ...................................................... 6
Chapter 2. Isomorphisms in CSR management practice from the perspective of neo-institutional
theory (Yanru Chen, Michiyuki Yagi, and Katsuhiko Kokubu). ..................................... 25
Chapter 3. Corporate culture and Performance Measurement Systems (Yelyzaveta Savchuk,Michiyuki Yagi, and Katsuhiko Kokubu). ...................................................................... 46
Chapter 4. Influence of various shareholders on CSR performance based on the stakeholder theory(Yan Tang, Michiyuki Yagi, and Katsuhiko Kokubu). .................................................... 71
Chapter 5. Roles of board directors in charge of CSR from the perspective of resource dependence
theory (Yian Ku, Michiyuki Yagi, and Katsuhiko Kokubu)............................................ 87

5

Chapter 1. Effects of Simons’ Four Levers of Control on CSR Performance
Intan Sartika Eris Maghfiroh*, Michiyuki Yagi*, and Katsuhiko Kokubu*
Abstract
With the motivation of supporting SDGs achievement, this study examines the relationship between
management control system (namely Simons’ four levers of control) and corporate social
reponsibility performance in Japanese companies based on datafrom questionnaire survey. The
results of regression model suggest that diagnostic control system has significantly positive effecton the performance and interactive control system has significantly negative effect. Moreover, inmanufacturing sector, only diagnostic control system has significantly positive relation, while innon-manufacturing sector, only interactive control system has significantly negative relation. Thisimplies that critical performance factor that is associated with diagnostic control system holdimportant role in manufacturing sector. On the other hand, the negative effect of interactive control
system implies that some industries adopt higher degree of interactive control system to compensate
more strategic uncertainties.

Key words: Levers of control, management control system, corporate social responsibility*

SESAMI Program, Graduate School of Business Administration, Kobe University.
61. Introduction
With the rapid technological development and economic growth in many countries,
society and environment are affected in many ways. The planet we live in may no longer be able tosufficiently provide resources for future generations. The inequality between rich and poor people
also has become a serious issue. In the hope of tackling these problems, the Sustainable
Development Goals (SDGs) were initiated at the United Nations Conference on Sustainable
Development in Rio de Janeiro in 2012 (United Nations Development Programme (UNDP), 2015).
The objective was to produce a set of universal goals that meet the urgent environmental, politicaland economic challenges facing our world. The SDGs replace the Millennium Development Goals(MDGs), which started a global effort in 2000 to tackle the indignity of poverty. The MDGs
established measurable, universally-agreed objectives for tackling extreme poverty and hunger,
preventing deadly diseases, and expanding primary education to all children, among otherdevelopment priorities.
There are seventeen goals in SDGs with 169 indicators and targeted to be achieved by
2030. Among these goals, sustainable consumption and production (goal 12) holds important rolein promoting resource and energy efficiency, sustainable infrastructure, and providing access tobasic services, green and decent jobs and a better quality of life for all. When this goal is well
implemented, it helps to achieve overall development plans, reduce future economic, environmental
and social costs, strengthen economic competitiveness and reduce poverty.
Sustainable consumption and production aims at ‘doing more and better with less’.
Benefits of SCP include increased net welfare gains from economic activities by reducing resourceuse, degradation and pollution along the whole lifecycle, and at the same time increasing quality oflife. It involves different stakeholders, including businesses, consumers, policy makers, researchers,scientists, retailers, media, and development cooperation agencies, among others. It also requires asystemic approach and cooperation among actors operating in the supply chain, from producer to
final consumer.
One of the indicators of goal 12 is encouraging companies, especially large andtransnational companies, to adopt sustainable practices and to integrate sustainability information
into their reporting cycle. This will require managers to establish a control system that allows them7

to integrate sustainable practice into the ongoing practice.
With the motivation of supporting SDGs achievement, this study aims to study the
relationship between management control system (namely Simons’ four levers of control) andcorporate social reponsibility (CSR) performance in Japanese companies. The dataset is obtained
from Kim’s (2017) questionnaire survey. The results of regression model suggest that diagnostic
control system has significantly positive effect on the performance and interactive control system
has significantly negative effect. Moreover, in manufacturing sector, only diagnostic control system
has significantly positive relation, while in non-manufacturing sector, only interactive control
system has significantly negative relation. This implies that critical performance factor that is
associated with diagnostic control system hold important factor in manufacturing sector. On theother hand, the negative effect of interactive control system implies that some industries adopt
higher degree of interactive control system to compensate more strategic uncertainties.
The remaining of this study is structured as follows. Section 2 introduces background of
this study in terms of the framework of Simons (1995). Section 3 describes research methodology
and data. Section 4 shows results of regression model, and Section 5 concludes the study with
implications.

2. Background
This study follows the framework of management control system proposed by Simons(1995). This management control system (MCS),also known as Levers of Control (LOC) introduces
new system that effective managers use to manage organizational tensions. Each system has its own
countervailing purpose in controlling strategy. First, the belief systems are used to communicate
core values and inspire commitment to the organization and frame the search for new opportunities.
Second, the boundary systems are used to define the limits of freedom, including acceptable risks
and standards of business. Third, the diagnostic systems are used to coordinate and monitor intended
strategies. Fourth, the interactive systems are used to gather and share information up and down theorganization about strategic uncertainties and emerging opportunities, to encourage learning, and to
facilitate new strategies.
8

It has become important issue recently for the business to be sustainable. Managers needto pay attention fairly to the triple bottom-line (profit, people, and planet). Within a CSR context,
belief systems can be seen as incorporating CSR related values in its long-term sustainability
objectives. Boundary systems, on the other hand, guide and control the behaviour of employees toavoid activities that may harm environment or cause any reputational risk/loss. Diagnostic control
systems are crucial to the successful achievement of CSR objectives because CSR activities that are
not accompanied by measurable outcomes are likely to be overlooked. Whereas interactive control
systems play crucial role by incorporating broad range of views from different stakeholders, such
as NGOs, local communities, and investors to gain new feedback and idea of CSR initiatives (Gondet al., 2012).
Arjaliès and Mundy (2013) did empirical research using sample from CAC 40 group of
publicly listed companies in France. They used questionnaires to explore how organizations
leverage MCS in different ways in order to drive strategic renewal and trigger organizational change
while simultaneously supporting society’s broader sustainability agenda. The findings suggest thatthe management of CSR has the potential to facilitate organizational change through processes thatenable innovation, communication, reporting, and the identification of threats and oppportunities
regarding sustainability issues.

3. Research Methodology
3.1 Model
The purpose of this study is to examine the effect of levers of control implementation on
CSR performance. This study adopts LOC framework by Simons (1995). Considering the resultsfrom previous studies, we hypothesize the relationship between each LOC and CSR performance asfollows:
H1:Belief systems are related to CSR performance in positive manner
H2:Boundary systems are related to CSR performance in positive manner
H3:Diagnostic control systems are related to CSR performance in positive manner
H4:Interactive control systems are related to CSR performance in positive manner
9

We test these four hypotheses using linear regression model. In the regression model, theCSR performance level (CSR) is used as dependent variable, whereas four LOC (which are namely
belief systems (Belief system), boundary systems (Boundary systems), diagnostic control systems(Diagnostic control), and interactive control systems (Interactive control)) are used as independent
variables.

𝑪𝑺𝑹 = 𝜷𝟎 + 𝜷𝟏 (𝑩𝒆𝒍𝒊𝒆𝒇 𝒔𝒚𝒔𝒕𝒆𝒎) + 𝜷𝟐 (𝑩𝒐𝒖𝒏𝒅𝒂𝒓𝒚 𝒔𝒚𝒔𝒕𝒆𝒎)+ 𝜷𝟑 (𝑫𝒊𝒂𝒈𝒏𝒐𝒔𝒕𝒊𝒄 𝒄𝒐𝒏𝒕𝒓𝒐𝒍)(1)+ 𝜷𝟒 (𝑰𝒏𝒕𝒆𝒓𝒂𝒄𝒕𝒊𝒗𝒆 𝒄𝒐𝒏𝒕𝒓𝒐𝒍) + ∑ 𝜷𝒌 𝑪𝒐𝒏𝒕𝒓𝒐𝒍𝒔𝒌 + 𝜺

where size (proxied by natural log of total asset; lnAssets), debt ratio (Debt ratio), return on
investment (ROI), and sales growth (Salesgrowth) are used as control variables (Controls). ε is anerror term.

3.2. Data
Regarding the dataset, we use answers from questionnaire survey of Kim (2017) tomeasure the degree of each LOC implemented inside the company. The sample of our study consistsof 137 Japanese companies selected from 151 companies of Kim (2017). 14 companies were omitted
because of missing values. The companies are classified into two main categories, manufacturers
and non-manufacturers. Further classification based on 33 sector classification of Tokyo Stock
Exchange (TOPIX Sector Indices) is shown on Table 1. Sample size in total are 88 companies frommanufacturer category and 49 companies from non-manufacturer category.
CSR performance data comes from Toyo Keizai CSR ranking (300 points at maximum).
To identify belief, boundary, and diagnostic control systems, we use average value and each valueof questions (Likert scale 1 to 7) in item C,D, and E respectively (Table 2). Regarding the interactive
control systems, we use questions in item F and G (Table 2). The original questionnaire was written
and answered in Japanese, and therefore translation into English is made for this research.

10

4. Results
4.1 Descriptive statistics
Table 3 shows descriptive statistics of this analysis. Table 4 shows the correlation between
each variables used. Figures 1 and 6 present the correlation of the LOC (item E and F&G) and CSR
performance of all sample (Figures 1 and 2), manufacturing sector (Figures 3 and 4), and nonmanufacturing sector (Figures 5 and 6).
The average level of CSR performance of the whole sample is 210.78 while for
manufacturing sector is 222.59 and non-manufacturing sector is 189.65. Among four LOC, averagevalues of belief system are the highest (5.44) and the lowest are interactive control system (4.32).
Overall, average values of each LOC in manufacturing sector are higher of those in nonmanufacturing sector.
Table 5 tells us the deeper insights about distribution of answers in each question. Averagevalues of items C1 to C5 (the question about CSR values, which reflects the implementation ofbelief systems) ranges from 4.98 to 5.77. Similarly, items D1 to D4 (question about CSR code of
ethics (boundary systems)) ranges from 5.00 to 5.50.
For question about diagnostic control systems in item E, average values range from 3.23
to 5.48. Among them, there is interesting finding which is about the itme E6 (‘CSR related targets
are included in performance appraisal and compensation system’). Most answer is 1 (33 companies)
and the average is 3.23 which shows that many companies still do not integrate sustainability issues
in the reward system. Further, looking on individual companies from different industry sector, somecompanies that answered 4 and above in this particular question, ranked better in the CSR
performance compared to the previous year rank. The lowest average based on industry is wholesaletrade (score of 2.8 out of 7).
For items F&G (about interactive control systems), another unusual finding can be seen
at F2 (‘There is seminar or lecture about CSR issues’). Most companies answered 1 which showsthat this area still has potential to be improved.

4.2 Regression results
The results of regression model are provided in Table 6. Columns 1, 2 and 3 show the11regression results for all sample, manufacturers, and non-manufacturers, respectively. Belief
systems and boundary systems are not statistically significant in all regression models, and thus
Hypotheses 1 and 2 are not supported. Diagnostic control systems are significantly positive in all
samples and manufacturers only , which is consistent with Hypothesis 3. Interactive control systems
are significantly negative in all samples and non-manufacturers only, which is opposite to
Hypothesis 4.

5. Conclusions
The purpose of this study is to examine the effect of levers of control on CSR performance.
This study adopts LOC framework by Simons (1995). Considering the results from previous studies,
we hypothesize that each LOC (namely belief systems, boundary systems, diagnostic control
systems, and interactive control systems) are related to CSR performance in positive manner.
Based on our analysis, it is suggested that hypotheses 1 and 2 (for belief system andboundary system) are not supported, whereas hypothesis 3 (diagnostic control system) is supported.
Hypothesis 4 (interactive control systems) is not supported, but as we have found that the interactive
control system is related in a negative manner as opposed to the expected positive. Thus, diagnostic
control systems and interactive control systems can be seen as significant factors for a company’s
CSR performance. Further, only diagnostic control which focuses in the critical performance
valuables, holds significant role in manufacturing sector. It is understandable because the diagnostic
control systems provide a mechanism by which the organization measures the outcome of their CSR
activities. On the other hand, this diagnostic control systems are not significant in nonmanufacturing sector and interactive control systems seemed to affect more, in negative manner.
The negative correlation between interactive control systems and CSR performance can beinterpreted as follow. The questions on item G in the questionnaire asked about the difficulty to
predict stakeholders’ responds in regard to CSR issues. The more difficult it is perceived, the degreeof interactive control systems usage is higher. This also gives signal about the uncertainty in theindustry and therefore the CSR performance is negatively associated with this LOC.
Regarding the sustainable consumption and production goal from SDGs, from the result12

of this study, it is revealed that Japanese companies have engaged in sustainable practice to certain
degree by integrating CSR values to their management control systems. From the survey replies ,there are some areas that have potential to be improved such as including CSR related targets into
the appraisal and compensation system, also educating employees about CSR values and code of
ethics through seminars to achieve this goal comprehensively.
Regarding limitations, this study does not take the process of the management control
system itself into consideration and focuses only on the visible measures of Simons’ four LOC. We
also do not seek to assess organizations’ motives for engaging in CSR.

13

References
Arjaliès, D. L., and Mundy, J., 2013, The use of management control systems to manage CSR
strategy: A levers of control perspective. Management Accounting Research, 24(4), pp.
284-300.
Gond, J. P., Grubnic, S., Herzig, C., and Moon, J., 2012, Configuring management control systems:
theorizing the integration of strategy and sustainability. Management Accounting
Research, 23 (3), pp. 205 - 223.
Kim, J., 2017, Kigyou no CSR keiei ni okeru Manejimento Kontororu Shisutemu no kenkyu (Astudy of Management Control System in CSR management of firms), Ph.D thesis,
Graduate School of Business Administration, Kobe University, Japan [Japanese].
Simons, R., 1995, Levers of Control : How Managers Use Innovative Control Systems to Drive
Strategic Renewal, Harvard Business School Press, Boston, MA.
United Nations Development Programme (UNDP), 2015, “Sustainable Consumption and
Production:
A
Handbook
for
PolicyMakers(GlobalEdition).”<https://sustainabledevelopment.un.org/content/documents/1951Sustainable
Consumption.pdf> (last accessed July 7, 2017).

14

Table 1: Industry classification (number of companies)
Manufacturers

Non-manufacturers

Foods (8)Textiles and apparels (5)Pulp and paper industry (2)Chemicals (14)Fishery and agriculture (1)Pharmaceutical (2)Rubber products (2)Glass and ceramics products (3)Iron and steel (1)Nonferrous metal products (3)Marine transportation (1)Information & communication (9)Wholesale trade (10)Retail trade (7)Construction (7)Electric power and gas (2)Land transportation (1)Real estate (1)Services industry (10)------

Metal products (5)Machinery (6)Electric appliances (22)Transportation equipment (8)Precision instruments (1)Other products (6)15Table 2: Kim’s (2017) Questionnaire Items
C. CSR values
1. CSR values is incorporated in company’s philosophy.
2. Managers communicate CSR values to employees.
3. The company communicates CSR values through internal training.
4. The company communicates CSR values through internal communication system like intranet.
5. The employees understand CSR values.
D. CSR code of ethics
1. In order to promote CSR activities, CSR code of ethics are implemented.
2. The company’s CSR code of ethics provide information about what actions are undesired from theemployees.
3. The company has system which inform the employees about CSR risk (e.g. unfair transaction,
environmental law violation).
4. The employees understand CSR code of ethics.
E. The method of assessing CSR activities
1. In order to hold CSR activities, different goals are set.
2. KPI which is related to CSR activities are set.
3. CSR activities are evaluated and monitored.
4. The achievement of CSR activities are reported to internal and external parties.
5. The evaluation of CSR activities in this year will affect the plan of next year.
6. CSR related targets are included in performance appraisal and compensation system.
F. Response toward CSR issues
1. There is periodical meeting about CSR issues
2. There is seminar or lecture about CSR issues
3. There is smooth communication within internal department about CSR issues
4. There is smooth communication with external stakeholder about CSR issues
5. There is smooth communication between upper manager and lower level employee about CSR
issues.
6. Best practice of CSR is shared inside the company.
G. Environmental uncertainties
1. Law about CSR.
2. International standard about csr (e.g ISO 26000).
3. CSR strategies or activities by rival companies.
4. Technology changed related to CSR.
5. Customer needs related to CSR.
6. General trend related to CSR.

