How does MNEs’ sustainable focus and NGO participation influence conflict situations with

Indigenous Communities?

A Quantitative Analysis on the Dynamics of Conflict Resolution

Master Thesis

Business Administration – Track International Management Name: Michelle Zwart

Student number: 10430377

Date: 29-01-2015

Thesis supervisor: dr. Ilir Haxhi

Second reader: dr. Johan Lindeque

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State of originality This document is written by Michelle Zwart, I declare to take full responsibility for

the content of this document. I declare that the text presented in this thesis is original

and that no sources other than those mentioned in the text and its references have been

used in creating it. The faculty of Economics and Business of the University of

Amsterdam is responsible solely for the supervision of completion of the work, not

for the content.

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Abstract

The resource extraction industry has been characterized by numerous violent conflicts

between MNEs and Indigenous communities, recognized for their idiosyncratic

cultural and institutional context. The survival of these communities depends on their

social and ecological environment, which is exploited by MNEs pursuing economic

activities that may lead to conflicting interests. The dynamics of conflict resolution

have not received enough attention yet, and in this study, we explore the dynamics of

these conflicting situations. More particularly, we first investigate whether a MNE’s

sustainable focus positively influences the process of conflict resolution, and second,

we analyze to what extent NGO participation moderates this relationship. For a

sample of 122 cases located in over 26 countries from Africa and Latin America, we

analyze the effect of sustainable focus and NGO participation on conflict resolution,

which is measured in conflict length and conflict severity. We argue that sustainable

focus has a positive influence on conflict resolution, and that this relationship is

positively moderated by NGO participation. Contrary to our predictions, the results

show that sustainable focus does not influence the conflict resolution (i.e., the MNEs

with a strong sustainable focus do not affect the length of the conflict or its degree of

violence) nor does the NGO’s participation. Our contribution is twofold: First, while

previous research has explored the dynamics of conflict resolution by examining

isolated cases of conflict, we take a quantitative approach providing a more

comprehensive picture of these relationships. Second, we investigate the unexplored

moderating affect of NGO participation on sustainable focus. Finally, our findings

provide valuable insights for managers in the field of international management by

refining current knowledge on conflict resolution.

Keywords: Indigenous communities; MNE; sustainable focus; NGO participation; conflict resolution

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Table of content

1.Introduction ............................................................................................ 6

2. Literature Review ................................................................................ 12 2.1 Indigenous communities ..................................................................................................... 12 2.2 Conflict situations between MNEs and Indigenous communities ...................................... 14 2.3 Sustainable Focus ............................................................................................................... 17

2.3.1 Environmental Focus …………………………………………………………………..17

2.3.2. Social Sustainable Focus ................................................................................................ 19 2.4 NGO Participation .............................................................................................................. 20 2.4.1. NGO characteristics ........................................................................................................ 20 2.4.3 NGOs in developing countries ........................................................................................ 21 2.4.2 NGO power and pressure ................................................................................................ 23

3. Theoretical Framework ........................................................................ 25 3.1 The mechanisms influencing conflict resolution ................................................................ 25 3.2 MNE’s sustainable focus and conflict length ..................................................................... 27 3.3 MNE’s sustainable focus and conflict severity .................................................................. 29 3.4 NGO participation and conflict lenght ............................................................................... 29 3.5 NGO participation and conflict severity ............................................................................. 31

4. Data & Methods ................................................................................... 34 4.1 Sample & Data collection ................................................................................................... 34 4.2 Dependent variables ........................................................................................................... 35 4.3 Independent variable .......................................................................................................... 36 4.4 Moderating variable ............................................................................................................ 36 4.5 Control variables ................................................................................................................ 37 4.6 Method of analysis ............................................................................................................. 38

5. Results and Analysis ............................................................................ 40 5.1 Descriptive Statistic Analyses and Correlation test ............................................................ 40 5.2 Regression Analyses ........................................................................................................... 44

6. Discussion ............................................................................................ 52 6.1 Findings .............................................................................................................................. 52

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7.2 Theoretical implications ..................................................................................................... 55 7.3 Practical implications ......................................................................................................... 56 7.4 Limitations .......................................................................................................................... 57

7.5 Future research ………………………………………………………………………….. 58

8. Conclusion ........................................................................................... 60

9. References ........................................................................................... 62

10. Appendix I ......................................................................................... 68

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List of Figures & Tables Figure 1: Conceptual model ………………………………………………………. 33 Table 1: Summary of regression analyses ………………………………………... 39 Table 2: Descriptive statistics and correlations …………………………………... 43 Table 3: VIF ……………………………………………………………………….. 44 Table 4: Logistic regression analysis with conflict length ………………………... 49 Table 5: Linear regression analysis with conflict length ………………………… 50 Table 6: Linear regression analysis with conflict severity ………………………… 51 Table 7: List of represented countries …………………………………………….. 68

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1. Introduction

‘’The Guatemalan government is fuelling the fires of conflict by failing to consult

local communities before awarding mining licenses to companies, effectively raising the risk of bloodshed and bulldozing over the rights of its people. Communities are

worried about the impact that mining might have on their human rights and have consistently complained that they are not adequately consulted when such projects

are proposed’’ (Amnesty International, 2014). Globalization has created new opportunities for MNEs, expanding to foreign

countries abundant in natural resources and low wage practices. When operating

abroad, MNEs face the resistance of local communities living on those grounds

(Lertzman & Vredenburg, 2005). Especially, the resource extraction industry is

characterized by violent conflict between MNEs and Indigenous communities. In

most of these cases corporations are criticized for acting in a socially and

environmentally irresponsible manner (Calvano, 2008). By extracting resources from

the ground they can harm both the ecological as well as the social environment.

Indigenous communities are characterized by their dependence on this environment

and more particular on their local ecology, history, cultural- and social identity

(Lertzman & Vredenburg, 2005; Calvano, 2008; Weaver, 2001; Whiteman &

Mamem, 2002). The differences in culture and customs between MNEs as well as

Indigenous communities can create miscommunication and conflict. For the MNEs

and Indigenous communities it is crucial to discover factors that can enhance conflict

resolution, as both sides undergo severe negative effects from these conflict

situations.

These conflicts have been on the research agenda for a while, but still little

research is done on the dynamics of this business and community relationship

(Calvano, 2008). Studies that focus on conflict situations focus mostly on the

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dynamics of conflict resolution from a qualitative research design with a single-case

perspective (Calvano, 2008; Kolk & Lenfant, 2010; Jamhali & Mirshak, 2009). These

studies do give valuable insights on particular cases, but they have failed to enlighten

relationships that are transferable across context and settings. This is also the case for

studies that attempt to examine the influence of sustainability on conflict resolution

(Imbun, 2007; Lertzman & Vredenburg, 2005; Calvano, 2008). This leaves an

important gap in the literature. This study attempts to fulfill this gap by studying the

influence of sustainable focus on conflict resolution from a quantitative perspective.

Thereby, this study sheds light on an important possible relationship, which can be

transferred across different geographical settings.

Sustainable focus has been a hot topic over the past decade because of the

growing concerns about environmental problems and socio-economic issues.

Sustainable development is commonly understood as the development that meets the

needs of the present, without compromising the ability of future generations to meet

their own needs (Lertzman & Vredenburg, 2005). Sustainable focus can be build out

of the three dimensions: environmental, social and economic focus (Lehntonen,

2004). This study will focus primarily on the environmental and social part of

sustainability as the resource extraction industries is most harmful in these two

dimensions (Kolk & Tulder, 2010).

The environmental dimension of sustainability concerns the integration of

environmental issues in a company’s decision making (DesJardins, 1998). According

to Goodland (1995) environmental sustainability improves human welfare by

protecting the sources of raw materials used for human needs. The wellbeing of

humans is closely linked to environmental ecosystems (Bedrich, Janousková & Hák,

2011). A MNE’s business can harm these local ecosystems on which Indigenous

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communities depend and this can cause conflict situations. If a MNE has a strong

sustainable focus it will make an effort to protect the ecological environment on

which the communities depend. The other dimension of sustainability is social focus

(Lehntonen, 2004). Black (2004) defines social sustainability as the extent to which

social values, social identities, social relationships and social institutions can continue

in the future. Lertzman (1999) states that an MNE with a sustainable focus is able to

create a sense of trust and maintain the relations and organizational resources

necessary for a healthy society. It is argued that when MNEs have a strong sustainable

focus, they invest more in their relationships with Indigenous communities. On top of

that, they respect their local institutions and create a strong sense of trust. This can

have a positive influence on the conflict resolution between both MNEs and

Indigenous communities. Thus, by extending previous research, in this current study

we explore from a neutral perspective the extent to which the MNE’s sustainable

focus affects the conflict resolution between MNEs and Indigenous communities.

Considering the relevance of sustainability in the MNE’s business development and

activities, we address our first research question:

RQ1: To what extent does the MNE’s sustainable focus affect the conflict

resolution between an Indigenous community and a MNE?

MNEs are not the only ones expanding on a global scale; NGOs are also

globalizing and especially collaborating with civil society groups in developing

countries. As a result, corporations are facing increased surveillance and criticism of

their international activities, as well as increased pressure to operate in a socially

responsible manner (Kapelus, 2002). Even though it is not uncommon for NGOs to

mediate in conflict situations, their role in conflict resolution has not received much

attention yet. Some studies investigate the role of NGOs in isolated cases, but its

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general influence on conflict resolution has not been studied before (Linton, 2005;

Khor, 2011; Jenkins & Yakovleva, 2006; Murphy & Arenas, 2011). Moreover, no

other studies examine the moderating role of NGO participation on sustainable focus.

