The Integration of Corporate Social Responsibility into Business Practice in Asia,
from 2000 to 2007.
Eun young SongSociology • Korea University

CSR Integration in Asian Countries

1Abstract
This paper investigates the relationship between organizational density and decoupling toilluminate the level of integration of CSR (Corporate Social Responsibility) guidelines introduced by the United Nation Global Compact (hereafter UNGC). The author introduces theconcepts of “mild decoupling” and “extreme decoupling,” which include the degree of loosealignment between formal rules and activities. Using the data on Asian participants of the
UNGC from 2000 to 2007, this article shows that density of the UNGC members at the
global level determines whether a company becomes a decoupled participant which fails tocommunicate with the UNGC board and refuses to engage in the integrity measures.
Whereas, local density influences on the degree of decoupling. These results suggest an institutional theory of decoupling : the increase in global density escalates decoupledness ingeneral, but the increase in local density decreases extreme decoupling. The implications of
this study for the neo-institutionalism and organizational decoupling are discussed.
Keywords:
United Nation Global Compact (UNGC), mild decoupling, extreme decoupling, global density and local density.
1. Introduction
Organizations frequently adopt formal laws, policies, programs and guidelines, but theyalso decouple these formal structures from actual practices in the organizations to buffertechnical core from external monitoring and evaluation (Meyer and Rowan 1977; Levin 2001).
Meyer and Rowan (1977:) noted that decoupling enables organizations to maintain legitimating formal structure while their activities vary in responses to practical considerations. Despite the importance of decoupling in business and institutional theory per se, many neoinstitutional analyses have associated with the diffusion or adoption stories. There has been
relatively little empirical research conducted to examine mechanisms of organizational decoupling. Although there are some quantitative analyses (e.g. stock repurchase programs andinformal decoupling practices (Westphal and Zajac 2001)), most previous studies on decoupling devoted to description of a particular case, such as anti-circumcision policies and continuation of female genital cutting in five African countries (Boyle, McMorris and Gómez
1999), and organized hypocrisies of the international organizations (Lipson 2006). Whilethese studies unfold many details about the decoupling cases, they do not explore the macrolevel logics behind decoupling or diversity in decoupling patterns.

CSR Integration in Asian Countries2

This paper considers two main questions: what is the dominant logic that determines
whether an organization becomes decoupled? Are there different logics applied to different
levels of decoupling? I argue that there is a positive relationship between the overall densityof adoption and the likelihood of decoupling from adopted guidelines. The more organizations adopt formal structures, the more adoption becomes ceremonial. Thus, one can expect
the less implementation of the rules at the time of the widespread adoption. A number of research on adoption might give some hint that the late adopters are more likely to decouple,
because the late adoption itself is a symbolic behavior (Tolbert and Zucker 1983; Westphal,
Gulati and Shortell 1997). Still, it is not clear whether the saturated stage of adoption hinders
integration between the adopted structures and activities.
I also argue that the density-driven logic of adoption influences on variation in decoupling.
So far, decoupling research has been limited to the general aspects of decoupling. To put itagain, researchers focused on the issue of “implementation or not.” However, my argument
is differ from these studies in two respects. First, I view the decoupling as a continuum of
coupling. There is a range of coupling. Decoupling phenomena in real life can be found insomewhere between opposite ends: 0% alignment and 100% alignment between practices
and guidelines. Although some scholars, including Levin (2001) who defines selective decoupling: a mix of coupledness and decoupledness in practice, acknowledge that decoupling is
not conceptually discrete, there is few attempt to show empirical evidences. Second, my emphasis is on how the density-driven logics can explain the difference in the scale of decoupling. Population ecologists argue that the increase of organization density in a new market
legitimizes the field as well(Carroll and Hannan 2000). It is not limited to intra-population
dynamics. Legitimacy in a focal population may generate legitimacy in other fields. Thus,
spill-over effects of inter-population legitimacy may influence the increase of organizational
density in non-focal fields. In this case, the borrowed legitimacy (or “identity” in Baron’s
term (2004)) sets the rules of behavior for new entrants. Consequently, local density increases the likelihood of coupling. Otherwise, the decoupled entrants lose the legitimacy,
therefore, barely survive.
This article focuses on the UNGC members in Asia and their integration of guidelines introduced by the UN bodies. I exploit the data on 728 business members and 143 stakeholder
organizations (e.g. NGOs, labor organizations, municipalities, universities, foundations andother types of non-profit organizations). The first part of this paper sketches the UNGC -- theempirical setting -- and the universalized paradigm: socialization of the market.” The second
part briefly reviews some of the literature on decoupling and introduces the concepts of