16

Table 3: Descriptive statistics
Obs
All sample
CSR score
Belief system
Boundary system
Diagnostic control
Interactive control
lnAssets
Debt ratio
ROI
Sales growth
Manufacturers
CSR score
Belief system
Boundary system
Diagnostic control
Interactive control
lnAssets
Debt ratio
ROI
Sales growthNon-manufacturers
CSR score
Belief system
Boundary system
Diagnostic control
Interactive control
lnAssets
Debt ratio
ROI
Sales growth

Average

S.D.

Min

Max

137
137
137
137
137
137
137
137
137

210.78
5.44
5.22
4.63
4.32
12.12
123.65
8.64
2.19

48.94
1.15
1.44
1.54
0.86
1.86
103.24
7.86
8.97

106.5
1.6
1.0
1.0
2.0
6.7
0
-16.2
-35.32

286.2
7.0
7.0
7.0
6.5
15.9
771.8
42.9
49.34

88
88
88
88
88
88
88
88
88

222.59
5.53
5.38
4.75
4.37
12.37
112.67
8.0
1.38

43.25
1.10
1.51
1.52
0.84
1.60
75.72
7.83
8.47

107.1
1.6
1.0
1.0
2.0
7.3
0
-16.2
-35.32

286.2
7.0
7.0
7.0
6.25
15.7
356.3
42.9
25.8

49
49
49
49
49
49
49
49
49

189.65
5.27
4.94
4.43
4.25
11.67
143.37
9.65
3.63

51.82
1.23
1.29
1.55
0.88
2.21
138.53
7.89
9.73

106.5
2.0
1.0
1.0
2.5
6.7
20.25
0
-17.79

282.2
7.0
7.0
6.8
6.5
15.9
771.8
42.6
49.3

17

Table 4a: Correlation matrix (All samples)BeliefsystemBeliefsystemBoundarysystemDiagnostic
controlInteractive
control
LN asset

BoundarysystemDiagnostic
controlInteractive
control

LN asset

Debt ratio

ROI

Sales
growth

CSR
score

1
0.68631

0.64260.68431

0.5566

0.5084

0.66891

0.48180.41950.62980.5192

1

Debt ratio-0.1966-0.111-0.0444-0.0430.1086

1

ROI-0.0405-0.0353

0.0262-0.0624-0.0191-0.2532

1

Sales growth-0.2768
0.4785-0.2115
0.4611-0.1953
0.6058-0.1443
0.4082-0.1574
0.74710.07720.00020.1439-0.0991-0.0995

1

ROI

Sales
growthCSR
score

CSR score

Table 4b: Correlation matrix (Manufacturers)
BeliefsystemBeliefsystemBoundarysystemDiagnostic
controlInteractive
control
LN asset

BoundarysystemDiagnostic
controlInteractive
control

LN asset

Debt ratio

1
0.66621

0.62630.70191

0.55670.52540.643510.45740.38240.55410.4032

1

Debt ratio

0.0344-0.02150.0091

0.06640.13381

ROI-0.0166

0.0537

0.19510.03030.2718-0.243118

1

Sales growth
CSR score-0.13540.4418-0.1377
0.4097-0.0703
0.5838-0.0696
0.39380.03770.77680.09290.1186

0.09310.1409

1
0.13

1

Sales
growth

CSR
score

1
-0.3203

1

Table 4c: Correlation matrix (Non-manufacturers)
BeliefsystemBeliefsystemBoundarysystemDiagnostic
controlInteractive
controlln asset

BoundarysystemDiagnostic
controlInteractive
control

LN asset

Debt ratio

ROI

1
0.727510.66020.642910.55000.47090.7072

1

0.49620.466

0.73310.6696

Debt ratio-0.3877-0.1887-0.0719-0.1309

0.1431

1

ROI-0.0526-0.1804-0.2444-0.2047-0.3588-0.3225

1

Sales growth-0.45290.5118-0.3137
0.5165-0.3649
0.6522-0.24
0.4332-0.34250.70410.0366-0.0053

0.1984-0.3922

CSR score

19

1

Item
Average
MedianMode
Item
Average
MedianMode
Item
Average
Median
Mode

C1
5.77
6
6
E1
5.08
5
7
F4
4.45
5
5

Table 5: Distribution of questionnaire’s responds
C2
C3
C4
C5
D1
D2
5.64
5.41
5.43
4.98
5.25
5.00
6
6
6
5
6
6
7
6
6
5
6
7
E2
E3
E4
E5
E6
F1
4.36
4.80
5.48
4.88
3.23
5.00
5
5
6
5
3
6
5
7
7
4
1
7
F5
F6
G1
G2
G3
G4
4.55
4.27
4.16
4.22
4.26
4.41
5
4
4
4
4
4
5
4
4
4
4
4

20

D3
5.53
6
7
F2
3.91
4
1
G5
4.24
4
4

D4
5.12
5
6
F3
4.53
5
5
G6
3.95
4
4

Table 6: Results of regression model
Dependent variable
Independent variables
Constant
Belief system
Boundary system
Diagnostic control
Interactive control
lnAssets
Debt ratio
ROI
Sales growthObs
R-squared
Adj R-squared(1)
CSR Score(All sample)(2)
CSR Score(Manufacturers)(3)
CSR Score(Non-manufacturers)-4.917(21.949)
2.115(3.576)2.629(2.815)7.291*(3.053)-8.279*(4.320)16.796(1.917)-0.041(0.028)-0.813(0.359)0.442(0.312)137
0.62320.5997-24.980(25.246)
0.128(3.821)0.511(2.901)7.135*(3.206)-1.8244.537
17.974**(2.280)-0.005(0.040)-0.573(0.407)0.681*(0.343)88
0.66200.627845.861(42.600)
4.306(7.710)3.730(6.144)8.848(6.096)-15.881*(8.833)12.786**(3.908)-0.041(0.046)-1.336*(0.736)0.099(0.608)49
0.61500.5380Notes ** and * stands for statistically significant level at 5 and 10%, respectively. Numbers are
estimated coefficients. Numbers in parentheses are standard errors.

21

Fig 1. Item E and Total CSR score

Fig 2. Items F&G and Total CSR score

22

Fig 3. Items E and Total CSR score (manufacturing sectors)

Fig 4. Items F&G and Total CSR score (manufacturing sectors)

23

Fig 5. Item E and Total CSR score (non-manufacturing sectors)

Fig 6. Items F&G and Total CSR score (non-manufacturing sectors)

24Chapter 2. Isomorphisms in CSR management practice from the perspective of
neo-institutional theory
Yanru Chen*, Michiyuki Yagi*, and Katsuhiko Kokubu*
Abstract
Focusing on the Goal 12: sustainable consumption and production in Sustainable Development
Goals, this study examines how corporate social responsibility practice from the perspective of neo
institutional theory. This study employs the survey data collected from Japanese firm and the datasetof Toyo Keizai CSR data in 2016. From the regression analysis, we find that coercive isomorphism
affects the CSR management practices positively, especially in manufacturing industries. Normative
isomorphism has similar positive effects while mimetic isomorphism has no correlation withcorporate social responsibility practices. These suggest that the practices are more likely to be
facilitated and improved by coercive regulations and professionalism in the CSR field, instead ofpeer’s pressure.

Key words: neo-institutional theory; corporate social responsibility; sustainable
development goals; isomorphism;*

SESAMI Program, Graduate School of Business Administration, Kobe University.
25

1. Introduction
With the repaid development of the world’s economy, severe problems in terms ofenvironment and society have been occurring. In order to reach the objective of being sustainablein economy, environment, and society, the United Nations set and released a set of 17 goals in 2015
with 169 targets used to monitor the implementation of these goals (United Nations Development
Programme (UNDP), 2015). The set of goals is known as the Sustainable Development Goals(SDGs). Ending poverty, protecting the planet and ensuring that all people enjoy peace andprosperity are the universal call to action of the Goals. By achieving these goals, our world is hoped
to be transformed into a sustainable world. In between, according to UNDP (2015), theimplementation of Goal 12: ensuring sustainable consumption and production patterns can help toachieve overall development plans, reduce future economic, environmental and social costs,
strengthen economic competitiveness and reduce poverty. It aims at “doing more and better withless” with the cooperation among actors operating in the supply chain, from producer to final
consumer.
Therefore, a medium which can not only present a company’s endeavor but also
communicate with all actors in the supply chain is critical. What’s more, according target 12.6,
which mentioned about the importance of adopting sustainable practices, we consider that
improving corporate social responsibility (CSR) practices can serve as one approach of achieving
Goal 12. This study examines how a company’s CSR management practices are being affected byexternal institutions (especially, three types of isomorphism), based on the neo-institutional theory
in DiMaggio and Powell (1983). This research uses the survey data of Kim (2017) and archival datafrom Toyo Keizai CSR dataset in Japan to investigate the effect of isomorphism on CSR
management practices of Japanese companies. This study finds that coercive and normative
isomorphism positively affect the level companies’ CSR management practices while mimetic
isomorphism has no effect on it. It indicates that the external coercive and normative pressure whichstems from government, laws and professional organizations can help to improve companies’ CSR
management practices.
The rest of this study is structured as follows. Section 2 introduces the theoreticalbackground of the neo-institutional theory and how it has been employed to study CSR related
26

topics. Three hypotheses are generated based on previous literature. Section 3 explains the model
to be used in this study and the data source. Section 4 presents results of both descriptive andregression analysis. Section 5 summarizes findings of the study, some implications for companies
and policy makers, and mentions the limitations of this study.

2. Background
2.1 Neo-institutional theory
Institutional theory has been a predominant perspective in organizational theory for
decades. It has gone through ‘a hundred schools of thought contend’ starting from emphasizing therole of habit and history in making decision then evolving into focusing on the importance ofsymbolic system and mental maps which can serve as guidelines for behaviors (Scott, 2008). While
led by DiMaggio and Powell (1983), some scholars proposed a distinction between the arguments,
which is the neo-institutionalism. The basic perspective of their argument is that economic reasons
are not the only factor which constrains organizations to change.
DiMaggio and Powell (1983) proposed that the organizational rationalization had shiftedsince the bureaucratization of organizations had been achieved, so that ‘competitive marketplace’
had no longer been the causes of bureaucratization. Instead, organizations are going throughprocesses which make them more and more homogeneous. These processes are named as‘isomorphic processes’ which are consist of coercive, mimetic, and normative processes. These
three kinds of isomorphism are resulted from pressures exerted on organizations.
Coercive isomorphism stems from pressure of responding to some mandates which are
related to the legitimacy problem (for instance, government regulations and laws). Mimetic
isomorphism stems from the pressure of solving uncertain problems. Therefore, organizations
whichfacing uncertain situation modelthemselves on other organizations. This explains how
imitation behaviors come out among organizations well. Normative isomorphism stems fromprofessionalization which can be categorized into two aspects: one is the formal legitimation andeducation, the other is professional networks among organizations. These two sources createorganizational norms and commonly recognized hierarchy of status.
27

What needs to be noted is the concept of ‘field’ mentioned by DiMaggio and Powell(1983). Field means several level factors such as the extent of relying on a single resource, the extent
to which organizations are related to state institutions, and so on. This will lead to a higher level ofthe organizational isomorphism.

2.2 CSR management and neo-institutional theory
Neo-institutional theory has been adopted in the literature to explore the determinants of
CSR behavior, considering the fact that little attention is paid on the role of institutions. For instance,
Brammer, Jackson, and Matten (2012) contend that the understanding of the efficiency of CSR
should be improved within wider institutional field of economic governance. Campbell (2007)
argues that although there is a strong relationship between economic profit and CSR behaviors, thevariety of institutional conditions mediate this relationship. Only with institutions and, ‘the sticks
and carrots’ constrain and/or enable behaviors in ways of CSR. Among different sorts of institutions,
Streeck and Schmitter (1985) claimed that sometimes corporate peer pressure can be the mosteffective means of facilitating increased CSR. Peer pressure refers to the pressure which is fromindustrial associations whose job is, in part, to ensure that their members act in socially responsible
ways.
Based on the previous studies, we hypothesize three types of isomorphism (coercive,
mimetic, and normative) may have effects on companies’ CSR management practices. According
to DiMaggio and Powell (1983), coercive isomorphism results from both formal and informalpressures exerted on organizations. For instance, the existence of legal environment affects many
aspects of an organization’s behavior and structure. Because CSR practices are one aspect of theorganization’s behaviors, they can also be affected by these kinds of coercive pressures. Campbell(2007) concludes from related studies that state regulations may affect the degree to which
corporations behave in socially responsible ways. We expect a positive relationship between
coercive isomorphism and the level of companies’ CSR management practices as follows.
H1: Coercive isomorphism has the positive effect on the level of companies’ CSR
management practices.

28

The second isomorphism is mimetic isomorphism, which refers to the process of imitatingothers when facing with the uncertain situations. For organizations, dealing with uncertain cases
results in extra cost. According to Matten and Moon (2008), managers tend to look at other practices
as legitimate if they are regarded as best practice. Based on this point of view, we hypothesize asfollows:
H2: Mimetic isomorphism has the positive effect on the level of companies’ CSR
management practices.
The last isomorphism proposed by DiMaggio and Powell (1983) is the normative
isomorphism, which refers to the pressure of professionalization. Galaskiewicz (1991) argues thatwhen normative or cultural institutions can create incentives for social responsible behaviors,
companies tend to act in such ways. Such normative institutions’ existence may explain the reason
why CSR related lectures became compulsory in business schools’ curriculums. Hence, we consider
that normative isomorphism can also improve the CSR practices.
H3: Normative isomorphism has the positive effect on the level of companies’ CSR
management practices.

3. Methodology
3.1 Model
The purpose of this research is to examine how the isomorphism is related to a company’s
CSR management practices. The objective of this study is to find out whether and how the threekinds of isomorphism, (i.e. coercive, mimetic and normative isomorphism according to theinstitutional theory) will affect a company’s level of CSR management, and whether the impact
varies among manufacturing and non-manufacturing industries. The regression model examines therelationship between companies’ CSR management practices and three kinds of isomorphism.
The dependent variable is the indicator which can reflect the companies’ level of CSR
management practice (CSR). We take the level which companies feel coercive, mimetic, andnormative pressures as independent variables to predict the institutional isomorphism as follows.

29

𝐶𝑆𝑅 = 𝛽0 + 𝛽1 𝐶𝑜𝑒𝑟𝑐𝑖𝑣𝑒 + 𝛽2 𝑀𝑖𝑚𝑒𝑡𝑖𝑐 + 𝛽3 𝑁𝑜𝑟𝑚𝑎𝑡𝑖𝑣𝑒 + ∑ 𝛽𝑘 𝐶𝑜𝑛𝑡𝑟𝑜𝑙𝑠𝑘 + 𝜀(1)

We include seven (k-th) control variables (Controls) which are lnRevenue, LEFF, INSOWN, FOWN,CROSSOWN, MOWN, and Dummy. lnRevenue is the logarithm of companies’ revenue which stands
for companies’ size. LEFF is the labor productivity which is calculated by revenue divided bynumber of employees. INSOWN is the institutional investors’ shareholding ratio. FOWN,CROSSOWN, and MOWN stand for the foreign investors’ shareholding ratio, cross-shareholding
ratio, president shareholding ratio, respectively. Dummy denotes a dummy variable of nonmanufacturing sectors. 𝛽1 , 𝛽2 , and 𝛽3 are coefficients which denote the impact of isomorphism
on CSR management practice. If they are significantly positive (negative), stronger pressures willlead to higher (lower) level of CSR management practice. In the model, 𝛽𝑘 is the coefficient ofcontrol variables. If the coefficient of the dummy variable (non-manufacturing sector equals 1) issignificantly positive, it means that the non-manufacturing sector perform better. 𝜀 denotes an error
term.

