National Corporate Social Policy, Corporate Governance Systems, And Organizational Capabilities

Purpose - In this paper, the authors aim to look at the relationship between divergent national corporate social policies as embedded in corporate governance regimes and the development of the firm's organizational capabilities. More specifically, the authors illustrate how the different systems of corporate governance developed in the USA and Germany are major resource-based factors on the decision to develop production-related organizational capabilities. The authors develop an integrative framework, drawing on both the corporate governance, as well as strategic management literatures, to explain idiosyncrasies and commonalities in capability development. In the aggregate, this would lead to differential corporate social and economic performance between Germany and the USA.Design/methodology/approach - This is a conceptual paper that develops a framework to link national corporate social policy as embedded in governance systems to corporate social and economic performance.Findings - Corporate governance systems - embodying divergent corporate social responsibility (CSR) orientations vis-a-vis the firm's stakeholders - can be viewed as determinants of group-specific resources that will not be transferable across different nation-states, leading to divergent corporate social and economic performance.Originality/value - The analysis emphasizes that CSR is an essential element of corporate governance. The authors highlight that regulatory, normative and cognitive institutional structures and orientations help to utilize and configure important firm-specific, industry-specific and country-specific resources and capabilities. This framework also contributes to recent developments in the corporate governance and management literatures that position CSR as a central element of corporate governance institutions.