The Effect of Complying with Censorship Requirements in China on the Home Country Stakeholder Perceptions of American Mnes

Home , BlizzCon

The effect of complying with censorship requirements in China on the home country stakeholder perceptions of American MNEs

A qualitative case study of established, well-known, American MNEs

Master’s thesis IB&M

Donny van der Zande

S3853179

Supervisor: Mrs. J.R. de Wit

Co-assessor: Dr. O. Lindahl

June 15th, 2020

Word count: 16487

ABSTRACT

The significant size of the Chinese consumer market causes foreign multinational enterprises (MNEs) to comply with requirements set by the Chinese government, such as engaging in censorship. Understanding how complying with censorship requirements in China can affect home country legitimacy is of increasing importance for MNEs with business operations in China. This thesis analyzes how complying with censorship requirements in China affects home country stakeholder perceptions for American MNEs. To answer this question, a qualitative content analysis is conducted by means of an interview, governmental documents, news articles and organization statements in order to obtain an overview of the current censorship situation in China, the MNE stakeholder perception in the United States and the US-China relations related to censorship. This thesis conducts a multiple case study analysis of established, well-known, American MNEs that complied with Chinese censorship requirements. By drawing on legitimacy theory and corporate political activity theory, the results show that complying with censorship requirements in China has a negative effect on home country stakeholder perceptions for American MNEs. The extent of this negative stakeholder perception is determined by the degree of personal involvement of the stakeholders. A higher degree of personal involvement is expected to lead to a more negative stakeholder response than a lower degree of personal involvement.

Key terms: Legitimacy, China, Censorship, Corporate political activity, Content analysis, American MNEs

ACKNOWLEDGEMENT

I would like to express my gratitude to my supervisor, Mrs. J.R. De Wit for her support and continuous constructive and helpful feedback. In addition to this, I would also like to thank Prof. Robert Ross for taking the time to enlighten me on the topic of censorship in China and its implications on MNEs in the United States, increasing the research quality of this thesis.

I would also like to thank several of my classmates for the continuous productive discussion related to my thesis’ theoretical and practical implications. Lastly, I would like to thank my family for the continuous support and motivation to pursue my degree.

TABLE OF CONTENTS 1. INTRODUCTION ...... 7

2. LITERATURE REVIEW ...... 11

2.1 Types of legitimacy ...... 11

2.2 Political risk and corporate political activism in China ...... 13

2.3 Reclaiming legitimacy ...... 15

2.4 Stakeholder perception ...... 17

3. METHODOLOGY ...... 19

3.1 Research design ...... 19

3.2 Sample selection ...... 20

3.3 Definitive sample and coding ...... 21

4. RESULTS ...... 23

4.1 Reasoning behind censorship in China ...... 23

4.2 Measures for censorship in China ...... 24

4.3 Controlled speech of organizations by China ...... 26

4.4 Increasing stakeholder perception ...... 27

4.5 Business case studies ...... 28

4.5.1 National Basketball Association (NBA) ...... 29

4.5.2 Activision Blizzard ...... 32

4.5.3 Google ...... 34

4.5.4 Apple ...... 37

4.6 US – China relations on censorship ...... 39

5. DISCUSSION AND CONCLUSION ...... 42

5.1 Discussion of findings ...... 42

5.2 Theoretical contributions and practical implications ...... 43

5.3 Limitations and suggestions for future research ...... 44

5.4 Conclusion ...... 45

6. REFERENCES ...... 47

6.1 Content analysis ...... 50

7. APPENDIX ...... 60

Appendix 1: Coding Scheme ...... 60

Appendix 2: Interview guide ...... 62

Appendix 3: Interview with Prof. Robert Ross of Boston College ...... 63

Appendix 4: Table overview of business case comparisons ...... 69

LIST OF TABLES

Table 1: The NBA………………………………………………………………………………..69

Table 2: Activision Blizzard……………………………………………………………………...70

Table 3: Google……………………………………………………………………………….….71

Table 4: Apple:…………………………………………………………………………………...73

LIST OF ABBREVIATIONS

CCP Chinese Communist Party

CPA Corporate political activity/activism

MNE Multinational Enterprise

NBA National Basketball Association

NGO Non-governmental organization

PRC People’s Republic of China

VPN Virtual Private Network

WHO World Health Organization

WTO World Trade Organization

1. INTRODUCTION “Thanks to the NBA, Twitter and a Chinese government that feeds a national “outrage culture”, questionable relationships between American companies and Beijing are getting more attention than ever.” – Jake Novak, CNBC (Novak, 2019)

A recent incident featuring the influence of China in the operations of western organizations has caused various news outlets to consider to what end the Chinese censorship has spread across borders. The Financial Times reported that a tweet supporting the ongoing protests in Hong Kong, created by the general manager of the Houston Rockets, a team in the National Basketball Association, hereafter referred to as NBA, resulted in a removal from Chinese state television (Rachman, 2019). This was, however, not the first time. China attempts to police the speech of foreign Multinational Enterprises (MNEs) on a variety of subjects, including Tibet, Taiwan, Xinjiang, human rights, territorial claims and now the demonstrations in Hong Kong in order to maintain the narrative and control desired by the Chinese communist party (Deyer, 2016).

The NBA is, however, not the only organization that recently experienced political tensions as a result of an association with the protests in Hong Kong. Blizzard, an American video game company, removed a professional player from a tournament and future events after he had showed support to the protests. This decision was met with significant backlash and a boycott of the company in the United States and across the world (Gonzalez, 2019). Another example is Apple, which removed an application showing the location of Hong Kong police after pressure from China. News outlets in China believed Apple to be aiding the protestors (Mihalcik, 2019). Google also removed an application related to the Hong Kong protests from their app store (Cutbertson, 2019). As was the case with the NBA, all the aforementioned instances are related to China’s censorship policy, indicating that this is a crucial factor when examining a foreign MNE’s business activities in China. It is still unclear to what extent China is able to influence business decisions of MNEs active in their market but the examples listed above illustrate a situation in which the Chinese government has significant control over the business operations of foreign MNEs in China. The increase in censorship policies will likely increase the extent to which foreign MNEs are affected if they are active or want to be active in the Chinese market. These types of legitimacy pressures were easier to deal with 20 years ago but the significant size of the current Chinese market causes western organizations to be wary of offending China (BBC News, 2019). Censorship in

China also directly affects other countries as was seen in the early stages of the Covid-19 pandemic. Legitimate information concerning the Covid-19 virus was suppressed in order to prevent negative media coverage (Amnesty, 2020). Therefore, there is a need to understand the censorship situation in China and the potential effects on other countries worldwide.

The relationship between the Chinese government and MNEs has been increasingly researched (Stevens, Xie, & Peng, 2016; Tan & Tan, 2012). Research into the relationship between Google, Yahoo and the Chinese government was examined during their spell on the Chinese market (Stevens et al., 2016; Tan & Tan, 2012). The case of Google and Yahoo provides an initial outlook on the influence of the Chinese government on foreign MNEs entering the country or market. With the increasing growth of the Chinese market, it can be assumed that this influence has only increased, causing a situation in which foreign MNEs active in the Chinese market are likely to comply with the censorship requirements of the Chinese government in order to maintain legitimacy (Stevens et al., 2016). The establishment and maintenance of legitimacy in host environments is an ever-critical issue for MNEs, since obtaining legitimacy concerns an organization’s survival (Suchman, 1995; Zaheer & Kostova, 1999). Obtaining host country legitimacy, however, can affect a company’s legitimacy in their home market by means of positive or negative legitimacy spillovers (Zaheer & Kostova, 1999). In the case of Google and Yahoo, complying with censorship requirements in China was negatively perceived in the United States (Stevens et al., 2016). For MNEs, their customer loyalty and company image depend on how a company is perceived by their stakeholders (Costa & Menichini, 2013). It can therefore be assumed that whenever a company is involved in a business activity abroad that their stakeholders consider to be against the norms and values of the home country, such as censorship, the activity will result in a decrease in legitimacy and negative stakeholder perceptions in the home country. This effect has to be further researched in order for MNEs to be able to understand the potential risk of complying with Chinese censorship demands. This is the central topic of this thesis and results in the following research question:

“How does complying with censorship requirements in China affect home country stakeholder perceptions for American MNEs?”

Existing research has not sufficiently looked at the exact effect complying with censorship requirements has on an MNE’s home country legitimacy when conducting business in China. This

8 research gap is examined through a detailed content analysis with the use of three propositions in order to obtain an overview of the current censorship situation in China, the effect of censorship in business and the US-China relations related to censorship. The effect of censorship in business is examined by analyzing four well-known and established companies: the NBA, Blizzard, Google and Apple. The MNEs selected for the business cases are well-known and established since such companies are monitored closely by their respective stakeholder groups in order to make sure they are conducting business which can be considered ethical and to the standards expected in the United States. Three propositions are formed in the literature review as a point of departure for this analysis. The propositions will not be empirically tested but rather explored by means of qualitative research.

This research will mainly contribute to the legitimacy theory and corporate political activism (CPA) theory. The two types of legitimacy theory that are relevant for this research are pragmatic legitimacy and moral legitimacy. Pragmatic legitimacy concerns the legitimacy which the American MNEs can obtain in China by adhering to local regulatory demands. Moral legitimacy concerns the legitimacy that the American MNEs can obtain in the home market for engaging in business practices in foreign countries which are up to the ethical standards set by the home country (Suchman, 1995). This research will contribute to the legitimacy theory by examining how complying with Chinese censorship requirements affects moral legitimacy in the United States. The notion that an American MNE cannot maintain pragmatic legitimacy in China and moral legitimacy in the United States at the same time is examined as a contribution to the theory behind legitimacy spillovers. Legitimacy spillovers have previously been researched with various subsidiaries from one company affecting each other (Zaheer & Kostova, 1999). The balance between pragmatic legitimacy in China and moral legitimacy in the United States has not been researched before to my knowledge. An earlier effort by Stevens, Xie and Peng (2016) described pragmatic and moral legitimacy in China for American MNEs but the potential effect of obtaining pragmatic legitimacy in China on moral legitimacy in the United States has not been researched before. Corporate Political Activism or CPA theory, describes a situation in which an MNE either chooses an engaging approach in which the company actively attempts to alter the host environment, or a non-engaging approach, in which they accept the regulations and standards present in the host country (De Villa, Rajwani, Lawton, & Mellahi, 2019). This thesis will contribute to the CPA theory by examining how using a non-engaging CPA approach in China

9 related to censorship requirements can affect an MNE’s stakeholder perception in their home market of the United States. This thesis also looks into which CPA approach American MNEs intrinsically opt for in China regardless of potential repercussions among home country stakeholders.

This thesis proceeds with the theoretical section describing multiple different inputs on legitimacy theory, CPA theory and stakeholder theory. Several propositions based on this theoretical section will be formulated and serve as an aid to further the understanding of how complying with legitimacy demands in China affects home country stakeholder perceptions for American MNEs. Subsequently, the methodology section highlights how this qualitative research is structured. Finally, the results of the research will be exhibited and discussed.