3.2 Data
We use the survey data collected by Kim (2017). The survey was conducted in 2016 forthe research topic about the management control system on Japanese companies’ CSR management.
The questionnaire consists of 14 question items asking about companies CSR related situations suchas practices, performance, values, and etc. Likert scale of 7 point is adopted in the designing of thequestionnaire. The questionnaire was sent to 1325 companies listed in the CSR Companies
Overview published by Toyo Keizai in 2016. There were 175 respondents covering different
industries, in which 166 (94 from manufacturing sector and 72 non-manufacturing sector) of them
are used for this research.
As the dependent variable, we use the item (E) ‘The method you are using to assess the
CSR practice’ to predict the level of companies’ CSR management practice. This question item iscomposed of six questions asking about how companies evaluate their CSR management practice,such as setting goals of CSR activities; appraising and monitoring the result of CSR activities(Detailed questions are listed in Table 1). Comparing to other question items (such as ‘How your30

company responds to CSR related problems’), the question item (E) is more directly related to acompany’s level of CSR management practices. We use the mean score of the six questions in this
sector of one company to stand for the general level of the CSR management practice.
Regarding the levels of coercive isomorphism, mimetic isomorphism, and normative
isomorphism, we use the question item H ‘The factors which affect the CSR management’ in thequestionnaire (detailed questions are listed in Table 2). There are 12 questions in this item, while it
can be divided into three aspects: coercive isomorphism (1 to 3 of item H), mimetic isomorphism(4 and 5 of item H), and normative isomorphism (6 to 12 of item H).
Because of the essential difference of the products in manufacturing and nonmanufacturing, we suppose that there are also difference of CSR management practice towards
different kinds of isomorphism. In this research, we also examine the differences among industries,
we divide industries into manufacturing and non-manufacturing sectors following 33 sectors
classification of Tokyo Stock Exchange (TOPIX Sector Indices). In which manufacturing sectors
includes (16 in total): Foods, Textiles and Apparels, Pulp and Paper, Chemicals, Pharmaceutical,
Oil and Coal Products, Rubber Products, Glass and Ceramics Products, Iron and Steel, Nonferrous
Metals, Metal Products, Machinery, Electric Appliances, Transportation Equipment, Precision
Instruments, and Other Products. Non-manufacturing sectors are (17 in total): Fishery, Agriculture& Forestry, Mining, Construction, Electric Power and Gas, Land Transportation, Marine
Transportation, Air Transportation, Warehousing and Harbor Transportation, Information &Communication, Wholesale Trade, Retail Trade, Banks, Securities and Commodities Futures,
Insurance, Other Financing Business, Real Estate, and Services.

4. Results
4.1 Descriptive analysis
The results of descriptive analysis are shown in Table 3. The average level of CSR
management practice for the entire industry is 4.610, while the manufacturing sector (4.773)
performs better than the non-manufacturing sector (4.398). Among the three isomorphisms, averagevalues of coercive isomorphism are likely to be the highest, whereas average values of mimetic
31

isomorphism are likely to be the smallest. Average values of coercive and normative pressures in
the manufacturing industry (5.436 and 5.029, respectively) are likely to be larger than the nonmanufacturing sectors (5.102 and 4.786, respectively). On the other hand, the average value of
mimetic pressure is slightly higher in the non-manufacturing industry (4.542) than the
manufacturing industry (4.516).
Regarding scatter plots, Figure 1(a) to Figure3(c) show the relationship of three pressures
and CSR management practices in manufacturing sectors (Figure 1(a) to Figure1(c)), nonmanufacturing sectors (Figure 2(a) to Figure 2(c)), and the entire sample (Figure 3(a) to Figure 3(c)).
Positive relationships can be find, which means the stronger the pressure is, the higher level of CSR
management will be performed. On the other hand, Tables 4, 5, and 6 present the correlation matrix
in manufacturing sectors (Table 4), non-manufacturing sectors (Table 5), and the entire sample(Table 6).

4.2 Regression Analysis
Table 7 presents the results of regression model. Columns 1, 2, and 3 show the regression
results for all industries, manufacturing sectors and non- manufacturing sectors, respectively. It
appears that the coercive isomorphism is statistically significant from zero and positive in bothmanufacturing sectors and all industries while statistically insignificant in non-manufacturingsectors. It is consistent with our hypothesis 1 to a great extent. Mimetic isomorphism is statisticallyinsignificant and negative in all of these three cases; this is opposite to our hypothesis 2. Normative
isomorphism is statistically significant and positive in all of these three cases; this is consistent withthe hypothesis 3.
Regarding the coercive isomorphism, it mostly stems from the government mandate, laws
or even industry itself, it exerts greater pressure on manufacturing industries. This is because the
manufacturing companies produce products under certain regulations which are towards, forinstance, the product quality, the impact on the environment, these are also factors considered in acompanies’ CSR management practices. While for non-manufacturing sectors, their products areintangible which are usually service. Therefore, regulations on this sector are not as strict as they
are to manufacturing industries, and as well, not directly related to a companies’ CSR management32

practices. While in general, compliance-style business system which is known for abiding byexisting laws and legislation is critical in Japanese companies (Nakano, 2007). This also one reason
which makes the coercive isomorphism be effective for CSR management.
However, it is surprised that mimetic isomorphism has no effect on the CSR management
practices. It might because in some cases, when there is no regulation on a certain problem, Japanesecompanies work according to its own internal rules or code of practice, which have sought to buildin the companies’ spirit (Fukukawa and Teramoto, 2009). Therefore, they are less likely to take theapproach of imitating what fellows are doing, while their own company values instead, are in thedominant place.
Normative isomorphism such as CSR related professional trainings and seminars offer
companies knowledge and ideas about CSR practices which can help to improve their own. Besides,
Galaskiewicz (1991) used to show that if managers in a company who attend such professionalorganizations, they can be instilled in an ethic of the virtues and benefits of corporate giving, whichlead to the motivation of performing in a more social responsible way.
While when we look at the coefficient of dummy variable, it is statistically insignificant.
It indicates that there is no significant difference among sectors.

5. Conclusions
This study aims to examine how the isomorphism is related to a company’s CSR
management practices in the context of Japanese companies. It finds that coercive isomorphism
affects the CSR management practices positively, especially in the manufacturing industries.
Normative isomorphism has similar positive effects while mimetic isomorphism has no relationshipwith companies’ CSR management practices. These suggest that CSR management practices are
more likely to be facilitated and improved by coercive regulations and professionalism in the CSR
field, instead of peer’s pressure.
Based on the findings, we offer some suggestions and implications for companies andpolicy makers. Since coercive isomorphism can positively affect the CSR management, companies
can actively respond to regulations. For policy makers, they should take leadership and establish
33

national frameworks for the achievement of the 17 Goals. They can also try to set more detailed oreven stricter regulations in order to urge companies to be more social responsible, especially can be
more efficient in resources and energy using.
Similarly, since normative isomorphism also has positive effect, professional trainings
and seminars in terms of CSR management or sustainability management can be more popularized.
In terms of the mimetic isomorphism which has no relationship with CSR management practices,
there is no need to take additional actions to strengthen the mimetic pressure.
We note limitations in this research. Firstly, this study is based on a single theory whichis the neo-institutional theory developed by DiMaggio and Powell (1983). The conclusion andimplication can be more robust if an integrated perspectives base can be adopted. Moreover, theeconomic factor, namely a company’s financial status is also one of the determinants on acompany’s CSR management practices. At last, this research has only studied the relationshipbetween the isomorphism and the CSR management practices. While isomorphism, as the externalpressure, will finally affect the organization, and the organization will have some reaction towards
the pressure. So far, we now only study the effect on the internal organization, which is CSR
management practices, we have not studied about the outcome of the isomorphism which is
supposed to be the performance of sustainable consumption and production. Therefore, the full
relationship is needed to be further studied.

34

References
Brammer, S., Jackson, G., & Matten, D. (2012). Corporate social responsibility and institutional
theory: New perspectives on private governance. Socio-economic review, 10(1), 3-28.
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? Aninstitutional theory of corporate social responsibility. Academy of management Review,32(3), 946-967.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism andcollective rationality in organizational fields. American Sociological Review, 48, 147-160
Fukukawa, K., & Teramoto, Y. (2009). Understanding Japanese CSR: The reflections of managers
in the field of global operations. Journal of Business Ethics, 85(1), 133.
Galaskiewicz, J. 1991. Making corporate actors accountable: Institution-building in MinneapolisSt. Paul. In W. W. Powell & P. J. DiMaggio (Eds.), The new institutionalism inorganizational analysis; 293–310. Chicago: University of Chicago Press.
Kim, J. (2017) Kigyou no CSRkeiei ni okeru Manejimento Kontororu Shisutemu no kenkyu (Astudy of Management Control System in CSR management of firms). Ph.D thesis,
Graduate School of Business Administration, Kobe University, Japan [Japanese]
Matten, D., & Moon, J. (2008). Implicit and explicit CSR: A conceptual framework for acomparative understanding of corporate social responsibility. Academy of Management
Review, 33, 404-424.
Nakano, C. (2007). The Significance and Limitations of Corporate Governance from the Perspectiveof Business Ethics: Towards the Creation of an Ethical Organizational Culture. AsianBusiness & Management, 6(2), 163-178.
Scott, W. R. (2008). Approaching adulthood: the maturing of institutional theory. Theory and society,37(5), 427-442.
Streeck, W., & Schmitter, P. (Eds.). (1985). Private interest government. Beverly Hills, CA: Sage.
United Nations Development Programme (UNDP), 2015, “Sustainable Consumption and
Production:
A
Handbook
for
PolicyMakers(GlobalEdition).”<https://sustainabledevelopment.un.org/content/documents/1951Sustainable
Consumption.pdf> (last accessed July 7, 2017).

35

Table 1: Question Item E
E. The method of assessing CSR activities
1. In order to hold CSR activities, different goals are set.
2. KPI which is related to CSR activities are set.
3. CSR activities are evaluated monitored.
4. The achievement or results of CSR activities are reported inside or outside the organization.
5. The evaluation of CSR activities in this year will affect the plan of next year.
6. CSR related targets are included in performance appraisal and compensation system.

Table 2: Question Item H
H. The factors which affect the CSR management

Coercive
isomorphism
Mimetic
isomorphism

Normative
isomorphism

1. CSR related laws and regulations
2. CSR related international standards
3. Monitoring on CSR activities conducted by regulators
4. Competitors' CSR strategies and CSR activities
5. Competitors’ best practices
6. CSR related issues learned from public seminars
7. Advices from professionals
8. Managers’ attention on CSR activities
9. The emphasis on CSR in corporate philosophy
10. CSR ranking
11. The requests of CSR activities from external organizations such as NGO andenvironmental orgs
12. The requests of CSR activities from customers or client companies

36

Table 3: Descriptive results
Obs
Practice
Coercive
Mimetic
Normative
Industry Dummy
InRevenue
LEFF
INSOWNFOWNCROSSOWN
MOWN
Practice
Coercive
Mimetic
Normative
InRevenue
LEFF
INSOWNFOWNCROSSOWN
MOWN
Practice
Coercive
Mimetic
Normative
InRevenue
LEFF
INSOWNFOWNCROSSOWN
MOWN

Average

S.D.

All Sectors
166
4.610
1.555
166
5.291
1.294
166
4.527
1.237
166
4.923
1.094
166
0.434
0.497
166
12.11
1.887
166
54.91
38.786166
28.30219.307166
18.68414.059
166
9.417
8.888
166
2.449
6.591
Manufacturing Sector
94
4.773
1.526
94
5.436
1.210
94
4.516
1.213
94
5.029
1.084
94
12.3161.688
9440.77423.34294
32.80618.81894
21.81213.73694
10.993
8.838
94
0.925
2.512
Non-manufacturing Sector
72
4.398
1.578
72
5.102
1.382
72
4.542
1.278
72
4.786
1.100
72
11.84
2.101
72
73.36646.61
72
22.42118.45272
14.60113.503
72
7.358
8.583
72
4.438
9.253

37

Min

Max

1
1
1
1
0
6.567
6.828
0
0
0
0

7
7
7
7
1
15.615186.121
76.23
54.38
39.77
45.096

1
1.667
1
2
6.567
9.76
0
0
0
0

7
7
7
6.857
15.406121.363
76.23
54.38
34.14
18.162

7.005
1
1
1
7.005
6.828
0.05
0.05
0
0.001

6.8
7
7
7
15.615186.121
66.7
45.36
39.77
45.059

Table 4: Correlation matrix (Manufacturing Sector)
Practice
Practice
Coercive
Mimetic
Normative

1.000

Coercive

Mimetic

Normative

InRevenue

LEFF

INSOWNFOWNCROSSOWN

0.599***

1.000

0.406***

0.683**

1.000

0.567***

0.730***

0.636***

1.000

InRevenue

0.521***

0.597***

0.485***

0.539***

1.000

LEFF
INSOWNFOWNCROSSOWN
MOWN-0.011

0.067

0.073

0.036

0.226**

1.000

0.493***

0.490***

0.388***

0.450***

0.735***

0.004

1.000

0.481***

0.499***

0.417***

0.505***

0.712***

0.008

0.939***

1.000

0.031

-0.0900.052-0.112-0.0750.047-0.118-0.1621.000-0.216**-0.246**-0.187*-0.106-0.340***-0.328***-0.248**-0.205**-0.093

MOWN

1.000

Note ***, **, and * stand for statistically significant level at 1%, 5%, and 10%, respectively.
Table 5: Correlation matrix (Non-manufacturing Sector)
Coercive

Practice
Coercive

Practice
10.580***

Mimetic

Normative

Mimetic
Normative

0.427***
0.634***

InRevenue
LEFF

InRevenue

LEFF

0.519***
0.784***

1
0.686***

1

0.679***
0.245**

0.604***
0.298***

0.588***
0.324**INSOWN
FOWN

0.543***
0.535***

0.382***
0.371***

CROSSOWN
MOWN

0.123
-0.2274*

0.183-0.296**

INSOWN

FOWN

0.643***
0.258*

1
0.561***

1

0.354***
0.376***

0.428***
0.446***

0.716***
0.725***

0.261**
0.229*

1
0.970***

1

0.094-0.151*0.169-0.295***0.072-0.329***0.264**-0.210*-0.034-0.259**-0.044-0.237**

CROSSOWN

MOWN

1-0.281**1

1Note ***, **, and * stand for statistically significant level at 1%, 5%, and 10%, respectively.

38

Table 6: Correlation matrix (All sectors)
Practice
1

Coercive

0.596***

1

Mimetic

0.411***

0.597***

1

Normative

0.606***

0.757***

0.653***

1

InRevenue

0.603***

0.607***

0.529***

0.593***

1

LEFF

0.075

0.132*

0.202**

0.100

0.339***

1

INSOWN

0.524***

0.454***

0.356***

0.452***

0.723***

0.019

1

FOWN

0.515***

0.453***

0.382***

0.489***

0.716***

0.010

0.955***

1

CROSSOWN

0.093

0.060

0.068

0.031

0.021

0.063

-0.024-0.0531

MOWN-0.214***-0.274***-0.132*-0.231**-0.320***-0.084-0.272***-0.248***-0.237***

1

Dummy

-0.120-0.128*0.010-0.110-0.1250.418***-0.267***-0.255***-0.203***0.265***

Practice
Coercive

Mimetic

Normative

InRevenue

LEFF

Note ***, **, and * stand for statistically significant level at 1%, 5%, and 10%, respectively.

39

INSOWNFOWNCROSSOWN

MOWN

Dummy

1

Table7: Results of regression model

Constant
Coercive
Mimetic
Normative
InRevenue
LEFF
INSOWNFOWNCROSSOWN
MOWN
Industry DummyObs
R-squared
Adj R-squared(1)
CSRPractice
All industries-1.649**(0.803)0.249**(0.112)-0.120(0.099)0.420***(0.139)0.249***(0.089)-0.004(0.003)0.020(0.016)-0.012(0.022)0.018*(0.011)(2)
CSRPractice
Manufacturing-0.702(1.167)0.422**(0.172)-0.170(0.146)
0.398**(0.180)0.112(0.125)-0.006(0.006)0.0167(0.020)-0.005(0.027)0.022(0.014)0.007(0.015)0.225(0. 219)
166
0.506
0.475

-0.037(0.055)
94
0.469
0.411

(3)
CSRPracticeNon-manufacturing-2.585**(1.115)0.0650(0.159)-0.173(0.148)0.516**(0.235)0.424***(0.138)-0.006(0.004)0.035(0.030)-0.039(0.043)0.017(0.017)0.013(0.016)
72
0.580
0.519

Notes: ***, **, and * stands for statistically significant level at 1, 5, and 10%, respectively.
Numbers are estimated coefficients. Numbers in parentheses are standard errors.

