1.1 Research Background

In today’s globalized and connected world, multinational corporations (MNCs) are increasingly facing demands to go beyond their economic role and demonstrate fulfillment of their societal and political responsibility toward society (Scherer et al., 2016).Footnote 1 These expectations emerge from multiple actors in an MNC’s social environment, such as the media, governments, the local community, and non-governmental organizations (NGOs). Particularly MNCs, whose nature lies in acting globally, face such demands in their home country setting and in multiple host country settings, all of which are different in their cultural beliefs and expectations concerning the role of MNCs (Kochhar, 2018; Kostova & Zaheer, 1999). In response to the expectations concerning their societal and political roles, MNCs have begun to engage in issues traditionally associated with governmental activities (Matten & Crane, 2005; Scherer & Palazzo, 2012). These issues include, for instance, education, public health, human rights, and environmental sustainability (Scherer & Palazzo, 2011, 2012). At the same time, companies have to fulfill their economic role, which might conflict with societal demands. As a result, MNCs need to find ways to manage self-interests while meeting the expectations of their multiple environments, including that of the host country, to avoid being questioned and criticized, which can increase risks and cause conflicts (Hillman & Wan, 2005) and threaten their legitimacy (Kostova & Zaheer, 1999).

In this context, over recent years, there has been rising interest in researching the “new” political and societal role of corporations by analyzing the various interactions and relationships between MNCs and their host country communities referring to corporate diplomacy (Mogensen, 2017; Ordeix-Rigo & Duarte, 2009; Westermann-Behaylo et al., 2015). The research field of corporate diplomacy is comparatively young, and conceptualizations of the term vary greatly (Ingenhoff & Marschlich, 2019). Corporate diplomacy has been recently defined as “the corporate activities of multinational companies, which are directed at the host country’s key stakeholders and aimed at participating in decision-making processes on relevant socio-political issues and building relationships in order to gain corporate legitimacy” (Ingenhoff & Marschlich, 2019, p. 357). Gaining organizational legitimacy is highly relevant for the long-term survival and social acceptance of foreign MNCs in their respective host countries, requiring continuous interactions and negotiations with multiple groups in the organizational environment (Bansal & Roth, 2000). To form legitimacy judgments toward an organization, individuals evaluate the extent to which an organization can meet their demands and those of society (Deephouse & Suchman, 2008; Dowling & Pfeffer, 1975). Therefore, organizational legitimacy refers to how individuals perceive the appropriateness of organizational behavior, considering their expectations (Bitekine, 2011; Suchman, 1995). Societal expectations are formed through a process in which organizational decisions and behavior are reflected against the norms and values prevalent in each social system (Suchman, 1995).

Building on the assumption that MNCs increasingly need to demonstrate their contribution to the social good (Scherer & Palazzo, 2011, 2012), it is assumed that corporate diplomacy enables MNCs to gain organizational legitimacy as corporate diplomacy activities show a company’s commitment to public interests, which may generally be perceived as appropriate (see Suchman, 1995). However, what is appropriate within a socially constructed system of norms and values, and which societal expectations organizations face, can vary across cultures and countries (see Deephouse et al., 2017; Kostova & Zaheer, 1999; Mogensen, 2019). For this reason, corporate diplomacy needs to build on engagement with the host country’s environment on different levels, including the government, NGOs, and citizens (Kochhar, 2018; Mogensen, 2017, 2019). The engagement process allows MNCs to identify important actors and societal demands and respond to them, which is essential for building organizational legitimacy (Devin & Lane, 2014).

This thesis applies a neo-institutional public relations perspective to corporate diplomacy by bringing together sociological neo-institutional approaches and public relations. Previous research has already linked corporate diplomacy and public relations (Mogensen, 2017; White, 2015) and outlined that the central goal of corporate diplomacy is to achieve organizational legitimacy (Mogensen, 2017). However, it has neither been sufficiently explained what role public relations plays in corporate diplomacy nor has it been clearly explicated how corporate diplomacy helps build legitimacy through public relations. Organizational legitimation, i.e., the process by which organizations gain legitimacy, is at the core of sociological neo-institutional approaches (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). Accordingly, organizations are embedded in their social environments, which express different expectations toward them. Organizations can build legitimacy by demonstrating conformity to societal demands through their formal structures (as opposed to their actual actions) to be considered legitimate (Meyer & Rowan, 1977). As sociological neo-institutional approaches consider formal structures, i.e., the externally visible communication of organizations, central to gaining organizational legitimacy, they are valuable for public relations research.

