به سوی یک نظریه مشروعیت محلی با MNEs در کشورهای در حال توسعه: استخراج از معادن نیومونت و توسعه پایدار بهداشت در پرو

This paper describes a current initiative by Newmont Mining Corporation (Newmont) to develop sustainable community benefit in communities around its mining operations in Peru in response to heightened criticism of Newmont by non-government organizations and the media. Using anthropologically oriented methods, a community health assessment project in an area of projected mining is described in detail in this paper. This case adds to London and Hart's social embeddedness strategy for multi-national enterprises (MNEs) working in developing nations by introducing a locally-based community interaction model, which we describe as a local legitimacy strategy, in an effort to bring about sustainable development in the communities that surround a MNE's production activities. The components of our local legitimacy strategy include co-analysis of community needs by MNEs and community partners, and planning and investment in developments to enhance the social fabric and the physical infrastructure needs of communities. The developing world is getting better at publicizing and monitoring the work of MNEs. We argue that it will be increasingly necessary for MNEs, like Newmont, to add local sustainable benefit into their strategic mix to gain the social license and legitimacy that is needed to operate in poorer communities.

This paper is an exploratory examination of the theoretical dimensions of multi-national enterprises' (MNEs) involvement in poorer population areas of the world. As such, the research questions of this paper are “why do MNEs seek local legitimacy in developing economies?” and “how do they do so?” To date, the lack of interest in developing nation economies has led to a transnational model of global strategy, which is pre-occupied with describing strategies that seek to overcome the lack of a Western-style business environment (Peng, 2001). That is, to the extent the local environment includes features inconsistent with what is typical in developed economies, an MNE will implement strategies to “fix” those features. A transnational model suggests that MNEs generally rely on proven global capabilities to adapt existing business models, such as a subsidiary strategy to control resources, extract knowledge and leverage economies of scales (Bartlett and Ghoshal, 1989). Also, MNEs are accustomed to creating competitive advantage through patents, brands and contracts and are wary of entering emerging markets where their proprietary technology and knowledge cannot be protected through enforceable legal mechanisms (Delios and Henisz, 2000). In effect, this paper argues that the transnational model needs to be amended to allow for a hybrid approach that balances local and global strategies by MNEs. Alternatively, a social embeddedness strategy model for MNEs in developing nations has been introduced (London and Hart, 2004). Social embeddedness is defined by London and Hart as the ability of MNEs to create competitive advantage based on a deep understanding of and integration with the local environment. This capability involves the ability to create a web of trusted partnerships with a diversity of organizations and institutions, generate bottom-up development and understand, leverage and build on the existing social infrastructure. What the case of Newmont in Peru adds to the social embeddedness construct is the extent to which MNEs are reaching out to gain legitimacy in the local communities in which they are working. London and Hart's social embeddedness construct describes, to a greater extent, why MNEs should to take a bottom-up local partnership approach to move their products in emerging economies. The Newmont case, however, isn't about moving product into new markets (Prahalad and Hammond, 2002). This case is about providing sustainable benefit to poor local communities in exchange for the minerals that Newmont is extracting out of the ground for trade on global markets. This is a remarkable development. As described in detail in this paper, community protests and pressure from NGOs have compelled Newmont to finally consider the welfare of the community. Beyond just providing jobs, Newmont must now convince the community that it can and will provide benefits that offset the environment and social externalities of mining. Newmont has begun to enter the realms of health services development in the communities surrounding its mining sites. To assist this effort, Newmont engaged an independent team of health experts and social scientists from the University of Colorado to visit communities around Newmont's mining sites in Peru and make recommendations as to what actions Newmont could take to improve health conditions in those communities. Newmont's foray into the development of the health sector is not the only example of extractive resource MNEs attempts to improve health conditions. Anglo-Gold and other mining companies in South Africa have funded and provided anti-retroviral therapy for their workers with HIV. In Mozambique, BHB-Billiton began treating its employees for malaria, but soon realized that public health efforts, in coordination with local government, were necessary to effectively address the disease in its workforce. In Papua New Guinea, Freeport–McMoran launched community-wide treatment for lymphatic filariasis to decrease the impact of this debilitating disease on its workforce (Gifford et al., 2007). The Newmont case in Peru, however, is unique in that the organization did not enter the health arena as a response to employee productivity losses. Instead, Newmont discovered that social license and legitimacy were becoming necessary inputs to its mining operations. The defensive strategies of environmental and social impact assessments alone, and ensuing mitigation efforts, were failing. Addressing health in a health-service shortage area, alternatively, represented an attempt at a proactive investment by Newmont to secure long-term legitimacy in the community. As Newmont has learned, and non-government development organizations have long known, any