2. LITERATURE REVIEW The establishment and maintenance of legitimacy in host environments is an ever critical issue for MNEs (Zaheer & Kostova, 1999). Previous instances of legitimacy issues for MNEs include criticism in global media and negative stakeholder responses such as destruction of property. Legitimacy refers to the social justification and the public endorsement of an actor or an activity (Suchman, 1995). Zaheer and Kostova (1999) also mention the concept of ‘legitimacy spillovers’. It describes a situation in which the legitimacy of a foreign subsidiary may be determined by the legitimacy of other subsidiaries in the MNE either in other countries or in the same market. These spillovers can either be positive or negative which either contribute or diminish legitimacy for a MNE. Across-country legitimacy spillovers examine the effect of how building legitimacy and mitigating political risk in one country can affect an organizations’ operations in another country. The main focus of this section will be on China as a host country due to its increasing market size and influence over foreign MNEs but the theory should be applicable to institutionally similar countries as long as they elicit similar reactions from the stakeholders of an MNE and possess the same market potential. Other countries that have imposed censorship include: India, Russia, Saudi Arabia and South Korea (Verkamp & Gupta, 2012). However, further research is required into the stakeholder responses from American MNEs related to complying with censorship requirements in these countries in order to test the generalizability of this thesis.

2.1 Types of legitimacy Companies operating in China, in particular, have been subject to ethical conflicts, which started with poor working conditions and accusations of exploitation in the garment industry (Hamilton, Knouse, & Hill, 2008). NGO’s and stakeholder groups in an MNE’s home country have frequently criticized these types of ethical conflicts since then, indicating a need for understanding stakeholder reactions in the event of other perceived ethical conflicts, such as complying with questionable legitimacy demands. Suchman (1995) identifies three primary forms of organizational legitimacy: pragmatic, based on the self-interests of the audience; moral, based on the normative approval shaped by the socially constructed value system of the audience and cognitive, based on the comprehensibility and people taking things for granted. In order for MNEs to obtain any of the three aforementioned types of legitimacy, their organizational activities have to be desirable or appropriate according to a set of norms and values determined by the home or host country the MNE is active in (Suchman, 1995). Pragmatic legitimacy will be used to describe a foreign

11 company’s direct dealings with the Chinese government while moral legitimacy will be used to describe the response of home market stakeholders. Cognitive legitimacy focuses on the subconscious acceptance of a company’s existence rather than a conscious evaluation of an organization’s merits and actions (Stevens et al., 2016). The actions of MNEs and the stakeholder response to these actions are a central aspect of this research. Cognitive legitimacy will therefore not be used to describe the effect of complying with censorship demands on home country stakeholder perception.

The effect of obtaining legitimacy in China

Regulatory or governmental support is essential for success in China so it is highly important for foreign MNEs to adhere to the Chinese regulations in order to obtain pragmatic legitimacy in China (Liao & Yu, 2012). However, at times the Chinese regulations can be in conflict with ethical or moral guidelines either set by the company or the company’s home country. Complying with the Chinese regulations is then expected to impede the company’s moral legitimacy. This was the case for Google and Yahoo whose actions were considered unethical by their stakeholders in their home market. Yahoo complied with the censorship requirements in China, leading to a highly negative response from their stakeholders in the United States. Google initially complied with the Chinese censorship requirements but later chose not to comply with the censorship requirements since it would go against their code of conduct. While various organizations praised this move, Google’s presence and activity in China alone caused a moderate negative response from their stakeholders (Peng, Liu, & Lu, 2019; Stevens et al., 2016; Wu, 2007). Moral legitimacy is therefore evaluated by the stakeholders of the MNEs who trust and expect the organization to contribute to the general social welfare at home and abroad following the norms and values set by the audience’s socially constructed value system (Stevens et al., 2016; Suchman, 1995). The audience related to moral legitimacy in this thesis is home country (United States) stakeholders. In the United States, these norms and values are significantly different from the norms and values in China. This can be seen in the Google and Yahoo case in which the initial compliance of these two companies with the censorship demands set by China was seen as an inhibition of free speech and considered unethical for an American company (Stevens et al., 2016). If an American MNE acts in a way which goes against the norms and values of the United States, their stakeholders in the United States may lose trust in the organization, resulting in a lower moral legitimacy (Poppo & Schepker, 2010). There

12 appears to be clear conflict for MNEs between obtaining pragmatic legitimacy in China and obtaining or maintaining moral legitimacy in the United States. This phenomenon is further examined in this thesis.

Proposition 1: American MNEs cannot obtain or maintain pragmatic legitimacy in China and moral legitimacy in the United States at the same time when it comes to censorship requirements in China.

2.2 Political risk and corporate political activism in China When it comes to achieving or maintaining both pragmatic and moral legitimacy, doing business in China comes with a significant amount of political risk since rules and regulations are not so transparent or absolute as in the United States (Jayaraman, 2009). Political risk is hereby defined as “the phenomenon whereby firms invest in a foreign country and experience unexpected, adverse impacts on their performance due to the host country political environment” (Stevens & Newenham-Kahindi, 2017: 11). Political risk in a foreign environment may arise due to various policies or actions by the host country government or the host country society that affect MNEs in their business operations (Stevens & Newenham-Kahindi, 2017). These host country policies or actions may result in billions of dollars in lost revenue for MNEs if they are not dealt with correctly (Stevens & Newenham-Kahindi, 2017). However, the pursuit of firm legitimacy actually appears to counteract the effect of political risk over time since a company would invest in relationships with the government and influential social groups, increasing their chances of surviving the political risk situation as time goes by (Darendeli & Hill, 2016). This calls for a bridging strategy in order to overcome the initial barrier of political risk by steadily increasing a firm’s legitimacy in a host country. Literature describing these types of strategies for dealing with this political risk is referred to as Corporate Political Activity theory (De Villa et al., 2019; Hillman, Keim, & Schuler, 2004).

Corporate political activity/activism (CPA) refers to firms engaging with home or host country governments to influence public policy in ways favorable to their corporate interests (De Villa et al., 2019; Hillman et al., 2004). The cross-border corporate political activity choices are dichotomized into two separate options: (1) an engaging approach to engage with home or host country governments in order to influence public policy; and (2) a non-engaging approach that involves either not engaging with the host governments or conforming to current public policies

(De Villa et al., 2019). A non-engaging CPA approach can also be defined as compliance, indicating that an organization consciously and strategically chooses to comply with institutional pressures in hopes of increasing their legitimacy (Oliver, 1991). Corporate political activity approaches can take many forms, from establishing political action committees (PACs) which entails financially backing a candidate with favorable policies, to lobbying or charitable donations (Hansen & Mitchell, 2000). These methods are primarily used in the United States by significantly large domestic companies and MNEs. These methods come with a widespread perception that they negatively affect the character of legislation, and that anyone who lobbies is a part of a so called special interest group (Keffer & Hill, 1997). The act of altering socially institutionalized practices such as engaging in political lobbying has the potential to further reduce public acceptance of an organization, leading to a decrease in moral legitimacy (Ashforth & Gibbs, 1990; Palazzo & Scherer, 2006). With the public perception in the US (home country) being fairly negative towards these types of CPA, it begs the question how these CPA methods are received in the US when a company employs these methods in China (host country). Before establishing that response, it is important to understand what types of CPA would contribute to an MNE’s legitimacy in China.

Corporate political activism in China

Collaborating methods, such as creating personal relationships with the government or with influential social groups, political accommodation and obtaining organizational credibility through compliance with local standards have a positive effect towards achieving a good relationship with the Chinese government (Luo, 2001). These can be considered as non-engaging CPA approaches since they entail conforming to current regulations in China. In China, non-engaging CPA approaches are positively received while engaging CPA approaches are negatively received by the Chinese government (Liu et al., 2019). Non-engaging CPA approaches appear to be most effective CPA approach for American MNEs when attempting to gain pragmatic legitimacy in host countries with a high political risk, such as China (De Villa et al., 2019). A non-engaging or collaborating relationship with the government or governmental support therefore seems essential to obtaining pragmatic legitimacy in China (Liao & Yu, 2012). Following a non-engaging CPA approach, foreign MNEs should be able to obtain a degree of legitimacy in China which would help them bridge the initial political risk barrier. Should MNEs choose an engaging CPA approach or directly go against the wishes of the Chinese government, their pragmatic legitimacy is expected to

14 decrease significantly. This was the case when Google actively went against the censorship requirements that are in place in China. Their legitimacy in China significantly decreased and their market share in China dropped rapidly (Peng et al., 2019; Stevens et al., 2016). However, there are ways for foreign MNEs to reclaim this lost legitimacy by taking an active compliant, non-engaging or apologetic approach and regaining the trust of the Chinese government and Chinese stakeholders which may lead to an increase in legitimacy. Google did not opt for this approach, instead deciding to leave the Chinese market.

2.3 Reclaiming legitimacy Reclaiming legitimacy either in the host country (China) or the home country (US) can prove to be a challenge whenever it is perceived that the trust of the government or general public is betrayed. The situation that follows this perception of betrayal can be defined as a crisis threatening organizational reputation (Coombs, 1995). Crises have the potential to affect the legitimacy of an organization as a result of cognitive re-orientation of existing interpretive schemes (Peng et al., 2019). This can happen in either or both of the two countries when MNEs are confronted with conflicting legitimacy demands, such as censorship in China and freedom of speech in the United States. A firm’s survivability is dependent on the ability of the public to trust its actions. A loss in legitimacy resulting from trust violations can either be considered an integrity violation or a competence violation. Integrity violations are intentional dishonest acts, while competence violations are considered as a lack of knowledge related to a specific business activity. Both types of violations cause stakeholders to question the previously common understanding of the organization and how it functions (Poppo & Schepker, 2010). The type of perceived violation influences the effectiveness of the communication a company can use when trying to repair its legitimacy (Poppo & Schepker, 2010). This communication can be defined as crisis-response strategies belonging to an MNE’s crisis management (Coombs, 1995). It can be assumed that complying with Chinese censorship demands is considered a competence violation in the United States. It can also be assumed that going against Chinese policies is considered a competence violation in China since in both cases the MNE can regain legitimacy by admitting guilt, indicating that both situations are considered competence violations (Poppo & Schepker, 2010). The most effective crisis-management strategy for repairing legitimacy for an MNE in either country related to transgressions such as complying with censorship requirements is through repentance or an apologetic statement (Coombs, 1995; Peng et al., 2019; Poppo & Schepker, 2010).

When it comes to legitimacy repair in China, previous instances of violations are needed in order to assess which type of CPA approach would function in China. The American MNE Walmart had two incidents in recent years related to their business activities in China (Liu et al., 2019). The first incident was a violation of consumer laws in Chinese stores where mislabeled pork items were sold as more expensive organic pork, obtaining 730.000 yuan in illegal benefits. It was defined as criminal misconduct and 10 Walmart stores had to be shut down. The second incident included the sale of packed donkey meat mixed with fox meat and was framed as a negligent act on the part of Walmart in the Chinese market. In the first incident, Walmart responded with a non-engaging approach, they were apologetic and open to reform following the shutdown of the stores. This response was perceived as reasonable and pragmatic in China and helped the company gain endorsement of the local host government. In the second incident, Walmart responded with an engaging approach in which they blamed the local government and tried to justify that the incident was not their fault since the meat was delivered by a local supplier. This response was perceived as irresponsible and insincere by the company’s stakeholders in China (Liu et al., 2019). Walmart’s operations in China were not widely publicized in the United States. This was possibly due to the situations being highly specific for the Chinese market and since the United States was not affected by this dispute. Another example of an American MNE attempting to repair their legitimacy in China is Apple (Peng et al., 2019). Apple was denounced after it had violated laws and regulations related to its warranty policy for Chinese consumers. Apple responded with an apologetic statement targeting their Chinese consumers. Apple’s apology was positively received and led to an increase in pragmatic legitimacy in China (Peng et al., 2019)

A non-engaging approach in China appears to be the effective option when it comes to repairing legitimacy since it will be perceived as reasonable and pragmatic (Liu et al., 2019; Peng et al., 2019). Therefore, in order to be successful in China, complying with or accommodating to the Chinese stakeholders, of which the key stakeholder is the government, is crucial for achieving pragmatic legitimacy (Liu et al., 2019; Oliver, 1991; Peng et al., 2019). It is expected that complying with censorship requirements in China is considered a competence violation in the United States.