Building on this argumentation, the present thesis firstly assumes that MNCs rely heavily on the legitimacy evaluations of their environment (Deephouse et al., 2017; Dowling & Pfeffer, 1975; Meyer & Rowan, 1977). Secondly, organizational legitimacy perceptions depend on demonstrating the organization’s congruence with societal expectations (Dowling & Pfeffer, 1975). Thirdly, following previous public relations scholarship, it is assumed that organizational legitimacy can be gained through public relations efforts that enable organizations to recognize and respond to societal demands (Devin & Lane, 2014). Bringing these arguments together, the following central assumption guiding this thesis can be formulated: Corporate diplomacy, building on public relations, enhances organizational legitimacy constructions by demonstrating the MNC’s commitment to societal issues in the host country society, thereby showing that the corporation meets the host country’s expectations. In turn, this process can positively affect the perception of congruence between the expectations of the host country environment and the actions of the MNC, contributing to building organizational legitimacy in the host country.

The current research explores corporate diplomacy in the case of the United Arab Emirates (UAE) since the country provides an optimal environment for studying corporate diplomacy for several reasons. First, the UAE is considered an emerging country (EDC, n.d.; Forbes, 2019). Emerging countries are mostly characterized by high economic growth, but they have not yet reached the societal standards and economic levels of developed countries (Jain et al., 2017). Particularly in emerging countries, where the state possesses substantial power but is partly unable or unwilling to provide public goods sufficiently, MNCs from developed economies are expected to contribute to improving local societal issues (Child & Tsai, 2005; Scherer & Palazzo, 2011, 2012). Given that corporate diplomacy is concerned with corporate engagement in societal issues (Ingenhoff & Marschlich, 2019; Kochhar, 2018; Mogensen, 2017), it is assumed that it plays a vital role in emerging countries such as the UAE. Moreover, due to their economic development, emerging countries are of high relevance to foreign MNCs for economic reasons (Wright et al., 2005). This is of specific significance for foreign MNCs operating in the UAE, rated the second-strongest emerging economy in the Arab region and among the top 20 financially strongest emerging countries worldwide in 2020 (Abbas, 2020). For these reasons, many foreign MNCs operate in the UAE, providing this dissertation with ideal conditions to study corporate diplomacy.

However, at the same, the UAE’s fast economic development comes with environmental and societal challenges, including higher demands for education, public health, and youth empowerment (Cordesman, 2018). Therefore, corporate engagement in societal issues is highly appreciated and encouraged to address these challenges, as a report by Oliver Wyman (2019) has emphasized. Powerful foreign MNCs, such as Unilever, Coca-Cola, and Nestlé, have started to find opportunities to contribute to the UAE’s political agenda (Koe, 2019; Unilever Middle East, 2018). One example is the “#CollectiveAction—Toward a Brighter Future Initiative,” which started in 2016 as a multi-sectoral collaboration addressing the improvement of environmental issues and entrepreneurship. #CollectiveAction includes the

participation from the private sector organizations, academia, community partners and public sector bodies […] to achieve goals common to the three overlapping strategic roadmaps, i.e., the UAE Vision 2021, the UN SDGs [Sustainable Development Goals], and the Unilever Sustainable Living Plan. […] [C]ollaboration between different stakeholders and businesses can play a critical role by mobilizing collective action to create sustainable models, that balance the needs of society, the environment, and the business itself. (Unilever Middle East, 2018, p. 10)

Another example is the creation of the “Alliance of Youth,” a private sector initiative launched by Nestlé Middle East to fight youth unemployment, which is a significant challenge in the UAE (Albawaba, 2017). These examples and the Unilever statement underscore the role of corporate diplomacy, which in the UAE seems to build on the collaboration with multiple groups in an MNC’s environment.

Lastly, the UAE comes with several particularities concerning its political, cultural, and media systems, which significantly affect international public relations and the organization’s environment (Khakimova Storie, 2015; Sriramesh & Verčič, 2009). The UAE is a federal presidential monarchy in which the government wields significant power, impacting all aspects of social life and affecting corporate activities to a great extent. Previous research has found that public relations efforts often emanate from governmental priorities (Duthler et al., 2015; Kirat, 2006, 2016). Moreover, as public relations thrives on public opinion and the freedom of expression, which is lacking in the UAE, public relations efforts in the UAE might tend to be perceived as less sophisticated and less built on civic society, as suggested for other non-democratic environments (Sriramesh & Verčič, 2002). Therefore, gaining legitimacy as the foundation for organizations’ social acceptance (Pollock & Rindova, 2003) is particularly relevant for foreign MNCs in the UAE. For all these reasons, studying corporate diplomacy and organizational legitimacy in the UAE is highly relevant for international public relations research and practice.