In the conflict resolution literature, both NGO participation as well as sustainable

focus only received attention as separate constructs.

Most NGOs have experience in peace-building situations and have knowledge

about local cultures, institutions and customs (Dahan et. al., 2010; Peterson, 1992).

This makes them valuable in conflict settings between MNEs and Indigenous

communities. NGOs can share this knowledge about the communities and peace

building, to help the MNE act in a more social and environmental sustainable manner

and positively moderate the process of conflict resolution. Furthermore, over the years

NGOs have gained a strong position because of their high level of expertise and their

trusted position (Brown and Kaleagaonkar, 2002). They are very much favored by the

main public. This enhances their position and negotiating power towards MNEs.

NGOs can use this power to pressure MNEs to perform and operate according to a

more sustainable strategy (Khor, 2011; van Teegen, 2004; Conroy, 2001), and thereby

positively moderate the relationship between sustainability and conflict resolution.

Thus, this study will address the unexplored moderating effect of NGO participation

on the relationship between sustainability and conflict resolution. Considering the

relevance and increasing role of NGOs in today’s business environment, we address

our second research question:

RQ2: To what extent does NGO participation moderate the relationship

between the MNE’s sustainable focus and conflict resolution?

As conflict between multinational corporations and local communities

escalates, scholars, executives, activists and community leaders are calling for

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companies to become more accountable for the impact of their activities on external

stakeholders (Calvano, 2008). Especially corporations in socially and environmentally

sensitive regions are vulnerable to these critics and are dealing with opposition from

both Indigenous communities as from NGOs. Moreover, there is a growing public

expectation for improved ethical performance in the resource extraction industries.

Therefor, conflict resolution is very important for both the MNE as the Indigenous

community. Both sides undergo negative effects from these conflict situations. From

the MNE’s point of view, conflicts have both financial and reputational consequences

(Calvano, 2008). As for the Indigenous communities these conflicts can lead to

serious injuries and sometimes even death of community people. It is crucial to find a

solution for these conflicts both from a managerial as well as from an ethical

perspective. If sustainable focus and NGO participation have a positive influence on

the conflict resolution process, both parties will profit from this and conflicts will be

shorter and less violent.

To answer our research questions, for a sample of 122 cases located in over 26

countries from Africa and Latin America, we analyze the effect of sustainable focus

and NGO participation on conflict resolution, which is measured in the length of

conflict and its severity.We argue that sustainable focus will have a positive influence

on conflict resolution and that this relation is also positively moderated by NGO

participation.

This study contributes to the existing literature in three ways. First, even

though previous studies tried to explore the dynamics of conflict resolution by

examining isolated cases of conflict, they do not show relationships that are

transferable across different geographical settings. This study fills this gap by using a

quantitative setting which allows a more comprehensive understanding of the

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relationships that influence conflict resolution. Second, to our knowledge, no other

previous study has investigated the moderating affect of NGO participation on

sustainable focus. Several studies have investigated the influence of both variables

separately on conflict resolution, but the relationship between sustainable focus, NGO

participation and conflict resolution has never been studied. Finally, from a practical

point of view the results of this study can help managers get a better understanding of

the factors influencing conflict situations. Having a better understanding will help

ensure that conflicts can be resolved quicker and be prevented in the future.

To answer our research questions, this thesis starts with a literature review on

Indigenous communities, conflict situations, sustainable development and NGO

participation. Then, we develop a theoretical framework, hypotheses and conceptual

model. Furthermore, we discuss the research design with a brief overview of the

dependent, independent and control variables as well as the sample and method of

analysis. For a sample of 122 cases located in over 26 countries from Africa and Latin

America, we analyze the effect of sustainable focus and NGO participation on conflict

resolution, which is measured in the length of conflict and its severity.

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2. Literature Review

‘Decision-making is not made by those who are affected by those decisions, people who live on the land, but corporations, with an interest which is entirely different than

that of the land, and the people, or the woman of the land. This brings forth a fundamental question. What gives these corporations like Conoco, Shell, Exxon, Diashawa, ITT, Rio Tinto Zinc and the World Bank a right with supersedes or is

superior to my human rights to live on my land, or that of my family, my community, my nation, our nation and to us as women? They should not have such right, that

right of self determination and to determine our destiny, and that of our future generations.’ – Winoma LaDuke, member of the Mississipi Band of Anishinaabeg,

Minnesoate, US (LaDuke, 1995).

2.1 Indigenous communities There is no common definition of Indigenous communities. What can be said

however is that Indigenous communities are generally characterized by their

traditional lifestyles, customs and laws. They have a distinct culture from the national

population and their own social organization (Calvano, 2008). Calvano (2008) points

out that Indigenous communities include dimensions of geography, social interaction

and identity. From a MNE’s perspective Indigenous communities are viewed as

important stakeholders. Especially in the resource extraction industry, MNEs often

deal with Indigenous communities (Lertzman & Vredenburg, 2005).

Identity is one of the central concerns to Indigenous people (Whiteman and

Mamen, 2002). An Indigenous community shares a common identity and common

obligations. Indigenous communities see themselves as the landowners of the grounds

MNEs work on. Indigenous communities’ construction of identity is linked to three

aspects: self-identification, community-identification and external-identification

(Weaver, 2001). Self-identification and community-identification are strongly linked

to place, territory, traditional homelands and a shared history. These are strong criteria

for belonging to a specific community. When the community is threatened, group

identification becomes the most important. Lertzman and Vredenburg (2005) show

that ethical relationships between firms and Indigenous people rely upon strong social

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institutions and those social institutions and local identity processes are dynamic and

interrelated. The identity of Indigenous communities is a powerful resource against

external threats. By using their cultural identity they gain global awareness and

support for their issues (Bruijn & Whiteman, 2010).

Moreover, Indigenous communities rely heavily on their traditional lands and

the resources they contain, not only for their economic survival, but also for their

social- and cultural identity and wellbeing. Damage to their cultural environment is an

important dimension of conflict (Lewicki et. al, 2003). A study by Bruijn &

Whiteman (2010) confirms that Indigenous communities suffer serious cultural

damage from negative impacts on their local ecology through societal changes related

to oil and gas development. Indigenous communities are not only very dependent on

their environment; it is also a part of their culture and very often a part of their

heritage. This makes Indigenous communities very often reluctant to changes in their

environment or on their lands as this can have a big influence on their cultural and

social stability. Bruijn & Whiteman (2010) investigated the Machiguenga

communities in Peru and point out that gas extraction by MNEs in their areas forms a

serious threat to the Machiguenga’s identity. Hereby they confirm again that these

Indigenous communities do indeed suffer cultural damage from harm to their local

ecology.

Significant is the emergence of the increased activism by Indigenous

communities. Large numbers of Indigenous people are entering in conflict with

mining companies (Fabig & Boele, 1999). Indigenous communities are challenging

MNEs on a wide range of issues including profit-flows, headquarters’ decision

making procedures, representation of the company board, right to extract minerals,

reporting procedures and long-term strategies (Kapelus, 2002). Moreover, these

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Indigenous communities benefit from the globalization of NGOs. This ensures them

more worldwide attention for their issues and helps them gain more power in the

discussion with MNEs (Kapelus, 2002).

2.2 Conflict situations between MNEs and Indigenous communities Conflict situations between local communities and MNEs have received

attention from very different fields of interests. Activists, community leaders, scholars

and organizations point out that MNEs should become more accountable for the

influence they have on external stakeholders (Calvano, 2008). They argue that

Indigenous communities often bear the negative social and environmental costs of the

extractive industry and they obtain little from the wealth that is generated

(O’Faircheallaigh, 2013). Nowadays a growing national and international recognition

of community rights, changes in corporate policy and greater Indigenous political

capacity are changing the legal and political context for extractive industries

(O’Faircheallaigh, 2013). It is important to understand the dynamics and causes of

these conflicts to prevent them from happening in the future and minimize their

negative influence.

When the interest of a MNE and an Indigenous community in a particular

geographic area collide, conflict can occur (Calvano, 2008). Violent conflict is

defined as ‘organized physical force resulting from grievances between two or more

parties and leading to injury or death to persons or damage or destruction to property’

(Oetzel et al., 2007, p. 331). This conflict is a dynamic process that unfolds over time.

Conflicts can be both different in their duration as well as in their degree of violence.

Conflicts that take over a longer period of time generally have a higher degree of

violence (Pondy, 1967). The resource extraction industry operates in social,

environmental and cultural environments. They are directly involved with natural

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systems, causing strong environmental impacts. Industrial development caused by

MNEs affect the lands that Indigenous communities live and depend on (Lertzman &

Vredenburg, 2005). The cultural beliefs, values and use of local ecosystems by

Indigenous communities are often very different than those of MNEs in the resource

extraction industry (Lertzman & Vredenburg, 2005). These conflicting interests,

values and cross-cultural differences often result in conflict situations. In these

conflict situations Indigenous communities are very often in a disadvantage compared

to the MNE, because the MNE has a dominant ideology and the ability to mobilize

resource to communicate their own perspective (Hart & Sharma, 2004).

The mining industry is one of the biggest resource extraction industries and

this industry often deals with Indigenous communities. Indigenous communities

frequently live in poverty next to the mining complexes that create a lot of wealth

(O’Faircheallaigh, 2013). This unequal distribution creates friction between both

parties. This friction is worsened because the mining companies have a great deal of

negative impact on their lands and resources. Lertzman & Vredenburg (2005) argue

that it is unethical to undermine the natural and social resources on which Indigenous

communities depend. Or it other words, it is unethical to engage with Indigenous

communities in a way that is contrary to their wishes, culture and needs for survival.