social investment requires in-depth knowledge of the community, extending far beyond the demographics of the employable workforce. This realization is the basis for this paper's presentation of a community health assessment case study. We suggest that such assessments will increasingly become the norm as extractive resource MNEs encounter organized community resistance to the development and operation of mining sites in the developing world. More broadly, we argue that the case of Newmont in Peru is an example of a changing equation where mutual benefit will be a new goal and standard for MNEs in developing nations. Because this case study attempts to address complex phenomena and thus requires a rich, holistic understanding of conditions, our approach is primarily qualitative and includes extensive contact with participants throughout communities and at multiple organizational levels. Also, our data gathering includes extensive use of archival and supplementary data sources. In presenting this study, we first outline the unique challenges for Newmont associated with its mining work within poorer population areas of the world. We then review the international business approach. Unlike similar institutional theory-based research, this paper suggests that Newmont's attempt to gain local legitimacy at its mining sites is expected to be a key element for its success in the global marketplace. The paper concludes with a discussion of the analysis results, limitations of this research, and possible new research directions. 1.1. Responding to NGOs' scrutiny The fact that the developed world comprises 20% of the world's population, yet uses 80% of the world's resources, shows that the world is not flat yet, to use an expression of a popular recent book on globalization (Friedman, 2005). For example, it is estimated that almost 60% of the world's six billion people live on less than $2 (US) dollars a day (World Bank, 2001). To a great extent, these poorer populations have not seen the benefits of the globalization of markets. Yet, the areas where poorer populations live in the world have and continue to serve as a very important component in the development of globalization because they often provide the raw materials and labor for extractive industries like oil and mining that drive the globalization process. In the past, the poor of the world have had little voice, and much of the developed world has had little understanding or appreciation for the plight of the poor. However, with the advent of the internet and the globalization of mass media (Smith, 2007), as well as the proliferance of goodwill-oriented organizations such as NGOs (e.g., CARE), foundations (e.g., Bill & Melinda Gates Foundation), service clubs (e.g., Rotary International) and government aid workers and individuals, the tables have turned. The developing world is now able to monitor and publicize the work of MNEs, and it will be increasingly necessary for MNEs to add local sustainable benefit into their strategic mix to gain the social license and legitimacy that is needed to work in poorer communities. Newmont, and other gold mining firms, are key actors in globalization with their international operations and the sale of their products on worldwide commodity markets. Yet, these firms have come under heightened public criticism in recent years. The communities around mining operations not only tend to be poor and vulnerable, but also often lack government protection, and the environmental and economic changes wrought by MNEs eventually affect health and society in areas of operation. Accordingly, questions have been raised concerning MNEs' social and environmental performance in emerging economies (Meyer, 2004). Some argue that MNEs have a human rights obligation to affected communities, which extends to health, education, and the environment (Sullivan and Frankental, 2002). For example, the health, social, and environmental impacts of mining MNEs cannot be considered in isolation from one another or from an MNE's overall corporate strategy (Caplan and Silva, 2005). Social critics argue that MNEs often elude public policy controls. In seeking to reduce costs, MNEs may play employees and countries against one another, creating downward pressure on wages and social standards on a worldwide basis (Dowell et al., 2000). Also, developing nations typically have less sophisticated market-supporting institutions and legal and regulatory capabilities. Inefficiency and corruption often prevent governments from effectively managing the external costs of industry and the resulting costs to society (Warner and Sullivan, 2004). MNEs can play a pivotal role in linking rich and poor economies and in transmitting capital, knowledge, ideas and value systems across borders. Foreign direct investment (FDI) by MNEs has motivated many governments to offer attractive incentive packages to entice these corporations to their countries. The rationale is that the social benefits of inward FDI would exceed the social costs to a nation (e.g., pollution) of FDI (Blomstrom and Kokko, 2003). For example, a number of subfields have developed among management researchers regarding corporate citizenship (Waddock, 2004), business sustainability (Holliday et al., 2002) and corporate strategies in developing nations (Prahalad and, Hart, 2002). Also, MNEs are increasingly being expected to consider the societal and environmental impact of their activities and to develop a more inclusive capitalism model (Hart and Christensen, 2002, Margolis and Walsh, 2003 and Soros, 2002). Bansal (2005) found that government, media and public opinion play substantial roles in encouraging corporate led sustainable development. Further, many MNEs working in developing nations partner with NGOs and non-traditional stakeholders, such as local tribes, to develop social responsibility strategies (Rondinelli and London, 2003). An integrated local approach to economic development and poverty alleviation is especially important in low-income markets where economic, social and environmental considerations are closely intertwined (Chambers, 1997, Sen, 1999 and World Bank, 2001).