1.2 Research Gap and Research Aims

Given the interdisciplinary nature of corporate diplomacy (Ingenhoff & Marschlich, 2019), previous conceptualizations of the construct vary greatly. They include corporate diplomacy as the role of corporate actors in public diplomacy (e.g., White & Fitzpatrick, 2018), corporate diplomacy as an attempt of MNCs to manage the international environment smoothly (e.g., Amann et al., 2007; Steger, 2003), or corporate diplomacy as corporations’ engagement in societal issues in the host country (Ingenhoff & Marschlich, 2019; Kochhar, 2018; Mogensen, 2017). The latter perspective will be adopted in this thesis. However, a clear and distinctive definition of corporate diplomacy, which is theoretically substantiated, is still missing (see Ingenhoff & Marschlich, 2019). Therefore, the first research aim is to develop a profound and comprehensive conceptualization and definition of corporate diplomacy at the intersection of neo-institutional public relations, representing the theoretical foundation for this dissertation, and public diplomacy, which I consider the origin of corporate diplomacy (see Fitzpatrick, 2007).

Corporate diplomacy is a comparatively young research field, and previous research has mostly been descriptive and conceptual (Mogensen, 2019, 2020a; Molleda & Kochhar, 2014; White, 2015). Some exceptions have explored corporate diplomacy on an organizational level to determine how corporations view their role in public diplomacy and nation branding (White & Kolesnicov, 2015), mainly concerning government-sponsored public diplomacy activities (Fitzpatrick et al., 2020; White & Fitzpatrick, 2018). Overall, these studies revealed that foreign MNCs do not see themselves as ambassadors of their countries (Fitzpatrick et al., 2020; White & Fitzpatrick, 2018). Instead, they conceive themselves as global actors and do not regard their role as supporting the home country (Fitzpatrick et al., 2020). Exploring the link of corporate diplomacy to corporate social responsibility (CSR), White et al. (2011) have found that foreign companies do not always act in line with the cultural values of the host country but can still support culture-building processes in transitional countries and contribute to the host country (White et al., 2011). The mentioned studies by White and colleagues offer an interesting starting point for research on corporate diplomacy. However, their understanding of corporate diplomacy as part of public diplomacy does not correspond to the conceptualization of the construct in this thesis. Moreover, the studies mostly examined corporate diplomacy in the context of U.S. corporations. Another study has investigated corporate diplomacy and its link to legitimacy, suggesting that MNCs can only gain organizational legitimacy if they include host country citizens or representatives of the host country community instead of directing corporate diplomacy toward the host country government (Mogensen, 2017). However, Mogensen (2017) has followed a case study approach by examining one specific corporate diplomacy project only. Therefore, the results are limited.

Overall, so far, it is not clear to what extent and how foreign MNCs engage in corporate diplomacy and to what extent corporate diplomacy as engagement in terms of involving actors in the host country environment affects organizational legitimacy perceptions. Moreover, although the Middle East offers a significant context for researching international public relations efforts due to its social, economic, and political particularities, which differ considerably from most Western countries, public relations research in the Middle East is still lacking (Dhanesh & Duthler, 2019). Previous public relations theorizing is mostly marked by the ethnocentricity of Western countries, particularly the U.S. (Broom & Sha, 2013; Sriramesh & Verčič, 2019). In an attempt to contribute to the significant research gap on corporate diplomacy and public relations research in the UAE, the following research questions concerning corporate diplomacy and organizational legitimacy on an organizational level are stated:

RQ 1::

To what extent and how is corporate diplomacy in the UAE performed as engagement with its social environment?

RQ 2::

To what extent and how is corporate diplomacy in the UAE used to gain organizational legitimacy?

Both neo-institutional approaches and public relations research have emphasized the role of the media in constructing social reality and, in this view, in creating organizational legitimacy (Deephouse, 1996; Deephouse & Suchman, 2008; Pollock & Rindova, 2003; Sandhu, 2012; Yoon, 2005). In media society, media coverage is one of the most relevant communication channels concerning the information on and evaluations of MNCs (Carroll & McCombs, 2003). Particularly regarding foreign organizations, media representations are among the major sources of organization-related information (Islam & Deegan, 2010). Deephouse and Suchman (2008) have argued that media coverage indicates legitimacy because it reflects and influences public opinion. According to media agenda-setting theory (McCombs & Shaw, 1972) and framing theory (e.g., Entman, 1993, 2008), the media sets the public agenda by determining what issues and subjects the public gets to know and, to a certain degree, how the public thinks about these issues and subjects. In this way, the media influences societal expectations and legitimacy judgments toward organizations (Deephouse, 2000). Previously, research on organizational legitimacy and media coverage has indicated that the more companies are covered in the news media (positively or neutrally), the higher their perceived legitimacy is (Marberg et al., 2016). Furthermore, research has pointed out that organizational legitimacy depends on how an organization and its activities are evaluated in the media, affecting organizational legitimacy on different levels (Rodríguez Pérez, 2017).