40

Figure1 (a) coercive pressure and CSR management practice (manufacturing sectors)

Figure1 (b) mimetic pressure and CSR management practice (manufacturing sectors)

41

Figure1(c) normative pressure and CSR management practice (manufacturing sectors)

Figure2 (a) coercive pressure and CSR management practice (Non-manufacturing sectors)

42

Figure2 (b) mimetic pressure and CSR management practice (Non-manufacturing sectors)

Figure2(c) normative pressure and CSR management practice (Non-manufacturing sectors)

43

Figure3 (a) coercive pressure and CSR management practice (entire sample)

Figure3 (b) mimetic pressure and CSR management practice (entire sample)

44

Figure3 (c) normative pressure and CSR management practice (entire sample)

45

Chapter 3. Corporate culture and Performance Measurement Systems
Yelyzaveta Savchuk*, Michiyuki Yagi*, and Katsuhiko Kokubu*
Abstract
The aim of this study is to investigate the relationship between corporate culture andperformance measurement systems, being one of the components of management control system.
We examine one attribute of performance measurement systems: nature of use, which is specificallymonitoring and strategic decision-making use. Data is obtained from questionnaire survey forJapanese companies in both manufacturing and non-manufacturing sectors. The result of regression
model shows that the corporate culture with flexibility values influences strategic use while having
no impact on monitoring use. On the contrary, the corporate culture with control values influences
not only monitoring use, but also strategic decision making use of performance measurement
systems.

Key words: corporate culture, performance measurement systems, strategic and monitoring
use, flexibility and control values*

SESAMI Program, Graduate School of Business Administration, Kobe University.
46

1. Introduction
Taking into account the rising ecological aspects for companies (Journeault, 2016) andproblems of consumption and production (United Nations, 2017) the question of corporate social
responsibility (CSR) has become one of the fundamentally important issues. Sustainable
developmental goals (SDGs) proposed by the Open Working Group (OWG) of the General
Assembly of the United Nations in September 2015 consist of 17 goals with 169 targets. Goal 12
aims to ensure companies as well as individual follow responsible sustainable consumption andproduction (SCP) patterns (United Nations, 2017). Goal 12 includes the efficiency in use andmanagement, environmental impacts, releasing contaminants, chemical substances, and so on. It
also aims to educate consumers about sustainable development and lifestyle.
Following the research by Henri (2006), this study aims to test the relationship between
corporate culture and performance measurement systems (PMS), being one of the components ofmanagement control system (MCS). We examine one attribute of PMS: nature of use, specificallymonitoring and strategic decision-making uses of PMS. Moreover, we investigate how two
attributes of corporate culture, flexible and control values, influence the CSR performance of thecompanies through PMS. While Henri (2006) obtained data from Canadian manufacturing firms,
we have conducted our research obtaining data from Japanese companies in both manufacturing andnon-manufacturing sectors.
The aim of this study is to investigate the relationship between corporate culture and one
attribute of the PMS, the nature of use. The result of this study has shown that the corporate culture
with flexibility values influences strategic use of PMS while having no impact on monitoring useof PMS. On the contrary, the corporate culture with control values influences not only monitoring
use of PMS, as expected, but we also have found that clan culture has impact on strategic decisionmaking use of PMS.
The rest of the study is organized as follows. Section 2 introduces the background ,theoretical framework, and develops a set of hypotheses . Section 3 explains the methodology anddata. While section 4 shows the results, in section 5 we make a summary of the findings and propose
some practical implications.

47

2. Background
2.1 Corporate culture
In the past decades, researches have proposed different frameworks to examine corporate
culture. All of them focus on various dimensions of corporate culture. For instance, Hofstede (2001)
defines 5 dimensions of national culture: power distance, uncertainty avoidance, individualism,
long/short term orientation, and masculinity; and 6 dimensions of corporate culture: process oriented
versus results oriented, employee oriented versus job oriented, parochial versus professional, open
system versus closed system, loose control versus tight control, and normative versus pragmative.
The reason for that variety of dimension defined is that corporate culture is a very broad notion andincludes many elements as well as complex factors (Cameron and Quinn, 2006; Henri, 2006).
Since it was developed by Quinn and Rohrbaugh (1983), the Competing Value
Framework (CVF) was broadly used in the management accounting field (Agbejule, 2011; Bhimani,
2003; Heinicke, 2016; Henri, 2006). CVF was initially aimed to define the indicators oforganizational effectiveness (Cameron and Quinn, 2006; Yu and Wu, 2009). It was used to examine
different organizational phenomena including corporate culture (Henri, 2006). Among thirty-nine
dimensions studied two dimensions emerged (Cameron and Quinn, 2006). One dimension is thecontrol/flexibility axis which relates to the organizational structure. While control emphasizes
stability, order, and control, flexibility represents change and flexibility. The other dimension is theexternal/internal axis which relates to the organizational focus. External represents externalorientation and well-being of the organization itself, while internal emphasizes an internalorientation, integration, and well-being and development of people within the organization(Bhimani, 2003). These two axes form four quadrants each enabling four cultural types: clan,
adhocracy, hierarchy, and market (Fig.1).

2.2 Performance Measurement Systems
There have been made various classifications of management and accounting information
systems to define the uses of PMS. Among them, Henri (2006) defined 4 types of uses: (1)monitoring, (2) attention focusing, (3) strategic decision making, and (4) legitimization (Fig. 2).

48

(1) Monitoring use of PMS is used to provide feedback regarding expectations, set goals
and results. This system allows to make corrections if necessary in management, goals, etc.
Moreover, the information obtained during monitoring is used for reporting it to the stakeholders aswell as for external disclosure (Henri, 2006). This use of PMS corresponds to diagnostic control
defined by Simons (1995).
(2) Attention focusing is used to send the signals to the employees by top managers. They
are used to transmit the primary and secondary objectives and help employees understand what theyshould focus their attention on (Henri, 2006). Moreover, PMS is used to convey the view of theorganization of the top managers, key success factors, and critical uncertainties (Henri, 2006).
(3) Strategic decision making is used by top management to define the best alternative forthe company since top managers have to deal with strategic issues on the every-day basis. PMS isused to ‘reveal cause-and-effect relationships between internal processes and objectives’ (Henri,2006). PMS helps to gather information and to solve arising problems.
(4) Legitimization is used to justify past activity or decisions made in the company in thetimes of uncertainty (Henri, 2006). Regarding the current and future actions, PMS can also be used
for justifications or validation. PMS helps to provide the management with the results and impacts
in terms of performance thereby improving the legitimacy of organizational activities.

2.3 Hypothesis setting for the relationship between corporate culture and PMS
In our research, we integrate the competing values framework about corporate culture(Cameron and Quinn, 2006) and Henri’s (2006) framework. Since top managers have to deal withstrategic issues on the every-day basis, strategic decision-making is used by top management todefine the best alternative for the company. Following Henri (2006), who investigated the influenceof corporate culture on the diversity on management through PMS use (Fig. 2), we make four
hypotheses that corporate culture influences the use of control systems, which in its turn influences
the CSR performance (Fig. 3) as follows:

Hypothesis 1. Corporate culture with flexible values influences strategic decision- making use ofPMS.
49

Hypothesis 2. Corporate culture with flexible values does not influence monitoring use of PMS.
Hypothesis 3. Corporate culture with control values influences monitoring use of PMS.
Hypothesis 4. Corporate culture with control values does not influence strategic decision- making
use of PMS.

Regarding hypotheses 1 and 2, since flexibility values are related to flexibility, change,
and adaptability, the strategic decision making becomes more frequent and important. Strategic
decisions have four factors: the frequency, the complexity, the risk-related, and the urgency (Henri,2006). PMS are used to provide information to the top managers during the decision- making
process. The more flexible the culture, the more complex and urgent decisions have to be made, andtherefore the more information the top managers need in order to take decisions. On the contrary,in the companies with control culture, the stability and predictability make decision making processless needed.
Regarding hypotheses 3 and 4, since monitoring use of PMS is used for planning andcontrol, it is considered to reflect cybernetic logic which is more compatible with control values
than flexibility values (Henri, 2006). Cybernetic approach is characterized by order, goals clarity,and formal rules, while control values by stability and bureaucracy (Hofstede, 2001). Flexibility, on
the other hand, is characterized by teamwork, change, innovation, etc. While constant changing,creativity and innovativeness of flexibility values are associated with double-loop learning. Sincemonitoring use focuses on single-loop learning, the company which repeats past behavior, stability,and formality of control values becomes very important (Henri, 2006).
The reason why these hypotheses are important is because, first of all, little research has
been made about the use of PMS (exception Henri, 2006). Moreover, regarding the factors, it is still
unclear how and what context influences the use of PMS (Henri, 2006). Secondly, regarding thecorporate culture, previous researches have mainly focused on national culture and not on thecorporate culture (exceptions Agbejule, 2011; Bhimani, 2003; Henri, 2006). Moreover,investigating how different factors including corporate culture and performance measurement
systems may enhance CSR performance and help achieve Goal 12 of SDGs is one of the ongoingissues in the literature.
50Regarding the context, prior research has focused on the American and European
countries (Bhimani, 2003; Henri, 2006; Agbejule, 2011) but none on the Asian context. Therefore,
we extend the previous management accounting literature by using previous research on PMS andcorporate culture by the examining the influence of corporate culture on the use of control systems
in Asian context, particularly Japan.

3. Methodology
3.1 Model
The purpose of this study is to examine the relationship between the corporate culture andthe use of PMS in Japanese companies in manufacturing and non-manufacturing sectors. This
research aims to expand the Henri (2006) study findings in the Canadian manufacturing firms toanother context, particularly Japanese companies. This study follows the competitive values
framework by Cameron and Quinn (2006) for the corporate culture and the classification of PMS
use by Henri (2006).
The regression model of this study is expressed as follows (see Table 1 for the descriptionof variables):𝒀 = 𝜷𝟎 + 𝜷𝟏 𝑨𝑽𝑹𝑲𝑭𝟏 + 𝜷𝟐 𝑨𝑽𝑹𝑲𝑭𝟐 + 𝜷𝟑 𝑨𝑽𝑹𝑲𝑭𝟑 + 𝜷𝟒 𝑨𝑽𝑹𝑲𝑭𝟒 + 𝜷𝟓 𝑳𝑹+ 𝜷𝟔 𝑫𝑬𝑹 + 𝜷𝟕 𝑳𝑬𝑹 + 𝜷𝟖 𝑺𝑮 + 𝜷𝟗 𝑹𝑶𝑰 + 𝜷𝟏𝟎 𝑰𝑫 + 𝜺(1)

where Y is score of monitoring or strategic use of PMS. AVRKF1, AVRKF2, AVRKF3, and AVRKF4
are average score of each feature of corporate culture (Culture questions K Features 1 to 4: KF1 to
KF4). AVRKF1 and AVRKF2 represent flexibility values, while AVRKF3 and AVRKF4 represent
control values. Regarding the control variables, LR, DER, LER, SG, ROI, and ID are the naturallog of revenue, debt-equity ratio, labor equip ratio, sales growth, return of investment, and industry
dummy (1=non-manufacturing sector), respectively. ε is an error term.
We will collect dependent variable (Y) and score of each feature of corporate culture(AVRKF1, AVRKF2, AVRKF3, and AVRKF4) via questionnaire survey. All questions are measured
using a seven-point Likert-type scale.
51Regarding dependent variable (Y), for Monitoring use of PMS we use questions E (CSR
activity evaluation method), all 6 questions. Table 2 shows the detailed questions of Monitoring use.
These questions concern the evaluation of CSR management practice, such as setting goals of CSR
activities, CSR practice results monitoring. On the other hand, for Strategic use of PMS we use
questions L (Strategy), all 10 questions. Table 3 shows the detailed questions of Strategic use. These
questions ask whether a company is innovative, make new products, and services according to theneeds of market, prioritize the quality improving, and differentiate the market.
Regarding each feature of corporate culture, Table 4 shows detailed questions forcorporate culture. KF1 (Culture questions K Feature 1) corresponds to clan culture. Clan culture
represents a company with the atmosphere like in the family. The organization is held together byloyalty and trust, while emphasizing the long-term benefits, flexibility, morale, and member
participation, corporate commitment, and human resource development.
KF2 (Culture questions K Feature 2) corresponds to adhocracy culture. Adhocracy culture
forms type of a company where it is believed that innovation and pioneering initiatives lead tosuccess. Management promotes risk taking, creativity and adaptation.
KF3 (Culture questions K Feature 3) corresponds to hierarchy culture. Hierarchy culture
represents a very formal company where rules, policies, and procedures are what guide its
employees. Management’s main concern is to maintain smooth-running organization and efficiency.
KF4 (Culture questions K Feature 4) corresponds to market culture. Market culture may
be also called result-orientation culture, because the major concern of the company is to get the job
done. Employees are competitive and goal-oriented. Reputation and success are the most important
issues.
We have also run a regression studying each question for Culture separately.
𝒀 = 𝜷𝟎 + 𝜷𝟏 𝑲𝟏 + 𝜷𝟐 𝑲𝟐 + 𝜷𝟑 𝑲𝟑 + 𝜷𝟒 𝑲𝟒 + 𝜷𝟓 𝑲𝟓 +𝜷𝟔 𝑲𝟔 + 𝜷𝟕 𝑲𝟕 + 𝜷𝟖 𝑲𝟖 + 𝜷𝟗 𝑲𝟗+ 𝜷𝟏𝟎 𝑲𝟏𝟎 + 𝜷𝟏𝟏 𝑲𝟏𝟏 + 𝜷𝟏𝟐 𝑲𝟏𝟐 + 𝜷𝟏𝟑 𝑲𝟏𝟑 + 𝜷𝟏𝟒 𝑲𝟏𝟒 + 𝜷𝟏𝟓 𝑲𝟏𝟓+ 𝜷𝟏𝟔 𝑲𝟏𝟔 + 𝜷𝟏𝟕 𝑳𝑹+ 𝜷𝟏𝟖 𝑫𝑬𝑹 + 𝜷𝟏𝟗 𝑳𝑬𝑹 + 𝜷𝟐𝟎 𝑺𝑮 + 𝜷𝟐𝟏 𝑹𝑶𝑰 + 𝜷𝟐𝟐 𝑰𝑫 + 𝜺(2)

Table 4 shows detailed questionnaire items. K1 to K4 are the questions K Feature 1 (clan culture).
K5 to K8 are the questions K Feature 2 (adhocracy culture). K9 to K12 are the questions K Feature52

3 (hierarchy culture). K13 to K16 are the questions K Feature 4 (market culture). Thus, K1-K8
represent flexibility values, while K9-K16 represent control values.

3.2 Data
Data for this study is obtained from Kim (2017). This data contains survey data of 175
Japanese companies. Kim (2017) conducted survey by sending questionnaire to 1325 companies
listed in Toyokeizai 2016 CSR companies list. Regarding scores of monitoring or strategic use of
PMS, Tables 2 and 3 show detailed questionnaire items. Regarding corporate culture, we use
questions K (Corporate culture), all 16 questions (see Table 4 for the detailed questions). Allquestions are measured using a seven-point Likert-type scale.
Industry classification of this study is based on 33 sector classification of Tokyo Stock
Exchange (TOPIX Sector Indices). Manufacturing sectors are the following 16 sectors: Foods,
Textiles and Apparels, Pulp and Paper, Chemicals, Pharmaceutical, Oil and Coal Products, Rubber
Products, Glass and Ceramics Products, Iron and Steel, Nonferrous Metals, Metal Products,
Machinery, Electric Appliances, Transportation Equipment, Precision Instruments, and Other
Products. Non-manufacturing sectors are the following 17 sectors: Fishery, Agriculture & Forestry,
Mining, Construction, Electric Power and Gas, Land Transportation, Marine Transportation, Air
Transportation, Warehousing and Harbor Transportation, Information & Communication,
Wholesale Trade, Retail Trade, Banks, Securities and Commodities Futures, Insurance, Other
Financing Business, Real Estate, and Services.