Therefore, they argue that companies should take a sustainable development approach

and take into account the biophysical, organizational and cultural systems of the

Indigenous communities of the territories in which they operate to avoid conflict

situations.

As pointed out by Crawley & Sinclair (2003) discussion regarding conflicts

between Indigenous communities and MNEs almost always happen from the context

of corporate/public affairs and stakeholder management. Furthermore, evidence

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indicates that the global industrial expansion and consumption of Western countries is

often unsustainable. Systems on which local communities depend are often not taken

into account. Therefore, they propose a model of enduring ethical engagement. This

model is based on two way learning, adaption, long-term sustainable relationships and

the recognition of the Indigenous communities’ special relationship to their lands. The

model of enduring ethical engagement is the basis for peace between these MNEs and

Indigenous communities. However, this model of enduring engagement is not easy to

accomplish. In the study of Crawley and Sinclair (2003) none of the Australian

companies in the sample have reached the proposed mature stage. This also points out

how difficult it is to overcome these cultural differences and to create a situation of

enduring peace.

Several studies investigate the dynamics of conflict resolution from a CSR

perspective (Kolk & Lenfant, 2010; Jamhali & Mirshak, 2009, Calvano, 2008). These

studies all highlight the positive influence of CSR on conflict resolution. According to

Calvano (2008) conflict is being influenced by three factors: stakeholder power,

stakeholder perception gaps and cultural context. The first is based on the difference

in power between MNEs and communities. The second is based on the differences in

perception gaps; MNEs view communities as unthankful, while communities view

MNEs as imposing their will. The third is based on cultural differences. According to

Calvano (2008) MNEs should engage in a CSR strategy that acknowledges these

differences to avoid conflict situations.

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2.3 Sustainable Focus Sustainable development is commonly understood as the development that

meets the needs of the present, without compromising the ability of future generations

to meet their own needs (Lertzman & Vredenburg, 2005). The concept of sustainable

development emerged after an increasing concern for environmental problems that

were caused by human actions. The stakeholders of sustainable development include

all the earth’s inhabitants, human and non-human. Sustainable development provides

these stakeholders with the greatest good or in the opposite the least harm (Lertzman

& Vredenburg, 2005). Nowadays, attention for sustainable development is the result

of the growing awareness for environmental problems, socio-economic issues that

deal with poverty and inequality and concerns about a healthy future for humanity.

Therefore, sustainable focus strongly links environmental and socio-economic issues

(Hopwood, Mellor & O’Brien, 2005). Robinson (2004) argues that sustainable

development needs integration across different fields; MNEs, governments and NGOs

need to work together to truly make a difference.

Sustainable development is based on three pillars: environmental, social and

economic (Montiel, 2009). The first two will be discussed in the following chapters,

as firms in the resource extractions industry have the strongest influence on the social-

and ecological environment of Indigenous communities (Letzman & Vredenburg,

2005). The economic dimension of sustainable focus will not be addressed in this

study.

2.3.1. Environmental Sustainable Focus

One of the dimensions of sustainable development is environmental focus

(Lehntonen, 2004). The environmental dimension concerns the integration of

environmental issues in a company’s decision making (DesJardins, 1998). DesJardins

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(1998) argues that businesses have more responsibility and as a result need to make

sure that their activities are ecologically sustainable. According to Goodland (1995)

environmental sustainability improves human welfare by protecting the sources of

raw materials used for human needs. The wellbeing of humans is closely linked to

environmental ecosystems, because they depend on them (Bedrich, Janousková &

Hák, 2011). Maintaining these ecosystems is very important and crucial for a

sustainable future.

Environmental sustainability and natural capital are closely linked. Natural

capital is divided in two types of capital: it can take the form of natural resources

(these can be renewable or non-renewable) and it can take the form of ecosystems

services, for example: climate stabilization, reproduction of plants and animals. It is

important to closely link the natural resources and the ecosystem services. If an

industry consumes more energy and materials than it produces, the environment will

become unsustainable (Dyllick & Hockerts, 2002). This will have major effect on the

whole environmental system and on the humans and animals depending on this

system.

In 2001 the OECD made a valuable contribution to the concept of

environmental sustainable strategy. They propose an environmental strategy focusing

on five key principles: maintaining integrity of ecosystems, enhancing quality of life,

measuring progress, de-coupling environmental pressures from economic growth and

improving governance and co-operations. These five key principles should be the

focus of a MNE’s environmental sustainable strategy (Bedrich, Janousková & Hák,

2011). Most MNEs are directly involved with natural ecosystems. Their business can

cause direct environmental impact. Industrial development has impact on the lands

and lives of local communities. The way Indigenous people live and depend on these

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local ecosystems is often contrary with the business of MNEs. This often results into

conflict situations (Lertzman & Vredenburg, 2005). Evidence suggests that currently

industrial expansion is unsustainable and hereby undermining the systems on which

local communities depend (Lertzman & Vredenburg, 2005).

2.3.2. Social Sustainable Focus In the past decade the social dimension of sustainable development has

received more attention. According to Coleman (1990) the social dimension of

sustainable development is linked to social capital. Social capital is described as the

organizational resources of relations, trust and institutions on which communities are

based (Lertzman, 1999). Social sustainability should be able to maintain and build

social capital (Lertzman & Vredenburg, 2005). Based on this statement sustainable

development must be able to maintain and create the trust, the relations and

organizational resources necessary for a healthy society (Lertzman, 1999).

Social sustainability is also based on cultural capital (Berkes & Folk, 1994).

Cultural capital refers to the resources of shared knowledge, beliefs and values upon

which communities are based (Lertzman, 1999). For a MNE to be social sustainable

it is important to acknowledge these beliefs and values. As Lertzman and Vredenburg

(2005) state sustainable development is a cross-cultural proposition. Every culture has

different values and meanings and it is unethical to affect the land and lives of

Indigenous communities in way that inconsistent with their culture, wishes and needs.

This may also result in situations of conflict between both Indigenous communities

and MNEs.

Crawley and Sinclair (2003) propose that is important to have a social

sustainable model of enduring engagement between the MNE and the Indigenous

community. This model is based on two way learning, power sharing and respecting

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both cultures. They have developed this model by studying mining companies in

conflict with Australian Aboriginals. This model leads to a sustainable, ethical and

good relationship and can be used to avoid situations of conflict.

2.4 NGO Participation

2.4.1. NGO characteristics The NPO Act 71 of 1997 defines NGOs as non-governmental organizations

(van Eeden, 2007). NGOs are driven by a social purpose. Teegen, Doh and Vachania

(2004, p. 466) describe this social purpose of NGOs as ‘the aim to serve a societal

interest by focusing on social, political and environmental goals including equity,

education, health, environmental protection and human rights’. Thus, in general

NGOs are very often concerned with improving the conditions of the environment

and institutional development. They do this without having a profit motive in mind

(Teegen, 2005). NGOs focus mostly on social and environmental problems such as

improving healthcare, countering environmental degradation and hunger issues

(Dahan et. al., 2010). Having this is in common; NGOs vary widely on other standard

characteristics like size, duration, range and scope of activities, ideology, cultural

background, organizational culture and legal status (Pricen & Finger, 1994). They can

have memberships ranging from local to global (Fisher, 1997). Some small NGOs

tend to focus locally on addressing environmental activities with only a handful of

staff members, while others operate internationally and address a wide range of

activities across the globe with a far bigger budget, range and influence.

Over the previous years there has been a growing interest in NGOs. This can

be partly explained by their rapid growth in number and influence (Bendell, 2000;

Pricen & Finger, 1994). They have established themselves as important stakeholders

in world-class affairs. Over the years their focus shifted from international

21

governance to business (Doh & Teegen, 2003). This has made them a very important

and interesting actor in the international field of business. Both newer and more

established NGOs show a strong propensity to collaborate with organizations and

local communities in the developing world (Kapelus, 2002). Over the recent years,

NGOs have established a greater interest in issues regarding the resource extraction

industry (Kapelus, 2002).

In the following part the influence of NGOs will be discussed by first looking

at the NGO’s knowledge and experience, and second by looking at the ability of

NGOs to exert pressure and influence the public opinion.

2.4.3 NGOs in developing countries NGOs are especially active in developing countries. As a result, they have a

lot of experience in working with Indigenous communities. This experience provides

them with the necessary knowledge about the local market, the local communities and

the local government (Dahan et. al., 2010). There is an increasing willingness of

MNEs to collaborate with NGOs (Vachani, Doh & Teegen, 2004). NGOs are better

aware of the populations’ economic and social needs. Moreover, they are in touch

with social trends, and thus able to identify potential local markets and products.

These insights help the firm better adapt to the local market context (Dahan et. al.,

2010). Oetzel & Doh (2009) show that with the interaction of NGOs, MNEs can

overcome the concept of liability of foreignness. As most NGOs have longstanding

relationships with the communities of the countries in which they operate, they can

serve as a mediator in situations of miscommunication and conflict. NGOs tend to

endure a higher level of trust from these communities than MNEs. This makes their

participation very valuable (Oetzel & Doh, 2009). Moreover, NGOs can help MNEs

build effective relations with these local communities (Nwankwo, Philips & Tracey,

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2007; Dahan et. al., 2010). Their experience in peace-building activities can play a

vital role in this (World Bank, 2006).