However, prior research so far has insufficiently addressed the relationship between corporate diplomacy and media coverage. To the best of my knowledge, empirical studies on the effects on organizational legitimacy through the media coverage of corporate diplomacy do not yet exist. Moreover, although media relations and legitimacy are at the heart of public relations (Hallahan, 2010; Metzler, 2000), previous research has rarely studied the link between media coverage and organizational legitimacy. Therefore, the following research question is stated:

RQ 3::

To what extent and how can the media coverage of corporate diplomacy contribute to organizational legitimacy?

The primary assumption of newer neo-institutional approaches is that organizations can take an active role in the legitimation process through public relations (Frandsen & Johansen, 2013; Fredriksson et al., 2013). According to previous literature, organizational legitimacy can be ascribed when corporate diplomacy is perceived as congruent with broader societal expectations, referring to moral legitimacy (Dowling & Pfeffer, 1975; Suchman, 1995); to the expectations of the most immediate individuals of an organization, reflected in pragmatic legitimacy (Bitekine, 2011; Suchman, 1995); and to governmental expectations and rules, considered as regulative legitimacy (Diez-Martin et al., 2019). Following this, it can be assumed that corporate diplomacy can affect legitimacy perceptions by communicating its value for the host country’s society (moral legitimacy), for particular groups or organizations in the host country (pragmatic legitimacy), and the host country’s government (regulative legitimacy).

Moreover, the previous literature has pointed to the role of institutional linkages (see also Sect. 4.5), which are conceived as institutional relations between the corporation and an already-institutionalized organization (Baum & Oliver, 1991). Accordingly, organizations linking themselves and their activities to actors that are established and perceived as legitimate can thus increase organizational legitimacy (Baum & Oliver, 1991; Bitekine, 2011). Institutional linkages can be reflected in collaborations between different organizations or between an organization and the government (Baum & Mezias, 1993; Baum & Oliver, 1991). In the UAE, the government wields significant power, and public–private partnerships are common in the Middle East region (White & Alkandari, 2019). Therefore, it can be presumed that the communication of corporate diplomacy activities, outlining MNCs’ linkages to the UAE Government, increases organizational legitimacy perceptions of the corporation. However, empirical research analyzing the effects of corporate diplomacy on organizational legitimacy does not yet exist. Therefore, the following research question is stated:

RQ 4::

To what extent and how do institutional linkages with governmental institutions influence the effects of corporate diplomacy on organizational legitimacy?

Figure 1.1 gives an overview of the research questions.

Figure 1.1
figure 1

Summary of the research questions

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Overall, by answering the four research questions, I aim to empirically examine how corporate diplomacy can contribute to the legitimation process of foreign MNCs operating in the UAE on three levels – the organizational level (RQs 1 and 2), the media level (RQ 3), and the audience level (RQ 4). In this way, the empirical research aims of this dissertation are, firstly, to assess how corporate diplomacy in the UAE is performed as an engagement strategy with host country actors to gain organizational legitimacy. Secondly, my research aims to discover how media outlets in the UAE cover and evaluate the topic of corporate diplomacy and how it constructs organizational legitimacy. Thirdly, this dissertation seeks to determine whether institutional linkages with the host country government in the UAE affect the perception of the organizational legitimacy of MNCs. By empirically exploring corporate diplomacy as a legitimation strategy, this research intends to contribute to the evolving research on corporate diplomacy in the realm of public relations (e.g., Mogensen, 2017; White & Fitzpatrick, 2018) and to respond to the call for public relations research concerning whether and how organizations deal with societal expectations and values in their environment raised by previous scholars (Frandsen & Johansen, 2013; Fredriksson et al., 2013). Lastly, by analyzing corporate diplomacy in the UAE, this dissertation aims to offer a contextual understanding of corporate diplomacy accounting for diverse political and cultural conditions in a global world and, in this way, to contribute to international public relations research and practice.