4. Results
4.1 Descriptive analysis
Descriptive statistics of this data is shown in Table 5. For dependent variables, we use
Average Monitoring use of PMS (Questions E) and Strategic use of PMS (Questions L). Figures 4
and 5 show the correlation between corporate culture K Feature 1 (Clan culture) and Strategic
decision- making use of PMS as well as Monitoring use of PMS respectfully. Figures 6 and 7 present
the correlation between corporate culture K Feature 2 (Adhocracy culture) and Strategic decision53

making and Monitoring uses of PMS respectfully. Figures 8 and 9 show the correlation between
corporate culture K Feature 3 (Hierarchy culture) and Strategic decision making and Monitoringuses of PMS respectfully. Figures 10 and 11 present the correlation between corporate culture K
Feature 4 (Market culture) and Strategic decision making and Monitoring uses of PMS respectfully.
The scatterplots presented show that Clan, Adhocracy, Hierarchy, Market cultures tend to bepositively related to Strategic use of PMS. On the other hand, they do not tend to be correlated with
Monitoring use of PMS. Regarding industry classification, all scatterplots show that relationshipbetween corporate culture and both uses of PMS is more positively correlated in manufacturingsector than in non-manufacturing sector.

4.2 Regression results
Table 6 shows the result of a regression analysis of strategic and monitoring uses of PMS
where we take average scores of Culture questions. Regarding strategic use of PMS (columns 1 to3), in the manufacturing sector, non-manufacturing sector, and the whole sample, AVRKF1 (Clanculture), AVRKF2 (Adhocracy culture), AVRKF4 (Market culture) are significant and have positive
relationship with strategic use of PMS. It brings the support to the hypothesis 1 while hypothesis 4
is partially supported because the market culture which represent control values does have influenceon the Strategic decision- making use of PMS.
On the other hand, regarding monitoring use of PMS (columns 1 to 3), AVRKF3(Hierarchy culture) and AVRKF4 (Market culture) are significant and have positive relationshipwith Monitoring use of PMS in the whole sample, while in the manufacturing sector significant isonly AVRKF3 (Hierarchy culture). In the non-manufacturing sector, none of the features are
significant. Therefore, a clear statistically significant relationship between control values (Features
3 and 4) and monitoring use of PMS brings support to hypothesis 3. And since the relationshipbetween flexibility values (Features 1 and 2) and monitoring use of PMS is not significant the
hypothesis 2 is also supported.
As for the control variables, the results suggest positive and significant relationshipbetween size, ROI and Strategic decision-making use of PMS in the whole sample. In the
manufacturing sector, none of the control variables are significant. In the non-manufacturing sector
54

size, DE ratio, sales of growth and ROI are significant with ROI being the most significant. On theother hand, regarding monitoring use of PMS, the results suggest positive and significant
relationship between size (log of revenue) in all models (manufacturing, non-manufacturing and in
the whole sample), sales of growth only in the whole sample, labor equip ratio in the nonmanufacturing sector.
Regarding industry dummy (1=non-manufacturing sector), the coefficient of industry
dummy is significantly negative for Strategic decision -making use of PMS. This means the industry(non-manufacturing sector) has a significant impact on Strategic use of PMS, and the level ofstrategic decision-making use of PMS will be lower in non-manufacturing sector. On the other hand,regarding Monitoring use of PMS, we found that the coefficient of the dummy variable is not
significant, which means the industry (non-manufacturing sector) has not impact on Monitoring useof PMS.
Table 7 shows the result of a regression analysis of the strategic decision-making use of
PMS and Monitoring use of PMS where we investigate each corporate culture question separately.
Corporate culture questions 2, 3, 8, 12, and 13 are significant and has impact on the Strategic
decision- making use of PMS in the whole sample. In the manufacturing sector questions 2, 8, 11,
and 13 are significant, while in the non-manufacturing sector questions 7, 10, and 11.
On the other hand, on the Monitoring use of PMS has influence corporate culture
questions 5, 13, and 14 in the whole sample. In the manufacturing sector only questions 13 and 14
are significant, while in the non-manufacturing sector none of the questions are significant.

5. Conclusions
Following the research of Henri (2006), the aim of this study was to expand the current
understanding of the relationship between corporate culture and PMS in Asian context. Our research
provides supports to the theory and shows that in Japan flexibility values are associated more withstrategic decision- making use of PMS while control value companies use PMS for monitoring useof PMS to a greater extend that flexibility value companies. We also find that corporate culture

55

influences both strategic decision making and monitoring uses of PMS to a greater extend in
manufacturing sector than in non-manufacturing sector.
From a theoretical viewpoint, this study extends the previous management accounting
literature using prior research on corporate culture and PMS by investigating the influence ofcorporate culture on the use of PMS being one of the components of MCS.
This study has several practical implications for management. Since each use of PMS
may not be usable by companies with flexible and control values, it is important that managers use
PMS in correspondence with the values of the company’s corporate culture. For instance, if acompany has flexibility values it may be much more effective to use PMS for strategic decision
making. Therefore, companies may adjust its management control systems according to thecorporate culture they possess in order to ensure the success of its use.
This study has several limitations. First of all, due to the limited data, we focused only on
one corporate culture dimension and only on two uses of PMS. More uses as well as moredimensions of corporate culture may be investigated for the better understanding of the influence ofcorporate culture on PMS. Moreover, this study is static and does not reflect the development ofcorporate culture and PMS over time. Panel data may show more interesting and reliable results.

56

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(2017).
Sustainable
Development
Goals.
<https://sustainabledevelopment.un.org/sdgs > (accessed July 1, 2017).
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57

Clan

Adhocracy

MarketHierarchy

External focus and differentiation

Internal focus and integration

Flexibility and discretion

Stability and Control

Fig. 1. The competing values model (adapted from Cameron and Quinn (2006))

58

Fig. 2. Theoretical model (Henri, 2006)

59

Fig. 3. Theoretical model.

60

Table 1. Description of variables
VariablesK
Y
AVRKF1AVRKF2AVRKF3AVRKF4
LR
DER
LER
SG
ROI
ID

Meaning
Corporate culture questions
Either Monitoring or Strategic uses of PMS
Average of corporate culture Feature 1 (Clan culture)
Average of corporate culture Feature 2 (Adhocracy culture)
Average of corporate culture Feature 3 (Hierarchy culture)
Average of corporate culture Feature 4 (Market culture)
Natural log of revenue
DE ratio
Labor equip ratio
Sales growth
Return of investment
Industry dummy (1=non-manufacturing sector)

61

Table 2. Questions E (Monitoring use of PMS)
E – Monitoring use of PMS
1. In implementing CSR activities, your company sets diverse objectives.
2. Your company implements KPI that includes CSR.
3. Your company measures and monitors the results of CSR activities.
4. You company reports the results of CSR activities within and outside the company.
5. The evaluation of CSR activities affects CSR planning for the next fiscal year.
6. CSR-related indicators are included in the performance evaluation and remuneration systems.

Table 3. Questions L (Strategic decision making use of PMS)
L – Strategic decision making use of PMS

1. Continuous development of new products and services.
2. Providing customers with various kinds of products and services.
3. Changing the characteristics of products and services according to customers' needs.
4. Providing products and services quickly according to the changes in the market demand.
5. Prioritizing pursuit of quality improvement of products and services.
6. Developing differentiated marketing for domestic and foreign markets.
7. Expanding proactive investment to increase our reputation and recognition.
8. Producing products and services as efficiently as possible.
9. Prioritizing pursuit of products and services cost reduction.
10. Sell low-priced products and services to domestic and foreign markets.
Table 4. Questions K (Corporate culture)
K Feature 1 – Clan culture
1. We are the company that values intimate human relations like in the family.
2. Our leaders take care of their subordinates and value good relationships.
3. Our strength is loyalty and mutual trust towards our company.
4. We prioritize human resources and value unity.
K Feature 2 – Adhocracy culture
5. We are innovative company that despite the risk take on challenges.
6. Our leaders value innovation and risk taking.
7. Our strength is commitment to the innovation and technological development.
8. We prioritize challenging new things and value opportunity search.
K Feature 3 – Hierarchy culture
9. We are an organization that emphasizes provisions and procedures that strictly control the behaviourof employees.
10. Our leaders place emphasis on efficiency by organization and smooth business operation.
11. Our strengths are documented official rules and policies.
12. We prioritize stability and emphasize efficient management.
K Feature 4 – Market culture
13. We are the result-oriented company that value goal achievement.
14. Our leaders stress clear goals and results.
15. Our strengths are successful fulfillment of duties and goals achievement.
16. We prioritize competitive behavior and achieving results.

62

Variables
Whole sample
AVRKF1

Table 5. Descriptive statistics
Obs
Average

S.D.

Min

Max

173

5.11

1.19

1.5

7

AVRKF2

173

4.64

1.44

1

7

AVRKF3

173

4.86

1.22

1.5

7

AVRKF4

173

4.97

1.23

1.25

7

AVRE

173

4.61

1.98

1

7

AVRL

173

5.22

1.41

1.5

7

ID

175

0.451

0.499

0

1

LR

175

12.088

1.890

6.57

15.61

DER

162

142.6

171.3

9.5

1781.24SG

162

28.1139.17-35.32

49.34

LER

162

175.206

228.380.85

1405.5ROI
Manufacturing Sector
AVRKF1

162

9.7

10.5

-16.21

92.71

84

5.12

1.02

1.5

7

AVRKF2

84

4.76

1.33

1

7

AVRKF3

84

4.93

0.95

2

7

AVRKF4

84

4.96

1.2

1.25

7

AVRE

84

4.64

1.53

1

7

AVRL

84

5.43

0.96

1.5

7

LR
DER
SG
LER
ROI

84

84
84

12.1
11.3
1.56
127.23
9.09

1.64
79.33
8.46
106.2
8.41

6.5
9.5
-35.32
2.96-16.21

15.4
407.41
25.78
484.8142.96

AVRKF1

59

5.02

0.87

2.5

6.25

AVRKF2

59

4.28

1.3

1

7

AVRKF3

59

4.75

0.89

2.5

6.75

AVRKF4

59

5.01

0.80

2.75

7

AVRE

59

4.15

1.54

1

6.8

AVRL

59

4.83

0.72

3.1

6.4

LR

59

11.53

1.98

7

15.61

DER

59

173.62254.46

14.39

1781.24

SG

59

4.23

10.13

-17.79

49.34

LER

59

231.60287.570.85

1363.7

ROI

59

11.16

13.2

-0.2

92.71

84
84

Non-manufacturing Sector

Notes: E and L are Monitoring and Strategic decision making uses of PMS, respectively.

63

7
6

PMS)

Average L (Strategic decision making use of8

5
Manufacturing sector

4Non-manufacturing sector
3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 1
Fig. 4. Average corporate culture K Feature 1 (Clan culture) and Average L(Strategic decision making use of PMS)

Average E (Monitoring use of PMS)

8
7
6
5
Manufacturing sector

4Non-manufacturing sector
3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 1

Fig. 5. Average corporate culture K Feature 1 (Clan culture) and Average E(Monitoring use of PMS)
64

7
6

of PMS)

Average L (Strategic decision making use

85
Manufacturing sector

4Non-manufacturing sector

3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 2 Adhocracy culture

Average E (Monitoring use of PMS)

Fig. 6. Average corporate culture K Feature 2 (Adhocracy culture) and Average L(Strategic decision making use of PMS)

8
7
6
5

Manufacturing sector

4Non-manufacturing3

sector
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 2 Adhocracy culture

Fig. 7. Average corporate culture K Feature 2 (Adhocracy culture) and Average E(Monitoring use of PMS)

65

Average L (Strategic decision making use of PMS)

8
7
6
5

K3-L for4man
K3-L fornon-man

3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 3

Fig. 8. Average corporate culture K Feature 3 (Hierarchy culture) and Average L(Strategic decision making use of PMS)

Average E (Monitoring use of PMS)

87
6
5
K3-E for man

4

K3-E for non-man
3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 3

Fig. 9. Average corporate culture K Feature 3 (Hierarchy culture) and Average E(Monitoring use of PMS)
66

7
6

of PMS)

Average L (Strategic decision making use

85
Manufacturing sector

4Non-manufacturing sector

3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 4 Market culture

Fig. 10. Average corporate culture K Feature 4 (Market culture) and Average L(Strategic decision making use of PMS)

Average E (Monitoring use of PMS)

8
7
6
5
Manufacturing sector

4Non-manufacturing sector

3
2
1
1

2

3

4

5

6

7

8

Average corporate culture K Feature 4 Market culture

Fig. 11. Average corporate culture K Feature 4 (Market culture) and Average E(Monitoring use of PMS)

67

Independent variables
Constant
AVRKF1AVRKF2AVRKF3AVRKF4
LR
DER
SG
LER
ROI
ID
Obs
R-squared
Adj R-squared

Table 6. Results of regression of Strategic decision making and Monitoring uses of PMS (Average culture scores)
Strategic decision making use of PMS
Monitoring use of PMS
ManufacturingNon-manufacturing
Whole sample
ManufacturingNon-manufacturing
0.86
1.14*
1.05***-3.83***-2.39*(0.62)(0.57)(0.42)(1.20)(1.5)
0.25***
0.18**
0.2***
0.19
0.05(0.002)(0.09)(0.06)(0.15)(0.23)
0.27***
0.26***
0.25***-0.02-0.06(0.07)(0.05)(0.47)(0.14)(0.14)
0.08
0.000
0.04
0.39**
0.12(0.20)(0.08)(0.06)(0.17)(0.22)
0.18**
0.14*
0.21***
0.26
0.03(0.08)(0.09)(0.06)(0.16)(0.23)
0.04
0.06*
0.13***
0.34***
0.51***(0.05)(0.03)(0.07)(0.09)(0.10)
-0.00
0.00*
0.00
0.00
0.00
(0.00)(0.00)(0.00)(0.00)(0.00)
0.01-0.01*-0.003-0.02-0.02(0.01)(0.006)(0.005)(0.01)(0.01)
0.001
0.00
0.00
0.00
-0.001*(0.00)(0.00)(0.00)(0.00)(0.00)
0.004
0.01**
0.01*
0.00
0.01
(0.01)(0.00)(0.005)(0.01)(0.01)-0.48***(0.11)
84
59
145
84
59
0.46
0.64
0.33
0.45
0.47
0.41
0.58
0.29
0.38
0.38

Note ***, **, and * stand for statistically significant level at 1%, 5%, and 10%, respectively. Numbers in parentheses are standard errors.