Linton (2005) investigates the coffee industry, which has been in crisis for

more than 20 years. As with many other resource extraction industries, the coffee

industry is characterized by poor circumstances; many farmers live in poverty, which

decreases their families’ health and education prospects. NGOs work in this industry

to create a more sustainable environment. They influence the MNEs operating in the

area twofold: by learning them more about the culture, social and environmental

problems of the farmers, but also by offering them the chance of cause-related

marketing by linking the MNEs to this relevant social issue. The MNEs can use this

to improve their social and environmental responsibility and to create a more

sustainable brand picture. The NGOs create a more sustainable environment with

benefits for both the MNE as well as the local famers.

A case study done on mining activities in Peru by BHP Billiton also shows

positive effects of NGO participation on conflict settings. Oxfam Novib facilitated the

discussion between BHP Billiton and the harmed Indigenous communities in the

mining area. After a period of negotiation, BHP Billiton and the communities signed

an agreement, which ended the conflict. In this case Oxfam Novib acted as an

independent third party in facilitating the discussion (Murphy & Arenas, 2011). These

are just two of the many examples in which NGOs use their local knowledge and

strong position to create a more sustainable social and environmental environment

(Kolk & Lenfant, 2012; Kolk & Lenfant, 2013; Millar, Choi & Chen, 2004).

Another stream of research focuses on partnerships between NGOs and

MNEs. In this case NGOs are not only involved in the conflict, but they deliberately

partner-up with MNEs to make a difference. There are several examples of successful

23

partnerships between NGOs and MNEs. Kolk & Lenfant (Forthcoming) focus on the

partnership between MNEs and NGOs in conflict situations in Africa. They show that

learning and institution building characterize these partnerships. These partnerships

prove to be very useful for MNEs and are highly relevant in conflict situations (Kolk

& Lenfant, Forthcoming). In this example, MNEs were able to achieve necessary

knowledge from the NGOs about the local culture, institutions and issues. A case

study done by Murphy & Arenas (2011) shows another good example of successful

partnerships in conflict situations. They investigated the alliance between Goldcorp, a

mining company and Citizen’s Development Corps (CDC), a NGO. These two parties

founded a Guatemalan NGO, Fundacion Sierra Madre (FSM). Together with FSM,

Goldcorp held multiple consultations with local communities to address the problems

in the area and looked for an agreement that suited both parties. Several other studies

also highlight the value of partnerships between NGOs and MNEs in conflict

resolution (Millar, Choi & Chen, 2004; Kolk & Lenfant, 2012).

2.4.2 NGO power and pressure NGOs work to influence key-decision makers to serve otherwise dormant

actors and they attempt to transform the dominant actors’ relationships with each

other and with the dormant actors (Doh, Teegen & Vachani, 2004). NGOs’ advocacy

strategies can be distinguished as ‘insider’ strategies aimed at influencing decision

makers directly and ‘outsiders’ strategies intended to mobilize public opinion

(Peterson, 1992). According to Kapelus (2002) the major factor of the increase in

emphasis on sustainability is the fact that NGOs have increased their organizational

capacity. This allows them to exert much greater pressure on corporations, both

directly through actions against their production facilities and campaigns directed at

shareholders and consumers as well as indirectly through the political system.

24

Jenkins and Yakovleva (2006) discuss the issues regarding social and

environmental disclosure in the mining industry. They show that engagement with

Indigenous groups has become a reputational imperative for mining companies. This

is the result of the increased organizational capacity and co-operation of NGOs. There

are various examples of NGOs pressuring MNEs to become more accountable and

sustainable. On of these examples is the case of MacMillan Bloeder, a Vancouver-

based timber and paper company. Greenpeace and other less familiar environmental

NGOs pressured the timber company for its unethical and unsustainable production

process, in particular for its clear-cutting forest practices in Clayoquoat Sound on

Vancouver Island. After the NGO pressure became to high MacMillan announced that

it would change its production process from clear-cutting to selective cutting, which is

more sustainable. There were two major reasons why MacMillan changed its strategy:

First, as mentioned above local environmental groups pressured the Timber

Company, and second, it became a target of Greenpeace worldwide marketing

campaign (Conroy, 2001).

Khor (2011) investigates the influence of NGOs on the palm-oil industry in

Indonesia and Malaysia and shows the same effect. More particular, he shows that

several MNEs operating in that geographical area adjusted their operations after being

the victim of boycotts resulting out of NGO pressures. Again this example shows the

effective power of NGOs. MNEs have a lot to loose when having a powerful NGO

working against them. The words of the NGOs tend to be favored by the public over

the words of the MNE. NGOs have gained this strong position because of their high

level of expertise and trusted positions (Brown and Kaleagaonkar, 2002). The main

public knows them as being very valid and viable entities. This enhances their strong

position and negotiating power. According to Teegen (2003) the lack of a ‘profit

25

motive’ is also a reason why NGOs profit from a strong legitimacy in the eyes of the

global public.

Even if the MNE has a sustainable brand image the opinion of NGOs can still

threaten or enhance this. Robinson (2004) shows that supportive cooperation between

MNEs and NGOs leads to a higher credibility of the MNE’s sustainable intention and

to a more positive effect of sustainable strategy on competitive advantage. This

credibility is very important for the MNE and its overall brand image. If a NGO talks

negative about a MNE and its sustainable efforts, it can easily damage the

corporation. From this it can be argued that it is in the MNE’s best interest to make

sure the NGO is working with the brand instead of against the brand.

3. Theoretical Framework

3.1 The mechanisms influencing conflict resolution The resource extraction industry has been characterized by numerous violent

conflicts concerning Indigenous communities, MNEs and the struggles for resources,

rights and land. Although these conflicts have been on the research agenda for a

while, not enough attention has been paid to the actual dynamics of these conflicts

(Calvano, 2008). Several studies attempt to investigate the factors influencing conflict

resolution. Lertzman & Vredenburg (2005) examine the Scientific Panel for

Sustainable Forest Practices in Clayoquot Sound. This area was characterized by one

of the biggest environmental conflicts, which eventually brought a stop to the

industry. In their study they suggest that sustainable development can help MNEs

have better and more ethical relationships with Indigenous communities to prevent

situations of conflict. Moreover, Linton (2005) addresses the influence of NGO

participation in the coffee-industry and shows how the help of NGOs can prevent

26

situations of conflict. Although these studies are very helpful in creating a broader

sense of the characteristics influencing conflict resolution, they ignore establishing

relationships that are transferable across different geographical settings. Therefore, a

quantitative design is suitable to help enlighten these relationships and to give a

broader idea about the dynamics of conflict resolution. Moreover, this study addresses

the moderating influence of NGO participation on the relationship between

sustainable focus and conflict resolution. Several studies have examined the influence

of the constructs sustainable focus and NGO participation on conflict resolution

separately, but no study has ever examined their relationship together with conflict

resolution. Overall, this study helps to create a more comprehensive picture of the

relationships influencing conflict resolution.

This study argues that there are two factors influencing the process of conflict

resolution: sustainable focus and NGO participation. Conflict resolution is measured

in both length as well as severity of conflict, because conflicts can differ in there

duration as well as in their degree of violence (Oetzel et. al., 2007). The resource

extraction industry is seen as one of the most damaging industries to both the social as

well as the ecological environment and Indigenous communities are characterized by

their strong dependence on this environment and more particular on their local

ecology, history, cultural- and social identity (Lertzman & Vredenburg, 2005;

Calvano, 2008; Weaver, 2001; Whiteman & Mamem, 2002). As shown by several

studies, harming this environment can cause situations of conflict (Bruijn &

Whiteman, 2010; O’Faircheallaigh, 2013; Crawley & Sinclair, 2003; Calvano, 2008).

Therefore, it is reasonable to think that sustainable development plays a key role in

this industry and its conflicts. A MNE with a strong environmental and social

sustainable focus will try to protect and maintain the ecological and social

27

environment the communities depend on and therefore communities will be less

triggered to start and maintain a conflict (Bedrich, Janousková & Hák, 2011,

Lehntonen, 2004, Lertzman, 1999). Thus, we argue that sustainable focus will

positively influence the process of conflict resolution.

During the years NGOs have started to play a vital role in world politics, this

can be partly explained by their rapid growth in number and influence (Bendell, 2000;

Princen & Finger, 1994). NGOs have experience in both peace-building activities and

in working with Indigenous communities. Furthermore, NGOs are able to influence

the public opinion and influence MNEs’ strategies (Dahan et. al., 2010; Peterson,

1992). This makes NGOs very suitable in the process of conflict resolution. NGOs

can share their knowledge with MNEs, which can help them become more sustainable

and create a relationship build on trust with Indigenous communities. This will have a

positive influence on the process of conflict resolution. Otherwise, NGOs can also

force MNEs in a sustainable strategy and thereby influence the process of conflict

resolution. In other words, NGO participation can positively moderate the influence

of sustainable focus on conflict resolution. Both mechanisms and their influence on

conflict resolution will be discussed in further detail below.

3.2 MNE’s sustainable focus and conflict length A strong sustainable strategy considers both the social as well as the

environmental part of sustainability. Bedrich, Janousková & Hák (2011) show the

importance of local ecosystems for Indigenous communities. Indigenous communities

strongly depend on the sources of raw material that these ecosystems provide, but

business often disturbs these ecosystems by using more raw materials than is

produced, which will in return lead to unsustainable ecosystems. The importance of

these local ecosystems is also shown by Bruijn & Whiteman (2010) who investigate

28

the Machiguenga community in Peru. They point out that gas extraction by MNEs in

their areas can be a serious threat to the Machiguenga’s identity. Moreover, research

by Calvano (2008) shows that local communities consider MNEs as imposing their

own will and not considering local institutions. Her study emphasizes that a cultural

clash between MNEs and local communities is one of the reasons a lot of conflicts

start and build on. MNEs with a strong sustainable focus acknowledge these cultural

differences and try to reconcile with the local community instead of imposing the

MNEs’ will.