1.3 Structure of the Thesis

The thesis is structured in nine chapters and begins by presenting a comprehensive overview of the theoretical framework underlying this dissertation and an extensive overview of previous conceptualizations and findings on corporate diplomacy. Furthermore, building on the extensive literature review, this research develops a new definition of neo-institutional public relations, subsequently applied to corporate diplomacy to build an integrative framework and a clear and distinctive definition of corporate diplomacy. Moreover, the thesis presents the empirical studies that allow the research questions to be answered while providing an overall discussion of the results and portraying and critically assessing the legitimation process through corporate diplomacy in the UAE. Lastly, implications for theory and practice and future research directions are discussed.

Chapter 2 introduces the theoretical and conceptual framework of this research, including the sociological neo-institutional approach, organizational legitimacy and the role of the mass media, and public relations theory. Therefore, the chapter gives an overview of the sociological neo-institutional approach by describing its key assumptions and discussing its core constructs. Secondly, the chapter presents an overview of organizational legitimacy, pointing to the relevance of legitimacy for organizations, defining the construct, and giving theoretical insights into the legitimation process by emphasizing the role of the mass media in forming legitimacy judgments. Thirdly, the chapter regards public relations from a relational perspective, emphasizing its link to the concept of engagement and the role of public relations in gaining organizational legitimacy. Moreover, since I explore the legitimation process of MNCs on a media level, the second chapter introduces the relationship between public relations and the media. The chapter finishes with an overview of the previous literature on neo-institutional public relations and develops a clear definition of neo-institutional public relations.

Chapter 3 presents and discusses corporate diplomacy at the intersection of public relations and public diplomacy. Therefore, public relations and public diplomacy are briefly compared to find their commonalities and differences, which are relevant for understanding the elements of corporate diplomacy. Subsequently, corporate diplomacy is compared with CSR concepts, i.e., instrumental and political-normative perspectives on CSR, to distinguish the terms from each other. Furthermore, previous definitions and conceptualizations of corporate diplomacy are portrayed and discussed. Building on that, the chapter presents a new conceptualization of corporate diplomacy, including a precise and distinctive definition of the construct.

Chapter 4 presents the current state of empirical research on corporate diplomacy. Moreover, it extensively reviews prior studies on the link between the mass media and organizational legitimacy and the role of institutional linkages in gaining organizational legitimacy. Lastly, the chapter discusses intervening variables that affect the legitimation process and derives a hypotheses model of the effects of corporate diplomacy on organizational legitimacy.

Chapter 5 offers insights into the case of the UAE by illustrating the country’s economic, political, and cultural particularities as well as the features of the UAE media system. In this regard, the fifth chapter allows to contextualize the research in this thesis since the legitimation process through corporate diplomacy is examined in this specific country.

Chapter 6 presents the methods used to explore corporate diplomacy on the organizational, media, and audience levels, including a detailed description of the samples, the research instruments and measurements, each study’s procedure, and the data analysis. Therefore, each empirical study’s methodology is presented separately.

Chapter 7 outlines the results of each empirical study considering the research questions summarized in Figure 1.1. In this way, the chapter firstly illustrates organizational perspectives on corporate diplomacy by offering insights into how the corporate diplomacy engagement process appears, which actors in the organizational environment are addressed, and how corporate diplomacy is used to gain organizational legitimacy. Furthermore, the second part of this chapter presents corporate diplomacy media frames and their contribution to organizational legitimacy on the cognitive, moral, pragmatic, and regulative levels. Finally, the chapter displays how corporate diplomacy with governmental institutional linkages affects organizational legitimacy perceptions.

Chapter 8 offers an in-depth discussion of the results by considering the results of each study separately. In this regard, the chapter answers the first and the second research questions, presenting the different engagement approaches of MNCs, which have different consequences for gaining organizational legitimacy. Building on the results, the chapter derives five modes of corporate diplomacy. Moreover, the chapter discusses the findings of the second study, answering the third research question of what role the news media and media frames play in the legitimation process of MNCs through corporate diplomacy. Subsequently, the chapter discusses the role of the institutional linkages between the MNC and the local government to gain legitimacy from the general audience in the host country to answer the fourth research question. The chapter ends with an overall discussion of the results throughout the conducted empirical studies to answer the overall research question of how MNCs in the UAE can build legitimicy through corporate diplomacy in the host country. Therefore, the chapter relates the studies’ results to neo-institutional core constructs, developing a profound overview of the interrelations between different actors in an organizational field and the consequential social constructions of legitimacy perceptions and judgments.

Chapter 9 brings together the main findings of the previously presented empirical studies by briefly answering each research question. Subsequently, the chapter formulates the major contributions of this thesis for theory and practice and discusses its limitations. Finally, the chapter postulates directions for future research and finishes with concluding remarks.