Incorporating stakeholder approach in corporate social responsibility (CSR): a case study at multinational corporations (MNCs) in Penang

Purpose – The purpose of this research is to gain deeper understanding on how the stakeholders' relationship is incorporated in multinational corporations' (MNCs') corporate social responsibility (CSR) approach. Design/methodology/approach – Stakeholder theory by Freeman was used as the theoretical framework of this research. A case study of two established MNCs in Penang, Malaysia, were conducted and analysed through within‐case and cross‐case analysis. Three research questions focusing on aspects of CSR (internal and external), concerns of primary and secondary stakeholders based on Carroll's three‐domain approach and factors that influence CSR practices within each stakeholder group were developed. Findings – A main theoretical contribution of the study found that MNCs in developing countries are increasingly addressing new ways to incorporate CSR internal and external aspects in their operations which will eventually alter the fundamental process of evaluation among their stakeholders. Given the tendency among developing countries to regard all forms of CSR concerns, economic, ethical and legal concerns are equally important. Another main theoretical contribution of this study highlighted that different locality between home country and foreign country operation does affect the CSR work. Findings of this study show that the view of increasing investor clout on CSR in the country where they do business does not affect the MNCs and the influence of CSR activist as top CSR issues does not directly influence MNCs' actual CSR work. Research limitations/implications – The study has clearly projected the use of stakeholder theory by Freeman. Internal and external aspects of CSR were supported by these organisations as their standard practices. MNCs need to assume these concerns (economic, ethical and legal) for meeting the obligations towards their stakeholders. Stakeholders are significant drivers of CSR which can affect, or is affected by, the achievement of the organisations' objectives. Practical implications – The study presents practical implications for policy makers and MNCs in developing countries on new ways of incorporating CSR internal and external aspects in their operations and various concerns (economic, ethical, legal) of stakeholders that have been accepted as necessary for the proper functioning of business. Originality/value – This research paper provides a strong base for MNCs and academicians to understand the various aspects, concerns and factors that influence CSR practices within each stakeholder group.