Peng (2001) argues that developing nation economies, which represent almost four billion of the six billion people in the world, will become the new battleground for international business competition as MNEs look for new opportunities away from increasingly saturated markets in developed nations. Although the number of MNEs that are exploring economic opportunities in developing nations continues to grow, strategies in these economies are not well defined nor empirically tested at this time. Generally, international business researchers have assumed that the transnational model of global strategy (Bartlett and Ghoshal, 1989) would be as applicable in the developing world as it is in industrialized nations. The transnational model identifies global efficiencies, national responsiveness and worldwide learning as necessary capabilities for MNEs. However, researchers investigating MNEs' strategies in developing nations have found that these transnational strategies are generally not successful. Worse, the top-down strategies from the transnational model may be a recipe for failure for a venturesome organization. Alternatively, a social embeddedness strategy model for MNEs in developing nations has been introduced (London and Hart, 2004). Social embeddedness involves the ability to create a web of trusted partnerships with a diversity of organizations and institutions, generate bottom-up development and understand, and leverage and build on the existing social infrastructure. The case of Newmont mining in the Conga mining region of Peru provides further empirical support for the social embeddedness model of strategy in developing nations. What the Newmont case adds to the social embeddedness model is the extent to which MNEs are reaching out to gain long-term legitimacy in the local communities in which they are working. For example, the communities around Newmont mines in the developing world are for the most part poor and vulnerable, and some have suffered either directly or indirectly as a result of mining activities. When community relations deteriorate, Newmont's prospects of obtaining social license to operate decline. Discontent over mining activities then spreads globally through the web and other media outlets, and any adverse impact or externality of mining, perceived or real, affects Newmont's ability to conduct business around the world. As described, Newmont's efforts to provide health-related sustainable benefit are beyond the corporation's core mining competence. Also, Newmont's effort goes beyond corporate benevolence, charity or philanthropy. Overall, we argue that the case of Newmont in Peru is an example of a changing equation where mutual benefit will be a new goal and standard for MNEs in developing nations (United Nations Social and Economic Council, 2003). The four billion people that live on less than $2 a day should not just be seen as an ‘opportunity’ for globalizing capitalists, but as a mass of humanity in dire need of basic infrastructure development. To even the effects of capitalism between global markets and developing nations, MNEs will have to start developing legitimacy by providing sustainable benefit to local communities. These strategies are not simply charitable acts; they also pave the way for MNEs to be welcomed by developing nations for the longer term and promote the local community's ability to support the efforts of the MNE. 7.1. Future research This case study introduces the theoretical concept of local legitimacy. As presented, this concept consists of three components relative to the Newmont sustainable development case in Peru: co-invention and analysis, development of community social fabric, and development of physical infrastructure. Future international business research should consider the differing ways corporations can and do socially embed themselves in developing nations and seek local legitimacy. London and Hart's path-breaking work and this case study on Newmont have illustrated several examples of this, but there are many other examples to consider. Future research should also explore the conditions under which MNEs need to develop strategies of local legitimacy in developing nations. Some possible research questions include: 1) Are MNEs that have received negative publicity for previous local environmental and other problems more likely to initiate local legitimacy strategies? 2) Are MNEs, which are in industries that receive less scrutiny from NGOS/Media, less inclined to develop local legitimacy strategies? 3) Are MNEs with higher profit margins more likely to develop local legitimacy strategies? 4) When possible, do MNEs seek locations in the developing world which have lower expectations for local legitimacy strategies? And, 5) Do MNEs which plan to stay in a particular location for a greater number of years more likely to initiate local legitimacy strategies? Another research question to consider is what is the ‘tipping point’ for which MNEs must bring local legitimacy into their strategic mix. And, is this tipping point moving? That is, are NGOs and mass media clearly moving the tipping point toward greater corporate social responsibility for MNEs in the developing world as well as the developed world? These suggested research questions concern the international business side of things, however, there is much to consider on the organization theory side too. For example, our research places empirical considerations into a neo-institutional organization theory framework. Are there other theoretical frameworks that might provide more explanatory power than institutional theory? Also, the institutional approach taken in this paper isn't typical. Most institutional approaches focus on values and social structure and how organizations try to match or mimic them (Scott, 1995). However, this case study is more than another description of organization mimicry of a social structure. This case is also about agency and how an organization's actions can change the institutional environment (DiMaggio, 1988). For example, in this case study, Newmont is arguably proactive in trying to change the institutional environment for all gold mining and other extractive resource corporations. Could smaller firms, or firms with less visibility than Newmont, be successful at changing their institutional environment too? Or, more generally, under what conditions does agency have an impact in the institutional arrangement of organizations. 7.2. Limitations There are limitations to the conclusions that can be drawn from this exploratory study. First, our research is only done in the Conga mining area of Peru. Despite the intensive health assessment effort by the interdisciplinary team of CU researchers, it would be helpful to have a comparison case or two of other MNE mining firms to corroborate the results of this study. Second, this study is not complete, but will continue to unfold in coming years. The recommendations provided by the CU project team have been sent on to Newmont all provide for substantial infrastructure development. Newmont has accepted these recommendations and appears ready to implement many, if not most, all of the recommended interventions, but the process of doing such is still in a very early stage precluding any attempt to measure the effectiveness of these interventions. Note that a separate project is being conducted by another CU team in Newmont's two mining regions in Ghana and a third study may be started at Newmont's mine in Indonesia. The Ghana assessment is being completed by a different team of health professionals and researchers, including the first author of this paper. The communities in the Newmont mining areas in Ghana, like the Conga mining area, are very poor, but the social and geographic circumstances are different than in Peru. Despite these differences, most of the issues that have been confronted in Ghana are quite similar to what has been found in the Conga mining area of Peru. More importantly, the institutional-based theory results of this paper are very consistent with what has been happening at Newmont's mining locations in Ghana. In sum, Newmont is working hard to establish local legitimacy at the mining sites in an effort to develop social license for up to fifteen years of mining.