Conflicting legitimacy demands

Obtaining legitimacy in China often comes with conflicting demands from home and host country stakeholders(Stevens et al., 2016; Zaheer & Kostova, 1999). This occurred to Google and Yahoo upon entry into China. They were required to uphold local regulations of information censorship in order to obtain legitimacy in China. This restriction of information was in conflict with the system in the US where free flow of information and freedom of speech are considered crucial. Yahoo chose a non-engaging CPA approach with the Chinese regulations and quickly gained a high legitimacy in the Chinese markets. The choice for this CPA approach was not well received in the home market resulting in a low perceived legitimacy among stakeholders and Yahoo’s exit out of China. Google did not agree with this censorship and chose an engaging CPA approach, actively trying to alter the rules implemented by China. This resulted in a low perceived pragmatic legitimacy among stakeholders in China but also a relatively low perceived moral legitimacy among stakeholders in their home market (Peng et al., 2019; Stevens et al., 2016). Complying with censorship requirements therefore seems to consist of a lose-lose situation in which people either succeed in China but receive a negative response in their home market causing them to eventually leave the Chinese market or a negative response in both China and the home market. This leads to the possibility that doing business in China is generally negatively received by the home market related to both engaging and non-engaging CPA strategies. This calls for a further analysis of the intricate dealings of companies with China and the exact effect on legitimacy in the home market. Complying with the Chinese government, in particular in situations that consist of censorship, is therefore expected to have a negative effect on the home country legitimacy of an American MNE.

Proposition 2: Complying with Chinese censorship requirements in order to obtain pragmatic legitimacy has a negative effect on home country moral legitimacy for American MNEs

2.4 Stakeholder perception Customer loyalty and company reputation depend on how stakeholders perceive the company’s social behavior (Costa & Menichini, 2013). Organizational legitimacy, including moral, pragmatic and cognitive legitimacy, is the stakeholder perception that an organization is good and that it has a right to continue its operations. This right is granted by the stakeholders of an organization (Peng et al., 2019). Moral legitimacy is based on how overall social welfare and the norms and values set by the society of the home country are considered by an MNE (Stevens et al., 2016; Suchman, 1995). For an MNE, being well-perceived among stakeholders is therefore crucial for their

17 company reputation and legitimacy. It is also important for an MNE to realize that when a stakeholder group’s interests are not being met, they are likely to leave the firm for another network that will satisfy their interests or they will try to find other ways to pursue their interests (Freeman, 2010). This indicates that unless a business model is unique and non-substitutable, stakeholders are willing to find other outlets to satisfy their interest if they perceive that their trust in the company is broken. The best way for a company to achieve success is keeping all stakeholder groups satisfied, since their interests appear to be inherently tied together (Freeman, 2010). In order to “manage for stakeholders”, the relationships between these interest groups have to be shaped and managed. This is a key aspect of today’s business organizations (Freeman, 2010). This seems to be a difficult concept as companies such as the NBA, Blizzard, Apple, Google and Yahoo all opted for China’s financial incentives rather than social responsibility by choosing to comply with Chinese censorship demands. This angered stakeholder groups without financial interests in the company (Roberts & Pan, 2019; Stevens et al., 2016). This leads to the expectation that MNEs intrinsically choose pragmatic legitimacy in China over moral legitimacy in the United States even if it goes against the wishes of certain stakeholder groups. Stakeholder perception is therefore framed as the general response of the majority of stakeholder groups, since a company’s decisions are targeted primarily at increasing their financial performance which is in the interests of the shareholders. When it comes to situations in China affecting the stakeholder perception in a company’s home market, it is to be expected that the stakeholder awareness of a company’s actions is larger when a company is well-known and significantly large, because it will be frequently mentioned in the media. Social responsibility also seems to be a larger issue for these types of companies, also increasing the awareness of a company’s actions in China.

Proposition 3: American MNEs intrinsically choose pragmatic legitimacy in China over moral legitimacy in the United States regardless of potential negative stakeholder responses when it comes to Chinese censorship requirements.

3. METHODOLOGY This thesis features exploratory research by trying to determine how the phenomenon of complying with the censorship requirements in China affects the home country stakeholder perceptions for American MNEs. This will be examined with the use of the three aforementioned propositions as well as a detailed analysis related to the current censorship situation in China, four business cases of American MNEs and the US-China relations related to censorship.

3.1 Research design This thesis consists of exploratory research with the goal of obtaining new insights related to a previously unexplored situation (Jaeger & Halliday, 1998). A qualitative analysis is used that takes the propositions formed in the literature as a point of departure. Through multiple types of data, including an interview, governmental documents, news articles and organization statements, a triangular analysis is created on the subject by means of a multiple case study. This is done in order to obtain a multifaceted result that includes inputs from a variety of stakeholders in order to determine how an MNEs actions in China are perceived in the United States. A multiple case study is used since it is well suited to new research areas for which existing theory seems inadequate and allows for incremental theory building (Rowley, 2002). An interview is conducted with prominent American professor Robert Ross on the relationship between China and the United States and the extent to which China is able to influence MNEs in the US into complying with their demands and into the reaction this generates from the stakeholders. This is a semi-structured interview in order to obtain retrospective and real-time accounts of Prof. Ross’ experience related to the phenomenon of theoretical interest (Gioia, Corley, & Hamilton, 2012).

The research method used is a content analysis. Qualitative content analysis is defined as an “empirical, methodological controlled analysis of texts within their context of communication, following content analytical rules and step by step models, without rash quantification” (Mayring, 2000: 2). This is used to analyze data and examine potential patterns in this data. Advantages of a content analysis are primarily transparency and replicability since it includes a systematic approach which can be replicated by other researchers. The results are therefore highly reliable. Limitations of content analysis are that it can be relatively subjective since it depends on the interpretation of the researcher (Luo, 2019; Rowley, 2002). This thesis attempts to overcome this limitation to some extent by including a wide variety of inputs on the subjects of censorship in China, the US-China

19 relations related to censorship and the stakeholder perceptions of MNEs from the United States. These inputs come from news sources in the US as well as from news sources in China and other countries in order to create a non-biased sample to a certain extent.

3.2 Sample selection The content analysis includes interviews with experts related to China featured in various news articles and journals. The interviewees in these news articles and journals include several prominent researchers and professors. Examples of interviews that are examined are with: Prof. Margaret Roberts from the University of California (2017), Daniel Blumenthal, director of Asian Studies at the American Enterprise Institute (2020), Elizabeth Economy, director for Asia studies at the Council on Foreign Relations (2018) and Prof. Christopher Balding from Fulbright University in Vietnam (2019). Additionally, the content analysis features journalistic opinions and descriptions, public opinions and NGO statements. The perception of various important stakeholder groups in the United States, including the government, NGO’s, consumers and employees are considered. The time frame which these newspaper articles and documentation stem from is 2010 until 2020 in order to get a broad overview of how this situation has developed over time since the initial practices of Google and Yahoo in China in 2010.

There are several criteria for MNEs to be selected for this thesis. The first criterion is that the MNE needs to be well-known and established in order for them to be frequently mentioned in the media. The actions of these types of MNEs will be widely broadcasted to their stakeholders through media and subsequent social media and are therefore more likely to elicit a reaction in comparison to smaller relatively unknown companies. The second criterion is that the MNEs have to be American with dealings in China. The third criterion is that the MNEs need to have been mentioned by media as a result of complying with Chinese censorship requirements. The companies that fit these criteria and are selected for this thesis are the NBA, Blizzard, Google and Apple since they have been engaged in altercations with the Chinese government, do business in China and are sufficiently well-known and established to be featured in media and elicit a reaction from their stakeholders.

There are also several criteria for the inclusion of media channels, NGO’s and private news organizations. The first criterion is that they feature information either on one of the four companies, the NBA, Blizzard, Google and Apple. The second criterion is that they feature information on the censorship policy situation in China. The third criterion is that they feature

20 information on the situation between the US and China when it comes to the Chinese censorship policy. These criteria can be seen independently, indicating that if a media channel, NGO or private news organization fulfills one of the criteria, they are eligible for inclusion in this thesis.

Newspapers that are examined in this research are: NYTimes, Business Insider, Financial Times, Reuters, The Daily Telegraph, EFE newswire, South China Morning Post, Washington Post, the Guardian, Canadian Press, Telegraph Herald. NGOs with documentation and standpoints on the subject of censorship in China that are included are: Global Voices, Witness organization, Amnesty International, Human Rights in China. Governmental transcripts that are examined are the US Congressional Testimony and Transcripts, the US-China economic and security review commission, the House Oversight and Government Reform Subcommittee on Information Technology and the Senate Judiciary Committee. Private news companies and blogs featuring information on the topic by means of documentation that are examined are: Foreign Policy Blogs Network, Plus Media Solutions, Fast Company, Council on Foreign Relations, Pew Research Center, Morning Consult, eweek.com, VentureBeat, Silicon, Activist Post, thenextweb.com, the American prospect blogs, Axios, Digital Journal, Conservative Daily News, Western Free Press, Sputnik News service, Florida Politics, Atlantic Online, indieWIRE, National Legal and Policy Center. Combining the inputs from these various sources will help provide a clear overview of the censorship situation in China and how complying with Chinese demands affect stakeholder perceptions in the home market for well-known and established MNEs in the United States.

3.3 Definitive sample and coding The selected sample includes 72 articles and documents from the aforementioned news institutions. The data collection also includes an interview with Boston College professor Robert Ross, an expert on China-US relations. Other professors were contacted for an interview but the response rate was rather low at only 27% with the other respondents indicating to know too little about the specific topic of censorship or that they had better ways of allocating their time during the Covid- 19 pandemic. The transcript of the interview with Prof. Ross can be found in Appendix 3. Out of the 72 articles, 65 codes were created following a conventional content analysis approach of allowing codes and categories to flow from the data rather than using preconceived categories (Hsieh & Shannon, 2005). This is done since there has not been significant research into this topic

21 and therefore requires substantial immersion into the data in order for new insights to emerge (Hsieh & Shannon, 2005).

The definitive coding sample consists of three major categories, with subsequent first and second order codes (Gioia et al., 2012). The first category is the effect of censorship in business. The effect of censorship in business category consists of codes related to the four business cases and the general implications of censorship on business operations. The four business cases of the NBA, Blizzard, Google and Apple are further divided into second order codes, including the actions of the company, the compliance with censorship requirements, the influence of the company in China and the stakeholder perception in the home country. The most important stakeholder groups related to censorship in China are the US government, an MNE’s employees, an MNE’s consumers and NGOs since they will provide insights into the stakeholder perception from various different angles. These codes allow for a detailed analysis related to the business cases of the American MNEs concerning the censorship requirements in China. The second category is censorship in China. This category includes codes that describe the current censorship situation in China. Understanding the current censorship situation in China is important when determining to what extent censorship is able to affect other countries and organizations. The category includes several first order codes. The first order codes include measurements for censorship, reasoning behind censorship and controlled speech of organizations by China. The third category, US-China relations on censorship, is created in order to obtain a detailed analysis of US-China relations related to the censorship policy in China. The first order codes include potential strategies to combat Chinese censorship and US-China relations. An overview of all codes in the analysis can be found in Appendix 1. Appendix 4 contains an overview of business case comparisons.

