This study aims to investigate how subsidiaries of multinational corporations (MNCs) in Indonesia respond to the institutionalization of mandatory corporate social responsibility (CSR), particularly in the extractive industry. It aims to analyse how subsidiaries manage tensions between regulatory obligations and the expectations of diverse local stakeholders.
Drawing on institutional theory and the political CSR perspective as conceptual tools, this study uses a case study research design within a qualitative approach to investigate the interrelationship between the study constructs. It uses a model of external influences to examine an MNC’s subsidiary strategies, using data collected through document analysis and 21 semi-structured interviews with corporate representatives and local stakeholders in a selected region of Indonesia.
This study provides evidence of the implementation of proactive CSR strategies by the MNC subsidiary aimed at maintaining organizational legitimacy. The subsidiary consistently aligned CSR initiatives with local development priorities and cultivated relationships with influential local actors, leading to elite capture and the marginalization of the communities that CSR regulations were intended to benefit. The findings demonstrate that CSR initiatives function as political instruments for navigating local “Little Kings” (local elites) and addressing institutional voids. The study highlights the need for more inclusive CSR governance mechanisms that mitigate local power asymmetries and promote broader community participation to prevent CSR from becoming a symbolic exercise and mechanism of elite capture rather than an instrument of meaningful social transformation.
The study is situated within Indonesia’s decentralized political context and examines a single MNC subsidiary, which may constrain the generalizability of findings to contexts characterized by similar cultural, political and economic conditions.
This study offers a nuanced understanding of CSR as a strategic response shaped by both institutional and stakeholder pressures within an emerging economy. It addresses a significant void in the literature by extending CSR theory to decentralized political contexts. The study contributes to theory, policy and practice by demonstrating how formal CSR compliance can simultaneously reinforce informal and subtle power structures, thereby revealing the political economy underlying CSR implementation in decentralized governance settings.