CSR Integration in Asian Countries3

“mild decoupling” and “extreme decoupling,” followed by hypotheses. The next section describes the sample of this study and measures, including model specification. The final part ofthis essay presents the results and then offers a discussion and conclusion.
2. UNGC: Universal guidelines of market socialization“Corporate social responsibility is synonymous with corporate sustainability and should beembedded in the business planing process.” (UNGC 2007:8, Emphasis italicized)
On 26 July 2000, the UNGC, from its origin as an initial idea proposed at the 1999 World
Economic Forum in Davos, was launched with several dozen business leaders. With morethan 5000 organizations located in over 100 countries, the UNGC has since the world’s
largest voluntary corporate citizenship initiative (UNGC office 2005; United Nations 2007).
It provides universal guidelines for participants (in particular, business organizations) thatare committed to aligning their operations and strategies with ten UNGC principles in theareas of human rights, labor, environment and anti-corruption (UNGC office 2005; 2007).
Table 1. Ten principles of the Global Compact
Main areas

Principles

Foundation for idea

Human Rights Principle 1. Businesses should sup- The Universal Declaraport and respect the protection of tion of Human Rights
internationally proclaimed humanrights.
Principle 2. Businesses make surethat they are not complicit in human rights abuses.
Labor
Principle 3. Businesses should up- The International Labor
hold the freedom of association and Organization’s Declarathe effective recognition of thetion on Fundamental
right to collective bargaining.
Principles and Rights at
Principle 4. The elimination of all Work
forms of forced and compulsory
labour.
Principle 5. The effective abolitionof child labour.
Principle 6. The elimination of discrimination in respect of employment and occupation.

CSR Integration in Asian Countries

Year of commencement
1948

1998

4

Main areas

Principles

Foundation for idea

Environment Principle 7. Businesses should sup- The Rio Declaration on
port a precautionary approach to Environment and Develenvironmental challenges.
opmentPrinciple 8. Businesses should undertake initiatives to promote
greater environmental responsibility.
Principle 9. Businesses should encourage the development and diffusion of environmentally friendly
technologies.
AntiPrinciple 10. Businesses should
The United Nations
Corruption work against corruption in all its Convention Against Corforms, including extortion andruptionbribery.

Year of commencement
1992

2003

(Source: United Nations Global Compact Homepage, URL: www.unglobalcompact.org)
The UNGC clearly mentions the benefits of participation in its brochures and its homepage,
as well. Being a UNGC member is not limited to a simple collaboration with other businesses,
NGOs, labor unions and government organizations on critical issues. Rather, it increases legitimacy and license to operate, because business practices are based on universal values(UNGC 2007; UNGC office 2007).
The UNGC does not directly police, enforce or measure the behaviors of member organizations, but it is first and foremost concerned with the social legitimacy of business and markets(UNGC 2007). One of its two objectives is making the Global Compact and its principles partof members’ strategy and operations. Thus, it stimulates organizational change through theimplementation of the corporate social responsibility guidelines. Although it is not a regulatory tool, the UNGC expects reports from each participant. Member organizations should
publish in their annual report or sustainability report as a description of the ways in which
they implement the UNGC ten principles into their business. This is called “Communication
on Progress (COP).” The Global Compact board believes in the transparency and accountability of the report submitted by participants (UNGC 2007; UN 2007).
A COP is required to include a description of practical changes in actions and an assessmentof outcomes or expected results from the change. It surely reveals that participants have taken
the UNGC principles. Company participants should publish in a first COP within two years
from the entry date of the UNGC, then COPs should be updated every year. The UNGC
marks participants as “non-communicating” members which fail to meet the reporting dead-