When a MNE has a strong sustainable focus, its strategy will focus on

maintaining and improving the ecological and social environment of the Indigenous

communities. These MNEs will try to keep the ecosystems of the grounds on which

they operate sustainable by carefully using the sources of raw materials and support

ecosystems services like reproduction of plants and animals. The business of the

MNE will be less harmful for the local communities depending on them and the

communities will be less motivated to keep the conflict going. This will have a

positive influence on conflict length. Moreover, MNEs with a strong sustainable focus

will also consider local institutions and the local culture. The MNE will acknowledge

the differences in values and beliefs and not try to impose its own culture. This will

have a positive effect on the clash between both parties because the communities will

feel more understood and appreciated. Again, this will give the communities fewer

reasons to keep the conflict going, which will positively influence the conflict length.

The positive influence that sustainable focus can have on conflict resolution is

shown in the study of O’Faircheallaigh (2013). He emphasizes the negative impact

that the resource extraction companies have on the lands and resources of local

Aboriginal communities in Australia. According to his study the negative effects on

29

the social and ecological environment are of great influence on the friction between

both parties. He argues that a sustainable strategy can have a positive influence on this

friction. Based on these findings, we can therefore predict that:

H1: A strong sustainable focus has a positive influence on conflict length (the conflict

will be shorter).

3.3 MNE’s sustainable focus and conflict severity The same reasoning is used for conflict severity as for conflict length. Several

studies show the importance of the ecological and social environment to Indigenous

communities (Bedrich, Janousková & Hák, 2011; Bruijn & Whiteman, 2010 &

O’Faircheallaigh, 2013). If a MNE has a strong environmental and social sustainable

focus, it will try to prevent harming the ecological environment and respect the social

environment of the Indigenous communities. When the ecological environment of the

communities is maintained and harm is prevented, the communities will be less

triggered to act in a highly violent manner. This will positively influence the severity

of the conflict. Based on research by Calvano (2008) we argue that the Indigenous

communities will feel more appreciated and understood, as MNEs with a strong

sustainable focus will make an effort for this. Resulting in fewer motives for the

communities to act in a highly violent manner against the MNE and positively

influence the conflict severity. Based on these findings, we can predict that:

H2: A strong sustainable focus has a positive influence on conflict severity (the

conflict will be less violent).

3.4 NGO participation and conflict lenght NGOs have a lot of experience in working in developing countries and this

provides NGOs with knowledge about the Indigenous culture, institutions, customs

and other characteristics (Dahan et. al., 2010). MNEs most often lack this knowledge

30

and do not act according to it. This creates tension and sometimes conflict. Most

NGOs have longstanding relationships with local communities (Oetzel & Doh, 2009),

are more trusted by these communities and they have been active in peace-building

activities before (WorldBank, 2006; Murphy & Arenas, 2011). When participating in

the conflict setting, NGOs can share these valuable resources with the MNE. Linton

(2005) shows how NGOs participated in conflicts in the Coffee-industry and by

sharing their local knowledge they helped MNEs act in a more sustainable manner.

This helped reduce the conflicts between communities and MNEs in this industry.

Apart from the NGO’s valuable local knowledge, they also serve a different purpose.

In the literature there are various examples of case studies in which NGOs use their

power to pressure MNEs in a more sustainable strategy. NGOs are very much favored

by the main public and this has enhanced their position and negotiating power

towards MNEs (Brown and Kaleagaonkar, 2002). Khor (2011) shows how NGOs

influence the palm-oil industry in Indonesia and Malaysia. Firms operating in this

area adjusted their strategy after being the victim of boycotts resulting out of NGO

pressures and the threat of losing credibility. The same effect is shown in a study by

Conroy (2001). In his case study MacMillan changed its strategy after being pressured

and victimized by Greenpeace for not operating in a sustainable manner. Thus, it can

be concluded that NGOs are very effective in pressuring MNEs to become more

sustainable and act in a more environment and social responsible way.

Therefore, we argue that NGO participation will positively moderate the

relationship between a MNE’s sustainable focus and conflict resolution. When a NGO

is participating in the conflict, the MNE can use its local knowledge to learn more

about the Indigenous communities and their ecological and social environment. With

this knowledge the MNE can act in a more sustainable matter and this will give the

31

Indigenous communities less of a reason to endure the conflict. Moreover, NGOs can

use their trusted position and peace-building knowledge to facilitate the discussion

between both parties and help create an agreement. Last, NGOs can also use their

power to pressure the MNE in a more sustainable manner. Again, this will have a

positive influence on conflict length, as a more sustainable strategy will keep the

communities less motivation to keep the conflict going.

The case study done by Murphy and Arenas (2011) illustrates a good example

of the positive influence of NGO participation on conflict resolution. In their case

study Oxfam Novib facilitated the discussion between BHP Billiton and an

Indigenous community. With the help of Oxfam Novib an agreement was signed by

both parties, in which BHP agreed to act in a more sustainable manner. In this case

Oxfam Novib did not only convince BHP to change their strategy to a more

sustainable one, they also helped resolve the situation of conflict. Based on these

findings, we predict that:

H3: NGO participation will positively moderate the influence of sustainable focus on

conflict length (the conflict will be shorter).

3.5 NGO participation and conflict severity Again, the same reasoning and previous studies can be used for conflict

severity as for conflict length. In line with the findings of Khor (2011) and Conroy

(2001) we argue that NGOs can pressure MNEs to a more sustainable strategy. This

makes the MNE less of threat to the Indigenous communities. When the MNE’s

business is less harmful to both the ecological as well as social environment of the

Indigenous communities, the Indigenous communities will be less motivated to use

high violence against the MNE. Thus, NGO participation can have a positive

moderating influence on the relationship between sustainable focus and conflict

32

severity. Moreover, in line with the study of Linton (2005) MNEs can profit from the

knowledge and peace-building experience of the NGO participating in the conflict.

This can help MNEs to better understand the importance of the ecological and social

environment to the Indigenous communities and act according to this in a more

sustainable manner. Again, NGO participation can help improve the sustainable focus

of the MNE, which will result in less harm for the communities and less reason to use

high violence against the MNE. Concluding, we argue that NGO participation

positively moderates the relationship between sustainable focus and conflict severity.

Based on these findings, we can predict that:

H4: NGO participation will positively moderate the influence of sustainable focus on

conflict severity (the conflict will be less violent).

33

3.6 Conceptual model Figure 1.1 shows the conceptual model containing the relationships between

the independent, dependent and moderating variables. It is proposed that sustainable

focus has a positive influence on conflict length and conflict severity. Both

relationships are positively moderated by NGO participation.

Figure 1.1: Conceptual model

34

4. Data & Methods

4.1 Sample & Data collection This study uses a cross-sectional research design to study the relationship

between sustainable focus, NGO participation and conflict resolution between MNEs

and Indigenous communities. The analysis is done from a firm-level perspective. For

the purpose of this study a sample was drawn of conflict situations in Latin America

and Africa. The case selection and reviewing was done by group format, in which

each individual reviewed 50 cases. For this study an overall of 122 cases is used.

Appendix I shows the distribution of cases across countries. In total the sample

contains cases of conflict situations in 26 countries.

First, cases were included if they contained MNEs from the resource

extraction industry and described the correct geographical area. Second, cases were

included in the sample if they contained any situation of conflict between both a MNE

in the resource extraction industry and an Indigenous community. The resource

extraction industry contains multiple industries like mining, oil and gas, electric

winning activities and logging. Data was collected from the following databases:

EJOLT, Intercontinentalcry, Business & Human Rights Resource Center, Minewatch,

American University of Washington Database. Other websites were used for

additional information on the cases. After collecting the data, the coding was done by

using a coding manual, which contained all the necessary variables of each group

member. After the overall coding was finished, the cases that fit the geographical area

of this study were included in an overall dataset that was finally used to do the

analysis of this study.

35

4.2 Dependent variables The dependent variable of this research is conflict resolution. This variable is

split into two dimensions: (1) severity of conflict (type of violence) and (2) length of

conflict. Violent conflicts can be either short or long (Getz & Oetzel, 2009).

(1) The length of conflict is analyzed and categorized into two subgroups: (a)

long conflicts and (b) short conflicts. To determine what defines short conflicts and

long conflicts, the median of the overall sample was used. The median of conflict

length is 73.5 month. Conflicts that took over a longer period of time are coded as

long conflicts and conflicts that took over a shorter period of time are coded as short

conflicts. A lot of cases included conflicts that were ongoing on the date of collection.

To not lose the ability to use these cases, they are coded with an end date of

November 2015 (the collection period of the data) and afterwards assessed as either

being long or short. As a control, length of conflict is also measured as a linear scale

variable with the total months as an outcome to check whether there is a difference

between both measurements of conflict length.

(2) Conflicts can be very different in type and intensity (Getz & Oetzel,

2009). In this research conflict severity is measured by measuring type of violence.

