It's not Just Hypocrisy if Firms Don't Do What They Say

Why do firms respond differently to the same pressures that they receive from their stakeholders? Why do some firms "fake" responsiveness (decouple "action" from "word") whereas their peers actually engage in deep internal changes to meet their stakeholder expectations? In the paper Faking it or Muddling through? Understanding Decoupling in Response to Stakeholder Pressure, forthcoming in Academy of Management Journal Maurizio Zollo (Department of Management and Technology and CROMA research centre, Bocconi University) - with Donal Crilly (London Business School) and Morten Hansen (University of California, Berkley) - tries to answer these questions focusing in particular on the implementation of corporate social responsibility (CSR) policies. Differently from existing studies that paint a cynical picture of corporate life by stressing how decoupling is a calculated form of deception, here the authors suggest that the divergent responses to external stakeholders is not always intentional, but it might be an emergent process due to the interplay of industry or environmental characteristics with internal firms' dynamics. In the presence of information asymmetry between firms and stakeholders, managers' responses are likely to be intentional ("faking it"), whereas in the presence of competing stakeholders expectations, responses are emergent and led by their attempt to learn what to do ("muddling through").

To achieve their purpose Crilly, Zollo, and Morten have set up a very structured and rich field study based on hundreds of interviews via phone or in site with CEOs or senior executives of 17 large multinational firms matched in pairs and triads by industry and geography but differing in their implementation of CSR practices.In addition, they carried out about two hundreds interviews with the stakeholders of these firms, asking similar questions about the firms' intentions and actions. Following a sophisticated methodology for the interviews text codification and analysis (fuzzy sets) the authors discover that there are diverse responses to the institutional pressures, and identify four factors that might influence them. In particular, they consist of the information asymmetry and the stakeholder consensus at the industry level, and the level of consensus among managers and perceived interests in implementing policy, at the firm level.The combination of these factors explains and predicts under which circumstances corporate behaviour might be more or less in line with the stated intentions.

The results elaborated from the interviews highlight that decoupling might follow two pathways. It can be an evasive decoupling that is a deliberate choice where stakeholders accuse the firm of playing the CRS game trying to conceal its non-implementation: this is essentially due to low internal managerial consensus on how to interpret CSR policies. Differently, the possibility of a so called "emergent" decoupling might happen when managers understand CSR but face stakeholders with conflicting expectations. It is conflicting demands from stakeholders that create internal tensions among mangers facilitating the resistance to policy implementation. With respect to policy implementation, the data from the interviews suggest that the absence of decoupling can be strategic when managers link CSR to potential business opportunities and when information asymmetry would impede the benefits from the establishment of close stakeholder relationships. Finally, implementation might not depend on asymmetry of information or strategic motivations, but it is due to the strength of managerial consensus about corporations' social responsibility, which is the reflection of their general degree of consensus in operating routines and strategic processes.

Therefore, corporations decouple their actual behavior from stated commitments not only for intentional reasons, but also as results of uncoordinated or exploratory attempts to respond to conflicting demands on their behaviors in a chaotic learning ("muddling through") process.Good news is that internal (managerial) and external (stakeholder) consensus can help in aligning action with intention in CSR processes.