CSR Integration in Asian Countries5

line of COP, or refuse to engage in dialogue on a matter raised under the UNGC integrity
measures within three months of first being contacted by the Global Compact Office about
the matter. Further, the UNGC removes “inactive” members that fail to submit a COP within
three years of joining the UNGC or within two years of submitting their last COP (UNGC2007). To establish the business norm for human rights, labor standards, environmental
stewardship and the fight against corruption, the UNGC encourages members and celebrates
good performance of participants, through the disclosure of a model of COP reports andcases of developing corporate sustainability. Non-business participants are also encouraged
to commit their organization to the ten principles and to report on progress made within theirorganization (ibid).
In this paper, both inactive and non-communicating members are decoupled organizationsin the GC guideline implementation. Using the sample of 871 Asian UNGC members, I examine the logics of decoupling and the variation in decoupling.
3. Decoupling: from mild to extreme
Institutional theorists and organization theorists have recognized the importance of decoupling in affecting the existence of organizations. However, scholars working on this issue
have typically focused on decoupling cases or conditions for coupling. Case-driven studies on
decoupling include critical views on organized hypocrisies of the international organizations,such as the world bank and the UN (Lipson 2006), stories of five African countries aboutanti-circumcision policies and continuation of local practices (Boyle, McMorris and Gómez
1999) and interpretation of two decoupling cases—the abuse of prisoners in the Abu Ghraib
prison and the falsification of architectural internship reports —as deviance within organization (Monahan and Quinn 2006). The existing literature also examines external/internal
conditions that may help organizational activities become aligned with structure. For example, corporate ethics communications are easily decoupled, when top managers aware theguidelines (Weaver, Treviño and Cochran 1999). In this regard, Westphal and Zajac (1995;
1998; 2001) conducted a series of decoupling research. They examine the relationship between intra-organizational conditions of power distribution and probability of decoupling.
Their sociopolitical explanations of decoupling include stock buyback programs and informal
decoupling practices (Westphal and Zajac 2001). Another example is that incentive programsfor CEOs can be decoupled, when CEOs are more powerful than board of directors (Westphal and Zajac 1998; Zajac and Westphal 1995).

CSR Integration in Asian Countries6

In many studies, the premise of the notion of decoupling is not continuous. In other words,
previous research on decoupling have mainly considered the issue of “implementation ornot.” However, my definition of decoupling is differ from the prevailing conception of decoupling. Decoupling is a continuum of coupling. The extremes are quite distinct. At the
coupling end of the continuum is 100% alignment between practices and guidelines. At thedecoupling end of the continuum is 0% alignment. Decoupling phenomena in organizations
can be situated somewhere between two extremes. In previous literature, there are some
types of decoupling (e.g. selective decoupling in Levin (2001)), but decoupling has been always discrete, not continuous.
In this paper, I define the “mild decoupling” and “extreme decoupling,” at the level of organizational decoupling. I label a focal organization’s delayed implementation of guidelines
as that decoupling’s mildness. Mild decoupling can be loose-coupling, whether it is intentional or unintentional. A key point of mild coupling is volatility. An organization defers adecision to change routines, at the moment. It may turn to be a decoupled organization, unless it makes a decision sooner or later. Extreme decoupling almost equals the existing concept of decoupling, but signifies organizational “intention” to decouple. For the research
purpose, however, extreme decoupling refers to the decoupled organization.
Figure 1. A continuum of coupling
Absolute or Extreme
Decoupling

Mild

Absolute
Coupling

4. Logics behind decoupling: Density-driven hypotheses
Previous research on decoupling conditions has been focused on internal and external factors on organizational implementations. For instance, Westphal and Zajac (2001) found thatprior decoupling experience at the focal firm may influence subsequent decoupling. For another example, Weaver et al (1999) revealed that how external expectations of legitimacy andtop management commitment to corporate ethics and business concerns lead to integrated
and decoupled forms of corporate social performance. Relatedly, institutional research on
adoption has led to the important insight that late adopters are more likely to adopt formal
structures for the purpose of legitimacy (Levin 2001; Tolbert and Zucker 1983; Westphal et
al 1997). In particular, Levin (2001) examined influences of different institutional mechanisms -coercive, mimetic and normative- on late adopters’ implementation in different periods.