Different types of conflict are assessed from low violence to more high violence

(Calvano, 2008). Type of violence was measured on a seven-point scale from 1 (low

violence) to 7 (high violence), respectively: peaceful negotiations & peaceful protests,

court actions, low-level violence (from either side) including intimidation tactics, high

level violence including physical damage but no kidnapping or deaths, high-level

violence (from either side) including kidnappings but no deaths and high-level

violence (from either side) including deaths.

36

4.3 Independent variable The independent variable in this research is sustainable focus. This variable

can be described as: the development that meets the needs of the present, without

compromising the ability of future generations to meet their own needs (Lertzman &

Vredenburg, 2005). There is no commonly accepted way of measuring sustainability

(Lopez, Garcia & Rodriquez, 2007). In this study the MNE’s sustainable focus is

measured using two indices: the Dow Jones Sustainability Index and the FTSE4good

Sustainability Index. The Dow Jones Sustainability index is a multidimensional

construct, which measures sustainability based on economic, social and

environmental indicators. It includes the companies with the best sustainable practices

in their respective industries (Lopez, Garcia & Rodriquez, 2007). According to

SusAinability (2004) the Dow Jones Sustainability index’s requirements concerning

sustainability aspects are further reaching than in any other sustainability index. This

makes the DJSI a very strong indicator of sustainable focus (Lopez, Garcia &

Rodriquez, 2007). The FTSE4good is another well known sustainability index. This

index measures the performance of companies that meet the globally recognized

sustainability standards. The companies included in the sample were assessed on a

three-point scale: (0) either not included in both indices, (1) included in either the

DJSI or the FTSE4good index, or (2) included in both indices. When a MNE is

included in both of the indices, its sustainable focus is highest. Respectively, when a

MNE is included in one of the indices, its sustainable focus is higher than when it is

included in none of the indices.

4.4 Moderating variable NGO participation is the moderating variable in this study. NGO participation

constitutes a very broad concept, but overall NGO participation considers a vorm of

37

collaboration between the NGOs and other stakeholders. NGOs can participate in the

conflict resolution process in multiple ways: (1) by facilitating the discussion between

communities and MNEs (Murphy & Arenas, 2011), (2) by forcing the MNE and the

Indigenous community into some kind of agreements (Conroy, 2001), (3) or by being

involved on the projects itself on the long run (Murphy & Arenas, 2011). In this

study NGO participation is coded as a dummy variable with two outcomes: (0) NGOs

are not participating in the conflict or (1) NGOs are participating in the conflict.

When a NGO is participating in the conflict, this is the result of the NGO facilitating

the discussion, of the NGO being involved in the project itself, or of the NGO helping

on setting an agreement between MNE and the Indigenous community.

4.5 Control variables This study uses three control variables focused respectively one country level,

community level and firm level. The control variable used on firm level is MNE’s

experience in the country of conflict. It can be argued that experience in a country by

a MNE will influence the conflict resolution process (Oetzel, Getz & Ladek, 2005).

The longer a firm operates in a specific country, the more likely that it develops

relationships with key stakeholders, establishes operational and political networks and

overcomes the costs of liability of foreignness (Eden & Miller, 2004). MNE

experience in the country is measured in years. The second control variable used in

this research is institutional strength. The countries included in the dataset are

different in their country governance structures. Country governance structure

consists of Voice & Accountability, Political Stability and Absence of Violence,

Government Effectiveness, Regulatory Quality, Rule of Law, and Control of

Corruption (The World Bank 2013). The institutional strength of a country is

measured as the average of these scores and used as a control variable. It can be

38

argued that institutional strength can have an influence on conflict situations. The last

control variable in this research focuses on community level and is cultural isolation.

Isolation preserves behaviours through geographic, cultural and language barriers.

Isolated communities maintain most of their traditional cultures and choose to live in

the isolation from mainstream society (Montenegro & Stephens, 2006). The more

cultural isolated the communities are, the more difficult it is to negotiate with MNEs

from other countries with different cultural norms and values. Cultural isolation is

measured on a 3 points scale: (1) Highly isolated, community has an isolated culture,

with a different language, not connected to a broader ethnic group, (2) Community is

connected to a broader ethnic group, but isolated within the group and (3) Community

is embedded within a broader mainstream ethnic group.

4.6 Method of analysis As this study contains two dependent variables, the analysis will be done

twofold. The relationship between sustainable focus and conflict severity with a

potential moderating influence of NGO participation will be measured using linear

regression analysis. This relationship can be described as:

𝑌 = 𝛽0 + 𝛽1𝑋1 + 𝛽1*𝛽2𝑋2 + 𝜀

In this case Y represents the dependent variable conflict severity measured by type of

violence. The regression coefficients are represented by 𝛽0, the intercept, and 𝛽1,

which represent a MNE’s sustainable focus as an independent variable, and 𝛽1* 𝛽2

which represents the interaction effect between NGO participation and sustainable

focus (the moderator). Moreover, 𝜀 stands for the difference between the estimated

𝑋𝑖 and the actual 𝑋𝑖 (Field, 2009).

39

Conflict length is first coded as binary categorical variable (short vs. long). As

described by Field (2009) logistic regression analysis should be used when the

dependent variable is a categorical variable and the independent variables are either

categorical or continuous. So for conflict length as a binary categorical variable with

two outcomes (0) short conflict and (1) long conflict, logistic regression will be used.

The logistic regression is done in a stepwise approach starting with the control

variables, followed by the predictors. A stepwise approach is a good option when the

hypotheses tested are not supported by a lot of claims in the theory (Field, 2009).

Second, as a control, conflict length will be coded using a linear interval

variable with total length in months as an outcome. This is done to assess whether

there is a difference in outcomes of both regression analyses and to check whether the

independent variable and moderator have the same influence on the dependent

variable ‘conflict length’ when it is either measured as a binary categorical variable or

as an interval variable. Table 1 shows a summary of the combinations of variables

used in the various regression analyses. The SPSS software program is used to

analyze the data to make the statistical conclusions.

40

5.0 Results and Analysis

In this chapter the statistical analyses of the data are presented. This section

will start with an overview of the descriptive statistics, correlations between the

variables and a test for multicollinearity. Followed by the regression analyses

described in the method section. The results will be used to draw conclusions

regarding the proposed hypotheses of this study.

5.1 Descriptive Statistic Analyses and Correlation test The descriptive statistics of the dependent variables, the independent variable,

the moderator and control variables can be found in Table 2. As shown the overall

mean of conflict severity is 4.26 with a standard deviation of 1.86. This means that

the conflict severity of the average conflict lies between low level of violence

including intimidation tactics and high level of violence (from either side) including

physical damage but no kidnapping and deaths. For length of conflict the overall

mean is 0.50 with a standard deviation of 0.50. This means that there is almost an

equal distribution of long (which was codes as 1) and short (which was coded as 0)

conflicts. The overall mean of length of conflict measured in months is 99.37 with a

standard deviation of 102.77. This means that the average length of conflict is 99.37

months. Moreover, the mean of sustainable focus reports 0.39 with a standard

deviation of 0.45. So on average most firms of the sample are either included in only

one of the two indices (DJSI or FTSE4good) or in none. As shown in Table 2, in more

than half of the cases were NGOs participating (M = 0.61, SD = 0.491). The

descriptive statistics of the control variables can also be found in Table 2.

Moreover, Table 2 displays the correlation between the dependent,

independent, moderator and control variables of this study. To test for

multicollinearity between variables two methods were used. First as Table 2 displays,

41

none of the correlations are extremely high, above 0.80 (Field, 2005). This is the first

indicator that there is no multicollinearity between the variables. Moreover, the

Variance Indicator Factor (VIF) is used as a second indicator whether or not there

consists multicollinearity between the variables. The VIF indicates whether a

predicator has a strong linear relationship with the other predictors. A VIF value

below 5 indicates that this strong linear relationship does not exist. As Table 3 shows,

all the VIF values of the variables in this study are below 5; therefore

multicollinearity is not an issue in this analysis.

As shown by Table 2 there are significant positive correlations between length

of conflict (short vs. long) and type of violence, which indicates that when the length

of conflict increases, the type of violence increases as well and the conflict is more

violent. Second, length of conflict (in months) has a positive significant correlation

with sustainable focus and NGO participation. This indicates that when the average

length of conflict in months is longer, there are more NGOs participating and the

MNEs have a stronger sustainable focus. Moreover, sustainable focus and NGO

participation have a significant positive correlation. This indicates that when a MNE

is more sustainable, more NGOs are participating in the conflict. Sustainable focus

also correlates positive significant with two of the control variables. This indicates

that when the MNE has more experience operating in a particular country, it also

tends to have a higher sustainable focus. Moreover, when the MNE has this higher

sustainable focus, the country in which the MNE operates, tends to have a stronger

institutional strength. The control variable cultural isolation correlates significant with

both length of conflict (shorts vs. long), length of conflict (in months) and

institutional strength. This indicates that when a community is more cultural isolated,

42

the conflicts tend to be longer and in countries where the institutional strength is

higher, the communities tend to be more cultural isolated.

43

44

Table 3: Results of Multicollinearity test including VIF, Eigenvalue and Condition index

5.2 Regression Analyses Results of the logistic regression analysis between the independent variable,

the moderator and the dependent variable length of conflict can be found in Table 4.

In this case the dependent variable length of conflict is coded as a dummy variable

with two outcomes (0) short conflicts and (1) long conflicts. To measure the

moderating effect of NGO participation, an interaction variable between NGO

participation and sustainable focus is created, by multiplying both centralized

variables. The moderating effect of NGO participation is called ‘zNGO

participation*zSustainable focus’.