68

Whole sample-3.45***(0.87)
0.13(0.12)-0.03(0.10)
0.29**(0.13)
0.25*(0.12)
0.95***(0.14)
0.00(0.001)-0.07**(0.01)-0.0010.001
0.01(0.010)-0.12(0.23)
145
0.45
0.41

Table 7. Results of regression of Strategic decision making and Monitoring uses of PMS (Each question)
Strategic decision making use of PMS
Monitoring use of PMS
Independent variables
ManufacturingNon-manufacturing Whole sample Manufacturing Non-manufacturing Whole sample
Constant
1.32*
1.35**
1.39***-2.93**-2.74
3(0.69)(0.66)(0.46)(1.42)(1.81)(0.99).
KF1 Q1
-0.01
-0.05
-0.03
0.07
-0.13
0.01
7
(0.08)(0.08)(0.05)(0.15)(0.22)(0.11)***KF1 Q20.23**
0.13
0.16**
-0.15
0.35
0.14
(0.11)(0.18)(0.07)(0.22)(0.32)(0.15)KF1 Q3
0.15
-0.01
0.14*
0.14
0.17
0.12
(0.12)(0.09)(0.07)(0.24)(0.26)(0.15)KF1 Q4
-0.09
-0.05
0.01
0.09
-0.09
-0.01
(0.11)(0.08)(0.07)(0.23)(0.23)(0.15)KF2 Q5
-0.02
0.01
-0.04
-0.20
-0.38
-0.25*(0.10)(0.09)(0.06)(0.20)(0.25)(0.14)KF2 Q6
0.01
0.02
0.03
-0.04
0.11
0.01
(0.09)(0.10)(0.07)(0.19)(0.29)(0.14)KF2 Q7
0.07
0.15*
0.10
0.10
0.35
0.21
(0.11)(0.09)(0.07)(0.22)(0.24)(0.15)KF2 Q8
0.18*
0.10
0.13*
0.15
-0.14
0.05
(0.10)(0.10)(0.07)(0.21)(0.28)(0.15)KF3 Q9
-0.02
-0.01
-0.02
0.17
0.10
0.07
(0.07)(0.08)(0.05)(0.15)(0.22)(0.12)KF3 Q10-0.13
0.29***
0.00
-0.19
0.01
-0.04
(0.11)(0.10)(0.06)(0.22)(0.27)(0.14)KF3 Q11
0.21***-0.18*
0.08
0.14
-0.20
0.04
(0.08)(0.09)(0.06)(0.17)(0.25)(0.12)KF3 Q12-0.10-0.04-0.10*
0.03
-0.05
0.06
(0.09)
0.09(0.06)(0.18)(0.26)(0.13)KF4 Q130.24**
0.13
0.15**
0.63***
-0.18
0.26*
0.17
(0.10)(0.07)(0.24)(0.27)(0.14)

69

KF4 Q14
KF4 Q15
KF4 Q16
LR
DER
SG
LER
ROI
ID
Obs
R-squared
Adj R-squared-0.12(0.11)-0.06(0.11)
0.10(0.11)
0.08(0.05)
0.00(0.001)0.001(0.01)
0.00(0.001)0.01(0.01)
84
0.72
0.62

-0.09
(0.11)
0.12(0.11)
-0.03
0.08
0.08*
(0.04)
0.00(0.00)
0.00(0.01)
0.00(0.00)
0.002(0.01)
59
0.77
0.64

-0.05
(0.07)
0.02(0.06)
0.07(0.06)
0.13*(0.07)
0.00(0.00)-0.003(0.01)
0.00(0.00)
0.01*(0.01)-0.42***(0.12)
145
0.69
0.63

-0.47**(0.22)
0.21(0.23)-0.08(0.23)
0.39***
0.10
0.002(0.002)-0.03*(0.02)
0.00(0.001)0.01(0.02)
84
0.54
0.38

-0.02
(0.30)
0.44(0.29)-0.13(0.23)
0.53***(0.11)
0.00(0.001)-0.005(0.02)-0.001**(0.001)
0.004(0.02)
59
0.62
0.40

-0.24*(0.14)
0.17(0.15)
0.02(0.14)
0.99***(0.14)
0.00(0.001)-0.02*(0.01)-0.001(0.001)0.01(0.01)
0.01(0.25)
145
0.50
0.41

Note ***, **, and * stand for statistically significant level at 1%, 5%, and 10%, respectively. Numbers in parentheses are standard errors.

70

Chapter 4. Influence of various shareholders on CSR performance based on thestakeholder theory
Yan Tang*, Michiyuki Yagi*, and Katsuhiko Kokubu*
Abstract
This study examines the influence of different types of shareholders on the corporate social
responsible performance. Using a sample of 564 Japanese firms during the year 2015 and 2016
based on stakeholder theory, this study hypothesizes that ownership structure has influence onfirm’s CSR performance. We break down the ownership into different groups of shareholders:institutional, foreign, and managerial ownership. Results of regression model show that institutional
ownership and foreign ownership have the significantly positive effect on the corporate social
responsible performance. In contrast, top manager is negatively associated with firm’s corporatesocial responsible performance.

Key words: Corporate social responsible performance, stakeholder theory, shareholder,ownership structure*

SESAMI Program, Graduate School of Business Administration, Kobe University.
71

1. Introduction
With the problem of global population, finite resource availability, and resilience of the
Earth system, agenda 21 first highlighted the need for a transition toward sustainable consumption
and production (SCP) at the Rio Earth Summit in 1992. More recently the United Nations’Sustainable Development Goals (SDGs) reaffirmed the overarching importance of SCP (United
Nations, 2017). SDGs, otherwise known as the Global Goals, are a universal call to action to end
poverty, protect the planet, and ensure that all people enjoy peace and prosperity. There are 17 goals
and each goal has specific targets to be achieved over the next 15 years.
Goal 12 is to ensure SCP patterns. SCP aims at ‘doing more and better with less,’increasing net welfare gains from economic activities by reducing resource use, degradation, andpollution along the whole lifecycle, while increasing quality of life. It involves different
stakeholders, including business, consumers, policy makers, researchers, scientists, retailers, media,
development cooperation agencies, and among others.
This study examines the relationship between different types of shareholders andcorporate social responsibility (CSR) performance based on the stakeholder theory. Morespecifically, the purpose of this study is to examine the influence of institutional ownership, foreign
ownership, and managerial ownership on CSR performance of Japanese firms in year 2015 and2016. Results of regression model show that institutional ownership and foreign ownership have thesignificantly positive effect on the corporate social responsible performance. In contrast, top
manager is negatively associated with firm’s corporate social responsible performance.
This rest of the study is organized as follows. Section 2 introduces the theoreticalbackground of stakeholder theory and how it has been employed to study CSR related topics. Thissection also hypothesizes the relationship between ownership structure and CSR performance.
Section 3 explains methods and data selection. The descriptive statistics of data and regression
results are explained in section 4. Section 5 concludes the study.

72

2. Background
2.1 Stakeholder theory and CSR
Stakeholder theory has gained currency in the business and society literature in recent
years in light of its practicality from the perspective of managers and scholars. Freeman (1984)
defines a stakeholder as ‘any group or individual who can affect or is affected by the achievementof the firm’s objectives’. Stakeholders of the firm include stockholders, creditors, employees,
customers, suppliers, public interest groups, governmental bodies, and so on. The theory isorganized under two principal questions: what is the purpose of the firm? and what responsibility
does management have to stakeholders? The firm wants and needs to interact with interest groups
in order to achieve their goals (Freeman, 2000). According to Donaldson and Preston (1995), thetheory can be examined from three different perspectives: namely, the descriptive, the instrumental
and the normative perspectives. The descriptive perspective assumes an empirically oriented use of
the theory to show how concepts correspond to reality. The instrumental perspective relates to theuse of the theory to show the connection between stakeholder management and multi-dimensional
corporate performance. Finally, the normative perspective is used to examine how stakeholders
should behave and the motivations underlying their actions. Three aspects of this theory aremutually supportive and it can be useful to explain and guide the structure and operation (Russo andPerrini, 2010).
Ullmann (1985) concluded that stakeholder theory provides an appropriate justification
for incorporating strategic decision making into studies of corporate social responsibility activities.
Stakeholder theory forms a theoretical foundation in which to analyze the impact of prior economic
performance, strategic posture toward social responsibility activities. (Roberts, 1992).
Stakeholder theory provides a useful theoretical framework of corporate governance forlinking businesses’ responsibilities with corporate value creation. While CSR aims to define what
responsibilities business ought to fulfill, the stakeholder concept addresses the issue of whombusiness is or should be accountable to. Both concepts are closely inter-related (Jamali, 2008).
CSR is seen as ‘a process to integrate social, environmental, ethical, human rights, andconsumer concerns into their business operations with the aim of maximizing the creation of sharedvalue for their owners and for their other stakeholders and society at large’ (European Commission,73

2011). This conceptualization of CSR fits nicely with the stakeholder theory approach that views
CSR as an extension of corporate governance, whereby a firm's duties extend beyond its
shareholders to a broader group of stakeholders. (Theodoulidis et al., 2017)
A growing number of companies have incorporated CSR into their marketing strategies.
When some shareholders own significant percentage of the stock, they will have the power to affectcorporate decisions. Oh et al. (2011) assumed that CSR participation is a result of decisions madeby the corporate managers under the pressure from the shareholders. This study represents anattempt to utilize stakeholder theory to explore the relationship between ownership types(institutional investors, foreign investors, managerial investors) and CSR performance in Japan.

2.2 Shareholder structure and CSR(1) Institutional investors
Institutional investors include public and union pension funds, mutual funds, investmentbankers, insurance companies, and private firms. They often own significant percentages of thefirm’s stock and cannot easily sell their shares, they are likely to be more attentive to the firm’s
strategic decisions than other shareholders. Most of the institutional investor seek stable returns on
their investments in long run, they are interested in long-term profitability of the companies in theirportfolios and have the incentive to get engaged in corporate strategic management (Soliman et al.,2012). Investing in socially responsible business and maintaining the CSR ratings of the firms is
one way for institutional investor to signal to its potential clients that this institutional investor isreliable and responsible (Oh et al., 2011). Given this description, we predict that institutional
ownership will be a positive association between institutional ownership and CSR performance.

H1：Institutional ownership has positive relationship with the firm’s CSR performance.

(2) Foreign investors
In Japan, foreign investors have emerged as major shareholders since the 1990s, due tothe globalization of business and financial liberalization. Although traditional Japanese companies
74

have their own moral values, Japanese companies have been affected by Western-style management
practices which are assumed to have higher CSR engagement to some degree. In order to assert thepositive influence of foreign ownership on CSR, it is necessary to identify the foreign owners’
profiles that may indicate their investment orientations and preference. (Oh et al., 2011).
There are some arguments relies on the idea of information asymmetries for foreign
investors and uncertainty reduction that CSR investments may bring. Foreign corporate investors,
who possess less information than their domestic counterparts, may show a greater preference forcorporate social performance corporations, willing to consider the non-financial elements ofinvestees’ business to avoid risk or to reduce agency costs. Through the discussions above, we
expect that foreign ownership will be associated with firms’ CSR performance.

H2：Foreign ownership has positive relationship with firms’ CSR performance.

(3) Managerial ownership
For top managers, there are two perspectives to manage the firm. One is to stand on
shareholder perspective, its states that managers primarily have a duty to maximize shareholder
returns. There is one and only one social responsibility of business -to use its resources and engage
in activities designed to increase its profits. So, the managers may be more likely to pursue shortterm strategies that boost the company’s profits and positively affect their compensation.
On the other hand, according to the stakeholder theory, managers are agents of all
stakeholders and have two responsibilities: to ensure that the ethical rights of no stakeholder are
violated and to balance the legitimate interests of the stakeholders when making decisions. The
objective is to balance profit maximization with the long-term ability of the corporation to remain agoing concern (Smith, 2003). Overall, according to the two perspectives of managers, there are two
hypotheses can be given.

H3a. Managerial ownership has positive relationship with Firm’s CSR performance.
H3b. Managerial ownership has negative relationship with Firm’s CSR performance.
75

3. Research Methodology
3.1 Model
Shareholders play an important role as one of stakeholder. Prior research suggests thatshareholder structure is associated to CSR in developing countries. The purpose of this study is toattempt to utilize stakeholder theory to explore the relationship between ownership types(institutional investors, foreign investors and managerial investors) and CSR performance in Japan.
In this study, the regression analysis was used to test the relationship between the various
shareholders and the CSR performance (CSR). The regression model for this study takes thefollowing form:

𝐶𝑆𝑅𝑖𝑡 = 𝛽0 + 𝛽1 𝐼𝑂𝑖𝑡 + 𝛽2 𝐹𝑂𝑖𝑡 + 𝛽3 𝑀𝑂𝑖𝑡 + 𝛾1 𝐷𝑒𝑏𝑡𝑖𝑡 + 𝛾2 𝑅𝑂𝐴𝑖𝑡 + 𝛾3 𝑙𝑜𝑔𝐸𝑚𝑝𝑖𝑡(1)+ 𝛾4 𝐷𝑢𝑚𝑌𝑡 + 𝛾5 𝐷𝑢𝑚𝐼𝑖 +𝑒𝑖𝑡

where CSR is the score of the CSR performance. We use four types of CSR performance scores:
entire performance score and each dimension of CSR performance (human resources (HR)utilization, environment, corporate governance and social performance) as dependent variables. IO,
FO, and MO refer to the institutional ownership, the foreign ownership, and the managerial
ownership, respectively. Following variables are control variables. Debt is the debt ratio. ROA is
return on assets. logEmp denotes the number of employees in the log-form. DumY and DumI are thedummy variables refer to years and industries respectively.

3.2 Data
We use data from the Toyo Keizai Japan CSR Ranking and NEEDS-Cges (Corporate
Governance Evaluation System) database. There were 700 companies listed in Toyo Keizai CSR
ranking and 3587 companies listed in NEEDS-Cges for each year. Because of the missing data,
there were 564 Japanese companies between 2015 and 2016, that can be used, resulting in a total of1128 observations.
The 564 Japanese companies belong to 29 sectors according to the industry classification(Manufacturing sectors are following 16 sectors: Foods, Textiles and Apparels, Pulp and Paper,76Chemicals, Pharmaceutical, Oil and Coal Products, Rubber Products, Glass and Ceramics Products,
Iron and Steel, Nonferrous Metals, Metal Products, Machinery, Electric Appliances, Transportation
Equipment, Precision Instruments, and Other Products. Non-manufacturing sectors are following
17 sectors: Fishery, Agriculture & Forestry, Mining, Construction, Electric Power and Gas, Land
Transportation,

MarineTransportation,

Air

Transportation,

Warehousing

andHarborTransportation, Information & Communication, Wholesale Trade, Retail Trade, Real Estate, andServices). And there are 4 sectors excluded, they are Banks, Securities and Commodities Futures,
Insurance, and Other financial business. Industries were divided in to manufacturing sector and nonmanufacturing sector based on sector classification of Tokyo Stock Exchange (TOPIX Sector
Indices) in this study.
The total CSR score was used as the dependent variable in this study. Toyo Keizai has
formulated CSR ranking based on taking perfect overall score of 600 points, comprising four criteria
in the CSR field (a total of 300 points possible), namely HR utilization (100 points possible), theenvironment (100 points possible), corporate governance and social performance (a combined 100
points possible). In this study, the score of HR utilization, environment, corporate governance andsocial performance and the total CSR score are used as the dependent variable.
Regarding ownership variables, institutional ownership (IO) is calculated as thepercentage of shares owned by the institutional investors. Foreign ownership (FO) is measured by
the percentage of shares owned by foreign investors. And the percentage of CEO owned shares isused to measure managerial ownership (MO).
Regarding control variables, some difference of CSR performance may result from
corporate features such as firm size, financial performance, debt level, and industry. Firm size ismeasured by taking logarithm of the numbers of employees. We controlled for financial
performance by including return on assets (ROA) (Soliman et al., 2013). The ratio of debt represents
debt level in regression. And industries were divided in to manufacturing sector and nonmanufacturing sector based on sector classification of Tokyo Stock Exchange (TOPIX Sector
Indices). The industries are represented by dummy variables in this study. As well as the time
variable is represented by dummy variable.

774. Results
4.1 Descriptive statistics
Table 1 presents the descriptive statistics. The average total CSR score was 202.91, witha minimum of 99.90 and a maximum of 293.40. And the social performance dimensions had thehighest average score compared with others. The average number of percentage of institutions
owning shares in companies was about 29.10, with a minimum of 0 and a maximum of 74.97. The
average number of percentage of foreign owning shares was about 20.04, the minimum andmaximum number is 0 and 86.63 respectively. And the average percentage of CEO owned shares
was 1.53, with a minimum of 0 and a maximum of 68.27.
Table 2 shows the results of correlation analysis. It was used to check the relationshipbetween independent and dependent variables. Figures 1 to 3 show the relationship between three
types of shareholders using scatter plots.

4.2 Results of Regression Model
Table 3 shows the results of the regression analysis. Column 1 in table 3 shows therelationship between shareholders and total CSR performance. The institutional ownership (IO) andforeign ownership (FO) is positive and significantly related to the CSR performance. And the
managerial ownership (MO) is negative and significantly related to the CSR performance, theresults enabled us to accept hypotheses1, 2. And for hypothesis 3, the result enable us to accept
hypothesis 3b. It shows that top managers of Japanese firm likely to pay more attention to the profits.
Columns 2 to 4 show the regression results of the relationship between CSR dimensions
and different shareholders. Overall institutional ownership is significantly positive related to all
three dimensions. Foreign ownership also has the significantly positive relationship to the three
dimensions. The managerial ownership is significantly negative related to the environment, but has
no effect on the HR utilization and corporate governance and social performance.
The insignificant relationship of managerial ownership and HR utilization, and the social
performance can be interpreted as manager owners with either high or low ownership may support,
be neutral for, or not be interested in the investments in these dimensions to a similar degree. In
order to respond to external influences, satisfy external stakeholders, and prepare for potential future78

risks, firms cannot ignore the CSR dimensions, which are closely tied to the firms’ external
reputation (Paek et al., 2013).

