New project examines companies’ ethical challenges in emerging markets
What are the ethical challenges facing multinational companies when they are to transfer their values from one market to another? This question will be examined by a team of researchers from Lund University School of Economics and Management, the University of Birmingham and the Stockholm School of Economics.
There can be considerable differences in values and business methods between an international company’s domestic market and the emerging markets in which the company is active. This can lead to problems such as corruption, child labour and environmental pollution. How can companies develop better procedures to identify and manage these ethical dilemmas?
“There seems to be a need for tools and models to enable better control of these processes. We have, for example, a set of values in Sweden about what we think is ethical or not, but these can be difficult to understand in a local context in other regions of the world. In those places there is a need for processes to bridge the differences and understand each other in both directions,” says Ulf Elg, professor of Business Administration.
How are ethical codes transferred?
Ulf Elg is leading the new project A stronger competitive position through ethical behaviour: Swedish companies in emerging markets. The aim is to investigate how different norms and behaviour, as well as different parties, affect the company’s ethical behaviour. The researchers will study the interaction between Swedish multinational company headquarters and the subsidiaries of some selected foreign markets. How are ethical codes transferred, explained and spread in the local market?
“The study is based mainly on interviews, but also examines company documents. They often have some type of code of conduct and different control systems. We need to understand and relate to these in order to see how a local market applies them from their side”, says Ulf Elg.
The Swedish Foundation for Humanities and Social Sciences has granted a total of SEK 7.4 million to the project over a period of three to four years. The project started in January this year and the researchers have already interviewed a number of company representatives on site in Sweden. Next year there will be extensive field work, as the researchers are to visit three emerging markets in which the companies are active.
“It’s most common to look at the BRIC market, namely Brazil, Russia, India and China. But we would prefer to look beyond them. There are other emerging markets with considerable potential”, says Ulf Elg.
Complex legitimacy-creating relations
The project will also examine the interaction between the global company and external parties in the local market. This could include relations with political decision-makers, non-governmental organisations (NGOs), trade unions and the media.
“There is often a higher degree of uncertainty in the process when you are working in these markets, which means that legitimacy-creating relations are just as important as business relations. But this quickly becomes very complex. The company says ‘we must take responsibility’ while also wanting to bring down prices. This may be solved by investing in the suppliers and creating a win-win-situation. But that works above all with the really large companies,” says Ulf Elg.