As Table 4 shows the analysis was run in a stepwise approach with first only

the control variables, afterwards the independent variable was added, followed by the

interaction effect (the moderator). The beta values displayed in the Table 4 give an

indication of how important the predictor is (Field, 2005). Moreover, the significant

values are used to assess whether the hypotheses are accepted or rejected. Hypothesis

1 predicts that a MNE’s sustainable focus has a positive influence on the length of

conflict (the conflict will be shorter). As shown in Table 4 the relation between

sustainable focus and length of conflict is not significant (β = 0.407, p > 0.05). Based

on these results we cannot conclude that when a MNE has a strong sustainable focus,

Eigenvalue Condition Index VIF

Cultural Isolation 0.912 2.320 1.116

Institutional Strength 0.447 3.315 1.124

MNE experience in country

0.396 3.520 1.124

Sustainable focus 0.260 4.346 1.314

NGO Participation 0.054 9.546 1.034

45

the conflict will be shorter. Therefore, Hypothesis 1 is rejected. Moreover, Hypothesis

3 states that the influence of sustainable focus on conflict length is positively

moderated by NGO participation. Based on the results of the logistic regression

analysis we conclude that this relationship is not significant (β = - 0.174; p > 0.05),

therefore Hypothesis 3 is rejected. Thus, NGO participation does not have a positive

moderating effect on sustainable focus and conflict length.

As this analysis is done using a logistic regression analysis the value for R2

must be estimated. The value for R2 is estimated using two values: the Cox & Snell R2

and the Nagellkerk R2 (Field, 2005). The Cox & Snell R2 is based on the log-

likelihood of the model, the log-likelihood of the original model and the sample size.

However, as the Cox & Snell R2 upper bound never reaches a value of 1, this can be

seen as a drawback (Field, 2005). Therefore, the Nagellkerk R2 is used to address this

issue. When the R2 lies between 0.7 and 0.9 the regression line displays a good fit

with the data. As shown in Table 3 all values for both the Cox & Snell R2 as well as

the Nagellkerke R2 are below this range. This demonstrates a relative low goodness of

fit.

The dependent variable length of conflict (coded as a dummy; short vs. long)

displays no significant relation with both the independent and the moderating

variable. It is interesting to see whether this relation changes to a significant one when

length of conflict is not coded as a dummy, but used as a linear scale variable.

Therefore, a second regression analysis is run with length of conflict as a scale

variable with the total length of conflict in months as an outcome. The total length of

months is calculated from the beginning of the conflict until the end of the conflict.

As the dependent variable is not a dummy variable, but a scale variable, linear

regression is the most suitable method. Table 5 shows the results of this linear

46

regression analysis between length of conflict, sustainable focus and NGO

participation. Again Model 1 is used to test the relations of the control variables and

the dependent variable, Model 2 is used to test Hypothesis 1 and Model 3 is used to

test Hypothesis 3. As Table 5 shows, sustainable focus does not have a positive

significant effect on length of conflict when it is measured in months (β = 37.06, p >

0.05). Based on the results of the linear regression analysis Hypothesis 3 is also

rejected. Again, NGO participation does not have a significant moderating effect on

length of conflict measured in months (β = 1.842, p > 0.05). As shown by the values

of the R2 there is a poor fit between the regression line and the data. In Model 1 the R2

is 0.105 which indicates that the model counts for 10% of the variation in conflict

length. Moreover, in Model 2 and Model 3 the R2 has a value of 0.128, in this case the

model represents 12.8% of the variation in length of conflict. The interaction effect of

NGO participation seems to have almost no influence on the variation in conflict

length. Therefore, we can conclude that the variables are not very good determinants

of the variation in length of conflict.

Based on the two regression analyses run on the dependent variable length of

conflict, we can conclude that the independent variable sustainable focus and the

moderating variable NGO participation do not have a significant effect on the length

of conflict.

As Table 5 shows both control variables MNE experience in country (β =

1.340, P < 0.05) as well as cultural isolation (β = 46.179, p < 0.05) do have a

significant influence on the length of conflict when measured in months. Moreover,

cultural isolation also has a significant influence as a control variable when length of

conflict is measured as a dummy variable (β = 0.741, p < 0.05). The correlation

between cultural isolation and length of conflict (short vs. long) is also positive

47

significant. It is interesting to further investigate these relationships in future research

to get a broader view on the determinants of conflict length.

To test the relation between type of violence, sustainable focus and the

moderating effect of NGO participation, another linear regression analysis was done.

Hypothesis 2 states that a MNE’s sustainable focus will have a positive influence on

the conflict severity (the conflict will be less violent). In other words, when the

sustainable focus of the MNE is stronger, the conflict will be less violent. Hypothesis

4 states that NGO participation positively moderates the relation between a MNE’s

sustainable focus and conflict severity. This linear regression analysis was also done

in a stepwise approach. First the control variables were added and tested, followed by

the independent variable and the interaction effect (moderator). The results are shown

in Table 6. As shown by Table 6, the relation between type of violence and

sustainable focus is insignificant (β = -0.10, p < 0.05.). Therefore, Hypothesis 2 is

rejected. This indicates that when a MNE has a strong sustainable focus, this will not

have a positive influence on the severity of the conflict. NGO participation does also

not have a significant positive moderating influence of conflict severity (β = -0.298, p

< 0.05). Based on these results Hypothesis 4 is also rejected. Again the fit between the

linear regression line and the data is not optimal. For Model 4 and Model 5 R2

displays a value of 0.026 indicating that the variables count for 2.6% of the variation

in conflict severity. In this case sustainable focus seems to have almost no influence

on the variation in conflict severity. Model 6 has a R2 value of 0.049 indicating that

both the independent variable together with the moderating variable count for 4.9% of

the variance of conflict severity.

To conclude, all three-regression analyses report no significant results. This

indicates that sustainable focus does not have a direct effect on the conflict resolution

48

between Indigenous communities and MNEs. Moreover, conflict resolution is also not

influenced by the moderating effect of NGO participation.

This study has several limitations, which could have influenced these

unexpected results. This will be further discussed in the next chapter of this study.

49

50

51

52

6.0 Discussion

This study examines the relationship between sustainable focus, NGO

participation and conflict resolution. Conflict resolution is measured in both length as

well as severity of conflict. It is argued that if sustainable focus and NGO

participation have a positive influence on conflict resolution, the length of conflict

will be shorter and the conflict will be less violent. However, as shown by the

statistical analysis the hypotheses of this study are not supported. This could mean

that either there is no relationship between the variables or other factors may

influence the lack of statistical results. These factors will be explained in the

upcoming chapters.

6.1 Findings The first hypothesis states that sustainable focus has a positive influence on

the length of conflict. Thus, if a MNE has a strong sustainable focus, the conflict will

be shorter. The statistical analysis done in this study did not find any prove for this

relationship. Length of conflict was measured twofold: as a continuous variable in

which length is measured in total months of conflict and as a dummy variable in

which lengths has two outcomes, either long or short conflicts. The second hypothesis

states that sustainable focus has a positive influence on conflict severity, thus if a

MNE has a strong sustainable focus, the type of conflict will be less violent. Again,

this relationship was not proven by this study.

Sustainability is a concept that is very difficult to conceptualize, because

sustainable development is a complex and multidimensional construct. Depending on

the literature, there are various meanings of this concept (Ciegis, Ramanauskiene,

Martinkus, 2009). Pierantoni (2004) argues that as sustainability has different

meanings, it might include short- or long run strategies. Therefore, they argue that to

53

measure sustainability an index is required which measures both strategies. This study

used two indices to measure the sustainable focus of a MNE: the FTSE4good and the

DJSI index. Both indices use different indicators to measure sustainability and look at

long run strategies. Therefore, it is possible that MNEs from this sample with short-

run sustainability strategies were not included in the indices and for that reason coded

with a low sustainable focus. This could have created a lower validity of the variable

sustainable focus and influenced the results.

Moreover, the DJSI is highly sensitive to MNE’s size. The DJSI tracks the

performance of the top 10% companies in the Dow Jones Global Index that lead the

field of sustainability (Lopez, Garcia & Rodriquez, 2007). So in theory, it is possible

that there are smaller MNEs that have a strong sustainable focus, but are not included

in the DSJI. We conclude that measuring sustainability is difficult and it is possible

that the variable sustainable focus was not captured well enough by the use of only

two indices. The reasons discussed above could have influenced the validity of the

concept sustainable focus and therefore the outcome of the statistical analysis.

Previous studies that investigate the influence of sustainability on conflict resolution

only measure sustainability from a qualitative single-case perspective. Those studies

did not use a general measurement of sustainability, which needed to be transferable

across different contexts. This could explain the contradicting results compared to

previous studies.

The third and the fourth hypotheses concern the moderating influence of NGO

participation. The third hypothesis predicts that NGO participation positively

moderates the influence of sustainable focus on conflict length. Moreover, the fourth

hypothesis predicts that NGO participation positively moderates the influence of

sustainable focus on conflict severity. Again both hypotheses were not supported by

54

the statistical analysis done in this study. There could be several reasons for these

unexpected results.

First, as discussed in the previous part, this could be partly explained by the

relative low validity of the concept sustainable focus. Moreover, the data of this study

contained NGOs with various attitudes towards the MNE: from antagonistic, to

neutral and to supportive. In the theoretical part of this study, we argue that all three

attitudes would influence the MNE differently, but that NGO participation overall

would have a positive moderating influence on conflict resolution. It is possible

however that this is not exactly the case and that some attitudes are of greater

influence than others. It is reasonable to believe that for example NGOs with an

antagonistic attitude will use more severe and threatening methods to influence the

MNE than NGOs with a neutral attitude. Previous studies were able to overcome this

issue by only studying isolated cases of NGO intervention. If some attitudes are of

greater influence than others this could have influenced the results.