Coding is done with the use of the Atlas.ti program in order to allocate quotes and concepts related to the four companies, censorship in China and the US-China relations related to censorship into first order codes. These codes are then split into more specific second order codes and later grouped into categories. Afterwards, conclusions and inferences will be made based on perceived patterns in the data and these conclusions are discussed in the findings and the conclusion.

4. RESULTS In order to get an in-depth overview of how complying with the censorship requirements in China affects US multinationals, it is first crucial to determine what the censorship process entails in China. This will be described with the reasoning behind censorship in China, the measurements for censorship in China and the controlled speech of organizations. Additionally, the selected business cases are examined in order to compare and analyze the situations of the NBA, Blizzard, Google and Apple related to complying with censorship requirements and the effect of compliance on stakeholder perception in the United States. The final aspect of the results section will cover the US-China relations related to the censorship policy to determine the current state of affairs between the two countries and potential changes in the future.

4.1 Reasoning behind censorship in China There is a distinction between how the reasoning behind censorship is perceived by the leaders in China and how it is perceived in the United States (Economy, 2018; Blumenthal, 2020). The perception in China is described as: “For Xi Jinping, however, there is no distinction between the virtual world and the real world: both should reflect the same political values, ideals, and standards. To this end, the government has invested in technological upgrades to monitor and censor content. It has passed new laws on acceptable content, and aggressively punished those who defy the new restrictions” (Economy, 2018). China sees the internet as a part of their sovereignty and feels like they should regulate the internet in a similar or more strict way compared to other aspects of society such as the media.

The People’s Republic of China (PRC) employs censorship efforts such as the “Great Firewall” and the “Golden Shield” program (Eades, 2013; Roberts, 2017; Roberts & Pan, 2019). As is made clear from the quote, the key aspect is that China considers the internet to be part of their sovereign state and regulatory authority. This idea of “internet sovereignty” or “data sovereignty” has led to the PRC proposing an International Code of Conduct on data security to the United Nations to effectively put states in control of the internet (Roberts, 2017). In addition to this, in 2019, a United Nations committee passed a cybercrime resolution supported by Russia and China (Sherman & Raymond, 2019). The intent behind this treaty was to create an international law that would facilitate the repression of political dissent through the internet in these countries (Sherman & Raymond, 2019). As countries such as Russia and China advance their internet model, democracies

23 have to deal with tensions in their approach to internet governance. This tension leads to countries like the United States losing support for a truly global and open internet under the perception of protecting countries from cybercrime (Sherman & Raymond, 2019). This highlights that countries such as China and the United States have opposing viewpoints of how to handle the internet as a country.

The perception of the reasoning behind the censorship in the United States differs greatly from how China views its policy. In a senate foreign relations subcommittee in the United States, the reasoning behind the censorship policy was discussed. It was described as: “the Chinese Communist Party has constructed this massive propaganda and censorship apparatus because it considers the truth to be dangerous. It does not want its citizens to know the extent of its corruption, its repression, its mismanagement of the economy, and of crises such as the current virus, bird flu in 1997 and SARS in 2003.” (Blumenthal, 2020)

This indicates that China and the United States are on opposing sides of this policy, since China believes it is their right to police the internet while the United States believes that policing the internet is a repression of the people. Countries with conflicting norms and values often feel a certain way about a foreign country’s policy but are reluctant to actively try and influence these policies (Interview with Ross, 2020). However, the censorship in China is now affecting countries worldwide as countries are enduring the global Covid-19 pandemic. The disinformation spread by China in addition to the silencing of the Chinese citizens who wanted to speak out about the severity of the virus, is said to have created a situation in which the virus is expected to have been more widespread than it would have been if the country had been forthcoming with information (Blumenthal, 2020; Rogin, 2020; Zhang, 2020). If China would have been forthcoming with information concerning the virus, other countries could have been more prepared. This leads to the situation that the censorship policy in China has directly affected multiple countries worldwide. This results in an increasing awareness related to the censorship policy in China and how it affects other countries (Roberts, 2017; Blumenthal, 2020; Economy, 2018).

4.2 Measures for censorship in China When looking at the censorship policy in China, it is important to take into account what measures China has put in place in order to facilitate this censorship. China’s main form of foreign censorship called the “Great Firewall”, blocks Chinese internet users from using Facebook, Twitter, Google

24 and other foreign websites. Chinese citizens can use a virtual private network (VPN) in order to get around the firewall, but this is something only few people in China do (Roberts & Pan, 2019).

The censorship situation in China provides an interesting dynamic. The inhabitants know that their internet is censored, but over time, they go through a normalization process (Wang & Mark, 2015; Roberts, 2017). This implies that citizens in China consider the censorship policy more normal over time, leading to a situation in which the Chinese citizens do not actively try to counteract censorship (Roberts, 2017). Another example of the normalization process is that Chinese citizens feel that the censorship policy does not affect them in a major way (Roberts, 2017; Roberts & Pan, 2019). This can be further explained by the possibility of substitutes for the Chinese people in that: “Chinese users generally don't try to evade censorship because they don't need to - they have homegrown social media options like Weibo, WeChat and Douyin. These Chinese tech companies censor content for the Chinese government. Sometimes, they make their own censorship decisions to preempt government sanctions; other times they take directions from the government.”(Roberts & Pan, 2019)

The censorship in China of foreign services and companies therefore does not seem to affect the Chinese citizens in a significant way since they have domestic alternatives. However, the censorship in China currently encompasses more than only services and companies. There are also strict regulations in place for Western journalists. For example, China’s censorship policy when it comes to foreign media is that they are only welcome in China and to write about China if it portrays China in positive manner. The Chinese government monitors and bans Western journalists who publish content which portrays China in a negative light (Blumenthal, 2020; Parker, 2013). An example of China banning Western journalists occurred when three Wall Street Journal journalists were kicked out of China after writing an article highlighting the risks China’s governmental system poses to the world. In addition to this, the New York Times’ website was blocked after an article describing the wealth of Wen Jiabao, the 6th premier of the People’s Republic of China came out (Blumenthal, 2020). An example of self-censorship related to the censorship policy in China occurred when Bloomberg self-censored a report on the wealth of Princeling families in order to protect their journalists or their bottom line (Blumenthal, 2020; Parker, 2013).

“The most powerful weapon China has to bend the West to its ideological agenda is the lure of the Chinese market” (Blumenthal, 2020). The market size and potential incentivizes cause American companies and organizations to comply with demands set by China in order to get or maintain access to the Chinese market (Blank, 2019; Blumenthal, 2020). This causes a situation in which MNEs are careful of potentially offending China, leading to an increasing influence of China over the business operations of MNEs. This increasing influence frequently causes foreign MNEs to opt for a non-engaging CPA approach in order to appease the Chinese stakeholders and to obtain pragmatic legitimacy in China.

4.3 Controlled speech of organizations by China China’s influence is starting to reach beyond their own borders (Blumenthal, 2020; Rogin, 2020). Rather than only affecting companies and citizens in China, the country is increasingly interested in influencing what companies and people abroad do and say about China. One aspect in the United States that China has started to influence is pop culture. China is aware that their citizens have great admiration for American sports and pop culture stars. China believes that they have to control what these figures say (Blumenthal, 2020). An example of this is basketball star James Harden, who publicly apologized to China after his team’s general manager voiced his support for the protests in Hong Kong (Blumenthal, 2020; Rodrigo, 2019).

As mentioned earlier, the promise of the large market potential in China is significant motivation for foreign companies and organizations to comply with censorship demands by China. Whenever a situation occurs in which an MNE does something that offends China, the government is quick to punish the company. While the censorship regulation can only be implemented in China, China uses its market as a bargaining chip in order to censor foreign MNEs (Blank, 2019; Blumenthal, 2020; Rogin, 2020; Shepherd, Ahmed & Nicolaou, 2019). In 2018, Marriott’s online bookings in China were removed for one week after an employee “liked” a tweet supporting the sovereignty of Tibet. The hotel chain quickly apologized to China and fired the employee (Blank, 2019; Haas, 2018; Rogin, 2020). Versace, Coach and Givenchy apologized for a t-shirt showing Hong Kong on a map that was not sanctioned by China (Holland & Wang, 2019; Rogin, 2020). Mercedes-Benz apologized to China for quoting the Dalai Lama in an Instagram post (Blank, 2019; Cain, 2018; Rogin, 2020). China appears to be highly particular in what foreign companies can say or do with regards to China. It seems the only way to do business in China is to come across as apologetic

26 whenever China perceives that a company has made a mistake. This apologetic response is in line with a non-engaging CPA approach which appears to be the best method for gaining pragmatic legitimacy in China. Judging by the potential punishment of being excluded from the Chinese market, it is unlikely that foreign MNEs will choose an engaging CPA approach when it comes to censored topics in China.

4.4 Increasing stakeholder perception It is important to understand whether and how the American people perceive a company’s actions in China. In order to achieve that, it is initially important to determine to what extent the Chinese censorship affects American citizens in their day to day lives. There appears to be a growing awareness in the US of China’s censorship practices that occur worldwide in that: “Millions of Americans appear to be realizing the power and breadth of China's ability to censor and control on a worldwide scale. China has a history of leveraging access to its massive market of 1.5 billion consumers to get foreign companies to bend to its will, squeezing apologies out of multinational retailers and airlines alike.” (Pandey, 2019)

With an increase in publicized instances in which Chinese censorship affects American companies, there appears to be a growing understanding and realization of this censorship in the US (Palmer, 2019; Pandey, 2019; Shepherd, Ahmed & Nicolaou, 2019; Rogin, 2020). This increase in publicized instances was partially caused by large companies such as the NBA bringing awareness to the effect of Chinese censorship in the United States. However, American multinationals are not the only group that is affected by the censorship. In fact, the American society and culture also seem to be affected, which causes a response by the stakeholders in the US. This is described as: “Pushback in the US is in part driven by growing concerns that Chinese censorship is rippling through American culture and society. Hollywood, in particular, has tiptoed around Beijing to ensure commercial success in China.”(Shepherd, Ahmed & Nicolaou, 2019). This relates back to China’s desire to influence American pop culture to portray China in a positive light (Blumenthal, 2020). In order for American movies to be eligible for the Chinese market, they need to be adapted to Chinese standards, in which there is no room for a negative depiction of China (O’Connor & Armstrong, 2015; Parker, 2013). This causes a complicated situation for Hollywood, either to ignore the sensitivities from China and lose billions of dollars in revenue, or to adapt the content for China at the expense of the original intent of the movie (O’Connor & Armstrong, 2015). Some

27 examples of movies that were banned in China as a result of a negative perception are Kundun and Seven years in Tibet (O’Connor & Armstrong, 2015).

A good way to describe the complicated situation that American companies find themselves in with regards to China and their home country of the United States is that: “American and international firms are caught between a rock and a hard place. As they compete for profits and market share, they must navigate between the legal regimes and political demands emanating from Beijing on the one hand and democratic societies on the other” (Cook, 2018). This relates back to the proposition that pragmatic legitimacy in China and moral legitimacy in the United States are in conflict. Either the MNE opts for pragmatic legitimacy in China and has the risk of losing moral legitimacy in the United States or the MNE puts greater importance on the norms and values of the United States, and loses pragmatic legitimacy in China. For many MNEs, China is one of their largest markets, often tilting the decision in favor of pragmatic legitimacy in China.