5. Conclusions
This study investigates the relation of different types of shareholders and firm’s CSR
performance of Japanese firms. Through the result, we found that three types of shareholders havesignificant influence the firm’s CSR performance. The institutional ownership and foreign
ownership have significantly positive relationship with CSR performance. And we found that top
managers in Japan are likely to be less interested in improve CSR than institutional investors andforeign investors.
The results of institutional ownership indicate that Japanese institutional investors areconcerned with the impact of CSR decisions. This finding suggests that institutional investors pay
more attention to the CSR. They should invest more heavily in firms with higher levels of CSR
performance. At the same time, managers have to be proactive in accommodating the requirements
of institutional investors (Saleh et al., 2010). In the case of the Japanese company, most of theforeign investors come from USA and Europe and may place a relatively greater emphasis onsocially responsible business practices. Through the results, the foreign ownership has positive
relationship with CSR performance, allowing foreign owners to own more of the domestic
companies which facilitate socially responsible management and social investments (Oh et al.,2011). Top managers likely to be less interested in improving their firms CSR performance thaninstitutional investors and foreign investors. They may focus more on the profit of the business.
Firms need to pay more attention to deal with conflicting voices from different shareholders.
There are also limitations in this research should be noted. Firstly, the data in this research
only included two years data. So, we cannot tell how stable the relationships between ownership
structure and CSR. For the further research, it should be included longitudinal examinations.
Secondly, for managerial ownership, this study only uses the percentage shares of CEO to measure
the managerial ownership, but there are some other shareholders of managerial like top managerial79group, outside directors. They have the power to influence the firm’s decisions, so the future
research should involve more detail of managerial ownership.

80

References
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Variable
CSR
HR
Environment
SocialInstitutional ownership
Foreign ownershipManagerial ownership
Log employee
DE
ROA
DumY
DumI

Obs
1,128
1,128
1,128
1,128
1,128
1,128
1,128
1,128
1,128
1,128
1,128
1,128

Table 1. Descriptive statistic
Mean
Std.Deviation
202.91149.44464.70717.51866.87020.44471.33316.49529.09417.71820.037
14.559
1.525
5.151
3.194
0.558
48.01718.234
6.391
4.493
0.716
0.451
0.500
0.500

82

Min
99.90020.00020.00023.400
0.000
0.000
0.000
1.000
6.580
-15.742
0.000
0.000

Max
293.400
98.700100.000
100.000
74.97086.63068.2715.286
97.73033.3981.000
1.000

Table 2. Correlation matrix
CSR
HR
Environment
SocialIO
FO
MO
Logemployee
DE
ROA
DumI
DumY

CSR
1.000
0.897***
0.898***
0.932***
0.571***
0.523***-0.232***
0.634***
0.213***-0.0180.260***
0.018

HR

Environment

SocialIO

FO

MO

Logemployee

DE

ROA

DumI

DumY

1.000
0.660***
0.809***
0.519***
0.513***-0.165***0.576***
0.139***
0.068**
0.127***
0.006

1.000
0.753***
0.510***
0.442***-0.279***0.569***
0.217***-0.079***0.371***
0.014

1.000
0.530***
0.477***-0.175***0.584***
0.222***-0.0270.185***
0.029

1.000
0.859***-0.203***0.511***
0.016
0.225***
0.148***
0.039

1.000
-0.166***0.484***-0.071**0.312***
0.087***
0.044

1.000
-0.205***-0.113***0.083***-0.167***
0.001

1.000
0.218***
0.061**
0.174***-0.0031.000-0.401***-0.068**-0.0381.000-0.032
0.000

1.000
0.000

1.000

83

Table 3. Results of regression model
(1)
(2)
(3)
(4)
Variables
CSR
HR
Environment
SocialIO (Institutional ownership)
0.638***
0.129***
0.272***
0.237***(0.116)(0.0458)(0.0495)(0.0420)FO (Foreign ownership)
0.520***
0.270***
0.126**
0.124**(0.142)(0.0563)(0.0608)(0.0516)
MO (Managerial ownership)-0.347*-0.0334-0.329***0.0153(0.206)(0.0815)(0.0879)(0.0747)
logEmp (Log employee)
34.94***
12.05***
11.99***
10.91***(2.239)(0.885)(0.956)(0.812)
Debt (Debt ratio)
0.281***
0.0558**0.121***
0.104***(0.0642)(0.0254)(0.0274)(0.0233)
ROA-1.012***-0.117-0.553***-0.342***(0.261)(0.103)(0.112)(0.0948)
DumY (Year dummy)
0.716-0.1970.263
0.650(2.030)(0.803)(0.866)(0.736)
DumI (Industry dummy)
15.64***
0.871
11.85***
2.915***(2.345)(0.928)(1.001)(0.850)Constant
44.23***
14.62***
7.738***
21.87***(6.973)(2.758)(2.977)(2.529)Observations
1,128
1,128
1,128
1,128
R-squared
0.530
0.415
0.499
0.445
Notes *** and ** stand for statistically significant level at 5% and 10%, respectively. Numbers are
estimated coefficients. Numbers in parentheses are standard errors.

84

Figure 1. Scatter plots of the relationship between institutional ownership and CSR performance

Figure 2. Scatter plots of the relationship between foreign ownership and CSR performance85

Figure 3. Scatter plots of the relationship between managerial ownership and CSR performance86Chapter 5. Roles of board directors in charge of CSR from the perspective of
resource dependence theory
Yian Ku*, Michiyuki Yagi*, and Katsuhiko Kokubu*
Abstract
Engaging in corporate social responsibility, firms have started setting position named corporate social
responsibility director who are responsible for corporate social responsibility affairs. This study
examines if corporate social responsibility director really benefits corporate social responsibility
engagement of the firms and if the contribution of full-time position differentiates from the part-timeone. This study focuses on Japan and chooses 1356 samples from 2014 to 2016. Based on resource
dependence theory, this study hypothesizes that the corporate social responsibility director has positive
relation with both disclosure and reputation. Results of regression model show that corporate social
responsibility director has significantly positive relation with both disclosure score and CSR
performance measured by Bloomberg and Toyo Keizai Inc., respectively, and the full-time director
seems to have much more influences than the part-time director does.

Key words: resource dependence theory; sustainable development goals; corporate
governance; corporate social responsibility director; disclosure and reputation*

SESAMI Program, Graduate School of Business Administration, Kobe University.
87

1. Introduction
The 2030 Agenda for Sustainable Development set 17 Sustainable Development Goals(SDGs), implemented from September 25th, 2015, in order to end poverty, protect the planet, andensure prosperity for all (United Nations, 2017a). According to United Nations (2017b), as more andmore people anticipate getting into the middle class around the globe, it will increase resource-demand
while the current natural resources are already constrained. Consequently, if we do not take any actions
to deal with this issue, it will lead to irreversible damage toward the environment. For businesses, how
to find new solutions to ensuring sustainable consumption and production (SCP: Goal 12 of SDGs)
patterns becomes a popular issue. The enterprise is supposed to have better understanding ofenvironmental and social impacts of products and services, then designing solutions to reducing
impacts and improving well-being.
Consequently, we can say that corporate have a moral obligation in terms of environmental
and social activities and impacts. Corporate social responsibility (CSR) is used to justify why
companies ought to put attention on socially responsible actions (Sridhar, 2012). CSR at least covers
voluntary attention to the ethical, social, and environmental implications of business and is defined as‘situations where the firm goes beyond compliance and engages in voluntary actions that appear tofurther some social good, beyond the interests of the firm and that which is required by law’ (Kolk &Pinkse, 2010). It is suggested that CSR reporting issues have become a necessary facet of businesses
to show how the firm contributes to CSR affairs (Khan, 2010). Engaging in CSR, firms have started
setting position named CSR director who are responsible for corporate social responsibility. Corporate
governance (CG) creates balance among economic, social , individual , and communal goals, so thegovernance framework engages in allocating resources equally and efficiently, which requires
accountability for the stewardship of those resources and for aligning the interests of individuals,
corporations and society as near as possible (Khan, 2010).
This study examines if CSR director really benefits corporate social responsibility
engagement of the firms and if the contribution of full-time position differentiates from the part-timeone. This study focuses on Japan and chooses 1356 samples from 2014 to 2016. Based on resource

88dependence theory, this study hypothesizes that the corporate social responsibility director has positive
relation with both disclosure and reputation. Results of regression model show that corporate social
responsibility director has significantly positive relation with both disclosure score and CSR
performance measured by Bloomberg and Toyo Keizai Inc., respectively, and the full-time director
seems to have much more influences than the part-time director does.
The rest of the study is structured as follows. Section 2 introduces the theory frequently
adopted when we discuss CG, including agency theory and resource dependence theory, and the reason
why we choose resource dependence theory as the tone. Section 3 goes further to develop the
hypotheses and introduces the framework. Right after that, we explain how we select the samples andinterpret the result. Lastly, Section 4 shows estimated results and Section 5 moves to conclusion,
limitations, and future research.

2. Background
2.1 Resource Dependence Theory
The traditional view of CG is that suppliers who finance corporations would like to assure
their return on their investment by introducing CG, which is a profit centered model; however, CG
starts to change to social responsibility model in recent years (Shahin & Zairi, 2007). According to De
Villiers et al. (2011), after the scandals of CG in the early 2000s, the introduction of Sarbanes Oxley
Act of 2002 ruled the new standards of accountability of board of directors of U.S. public firms, suchas the board structure and board attitude toward transparency. In addition, as the issues of CSR become
more and more significant, what role the board plays in CSR issues becomes a popular topic in recent
years.
The previous study suggests two functions of the board: (1) monitoring management to alignits activities with shareholders’ interests from the viewpoint of agency theory and (2) facilitating
access to resources from perspective of resource dependence theory. Agency theory is an attractive
theory because it provides a view to include conflicts of interest, incentive problems, and problems of89

controlling system. Therefore, the previous studies regarding CG or disclosure analyze how to protect
shareholders’ interests by reducing information asymmetries (Michelon & Parbonetti, 2012).
Although previous researches pointed out that board composition affects the effectiveness of control
on top management. Thus, reducing the probability of frauds and earnings management, increasing
the quality of mandatory and voluntary disclosure is more controversial (Michelon & Parbonetti,2012).
Although agency theory is the dominant theory used in the research on boards of directors,
resource dependence theory also shows that it is much more supported than other board perspectives,
including agency theory (Hillman et al., 2009). According to De Villiers et al. (2011), it investigates
the relationship between firm environmental performance and board characteristics from perspectiveof boards’ monitoring and of resource provision abilities. The authors chose the two parts ofcharacteristics. One represents the board’s role of monitoring, while another one emphasizes the roleof resource provision. In this research, the role of resource provision is much supported than the roleof monitoring.
According to Velte & Stawinoga (2016), resource dependence theory states that the primary
key to gaining above-average profit lies in access to necessary strategic resources. A firm can be
imagined as a bundle of resources, and each company is supposed to own heterogeneous, different
resources, which determines the competitive advantages and strategies (Falkenberg & Brunsæl, 2011).
As a result, CG could be defined as the determination of the broad by which organizational resources
will be deployed and the resolution of conflicts among the myriad of participants in organizations(Kolk & Pinkse, 2010).
Different from the role of board of director, which plays as a monitor under agency theory,
another function of the board is to bring in resources that can be thought as strength or weakness of agiven firm. Board of director plays as a partner of the management and helps to set effective policies
and strategies. Resource dependence theory proposes four benefits that corporate boards can provide:(1) advice and counsel, (2) legitimacy, (3) channels for communicating information between external
parties and the firm, (4) preferential access to commitments or support from outside. Therefore, the90

logic of resource dependence theory suggests that a board’s provision of resources is related to firm’s
performance (Hillman & Dalziel, 2003).

2.2 Research framework and hypothesis development
This study refers to Michelon & Parbonetti, (2012)’s work shown in Figure 1. This study
revises the framework to Figure 2, which includes the consideration of reputation. According toMichelon & Parbonetti, (2012), stakeholder engagement is crucial to build an understanding ofstakeholders’ expectations and good CG and accountability should focus on addressing those social,environmental, economic, and ethical expectations.
Because the stakeholders can collectively affect the corporations by providing or
withholding resources, corporations increasingly realize the importance of transparency andaccountability (Sridhar, 2012). Sustainability disclosure represents a strategy used to respond to the
expectations of society, providing information about social and environmental impacts of corporate
activities to stakeholders (Michelon & Parbonetti, 2012).
The CSR director is a main board role to integrate sustainability into the core strategy andcurrent operation (Woods & Cartland, 2013), so we can suppose that CSR director plays an importantrole in enhancing company reputation and legitimacy by establishing relations with stakeholders,
helping controlling resources and choosing organizational strategy.
With respect to legitimacy, corporate governance can play a crucial role in managing theprovision of information to stakeholders since CSR director enacts and oversees disclosure strategies
and policies in the reports (Michelon & Parbonetti, 2012). On the other hand, because CSR director isin charge of sustainability strategy, CSR director can leverage the resources on hand in order to achievesustainable competitive advantage, which can lead to reputation (Shahin & Zairi, 2007; Falkenberg &Brunsæl, 2011).
Based on the statements of Peters & Romi (2012), there is an increase in the use of CG
mechanisms, creating board committees or executive officer positions concentrating on corporate
sustainability and environmental concerns. However, less attention is paid to the new position, CSR

91

director, whose responsibility includes integrating concerns of external stakeholders, corporate
strategy, and practices of CG. Therefore, it is anticipated that CSR director would contribute tocommunicating with stakeholders. A key action used to respond to the condition of the organization’senvironmental legitimacy is voluntary environmental disclosures. In Peters & Romi (2012)’s research,
the relation between the presence of CSR director and the likelihood of disclosure is marginallysignificant. The research of Michelon & Parbonetti (2012) also found that the presence of a director
in charge of CSR issues is positively correlated with disclosure in the annual report.
Here, we would like to take Japan as research subject and discuss further the effect of fulltime and part-time CSR director on disclosure score, which acts as the proxy of legitimacy, and CSR
performance, which acts as the proxy of reputation. Legitimacy depicts how company attempts to meetand adhere to the expectations of a social norms, values, rules, and meanings; however, reputation
centers on comparison of organizations to determine their relative status (Deephouse & Carter, 2005).
Because CSR director has impacts on not only legitimacy but also reputation, we made the two
hypotheses as follows:

Hypothesis 1: Firms with a CSR director will be more likely to have higher disclosure score.
Hypothesis 2: Firms with a CSR director will be more likely to have higher CSR performance.

3. Research Methodology
3.1 Model
The purpose of this study is to examine the degree of relationship between the position of
CSR director and CSR performance or disclosure score in Japan. Specifically, we have classified the
CSR director into full-time, part-time, and without director to see if that variable causes different
extent of influence on CSR or disclosure performance. The motivation of this study is that effective
corporate governance could ensure the stakeholders’ interests (Said et al., 2009). Setting the position
like CSR director becomes a trend though it is still small number now (Woods & Cartland, 2013).