Moreover, as discussed by Pricen and Finger (1994) NGOs can be very

different from each other on characteristics as size, range and scope of activities,

cultural background, ideology, organizational culture and legal status. Moreover,

there memberships can vary from local to global (Fisher, 1997). The characteristics of

NGOs were not taken into account in this study, but could have influenced its

moderating effect. It is reasonable to think that for example bigger NGOs are better

able to pressure MNEs than smaller NGOs. Moreover, it can be argued that local

NGOs tend to have more knowledge about the local communities than global NGOs.

These characteristics could be of influence on the ability of the NGOs to moderate the

relationship between sustainability and conflict resolution. Previous studies that focus

on NGO participation only look at the influence of a specific NGO on conflict

55

settings. Therefore, these studies did not have to take general NGO characteristics

into account. So overall, it is possible that the concept of NGO participation in this

study was to broad and therefore influenced the unexpected results.

7.2 Theoretical implications This study contributes to the theory about conflict resolution twofold. First, as

Calvano (2008) states not enough research has been done about the dynamics of

conflict resolution. The studies that focus on MNEs’ strategy and the process of

conflict resolution only examine isolated cases of conflict. Imbun (2007) investigates

views of two Papue New Guinea local communities regarding mining operations in

the area. His research shows the importance of integrating CSR into the management

pursuits of running mines in PNG. Lertzman & Vredenburg (2005) examine the

Scientific Panel for Sustainable Forest Practices in Clayoquot Sound. This area was

characterized by one of the biggest environmental conflicts, which eventually brought

a halt to the industry. In their study they suggest that sustainable development can

help MNEs have better and more ethical relationships with Indigenous communities

to prevent situations of conflict. As these studies are very helpful in creating a broader

sense of the characteristics influencing conflict resolution, they are limited to a

specific context. There is no guarantee that their results would be the same in different

geographical settings. Thus, the quantitative approach of this study provides a more

comprehensive picture of the relationships influence conflict resolution.

Second, this study addresses the unexplored moderating influence of NGO

participation on the relationship between sustainable focus and conflict resolution. As

discussed there are studies focusing on sustainable focus and NGO participation but

only as separate constructs. Again, these studies focus on isolated cases of conflict

(Linton, 2005; Khor, 2011; Jenkins & Yakovleva, 2006; Murphy & Arenas, 2011).

56

For example, Linton (2005) addresses the influence of NGO participation in the

coffee-industry and Khor (2011) looks at NGO participation in the Palm-Oil industry.

Moreover, Jenkins & Yakovleva (2006) examine NGO participation looking at a

particular company MacMillan Bloeder and how NGOs have influenced their

strategy. By linking sustainable focus and NGO participation, and more particular, by

investigating the moderating influence of NGO participation on the relationship

between sustainable focus and conflict resolution, this study addresses an important

gap in the literature.

7.3 Practical implications Despite the fact that the statistical analysis of this study showed no significant

results, this study does give valuable insights for managers in the field of international

management by refining current knowledge on conflict resolution.

The results of this study show that sustainable focus does not influence the

conflict resolution (i.e., the MNEs with a strong sustainable focus do not affect the

length of the conflict or its degree of violence), nor does NGO participation.

Therefore, we can conclude that for MNEs in the resource extraction industry facing

situations of conflict it is not more beneficial to have a strong sustainable focus.

Moreover, if an MNE is undergoing a situation of conflict, NGO participation will not

be significantly beneficial for the length and severity of the conflict. From an

Indigenous communities’ perspective we can also conclude that seeking help from

NGOs will not pose any great advantages.

57

7.4 Limitations This study is subject to some limitations. First the method of collecting and

coding ensured that the data is potentially biased by personal judgment. As the

collecting and coding of the data was done in group formation, it is possible that there

are some individual differences among the coding method. Moreover, data contained

articles from various databases and websites. There is a possibility that the data on

itself was also subject of personal judgment by the writers of the articles. For example

information collected via the website of a MNE could by written with the perspective

of putting the MNE in a positive daylight and some details regarding the conflict

situations may be left out.

Moreover, the sample contained 122 cases, which is a moderate amount.

However, the fact that the study did not return any significant results may be due to

this relatively moderate amount of cases. If this study would contain more data and

cases, there is a possibility that the results would be significant. This study contains

data spread across 26 countries and as Table 7 in Appendix I shows all countries were

almost equally represented. This indicates that none of the countries were

overrepresented and could have biased the results. For future studies this is something

important to keep in mind when expanding the geographical area to increase the

number of cases.

In addition, the coding of the variable conflict length was subject to some

problems. As the majority of the cases included conflicts that were ongoing, they

were coded with an end date of November 2015. However, this may have biased the

results, as the overall length of these conflicts was not measured until the actual end

date. There is a possibility that these conflicts take over a much longer period of time

58

than the ones coded in the dataset. To mediate this problem conflicts were coded as

either long or short and measured via logistic regression. The average length in

months of the overall conflict was used as an assessment if conflicts were either short

or long. Again, this average could be biased and lower than the actual lenght because

of the ongoing conflicts.

The measurement of sustainable focus is also subject to some problems. To

measure a MNEs sustainable focus two well-known indices were used; the DJSI and

the FTSE4Good index. However, the DJSI only tracks the performance of the top

10% companies in the Dow Jones Global index that lead the field of sustainability. It

is possible that some smaller MNEs in the sample do have a strong sustainable focus,

but are not included in the DJSI. Moreover, sustainable focus remains a difficult

concept to measure even with the use of indices (Singh et. al. 2008). Both indices

used in this study use different indicators to measure sustainable focus. This also

shows the difficulty of assessing what sustainability is, and how it can be measured.

There is a possibility that the results were influenced by the use of these indices to

measure sustainability and if other indices were used there is a chance that results

would be significant.

7.5 Future research This study opens avenues for future research. First of all, future research could

again focus on sustainability as a factor influencing conflict resolution. As

sustainability is an important subject in the field of business nowadays, it remains

valuable to examine its role in the conflict resolution process. Therefore, it could be

interesting to see what results are achieved if sustainability is measured via different

indices. Second, future research should ensure the use of more cases to strengthen the

results. As discussed previously, this study uses 122 cases. Quantitative results are

59

strengthened by the use of a high number of cases. Therefore, this is something that

should be accomplished in future research. Third, as shown in Table 4 both control

variables MNE experience and cultural isolation show a significant influence on the

length of conflict. It could be interesting to further investigate these relationships. As

discussed by Calvano (2008) it is important to get a clear view of the dynamics of

conflict resolution. Apart from the factors discussed in this study, there are many

other factors that could influence the conflict resolution process. Examining cultural

isolation and MNE experience is a good starting point.

60

8. Conclusion

This study examined the factors influencing the conflict resolution process

between MNEs and Indigenous communities. More particular, this study investigated

if sustainable focus and NGO participation positively influence conflict length and

conflict severity.

Counter to what was expected this study shows that sustainable focus does not

influence the conflict resolution process. Thus, in other words, if a MNE has a strong

sustainable focus the conflict will not be shorter or less severe. Moreover, this study

also shows that NGO participation does not have a positive moderating influence.

These results contradict the expectations of this study and therefore all the hypotheses

were rejected.

Previous studies highlight the importance of the social and ecological

environment to Indigenous communities. They show that disturbing this environment

leads to conflict situations (Bruijn & Whiteman, 2010; O’Faircheallaigh, 2013;

Calvano, 2008). A MNE with a strong sustainable focus will try to maintain and

protect this environment. This study shows that sustainable focus does not positively

influence the conflict resolution process, even though previous studies prove the

importance of the social and ecological environment in conflict situations. Moreover,

previous studies show the positive role NGOs can play in conflict situations, either by

using their knowledge and trusted position, or by using their forcing power over the

MNE (Oetzel & Doh, 2009; Linton, 2005; Murphy & Arenas, 2011; Khor, 2011).

Again results of this study contradict these previous studies as they show that NGOs

do not have a positively moderating influence on sustainable focus.

As Calvano (2008) stated, it is very important to get a clear overview of the

dynamics of this conflict resolution process. Overall, this study contributes to this as

61

it examined two important characteristics in business, but also in conflict situations:

sustainable focus and NGO participation. Thereby, this study sheds new and

interesting lights on the process of conflict resolution. Moreover, this study also opens

new gateways for future research. As significant relationships were found between the

control variables MNE experience in country and cultural isolations, these variables

form a good starting point for future research. In the end, enlightening the interesting

and important topic of conflict resolution further remains important, as this will not

only benefit the field of research, but also enhance the position of MNEs and the lives

of Indigenous communities.

62

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10. Appendix I

Table 7: Distribution and frequency of countries represented in dataset

Country Frequency Argentina 7 Bolivia 4 Botswana 1 Chile 11 Columbia 5 Costa Rica 2 Dominican Republic 1 Ecuador 8 El Salvador 1 Guatamala 1 Honduras 2 Lesotho 1 Madagascar 2 Malawi 2 Mexico 6 Mozambique 5 Namibia 4 Nicaragua 2 Nigeria 1 Panama 6 Paraguay 1 Peru 18 South Africa 8 Tanzania 4 Venezuala 2 Zimbabwe 5 Total 122