The US government is also starting to deem Chinese censorship as a global problem. Both Congress and the Senate have had multiple informatory meetings with experts related to the effect of Chinese censorship on Americans (Blumenthal, 2020; Cook, 2018). The US government is in favor of American MNEs upholding American norms and values as they go abroad and will likely act if they feel this is not the case. Additionally, in the wake of the Covid-19 pandemic, the Trump administration has spread awareness related to the dangers of Chinese censorship and disinformation for the American citizens (Rogin, 2020). This relates back to the earlier notion that a more forthcoming China, related to providing information on the Covid-19 virus, could have helped other countries be more prepared (Blumenthal, 2020; Rogin, 2020).

It therefore appears that there is a growing awareness of the Chinese censorship policies and how they affect companies and people in China. However, there is a need for a more detailed analysis on the response of the American people when American companies are actively complying with these censorship demands. In order to determine this, 4 business cases in which some form of compliance with these demands occurs are examined.

4.5 Business case studies In order to determine to what extent complying with the censorship requirements in China affects the stakeholder perception for US multinationals in their home market, the business cases of the NBA, Blizzard, Google and Apple are compared and analyzed. All four cases cover the actions of

28 the companies related to the censorship requirements by China, the influence of the company in the Chinese market, the compliance with the censorship requirements and the stakeholder perception in the United States.

4.5.1 National Basketball Association (NBA) The NBA is a cornerstone of American sports and entertainment and was created in 1949. It is among the most highly regarded sports organizations with nearly 500 million fans in China (Zilgitt & Medina 2019). Recently it endured a controversy surrounding Chinese censorship that elicited a large amount of responses from their stakeholders in their home market. The general manager of the Houston Rockets tweeted his support for the protests in Hong Kong. Chinese technology conglomerate Tencent cancelled digital streaming of Rockets’ games in response. This led to the NBA and Morey putting out a statement apologizing for the tweet (Roberts & Pan, 2019).

This public apology resulted in responses from a variety of different stakeholder groups who voiced their opinion on what had transpired. The government responded in a fairly unanimous way, in that a bipartisan set of US lawmakers from Congress and the Senate wrote a letter to the NBA indicating their disapproval of how the company handled the situation. It was bipartisan in the way that highly politically diverse US lawmakers from Ted Cruz of Texas to Alexandria Ocasio-Cortez from New York were a part of the letter (Congress of the United States, 2019; Lane, 2019). A key part of the letter included: "The NBA should have anticipated the challenges of doing business in a country run by a repressive single party government, including by being prepared to stand in strong defense of the freedom of expression of its employees, players, and affiliates across the globe." ( Congress of the United States, 2019; Lane, 2019). The request from the US lawmakers included that they expect the NBA to be united against potential future boycotts or selective treatment by China, especially with their higher influence in comparison with other American companies (Congress of the United States, 2019; Lane, 2019).

Another stakeholder group of the NBA, the media, responded in an equally disapproving way. One journalist wrote: “An American business, one that prides itself on supporting freedom of speech in America, became an arm of Chinese censorship. The NBA isn't just following Chinese law in China; it's imposing the Chinese Communist Party's rules internationally”(Palmer, 2019). This notion of imposing the Chinese censorship rules internationally is a key part of the negative stakeholder response. In the United States, the NBA allows their players and employees to comment on any

29 type of political policy while any mention of a political incident in China is off limits (Irfan, 2019). This is not just when the NBA is in China but also when they speak about China in the United States. This creates a situation in which China is able to impose its censorship regulations on foreign MNEs in their home countries, leading to concern from stakeholder groups such as the US government and the media who fear that the NBA values revenue from China over the norms and values in the United States. The NBA ended up giving another statement responding to the negative response by its stakeholders, indicating that it supported the freedom of speech of their employees to the dismay of China (Booker, 2019; Irfan, 2019).

As a result of the popularity and brand awareness of the NBA in the United States, the NBA is held to a high standard when it comes to protecting American norms and values in their business operations (Lee, 2019; Palmer, 2019). This perception is a key difference compared to how other American companies who are active in China are perceived. Rather than primarily complying with the censorship requirements when in China, the NBA has apparently also imposed censorship on their employees when in the US. Due to the public awareness of the NBA, this imposed censorship was widely publicized and elicited a response from the stakeholders. The NBA’s apology broadcasted the situation to a wider audience who, as a consequence, became more aware of China’s influence abroad (Lee, 2019; Palmer, 2019). To many people, it may hit close to home to see that China can actively alter business operations in the United States. This perception is widely shared and described as:

“Incidents that might once have gone unremarked by Americans are now drawing public attention. Partially that's due to the nature of the NBA itself; Americans care a lot more about basketball than they do about airline bookings—and perhaps a lot more about freedom of speech in the United States than about Hong Kong itself.” (Palmer, 2019)

“But unlike in previous cases, where U.S. companies' attempts to soothe Chinese audiences went largely unnoticed by the American public, the NBA's apology led to push back from American lawmakers and fans to stand up to Beijing.” (Lee, 2019)

Fans of the NBA, arguably the most important stakeholder group to the NBA, also responded to the situation. During a NBA game on October 9th, 2019, between the Washington Wizards from the United States and the Guangzhou Long Lions from China, several signs and banners appeared in the crowds reading “Free Hong Kong” and “Google: Uyghurs”. Security quickly removed these

30 signs and banners from the Capital One Arena stadium in Washington, stating that signs, banners, posters and flags were not allowed regardless of the political nature (Conklin, 2019). It is unclear whether the fans were protesting the situations in China in particular or the apologetic response from the NBA impeding the freedom of speech regarding these topics.

The NBA is, however, in a fairly unique position since there is no domestic equivalent for the NBA in China, and with the current popularity of basketball and the NBA in China, they appear to have significantly more influence in China than other American companies with a domestic substitute (Roberts & Pan, 2019). The NBA has 200 million followers on social media in China and nearly 500 million in China watched the NBA games in the 2018-2019 season. There are also around 300 million people in China who play basketball, making it the most popular sport in China (Blank, 2019; Zillgitt & Medina, 2019). This creates a significant influence for the NBA in China since there is a large demand for the NBA in China. This influence and the domestic response to the controversy caused the NBA to reevaluate the situation and quickly came to Morey’s defense, with the NBA commissioner Adam Silver indicating that the NBA firmly supports the freedom of expression of its players, employees and team owners (Booker, 2019; Irfan, 2019). This is an engaging CPA approach by the NBA and is different from how US companies have previously responded to the Chinese pressures, potentially explained by their greater influence. This influence can be described as: “While the NBA faces an economic hit for resisting censorship, it may have more leverage vis-a-vis the Chinese government than U.S. social media companies do. If Beijing bans NBA coverage, die-hard fans might seek alternative ways of viewing games that involve circumventing censorship. This potential gateway risk could give more incentives to the Chinese government to strike a deal with the NBA rather than blacklist it.” (Roberts & Pan, 2019)

Christopher Balding, associate professor at Fulbright University in Vietnam reiterated this point in an interview with Sputnik News, stating that the potential response to controversy depends on the number of Chinese alternatives or competitors that exist (Irfan, 2019). While the NBA has a lot of influence in China as a result of their large fan base, it is still stuck between a rock and a hard place, in that it needs to decide whether to maintain American principles of freedom of speech and expression going forward or whether to diminish these principles in order to have access to one of the largest markets in China (Blank, 2019; Shepherd, Ahmed, Nicalauo, 2019). For context, China makes around $500 million annually from doing business in China (Palmer, 2019; Zillgitt &

Medina, 2019). NBA Commissioner Adam Silver stated that the NBA expected to lose hundreds of millions of dollars following the rift with China, but no actual number related to the losses has been released (Deb, 2020).

Robert Ross, professor at Boston College, deems the controversy as a short term situation and feels that the controversy will not harm NBA sales or popularity when it returns after the coronavirus pandemic (Interview with Ross, 2020). It can therefore be expected that in the specific case of the NBA, while complying with the Chinese censorship requirements elicits a negative response from its stakeholders, the NBA’s business going forward will not be significantly harmed. The initial non-engaging CPA approach caused a negative stakeholder response in the United States and the subsequent engaging CPA approach caused a negative stakeholder response in China. This contributes to the proposition that it is difficult to balance pragmatic legitimacy in China with moral legitimacy in the United States.

4.5.2 Activision Blizzard The American video game company Blizzard produces well-known titles such as Heartstone, World of Warcraft and Overwatch, each gathering a significant player and fan base with professional, competitive tournaments. For context, Overwatch has sold 50 million copies worldwide since its release in 2016, resulting in over $1 billion in revenue (Carpenter, 2017; Ballard, 2020). This makes Blizzard a significantly large player in the gaming industry, which is valued at $150 billion (Ballard, 2020). Recently, the company has been going through a controversy after suspending a professional E-sports player going by the name Blitzchung, after he voiced support for the protestors in Hong Kong (Chan, 2019; Pandey, 2019; Roberts & Pan, 2019). The event generated significant concern, from various stakeholder groups, such as from members of Congress to people on Reddit, that American companies were going to cave to China in order to access their market (Roberts & Pan, 2019; Webb, 2019). For Blizzard, China is one of the world’s largest video gaming markets in the world, indicating that it is in Blizzard’s interest to maintain good relationships with China (Roberts & Pan, 2019). Blizzard also has Chinese investors. Tencent, one of China’s largest companies owns a 5% stake in its holding company, Activision Blizzard (Webb, 2019).

A was seen in the situation with the NBA, giving in to Chinese censorship, thereby choosing a non- engaging CPA approach, can create a backlash in other markets, hurting a company’s bottom line.

Blizzard faced a user boycott in response to the suspension of Blitzchung (Roberts & Pan, 2019; Webb, 2019). Customers deliberately refrained from using games made by Blizzard and enticed others to do the same through social media campaigns. Blizzard is facing significant backlash from some of their most valuable stakeholder groups, their employees and their customers (Fried, 2019). The employees of Blizzard staged a walkout and covered up a stone reading ‘every voice matters’ on the Blizzard campus (Takahashi, 2019). Blizzard’s took the non-engaging CPA approach further than the NBA, suspending a player and taking away his prize money. This resulted in a clear response in the United States which is described as: “Blizzard's decision has sparked outrage from Americans, who say Blitzchung's comments should be protected as free speech — especially given that Blizzard is an American company. Supporters of the protests in Hong Kong accused Blizzard of compromising its principles to protect its business interests in China.” (Webb, 2019)

Fans and customers also responded to the controversy, vowing to boycott Blizzard until it changed its stance on the Hong Kong protests. Message boards for Blizzard’s most popular games were filled with calls for a boycott of Blizzard. The topic “#Blizzardboycott” became trending on twitter, indicating the dismay and feeling of betrayal the fans and customers had in response to the actions of the company (Webb, 2019). Fans showed pictures of them deleting their Blizzard accounts and cancelling their World of Warcraft subscriptions (Webb, 2019).