CSR Integration in Asian Countries

7

Decoupling or not At the beginning of the Global Compact, the UNGC itself was a totallynew field. Only organizations that are aware of the importance of human rights, labor standards and other universal values, joined the Global Compact. The early members are loyal to
the guidelines. Thus, they are more likely to embrace the UNGC rules within their actual behaviors. Take for example, Sasol, a South-African based oil and gas company, participated the
UNGC in 2001. It provides human rights awareness and training programs to its employees.
Further, it integrates black empowerment policies in actual procedures. Novatis, a multinational pharmaceutical and biotech company headquartered in Switzerland, is another exampleof early member’s coupled behaviors. It joined the Global Compact in 2000 and firstly set a
standard of “living wage” for its employees worldwide (UNGC office 2007). Despite low
density of UNGC participants, the early movers commit their organizational activities to theten principles and regularly report COPs. Thus, other things being equal, I suggest:
H1. Regardless of the overall density, the early members of the UNGC are less likely to
decouple.
Figure 2. Logics of decoupling

Cum. density

The aforementioned research on late adopters implies that the adopter density might influence on decoupling of adopters. The number of organizations in the field, called global density, gauge the probability of decoupling. Figure 2 identifies cumulative global density of
UNGC members and likelihood of decoupling. The increase of firms in the market co-evolves
with the development of both field and its members' legitimacy (Baum and Powell 1995; Carroll and Hannan 2000; Hannan 1989; Hannan and Carroll 1992). The more firms enter, theCSR Integration in Asian Countries8higher the level of legitimacy is expected. Therefore, members at the later stage do not needto integrate between the guided rules and their behaviors, because adoption itself is takenfor-granted. In the Global Compact, there was only one member removed from the program.
Since 2003, however, the global density has been dramatically increased. The number of decoupling members has been escalated to 621 in 2007. This leads us to expect the following:
H2. The increase in global density positively influences on the increase of decoupling
members.
Mild vs. extreme decoupling Hannan, Carroll, Dundon and Torres (1995) analyzed automobile industry in five European countries and found that the increase of global density
strengthens legitimacy. Thus, European density increases entry rates of car manufacturers.
Whereas, local density depresses entry rates, due to the competition within a country. In thecase of decoupling, effects of the increasing global density reinforces the entry of ceremonial
members. However, the expansion of local members hinders the tendency of extreme decoupling. The UNGC noted that being a participant has internal and external benefits, such as
the improvement of a focal organization’s reputation and risk management by learning andsharing information about issues of human rights, environment and so forth (UN 2007;
UNGC 2007). Organizations may use the UNGC membership as their tool to enhance competitive advantages. In this regard, members from the same country become more sensitive tothe actions of peers. For instance, a focal firm detects whether its peers meet the deadline of
COPs. If a large number of cohort submitted COPs on time, the firm would be punctual. If
the peers fail to meet the schedule of COP, the firm also delays the submission of report. The
increase in local density means the increase of reference group. It heightens the chance ofmild decoupling, being “non-communicating” members.
H3. The greater local density is observed, the more likelihood of non-communicating is
expected.
Social responsibility has been emphasized in private sectors since the 18th century. For
instance, the East India Company in Britain changed its sugar suppliers from producers using
Caribbean slave labor to “slaveless” producers in India (The Economist 2002; ISO Advisorygroup 2004:2). Although it was initiated by a botcott from consumers, the rise to prominenceof corporate social responsibility regimes has been continuing to today (Zajac and Westphal2004). Many societies around the world require business organizations to protect the rights
of consumer, worker, and even the environment. Non-business organizations, such as NGOs
and labor unions, facilitate the CSR norm. As noted earlier, the UNGC is a universal guide-