92This study will contribute not only to clarifying the effects of CSR director on CSR or disclosure
performance but also to comparing the essential factors under each way of measurement to see whether
there is any difference.
The regression model of this study is as follows:

𝐶𝑆𝑅 = 𝛽0 + 𝛽1 𝐹𝑇 + 𝛽2 𝑃𝑇 + 𝛽3 𝑁𝐵 + 𝛽4 𝐼𝐷 + 𝛽5 𝑅𝑂𝐸 + 𝛽6 𝑆𝐼𝑍𝐸 + 𝛽7 𝐿𝐸𝑉 + 𝛽8 𝑇𝑄(1)+ 𝛽9 𝐼𝑁𝐷 + 𝜀

The CSR denotes CSR performance or disclosure score. While focusing on the effect of CSR director
on CSR performance or disclosure score, as this study finds that there are mainly three taxonomies offull-time, part-time, and without director. Accordingly, we set FT and PT as dummy variables torepresent the effect of full-time director and the part-time director. Other eight variables are control
variables: the number of board members (NB), the proportion of independent directors (ID), theprofitability (ROE), the leverage (LEV), the firm size (SIZE), opportunity of growth which takes
Tobin’s Q (TQ) as proxy, and the industry (IND) drilled down into manufacturing and nonmanufacturing in order to observe the industrial differences.
According to Hillman et al. (2009), the board size (NB) is a main focus in some previous
studies when using resource dependence theory. It is supported that board size is related to firm’s levelof internationalization, which is a symbol of environmental dependence, or even to financial
performance. Firms that facing different levels of uncertainty and environmental dependency willaffect the size or composition of the board. As large board can have more prestigious or experienced
members who owns expertise to deal with environmental issues, board size is regarded as an importantresource dependence related factor (De Villiers et al., 2011).
It is suggested that degree of board independence will foster board effectiveness. Based on
the argument of Said et al. (2009) and De Villiers et al. (2011), outsiders or directors who are notcurrent or past owners or employees of the firm may better protect the interests of shareholders because
they can be more dispassionate in their evaluation of ongoing strategies. It is also shown that the93increasing numbers of independent directors at board level helps assure board independence frommanagement, its ability to represent multiple perspectives within its environment, and the mediation
among various stakeholders (Michelon & Parbonetti, 2012). Empirical study also found that socially
responsible firms have more outside or independent directors than those non-socially responsible firms(Said et al., 2009). In order to exclude the effect of scale, we use the ratio of the number of independent
directors divided by the total number of directors (ID) as control variable.
The previous studies found that profitable firms tend to have better environmental
performance because those firms are able to cover the environmental costs (De Villiers et al., 2011).
As a result, based on the above statement of social impact hypothesis, we can say that the firm withgood financial performance is likely to have resources to participate CSR affairs or report CSR
information. It indicates how much pressure a firm receives from the investment community,
especially important for disclosure of corporate governance information (Kolk & Pinkse, 2010).
Consequently, profitability (ROE), measured by net income divided by total equity, is considered as
one of the important control variables (Peters & Romi, 2012; Michelon & Parbonetti, 2012).
If the firm’s level of debt increases, the market may require greater amount of informationin order to handle the operation and management, providing incentive for firm voluntarily disclosing
information, suggesting a positive association. Therefore, leverage (LEV), measured by total liability
divided by total equity, is included (Peters & Romi, 2012). Empirical study also examined that there
is a positive association between debt levels and environmental disclosures, suggesting more
information disclosed in firms with higher leverage (De Villiers et al., 2011).
According to previous studies on corporate disclosure, corporate size (SIZE) has been foundto be associated with disclosure extent positively and significantly. In other words, the larger the firmis, the higher the extent of disclosure would be (Michelon & Parbonetti, 2012). In addition, larger
firms are more likely to identify environmental issues and manage those effectively (De Villiers et al.,2011) and have greater amount of resources to invest in capital-intensive projects (Peters & Romi,2012).

94

The Tobin’s Q (TQ) is used to control for the growth opportunities of firm. If Tobin’s Q is
greater than 1, the entrepreneur is much more willing to make investment to ask for growth, while if
Tobin’s Q is less than 1, the entrepreneur tends to decrease the investment. In growth periods, firms
do not have sufficient resources to contribute to disclosure or setting committee in charge of CSR
affairs. The companies may disclose more sustainability-related information in order to differentiate
from other firms with similar growing pace (Peters & Romi, 2012).
Firms in environmentally sensitive industries tend to disclose more environmental
information and are likely to manage their environmental impacts effectively (De Villiers et al., 2011).
Industry type (IND) of this study is based on 33 sectors classification of Tokyo Stock Exchange(TOPIX Sector Indices). Manufacturing sector, which is classified as 1, includes the following 16
sectors: foods, textiles and apparels, pulp and paper, chemicals, pharmaceutical, oil and coal products,
rubber products, glass and ceramics products, iron and steel, nonferrous metals, metal products,
machinery, electric appliances, transportation equipment, precision instruments, and other products.
Non-manufacturing sector, which is set as 0, contains the following 17 sectors: fishery, agriculture &forestry, mining, construction, electric power and gas, land transportation, marine transportation, airtransportation, warehousing and harbor transportation, information & communication, wholesaletrade, retail trade, banks, securities and commodities futures, insurance, other financing business, realestate, and services.

3.2 Data
Two data sets have been used in this study, CSR performance measured by Toyo Keizai Inc.
and disclosure scores measured by Bloomberg. The research setting is Japan. Data ranges from 2014
to 2016 to observe the trend and change in these years and selected the samples measured by both ofthe databases. The Corporate Social Responsibility Database conducted by Toyo Keizai Inc. collected
the data by sending questionnaires to firms, and there are 1210, 1305, and 1325 enterprises’ CSR
performance evaluated from 2014 to 2016; in Bloomberg’s dataset, 1168, 2084, 2025 corporations are95

collected and their disclosure extents are measured from 2014 to 2016. Then, we excluded those
discontinued, incomplete samples. Lastly, 452 sampled companies are selected.
According to the measurement standard conducted by Toyo Keizai, the CSR performance
consists of human resources, environment, and corporate governance, each of which occupies 100
points, so the total is 300 points. On the other hand, Bloomberg score is based on the extent of acompany's Environmental, Social, and Governance (ESG) disclosure from company-sourced filings
such as Corporate Social Responsibility Reports, Annual Reports, DEF 14A, 10-K, Corporate
Governance Reports, and any public disclosures on company websites. The score ranges from 0.1 forcompanies that disclose a minimum amount of ESG data to 100 for those that disclose every data pointcollected by Bloomberg.

4. Results
4.1 Descriptive statistics
Table 2 describes our samples of companies in terms of dependent, independent, and control
variables from 2014 to 2016 with 452 firms, so there are 1356 samples in total. The dependent
variables are ESG (disclosure score), the disclosure score conducted by the Bloomberg, and CSR(performance score), the evaluation of CSR engagement conducted by Toyo Keizai. In ESG part, theaverage is 32.909 points; the highest score is 61.980 (compared to the highest possible score of 100)and the lowest score is 0.826 (compared to the lowest possible score of 0). The mean of CSR points
is 221.819, while the maximum and minimum is 294.100 (compared to the highest possible score of300) and 118.800 (compared to the lowest possible score of 0) respectively.
Regarding independent variables, if we refer to the setting of CSR director, the full-time
occupies 9%, the part-time has 79%, and the without one has 12% of the samples. The average numberof board members is 10.040, and the maximum and minimum is 26 and 3 respectively. The mean for
the ID (proportion of independent directors) is 0.205. In other words, more than 20% of the board iscomposed of independent directors. The mean profitability measured by ROE is 7.1%. In this data set,96

67% of the firms belongs to manufacturing industry, while the other 33% belongs to nonmanufacturing industry.
Table 3 presents the Pearson correlations matrix among the dependent, independent
variables, and control variables. We can see that both FT and PT are positively correlated to dependent
variables, ESG and CSR. If we look to control variables, only TQ is not significantly correlated to
ESG while only ROE is not correlated to CSR.

4.2 Regression results
Tables 4 and 5 show results of the regression model in terms of disclosure score (ESG) andCSR performance (CSR), respectively. In Table 4, the entire adjusted R-squared is 0.312, and bothfull-time (FT) and part-time (PT) director appear significantly positive effect on disclosure score.
However, if we turn to the result of individual year from 2014 to 2016, both full-time and part-time
do not show significant result in 2016. The lack of significance for the other independent variables
means that we cannot confirm a relationship between that control variable and disclosure score. The
regression coefficients for the control variables ROE, SIZE, and IND are significant and have theexpected signs.
In Table 5, the entire adjusted R-squared is 0.546, and both full-time and part-time hassignificant, positive relationship with CSR performance. The regression coefficients for the control
variables ID, SIZE, and IND are significant and have the expected signs.
NB shows negative relation and the result is not significant, which is out of our expectationof positive relation. According to Said et al. (2009), the large board size may lead to increased
communication and coordination problems, lessening the board control management, which may be
one of the possible reasons. Thereby, although more board members are supposed to bring in moreresources engaging in sustainability, the large board size may hinder the communication, preventing
those resources from being brought into the organization.

97

Concerning ID, although ID shows positively significant result, supporting the previous
studies that the independent directors can assist to ensure stakeholders’ interests because they cancalmly evaluate the ongoing strategy. However, in ESG’s result, it is neither positive nor significant.
Furthermore, the ROE has marginally significant and negative relation with ESG, but has
insignificant, positive relation with CSR, showing different result from previous studies. It reveals thatwhen company has poor profitability, companies may tend to complete the disclosure in order to shift
the focus, while the firm may not improve its CSR engagement even when it has great profitability
and own much more resources. As a result, we suppose that shift of focus may be a better explanation.
In both models, the IND are positively related to both of the dependent variables, showingthat the firms belonging to manufacturing sector are much more willing to engage in sustainability
issues that firms in non-manufacturing sector because of the sensitive industry attribute.

5. Discussion and conclusion
This study examines if CSR director performs from two perspectives, legitimacy andreputation, from the viewpoint of resource dependence theory, using Japanese firm data. We extend
the previous studies on the position of CSR director (Peters & Romi, 2012). From the results ofregression model, both full-time and part-time positively affect the dependent variables of ESG and
CSR, while full-time has much more influences than part-time. Therefore, the position of CSR director
can really benefit the legitimacy and reputation. Connected to the SDGs, ensuring consumption andproduction patterns, if the business would like to lessen environmental and social impacts, setting a
position of CSR director engages in those issues may be a good choice.
Regarding limitations, when we attempted to make the samples consistently in the sametime series, we had no choice but gave up some incomplete or inconsistent samples. Therefore, it could
be considered as a limitation because the samples may not be so comprehensive in Japanese market.
In addition, endogeneity issue (the omitted variables that represents a firm’s overall sustainability
strategy) could potentially affect our regression results (Peters & Romi, 2012). As in the previous

98researches, other control variables should be considered, such as audit committee, CEO duality, andownership structure. We also acknowledge that our dependent variables suffer from limitations.
Although those data are measured and retrieved from objective, credible third parties, themeasurement result may be influenced by condition like bias or survey responder’s misunderstanding(Peters & Romi, 2012). Because setting the position of CSR director in charge of CSR issues has
become a trend, the future researches can focus on other markets or countries to see if CSR director
positively influences the disclosure toward stakeholders or CSR engagement.

99

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100

Figure 1: Michelon & Parbonetti (2012)’s framework

Sustainability Disclosure

Legitimacy

Sustainability Strategy

Reputation

CSR Director at Board

Figure 2: Revised Michelon & Parbonetti (2012)’s framework101Table 1. Constructs of the Independent and Control Variables
Explanatory variables
Full-time (FT)Part-time (PT)
Board of directors (NB)
Independent directors (ID)Profitability (ROE)
Leverage (LEV)
Size (SIZE)
TobinsQ (TQ)

Industry type (IND)

Measurement
1 if the firm’s CSR director is full-time, 0 otherwise
1 if the firm’s CSR director is part-time, 0 otherwise
Number of members
Proportion of independent directors
Return on equity
Total debt divided by shareholders’ equity
Natural logarithm of total assets
Growth measured as the market value of common equity plus bookvalue of preferred stocks, book value of long term debt and current
liabilities, divided by book value of total assets
1 if the firm’s industry type belongs to manufacturing style, 0 otherwise102

Table 2. Descriptive statistics
Variable
ESG (disclosure)
CSR (performance)
FT
PT
NB
ID
ROE
LEV
SIZE
TQ
IND

Obs
1356
1356
1356
1356
1356
1356
1356
1356
1356
1356
1356

Mean
32.909221.8190.090
0.790
10.040
0.205
0.071
1.562
5.542
1.139
0.670

S.D.
11.87939.764
0.288
0.404
3.216
0.150
0.104
1.576
0.648
0.443
0.470

103

Min
0.826
118.800
0.000
0.000
3.000
0.000
-1.740
0.006
3.961
0.000
0.000

Max
61.980294.100
1.000
1.000
26.0000.769
0.488
20.589
7.617
4.846
1.000

Table 3. Correlation Matrix
Variables
ESG
CSR
FT
PT
NB
ID
ROE
LEV
SIZE
TQ
IND

ESG
1
0.579***
0.113***
0.047**
0.164***
0.068***-0.064***0.123***
0.456***
0.028
0.303***

CSR

FT

PT

NB

ID

ROE

LEV

SIZE

TQ

IND

1
0.206***
0.097***
0.214***
0.260***
0.005
0.190***
0.680***
0.112***
0.183***

1-0.625***0.085***
0.046**-0.097***0.072***
0.141***-0.009-0.0061
0.017
0.043*
0.054**
0.014
0.103***
0.011-0.0141-0.187***-0.0150.130***
0.404***-0.008-0.097***1
0.083***
0.034
0.198***
0.317***
0.010

1-0.150***-0.002
0.236***-0.0291
0.326***-0.084***-0.130***1
0.093***-0.03410.010

1Note ***, **, and * stand for statistically significant level at 1%, 5%, and 10%, respectively.

104

Table 4. Results of Regression Model (ESG Disclosure Score)
Dep. Variable
Year
Constant
FT
PT
NB
ID
ROE
LEV
SIZE
TQ
IND
Observations
R-squared
Adj R-squared(1)
ESG
Entire-19.500***
3.577***
1.853**-0.013-2.373-5.383**0.034
8.305***
0.111
8.051***
1356
0.317
0.312

(2.464)(1.240)(0.878)(0.096)(2.010)(2.681)(0.184)(0.511)(0.657)(0.577)

(2)
ESG
2016
-13.647***
0.773
0.229
0.012
-4.392-3.1820.041
6.367***
1.046
9.091***
452
0.251
0.236

(4.420)(2.335)(1.642)(0.185)(4.179)(4.397)(0.399)(0.920)(0.949)(1.059)

(3)
ESG
2015
-25.452***
4.213**
2.226*
0.113
2.081-13.239**0.041
9.266***
1.410
7.676***
452
0.428
0.416

(3.861)(1.882)(1.313)(0.146)(3.153)(5.891)(0.285)(0.796)(1.188)(0.878)

(4)
ESG
2014
-23.884***
4.238**
2.960**
0.039
4.254-6.800*-0.0739.124***
0.266
7.493***
452
0.430
0.418

(3.748)(1.811)(1.305)(0.139)(2.823)(3.995)(0.250)(0.785)(1.229)(0.863)

Notes ***, **, and * stand for statistically significant level at 1%, 5%, and 10%. Numbers are estimated coefficients. Numbers in parentheses are standard
errors.

105

Table 5. Results of Regression Model (CSR Performance Score)
Dep. Variable
Year
Constant
FT
PT
NB
ID
ROE
LEV
SIZE
TQ
IND
Observations
R-squared
Adj R-squared(1)
CSR
Entire-23.213***30.872***
16.783***-0.23828.607***4.236-0.07638.266***1.323
17.336***
1356
0.549
0.546

(6.702)(3.372)(2.387)(0.261)(5.467)(7.291)(0.501)(1.389)(1.787)(1.570)

(2)
CSR
2016
-20.676*
32.579***19.431***-0.41319.079*11.6600.009
37.623***3.707
15.554***
452
0.546
0.536

(11.376)(6.011)(4.228)(0.476)(10.758)(11.319)(1.026)(2.367)(2.442)(2.726)

(3)
CSR
2015
-20.773*
29.976***14.534***-0.25832.038***-13.530
0.481
37.943***3.212
18.043***
452
0.557
0.548

(11.905)(5.804)(4.050)(0.450)(9.720)(18.164)(0.878)(2.453)(3.664)(2.709)

(4)
CSR
2014
-24.825**
29.899***16.575***-0.07035.080***2.596-0.34639.235***-5.48618.226***
452
0.551
0.542

(12.040)(5.818)(4.192)(0.448)(9.070)(12.834)(0.804)(2.521)(3.948)(2.772)

Notes ***, **, and * stand for statistically significant level at 1%, 5%, and 10%. Numbers are estimated coefficients. Numbers in parentheses are standard
errors.
[2017.8.4 1245]

106