The media showed their dismay over the idea that Blizzard was prioritizing its relationship with China over protecting the free speech of its players. Blizzard subsequently denied this, but the thought process was already in place (Webb, 2019). Competitors of Blizzard also criticized the decision in a similar manner. Epic Games, the company that created the game “Fortnite” stated that none of their players would be punished for sharing their opinions on politics or human rights (Webb, 2019). An interesting aspect of this is that Tencent, the Chinese company with a 5% stake in Activision Blizzard, owns 40% of Epic Games, indicating that the company should have a greater interest in maintaining relationships with China, but instead appears to put a higher value on freedom of speech (Webb, 2019). Epic Games states that it would in this case have chosen moral legitimacy in the United States over pragmatic legitimacy in China.

The US government also indicated their disapproval for the decision made by Blizzard, in a bipartisan letter reminiscent of the letter sent to the NBA as mentioned earlier (Congress of the United States, 2019). US lawmakers including Alexandra Ocasio-Cortez (Democratic member of

33 congress for New York), Marco Rubio (Republican senator for Florida) and Ron Wyden (Democratic senator for Oregon), stated that Blizzard has to decide whether to look further than the bottom line and promote American values or to give in to the demands set by China (Congress of the United States, 2019; Hamilton, 2019; Shanley, 2019).

This situation puts Blizzard in a difficult position, it is dependent on the Chinese market and unlike the NBA, they do not have the same influence in China since a smaller group of Chinese citizens would be affected by a possible ban from China. The company appears vulnerable to the expanding efforts by China to control the public discussion of situations in China (Rogin, 2020). Blizzard therefore has to find a balance between pragmatic legitimacy in China and moral legitimacy in the United States. This contributes to the propositions that pragmatic legitimacy in China and moral legitimacy in the United States are difficult to balance and that complying with Chinese censorship requirements negatively affects moral legitimacy in the United States.

Robert Ross, professor at Boston College, while comparing the cases, indicated that the retaliation against Blizzard was far more severe due to it being more personal. The difference between the two is that you are dealing with personal interactions on the web rather than going into a store buying basketball shoes (Interview with Ross, 2020). It can therefore be expected that in situations similar to Blizzard, in which people perceive the controversy as being a personal issue in which they feel someone is wronged, the response by the stakeholders will be far more negative and will result in actual damage to both the brand as well as the profits of a company as consumers are expected to refrain from or think twice about using the company’s products in the future.

4.5.3 Google Google is one of the largest and most influential companies in the world today. It has, however, never fully been able to do business in China. Google withdrew from China in 2010 after not agreeing with the Chinese censorship policy (Yuan & Wakabayashi, 2018). In 2018, various reporters and employees revealed that the company was working on a new search engine for the Chinese market called Dragonfly. The search engine was said to comply with the Chinese censorship demands by removing various sensitive topics such as references to Tibet, Taiwan, Xinjiang, human rights issues, territorial claims and the demonstrations in Hong Kong (Roberts & Pan, 2019; Deyer, 2016). The potential decision from Google to go back to China and comply with

34 the censorship demands was not received well by their stakeholders. This was in part because the company was planning to do exactly what they were against 8 years earlier (Roberts & Pan, 2019).

Compared to the NBA, Google has relatively low influence in China due to the presence of Baidu, a Chinese equivalent to the American search engine. If they want to be active in China, they have to conform to the censorship requirements set by the Chinese government. The ability to block online services from reaching potential markets in addition to the large domestic market potential, allows the Chinese government to force concessions from foreign firms (Blank, 2019; Blumenthal, 2020; Cook, 2018; Rogin, 2020; Shepherd, Ahmed & Nicolaou, 2019). It appears that this ability and the market potential allow the Chinese government to even lure in significantly large companies such as Google. Taking that into account, this leaves little room for negotiation for companies wanting to do business in China, even for companies the size of Google. If Google wants to be active in China, they have to abide by the censorship regulations.

One of the first stakeholder groups that indicated that they disapproved of the potential search engine project in China were the employees (Johnson, 2018; Nakashima, 2018). Around 1000 Google employees have sent a letter to the leaders of the company urging them to be more forthcoming when it comes to the potential project. The employees stated that there were urgent moral and ethical concerns with the project (Johnson, 2018; Nakashima, 2018). The letter urged Google executives to make it clear what their intentions were behind the project and whether the company would go along with the Chinese censorship demands (Johnson, 2018; Nakashima, 2018). One of Google’s former employees, a research scientist named Jack Poulson, stated that he resigned because he felt that the company was not upholding their standards when it comes to human right norms. Google apparently did not answer whether or not it would agree to the Chinese censorship demands (Jowitt, 2018).

The US government also responded in a concerned manner. Six members of the Unites States Senate, sent a letter to Google CEO Sundar Pichai (United States Senate, 2018). The letter referred to the situation as a worrying precedent for other companies who are seeking to do business in China without compromising their core values when China is able to force the biggest search engine in the world to conform to their censorship demands (Johnson, 2018). In addition to this letter, 16 members of Congress also expressed their concerns over Google complying with the Chinese censorship demands (Gallagher, 2018; Jowitt, 2018; Reuters, 2018). U.S. Vice President Mike

Pence stated that Google would strengthen Communist Party censorship and compromise the privacy of the Chinese customers should it proceed with the Dragonfly search engine (Reuters, 2018).

Another stakeholder group that responded to the controversy were 19 NGO’s and organizations such as Amnesty International, WITNESS and the Human Rights Watch (WITNESS, 2018). They stated that by accommodating the Chinese government’s repression of dissent, Google would actively participate in violating the rights to freedom of expression and privacy for millions of internet users in China (WITNESS, 2018). Google mentions in their Code of Conduct that it is their goal to advance the rights to privacy and freedom of expression globally for their users (WITNESS, 2018). This project would be in contrast with their own Code of Conduct. This and the potential human rights concerns are the reason why the organizations strongly urged Google to cancel the project.

Robert Ross, professor at Boston College, perceives the situation as an issue for the corporate culture of Google. Eight years ago, Google left China, not wanting to let go of their own corporate values. These values are instilled in the corporate culture of Google so a potential move back to China can come across as going against your own values to the employees (Interview with Ross, 2020). Google’s choice for an engaging CPA approach when they were active in China eight years earlier resulted in praise that Google valued American norms and values over the financial incentives in China. Google seems to opt for a non-engaging CPA approach with the Dragonfly search engine. This is in conflict with the decision the company made eight years earlier and led to a loss of trust from the employees, the government and NGO’s. This led to a decrease in moral legitimacy for Google among stakeholder groups in the United States. However, considering the degree of political risk in China, a non-engaging approach seems to be the best method for Google to obtain pragmatic legitimacy in China (De Villa et al., 2019; Liao & Yu, 2012). Google ended up cancelling the Dragonfly project. It is speculated that this was as a result of the negative responses by the stakeholders. However, this was not confirmed by Google (Su, 2019; England, 2019).

For Google, their idea to potentially make a search engine which would be suitable for the Chinese market, resulted in a lot of negative responses (Johnson, 2018; WITNESS, 2018; Jowitt, 2018). For the employees, it is a highly personal situation, in which they might believe that the company is

36 going against their own values and their own corporate culture when wanting to do business in China. The government wants American companies to uphold American norms and values abroad. The NGO’s and organizations see this situation as a problem because Google might be contributing to the oppression of the Chinese people. One stakeholder group that did not have a significant response to the story were Google’s customers in America. This could be explained by the highly unpersonal nature of the situation for the American consumers. In addition, these actions will not change the product in the United States, so it is not likely that they associate the potential search engine in China with the usage of the search engine in America.

4.5.4 Apple Apple is an American multinational technology company, with many products that can be purchased in China (Abrougui, 2018). Apple currently has a market share in China of 8.5% in the first quarter of 2020, increasing from 7.3% in 2019. (Reuters, 2020). In recent years, Apple has selected a non-engaging approach when it comes to Chinese censorship demands in order to maintain pragmatic legitimacy in China. Apple has complied with Chinese censorship demands on multiple occasions. These instances often concern only one or two stakeholder groups, thereby having lower public awareness than companies such as the NBA or Blizzard who were widely publicized. The stakeholder groups that have displayed continuous concern related to Apple’s compliance with Chinese censorship requirements are the US government and various NGOs (Chesser, 2018; Tufekci, 2019).

There are several ways in which Apple complied with Chinese censorship demands. The first was through taking down Virtual Private Networks (VPN) that allowed Chinese citizens to surpass the “great firewall” internet barrier in 2017 (Abrougui, 2018; Cadell, 2017). The second way was through removing applications from the app store, including HKmap.live which showed the location of Chinese police officers during the Hong Kong protests, the Quartz news app, after ongoing documentation related to the Hong Kong protests and the Taiwanese flag from its emoji keyboard in Hong Kong (Fried, 2019). The third way was through storing user data locally in order to comply with the 2017 Cybersecurity law in China, which required foreign companies to store personal data of Chinese citizens within Chinese borders, rather than on international servers (Abrougui, 2018). The decision to store user data locally in China elicited a response from

37 organization Amnesty International, which stated that it would initiate a social media campaign against Apple (Chesser, 2018).

Taking down the VPN’s naturally caused a negative response from VPN operators located in various countries worldwide. ExpressVPN stated that they were troubled to see Apple aiding China’s censorship efforts (Cadell, 2017; Mozur, 2017). Sunday Yokubaitis, president of privacy and security software company Golden Frog, stated that he was disappointed that Apple caved to pressure by China even though there is no law or regulation that would make VPN’s illegal (Cadell, 2017; Mozur, 2017). He also stated that he sees internet access as a human right in China, and that he expected Apple to value human rights over profit (Cadell, 2017; Mozur, 2017).

Apple received a lot of negative feedback from the American government over the removal of the HKmap.live application, including feedback from U.S. senators and pro-democracy Hong Kong legislators (Lee, 2019; Tufekci, 2019). This caused them to reinstate the application, calling it a mistake to remove the app. However, People’s Daily, the official newspaper of the Communist Party of China stated that the decision would cause trouble for Apple (Tufekci, 2019). In response, Apple deleted the app again, once more inciting negative responses from the American government (Tufekci, 2019).

There is a growing interest among Apple’s shareholders to know where the company stands when it comes to the censorship requirements of the Chinese government. “Apple has faced a large shareholder rebellion over how the company complies with government censorship, as it comes under growing pressure for its role in China” (Titcomb, 2020). A proposal for Apple to disclose the degree of compliance with Chinese censorship requirements at a shareholder meeting in February of 2020 did not receive enough support, but the support had grown since a previous shareholder meeting, indicating increasing pressure from investors (Titcomb, 2020; Turvill, 2020). SumOfUs, a pressure group advocating for people over profits, brought the proposal forward at the annual shareholder meeting, stating that Apple was aiding the repression of Uighurs, Tibetans and other rights activists. Two of Apple’s advisory groups, ISS and Glass Lewis, recommended that shareholders supported the motion (Titcomb, 2020; Turvill, 2020). Apple sells billion dollars’ worth of products in China through complying with demands from China while many of America’s other tech companies are banned (Titcomb, 2020). This adds to the CPA theory that in order to do

38 business in China, an MNE has to take a non-engaging CPA approach (De Villa et al., 2019; Liao & Yu, 2012; Liu et al., 2019).