CSR Integration in Asian Countries9line of socialization of the market. Thus, its members devote themselves to exhibit and practice corporate citizenship and social responsibility in the four main areas: human rights, labor, environment and anti-corruption. The UNGC acknowledges the importance of stakeholders and their roles in the advancement of universal values. Civil society organizations,municipalities, universities and other types of non-private sectors can join the program. They
are expected to build a partnership or network with business members to help align economic
activities with social and environmental guidelines (UNGC 2007). In other words, legitimacy
of social responsibility in non-business population may generate legitimacy in the businessfield. The local density of stakeholder organizations is correlated with the level of coupling of
the Global Compact members. The absence of agreement on social responsibility at the local
level, makes members more difficult to integrate the guidelines. Since the CSR norm itself is
not implemented in the country, doing socially responsible performance seems very strange
or may violate the local rules. The abundance of local stakeholders prevents the occurrence of
decoupling. Still, members in a country which lack an appropriate number of non-profit organizations, have a high possibility of absolute decoupling.
H4. The greater local stakeholder density is observed, the less likelihood of inactivenessis expected.
5. Data and Methods
1> Data
The initial sample for this study is drawn from 114 UNGC member countries during the period 2000-2007. The membership data was collected from the UNGC website(www.unglobalcompact.org). The total number of UNGC members from 2000 to 2007 is
5403. Among them, there were 871 Asian members from 21 countries.1 The Asian participants consist of 728 business organizations and 143 non-business members (or stakeholder
organizations, including domestic and international NGOs, labor organizations, cities, foundations, academic organizations and associations). There were also 458 coupling members(or Active members) and 270 decoupling members (Inactive members: 231 and noncommunicating members:39) in the dataset.
In the context of countries and their participation in the UNGC, developing countries are
more likely to join the program, but less likely to integrate the UNGC guidelines. According
1 The 21 countries are Afghanistan, Armenia, Azerbaijan, Bangladesh, Cambodia, China , India, Indo-nesia, Japan, Kazakhstan, Korea, Laos, Malaysia, Mongolia, Nepal, Philippines, Russian Federation,
Singapore, Sri Lanka, Thailand and Viet Nam.
CSR Integration in Asian Countries10

to the UNGC statistics , 67% of countries with the most inactive participants are in are in Africa (40%) and Asia (27%) (UNGC 2006). As the UNGC office has noticed, the patterns of
disintegration are captured in the sample. Figure 3 shows how many Asian organizations havepromised the earth and how rapidly decoupling members has increased.
Figure 3. Entry of (or Participation in) UNGC and Exit of decoupling members

2>Variables
Dependent variables To test hypothesis 1 and 2, the dependent variable was the hazard rate
for decoupling since 2000. Decoupled members were considered if they were (1) inactive
participants which failed to submit COPs or (2)non-communicating participants which failed
to meet the COP reporting deadline. When a member faces failure to communicate progress,
that participant would be labeled “inactive” or “non-communicating. Consequently, the decoupling member would not be permitted to participate in the UNGC. The hazard ratio of
decoupling measures the possibility of disintegration between the CSR guidelines and business practices. It is also an appropriate measure of official exit from the program. Thus, I
constructed a dummy variable (decoupling =1, otherwise =0) to account for the implementation of the UNGC principles.
The third and fourth hypotheses predicts the relationship between local density and the degree of decoupling. I included extreme decoupling dummy variable (inactive members =1,

CSR Integration in Asian Countries

11otherwise =0) and mild decoupling dummy variable (non-communicating members =1, otherwise =0). Because different decoupling patterns could not be captured by simple decoupling dummies, it needed to be separately measured.

Independent variables
To test hypothesis 1, I measured the early UNGC adopters’ likelihood of decoupling using
member dummies. Participants which joined the program between 2000 and 2002 are considered as early adopters. Second hypothesis predicts the effect of global UNGC member
density on the risk of decoupling. Global density was operationalized as the total number of
UNGC members in current year. Similarly, local density in hypothesis 3 was the sum of thetotal number of UNGC members for each country in current year. Local stakeholder density
in the fourth hypothesis was defined as the sum of non-business members (stakeholders) for
each country in current year.

