Institutional strategy and corporate social responsibility of the new entrant in the grocery retail market: Case Lidl Finland

Abstract

Objective of the Study Corporate social responsibility (CSR) has become an increasingly important consideration for modern businesses. There is a research gap relating to the concept and role of CSR in the new market entry. This study sets out to explore the institutional approach and CSR strategy of a multinational corporation (MNC) in the context of new market entrance. The case organization examined in the study is Lidl Finland, which is a subsidiary of German-based multinational grocery retailer Lidl. The purpose of the study is to examine how the change of firm’s CSR strategy takes place upon market entry and how it is affected by institutional pressures.

Methodology The theoretical basis of this study relies on key literature from three subject areas: internalization theory, CSR, and institutional theory and strategies. Through qualitative single case study the causal factors underlying the process of change are identified and examined in the provided theoretical setting. A longitudinal process data, collected from media archives and interviews, is exploited in order to build an explanation and rationale for the changed CSR strategy of Lidl Finland. The idea is that longitudinal examination of organizational events and incidents provides a transparent description of the transition of the organization over time.

Findings and Conclusions The initial institutional approach of Lidl Finland could be described as defiant and the company was perceived as an irresponsible actor. This could mainly be contributed to the existence of strict business concept, lacking operational resources, liabilities of foreignness and cultural differences. The turn of 2005 can be dated as the starting point for the organizational change. Afterwards CSR gradually gained more prominent role in the business operations. Even though the mounting stakeholder pressure was the initial factor driving the organizational change, there were several other complexities that also affected the change of CSR strategy. These complexities included changes in the business strategy, different phases of the entry process, increased attention for CSR amongst stakeholders, alterations in the operating concept, and attainment of social capital. The role of CSR is an important consideration for a new market entrant, because responsible corporate behavior is directly linked with the attainment of organizational legitimacy. Finally, this study contributes in the form of descriptive propositions, which highlight the role of CSR considerations in the context of new market entry.