Greatfire.org, a group that tries to combat Chinese censorship, stated that Apple’s decision to comply with the Chinese censorship requirements could put pressure on other companies to do the same thing and even said it might result in Chinese citizens experiencing censorship all over the world instead of only in China (Denyer, 2017; Greatfire, 2014). The group feels that Apple CEO Tim Cook and General Secretary Xi Jinping have a common perception of the internet in that: "It is undeniable that Tim Cook and Xi Jinping have a shared vision of the internet. Xi wants to be able to control all information and silence those who may threaten his leadership. Cook helps him with vast, unaccountable, implementation of censorship across Apple products." (Denyer, 2017)

Apple finds itself in a complicated situation. China is Apple’s largest market outside of the US, indicating that it is crucial for them to stay active in that market (Mozur, 2017). This has, however, made them more vulnerable than other companies and with a lower influence in China since they have to maintain the non-engaging CPA approach in order to maintain pragmatic legitimacy in China. In the United States, Apple’s brand is perceived to be about freedom, fairness and equality, which is in contrast with the suppressive regime in China (Hersko, 2019). Due to this contrast, it can be expected that if Apple keeps complying with the censorship requirements in China, they will keep going through controversies in their home market. This adds to the proposition that complying with Chinese censorship requirements leads to a loss in moral legitimacy in the United States. Apple, as of June 15th, 2020, has not faced a significantly negative response from their stakeholders resulting in financial losses such as the NBA and Blizzard. However, if the company maintains the non-engaging CPA approach when it comes to censorship in China, it can be expected that this will change in the future, as China’s censorship requirements increase. Another possibility for a negative stakeholder response could occur if the degree of personal involvement increases and Apple’s customers in the United States feel that the company is going against their perceived brand image in other countries they are active in.

4.6 US – China relations on censorship The US-China relations were looking up as both countries signed a trade deal in January of 2020. However, the Covid-19 pandemic quickly increased tensions between the two countries (Bloomberg, 2020). The United States feels that China is partially responsible for the spread of the

39 virus and has stopped American funding to the World Health Organization (WHO) over the feeling that the organization was too close to China (Bloomberg, 2020). With high tensions between the two countries, it can be expected that the relationship will not get better anytime soon. The trade friction between the two countries originally started towards the end of the Qing dynasty, China’s last feudal government and continues until today (Chen, 2018). Ever since the US government approved the entry of China into the World Trade Organization in 2001, there has been an ongoing debate on free speech and censorship between the two countries (Chen, 2018). The United States is an avid believer in a free internet and China considers the internet to be a part of their sovereignty.

In all 4 business cases, the government responded in a negative way to American companies complying with Chinese censorship demands. Most of these responses were requests and advice on what the government thinks the companies should do, but it is intriguing to know to what extent the American government actively tries to influence or alter the censorship policy in China. “Combating internet censorship in China and helping Chinese internet users evade government censorship and surveillance has been identified as an important goal for U.S. foreign policy” (Eades, 2013). The US Agency for Global Media in collaboration with the Open Technology Fund have launched several projects intended to inform Chinese citizens on the threats of censorship, how to circumvent this censorship, how to communicate securely online and how to freely express themselves (Cunningham, 2019).

Robert Ross, professor at Boston College, states that interference in foreign policy can often be counterproductive towards that what the government is trying to achieve. When there were rumors circling around that Americans were supporting the protestors in Hong Kong, it created a more dangerous situation in Hong Kong (Interview with Ross, 2020). This is described as: “The very act of trying to interfere in Chinese politics to promote American values can make the Chinese system more oppressed” (Interview with Ross, 2020). While the American government may have good intentions, they could end up making the situation in a foreign country worse by interfering. Another problem with this interference is that if America is more ambitious and proactive in trying to manage the foreign policy of censorship in China, it may affect other tensions between the US and China such as in the South China Sea and the ongoing trade war (Interview with Ross, 2020).

While allocating resources when it comes to altering foreign policies can potentially be counterproductive and conflicting, preventing Chinese policies from affecting American

40 companies seems to be a big aspect of the current regulatory development in the United States. The Preventing Foreign Censorship in America Act is a bill which was introduces on February 10th, 2020. If passed, the bill will prohibit companies that are operating in the United States from retaliating against employees should they mention “China-related” topics. These topics could include Hong Kong, the Uighurs or the Chinese government’s human rights violations (Rogin, 2020). Comments on the bill from members of Congress include:

"Foreign adversaries think they can bully American entities into silencing their workers. But the First Amendment doesn't contain an asterisk. If you censor our basketball courts, we'll see you in the courtroom." Rep. Yvette D. Clarke (Rogin, 2020)

"The Chinese Communist Party is not content to exercise totalitarian control within its borders, increasingly, it is seeking to control freedom of thought and expression throughout the free world by pressuring foreign companies to punish or censor their employees who speak out on topics deemed objectionable by Beijing. This has to stop." Rep. Mike Gallagher (Rogin, 2020)

"As long as you're an American or on American soil, you should have the right to free speech. Congress will not stand idly by as China seeks to export its censorship abroad, the United States will remain the land of the free." Rep. Jim Banks (Rogin, 2020)

The potential passing of this bill would greatly influence the debate on censorship and would make complying with China in similar situations as Blizzard illegal rather than poorly received by stakeholders. The development of this bill indicates an increasing awareness of the effect censorship has on American MNEs and highlights that complying with censorship requirements from China leads to a decrease in legitimacy in the United States since the government is trying to make it an official offense. This indicates that the US government is a key stakeholder when it comes to American MNEs adhering to foreign policies such as complying with censorship requirements in China since they are able to actively interfere through regulation. As of June 15nd 2020, this bill has been introduced into Congress but no further action has been taken.

5. DISCUSSION AND CONCLUSION This chapter features the discussion related to the research in this thesis and the conclusions that were made as a result of this research. Additionally, theoretical contributions, practical implications, limitations and suggestions for future research are added.

5.1 Discussion of findings China’s censorship policy is an integral part of Xi Jinping’s governing strategy. It is based around the idea that there is no distinction between virtual autonomy and non-virtual autonomy. The Chinese Communist Party believes the internet to be a part of their regulatory jurisdiction, causing them to implement regulations on the usage of the internet. China effectively blocks Chinese viewers from Facebook, Twitter, Google and many other foreign websites that do not adhere by the censorship regulations. While censorship is a Chinese policy, it also influences companies and people with ties to China from other countries to avoid censored topics in an effort not to offend China.

American MNEs that do or want to do business in China are increasingly wary of offending China due to the significant market size and potential. This causes MNEs to take a non-engaging CPA approach, indicating that they will go along with the Chinese censorship requirements. Complying with Chinese censorship requirements leads to pragmatic legitimacy in China but has a negative effect on the moral legitimacy in an MNEs home market as was highlighted in the business cases. The NBA initially seemed apologetic towards China, resulting in negative responses from stakeholder groups such as the government, the media and their fans. Blizzard chose to actively take action to accommodate China, resulting in highly negative responses and boycotts from customers, employees, the government and the media. Google was considering a re-entry into China with a search engine that would comply with the censorship requirements. This resulted in a negative response from the government, employees and NGOs. Apple is very active in the Chinese market and routinely complies with Chinese censorship demands, leading to various instances in which different stakeholders respond negatively to the actions of Apple in China. In all four instances, complying with Chinese censorship demands led to a negative stakeholder perception in the United States. Additionally, it appears that pragmatic legitimacy in China is in direct conflict with moral legitimacy in the United States related to censorship since all four companies were not able to maintain both types of legitimacy at the same time.

The four business cases also show that American MNEs that are active or want to be active in China choose a non-engaging CPA approach regardless of the potential negative effects to the company’s moral legitimacy with their home country stakeholders. Apple endures multiple negative stakeholder responses because of a continued compliance with Chinese censorship requirements. Blizzard removed a player from an E-sports tournament because he showed support to the protests in Hong Kong. The NBA initially apologized to China for an employee stating his support for the Hong Kong protests. Google was willing to endure a negative stakeholder response in order to be active in the Chinese market again. This is a key notion among the business cases. The Chinese market provides an incentive for American MNEs to choose a non-engaging CPA approach in China, regardless of the negative stakeholder perception in their home market.

5.2 Theoretical contributions and practical implications This thesis concludes that complying with censorship demands from China has a negative effect on the home country stakeholder perception of American MNEs. This has several implications for CPA theory and legitimacy theory when it comes to the Chinese market. While a non-engaging CPA approach causes an increase in pragmatic legitimacy in China, it is negatively perceived in the United States, causing a loss in moral legitimacy. This implies that an MNE is unlikely to be able to have pragmatic legitimacy in China and moral legitimacy in the United States at the same time. The perception that obtaining pragmatic legitimacy in China negatively affects moral legitimacy in the United States is an interesting concept for legitimacy theory (Suchman, 1995; Zaheer & Kostova, 1999). Additionally, this thesis also concludes that American MNEs will opt for pragmatic legitimacy in China over moral legitimacy in the United States related to the Chinese censorship requirements. This contributes to legitimacy theory in that the size and potential of the Chinese market can moderate a company’s decision for a preferred type of legitimacy. This thesis contributes to the CPA theory by finding that using a non-engaging CPA approach in China related to censorship requirements can negatively affect an MNE’s stakeholder perception in their home market of the United States(De Villa et al., 2019; Liu et al., 2019). This thesis also finds that American MNEs intrinsically opt for a non-engaging CPA approach in China related to censorship requirements regardless of potential repercussions among home country stakeholders. This thesis also further confirms that a non-engaging CPA approach is the only CPA approach that leads to an increase in pragmatic legitimacy in China as was previously concluded in other research (Liu et al., 2019; Stevens et al., 2016).

There are various practical or managerial implications that follow from this research. As a manager of an American MNE, entering the Chinese market can bring forth great challenges that the MNE has not previously dealt with. It is therefore important for MNEs to have several crisis management protocols in place (Coombs, 1995). MNEs that are tempted by the significant size of the Chinese market risk losing their moral legitimacy in their home market and need a plan to repair or reclaim this legitimacy. With the right crisis-response strategies, large MNEs should be able to deal with scandals quite well, unless the scandal is perceived as a personal issue for the stakeholders. American MNEs that are active in China are going to be put into precarious situations and need to be prepared to deal with legitimacy demands from China and the US. Additionally, they need to prepare a response should they be asked to engage in censoring on behalf of China. Apple is able to be active in the Chinese market while complying with censorship demands with only minimal negative stakeholder responses. This leads to the possibility that an American MNE can be active in the Chinese market while complying with Chinese censorship demands if they are able to minimize the loss of moral legitimacy with their home market stakeholders. If MNEs are able to keep the degree of personal involvement related to the censorship in China for American stakeholders low, they should be able to be active in the Chinese market as highlighted by the business cases.

5.3 Limitations and suggestions for future research There are several limitations to the conclusions made in this thesis. Limitations of a content analysis are that it can be relatively subjective since it depends on the interpretation of the researcher. This is always a limitation of a content analysis since it requires the researcher to make inferences from various types of texts and sources. In order to account for this limitation, this thesis includes multiple types of data, including an interview, governmental documents, news articles and organization statements leading to multiple case studies in which the stakeholder response is shown. Not all groups classified as stakeholders have an equally negative response to a company complying with Chinese censorship demands, but there is little evidence for a potential positive stakeholder response. Shareholders of the four MNEs did not speak up during the censorship situation, possibly due to their financial stake in the businesses. Another limitation is that a content analysis lacks statistical proof since it contains describing a phenomenon rather than testing a hypothesis. The four business cases that were examined describe highly specific situations that are unlikely to happen in the exact same manner in the future, impeding the comparability of the theory.