Control variables
I added country level controls: GDP per capita, adoption of the declarations for the 4 mainareas, number of INGO density and membership. National socio-economic conditions may
influence individual organizations’ implementation of the global norms. To put the UNGC
principles into practice, organizations should change their routines and own standards, aswell. It seems more difficult, when there is no social understanding of the UNGC guidelines,
such as protection of human rights and elimination of child labor. Not only poor countries,
but also countries which agree upon few international guidelines give local UNGC members
little support to implement the universal CSR standards. Thus, I controlled for the effects ofdomestic CSR maturity in general.
I also included organizational and industry-level controls: organization size, membershipduration and industrial characteristics (e.g. manufacturing, education, public services). The
primary purpose of these variables was to control for potential heterogeneity among membersin the sample. I included organization size as dummy variable (small business =1, otherwise=0). Because there is 2-to-3-year grace period for decoupling members, I controlled formembership duration using young member dummy variable. Organizations which participate
in the UNGC program in the last 2 years were defines as “young members.”

CSR Integration in Asian Countries

12

Kim and Miner (2007) noted that there are potentially different effects of environmental
conditions in different industry. Organizations in different markets do not experience theidentical pressure of CSR. Thus, I constructed industry dummies, to account for the variationin normative implementation.
3> Methods
Survival analysis: Event history analysis (Exponential model)
Model 1. predicts the likelihood of decoupling.
Model 2. predicts the likelihood of mild coupling.
Model 3. predicts the likelihood of extreme coupling.
6. Preliminary analysis<Decoupling>
Variables

Baseline Model

Model 1Model 2GDP/capita-0.87(.038)***-0.77(.040)***-0.78(.053)***

IGO membership-0.99(.004)

1.00(.006)

1.03(.009)***Small firms

1.03(.121)-0.90(.123)-0.99(.140)

Young members-0.38(.069)***-0.17(.035)***-0.30(.065)***

Manufacturing

1.05(.099)

1.07(.128)-0.98(.116)

Education

1.54(.187)***2.04(.406)***

1.36(.219)*

Public services-0.00(.000)***-0.00(.000)***-0.00(.000)***

Early adopters--0.00(.000)***-0.00(.000)***Global density-

1.00(.000)***1.00(.000)***Local density---0.90(.009)***Local stakeholders--

1.05(.036)

Number of obs

2059

2059

2059

No. of failures

245

245

245

CSR Integration in Asian Countries

13

Variables
Logpseudolikelihood

Baseline Model-288.32202

Model 1-201.1858

Model 2-141.37415=====================================================<Extreme decoupling>
Variables

Model 1(H3 and H4)Baseline Model

Model 2GDP/capita-0.86(.042)***

1.15(.104)-0.81(.096)*

IGO membership-0.99(.005)-0.97(.011)***1.01(.017)

Small firms

1.02(.131)

1.07(.138)-0.96(.153)

Young members-0.00(.000)***-0.00(.000)***-0.00(.000)***

Manufacturing

1.09(.108)

1.13(.106)

1.16(.111)

Education

1.87(.135)***1.41(.102)***

1.77(.174)***

Public services

1.40(1.43)-0.20(.220)-0.70(.934)

Early adopters---0.00(.000)***Global density--

1.00(.000)***Local density--0.95(.007)***-0.91(.010)***Local stakeholders-

1.25(.062)***

1.10(.072)

Number of obs

2059

2059

2059

No. of failures

210

210

210

Logpseudolikelihood-235.19169-193.91689-102.52613

7. Tentative Conclusion
This study sought to address the effects of organizational density on the integration ofguidelines. The findings demonstrate that the global density of UNGC adopters is positively
related with the probability of decoupling. Whereas the early adopters are not governed by
the density-driven decoupling logics. Mild decoupling occurs when local density increases,
but more inactive members are observed when local CSR norm is not fully implemented. Thisfinding means that there are logics of decoupling and factors determining the degree of loosealignment between formal rules and activities. This article has a number of implications.
CSR Integration in Asian Countries

14First, it was shown that at the level of macro-organizational environment, global density effects are likely to operate with other aspects of local density. A second implication for neoinstitutional theory is further empirical support for the density-dependent decoupling. A final
implication deals with the significance of the devoting attention to variation in organizational
decoupling.

CSR Integration in Asian Countries

15

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