However, due to the cases describing different situations in which American MNEs complied with Chinese censorship demands, the argument can be made that complying with Chinese censorship demands elicits a generally negative response among stakeholders in the United States. This generalizability depends on the degree of personal involvement stakeholders feel related to the actions of an MNE, as was highlighted in the business cases. The theory is limited to MNEs from the United States that operate in China since both countries are unique in their operational methods. The ongoing tension between the two countries is also expected to influence the governmental responses to censorship situations surrounding American MNEs.

Future research is needed in order to further understand the situation for MNEs who are both active in China and the United States. As of right now, obtaining pragmatic legitimacy in China while maintaining moral legitimacy in the United States related to the censorship requirements is considered extremely difficult to impossible. However, this needs further confirmation by means of additional examples and cases. This can potentially be done by means of a quantitative analysis in which a significantly large sample of positive or negative stakeholder responses are compared and examined. This can be done in order to obtain a general concept of American stakeholder responses related to complying with censorship requirements in China. Future research can also look into the effect of complying with censorship requirements in China on the home country stakeholders of MNEs in other regions, such as Europe, other countries in North America and South America. This will give an insight into whether the American society and its perception of China is unique in its stance on Chinese censorship requirements or whether the censorship requirements are similarly perceived in other regions. Additionally, in order to test the generalizability of this thesis, future research is required into the stakeholder perception of American MNE related to complying with censorship requirements in countries such as India, Russia, Saudi Arabia and South Korea. This is required in order to test whether only Chinese censorship requirements are negatively received or whether censorship requirements are negatively received in general in the United States.

5.4 Conclusion This thesis examined the effect of complying with Chinese censorship requirements on the home country stakeholder perception of American MNEs. This was done by means of a qualitative content analysis examining a variety of sources highlighting the home country stakeholder

45 responses of four well-known and established, American MNEs. The NBA, Blizzard, Google and Apple were all found to be complying with Chinese censorship requirements. By analyzing these various instances in which American MNEs complied with censorship requirements from China, this thesis has shown that this compliance has a negative effect on the home country stakeholder perception of American MNEs. The extent of this negative stakeholder perception is determined by the degree of personal involvement of the stakeholders. A higher degree of personal involvement is expected to lead to a more negative stakeholder response than with a lower degree of personal involvement. Additionally, as a result of the significantly large market size and potential in China, American MNEs will opt for pragmatic legitimacy in China over moral legitimacy in the United States, provided that the compliance with the censorship requirement in China is not as widely publicized as for the NBA and Blizzard. This thesis also concludes that American MNEs cannot maintain or obtain pragmatic legitimacy in China and moral legitimacy in the United States at the same time when it comes to Chinese censorship requirements.

6. REFERENCES Ashforth, B. E., & Gibbs, B. W. 1990. The Double-Edge of Organizational Legitimation. Organization Science, 1(2): 177–194.

BBC News. 2019. The Hong Kong protests explained in 100 and 500 words - BBC News. BBC News. https://www.bbc.com/news/world-asia-china-49317695.

Coombs, W. T. 1995. Choosing the right words: The development of guidelines for the selection of the “appropriate” crisis-response strategies. Management Communication Quarterly, 8(4): 447–476.

Costa, R., & Menichini, T. 2013. A multidimensional approach for CSR assessment: The importance of the stakeholder perception. Expert Systems with Applications, 40: 150–161.

Cutbertson, A. 2019. Google pulls Hong Kong protest game from app store | The Independent. Independent. https://www.independent.co.uk/life-style/gadgets-and-tech/news/google-hong- kong-protests-game-app-android-revolution-of-our-times-a9151911.html.

Darendeli, I. S., & Hill, T. 2016. Uncovering the complex relationships between political risk and MNE firm legitimacy: Insights from Libya. Journal of International Business Studies, 47(1): 68–92.

De Villa, M. A., Rajwani, T., Lawton, T. C., & Mellahi, K. 2019. To engage or not to engage with host governments: Corporate political activity and host country political risk. Global Strategy Journal, 9(2): 208–242.

Deyer, S. 2016. China’s scary lesson to the world: Censoring the Internet works.; China is confidently promoting its vision of “Internet sovereignty.” Washington Post. https://advance-lexis-com.proxy- ub.rug.nl/api/document?collection=news&id=urn:contentItem:5JV8-SHF1-DXKP-J1B6- 00000-00&context=1516831.

Freeman, R. E. 2010. Managing for Stakeholders: Trade-offs or Value Creation. Journal of Business Ethics, 96: 7–9.

Gioia, D. A., Corley, K. G., & Hamilton, A. L. 2012. Seeking Qualitative Rigor in Inductive Research: Notes on the Gioia Methodology. Organizational Research Methods, 16(1): 15–

31.

Gonzalez, O. 2019. Blizzard, Hearthstone and the Hong Kong protests: What you need to know - CNET. Cnet. https://www.cnet.com/news/blizzard-hearthstone-and-the-hong-kong-protests- heres-what-you-need-to-know/.

Hamilton, J. B., Knouse, S. B., & Hill, V. 2008. Google in China: A Manager-Friendly Heuristic Model for Resolving Cross-Cultural Ethical Conflicts. Article in Journal of Business Ethics.

Hansen, W. L., & Mitchell, N. J. 2000. Disaggregating and Explaining Corporate Political Activity: Domestic and Foreign Corporations in National Politics. Source: The American Political Science Review, 94.

Hillman, A. J., Keim, G. D., & Schuler, D. 2004. Corporate Political Activity: A Review and Research Agenda. Journal of Management, 30(6): 837–857.

Hsieh, H.-F., & Shannon, S. E. 2005. Three approaches to qualitative content analysis. Qualitative Health Research, 15(9): 1227–1288.

Jaeger, R. G., & Halliday, T. R. 1998. On confirmatory versus exploratory research. Herpetologica, 54: 64–66.

Jayaraman, K. 2009. Doing Business in China: A Risk Analysis. Journal of Emerging Knowledge on Emerging Markets, 1(1): 55–73.

Keffer, J. M., & Hill, R. P. 1997. An Ethical Approach to Lobbying Activities of Businesses in the United States. Journal of Business Ethics, 16(12/13): 1371–1379.

Liao, T. J., & Yu, C. M. J. 2012. Knowledge transfer, regulatory support, legitimacy, and financial performance: The case of foreign firms investing in China. Journal of World Business, 47(1): 114–122.

Liu, X. X., Tsui-Auch, L. S., Yang, J. J., Wang, X., Chen, A., et al. 2019. The Color of Faults Depends on the Lens: MNCs’ Legitimacy Repair in Response to Framing by Local Governments in China. Management and Organization Review, 15(2): 429–458.

Luo, A. 2019. Content Analysis | A Step-by-Step Guide with Examples. Scribbr.

https://www.scribbr.com/methodology/content-analysis/.

Luo, Y. 2001. Toward a cooperative view of MNC-host government relations: Building blocks and performance implications. Journal of International Business Studies, 32(3): 401–419.

Mayring, P. 2000. Qualitative Content Analysis. Forum: Qualitative Social Studies, 1(2): 1–12.

Mihalcik, C. 2019. Apple pulls HKmap.live app used in Hong Kong protests - CNET. Cnet. https://www.cnet.com/news/apple-pulls-hkmap-live-app-used-in-hong-kong-protests/.

Novak, J. 2019. China’s reaction to the NBA is the wake-up call the world needed. CNBC. https://www.cnbc.com/2019/10/08/chinas-reaction-to-the-nba-is-the-wake-up-call-the- world-needed.html.

Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review, 16(1): 145–179.

Palazzo, G., & Scherer, A. G. 2006. Corporate legitimacy as deliberation: a communicative framework. Journal of Business Ethics, 66(1): 71–88.

Peng, C., Liu, S., & Lu, Y. 2019. The discursive strategy of legitimacy management: A comparative case study of Google and Apple’s crisis communication statements. Asia Pacific Journal of Management.

Poppo, L., & Schepker, D. J. 2010. Repairing public trust in organizations. Corporate Reputation Review, 13(2): 124–141.

Rachman, G. 2019. Chinese censorship is spreading beyond its borders | Financial Times. Financial Times. https://www.ft.com/content/cda1efbc-ee5a-11e9-ad1e-4367d8281195.

Rowley, J. 2002. Using case studies in research. Management Research News, 25(1): 16–27.

Stevens, C. E., & Newenham-Kahindi, A. 2017. Legitimacy Spillovers and Political Risk: The Case of FDI in the East African community. Global Strategy Journal, 7(1): 10–35.

Stevens, C. E., Xie, E., & Peng, M. W. 2016. Towards a Legitimacy-Based view of Political Risk: the case of Google and Yahoo in China. Strategic Management Journal, 37(5): 945– 963.

Suchman, M. C. 1995. Managing Legitimacy: Strategic and Institutional Approaches. The Academy of Management Review, 20(3): 571-610.

Tan, J., & Tan, A. E. 2012. Business Under Threat, Technology Under Attack, Ethics Under Fire: The Experience of Google in China. Source: Journal of Business Ethics, 110.

Verkamp, J.-P., & Gupta, M. 2012. Inferring mechanics of web censorship around the world. FOCI.

Wang, D., & Mark, G. 2015. Internet Censorship in China: Examining User Awareness and Attitudes. ACM Transactions on Computer-Human Interaction, 22(6): 1–22.

Wu, X. 2007. Stakeholder identifying and positioning (SIP) models: From Google’s operation in China to a general case-analysis framework. Public Relations Review, 33: 415–425.

Zaheer, S., & Kostova, T. 1999. Organizational Legitimacy under Conditions of Complexity: The Case of the Multinational Enterprise A. The Academy of Management Review, 24(1): 64– 81.

6.1 Content analysis Abrougui, A. 2018. How will Google plug into China's all-encompassing internet censorship regime? Global Voices. Retrieved from: https://globalvoices.org/2018/11/27/how-will-google- plug-into-chinas-all-encompassing-internet-censorship-regime/

Amnesty International. 2020. Coronavirus: Stop censorship in China. Amnesty International. Retrieved from: https://www.amnesty.org/en/get-involved/take-action/coronavirus-end- censorship-in-china/

Ballard, J. 2020. Should Activision Blizzard worry about Tencent’s new “overwatch” competitor? The Motley Fool. Retrieved from: https://www.fool.com/investing/2020/03/06/should-activision-blizzard-worry-about-tencents- ne.aspx

Bergin, M. 2019. Rick Scott: ‘NBA’s refusal to denounce Communist China is shameful’. FloridaPolitics. Retrieved from: https://floridapolitics.com/archives/307815-rick-scott-nbas- refusal-to-denounce-communist-china-is-shameful

Booker, B. 2019. NBA defends ‘Freedom of Speech’ for employees as China moves to block games. NPR. Retrieved from: https://www.npr.org/2019/10/08/768225490/nba-defends-freedom- of-speech-for-employees-as-china-moves-to-block-block-games

Blank, J. 2019. China bends another American institution to its will. The Atlantic. Retrieved from: https://www.theatlantic.com/international/archive/2019/10/nba-victim-china-economic- might/599773/

Bloomberg. 2020. Five Flashpoints to Watch as U.S.-China Relations Worsen. Bloomberg. Retrieved from: https://www.bloomberg.com/news/articles/2020-05-21/five-flashpoints-to- watch-as-u-s-china-relations-worsen

Blumenthal, D. 2020. "Global Engagement Center: Leading the United States Government's Fight Against Global Disinformation Threat." Congressional Documents and Publications. Retrieved from: https://www.foreign.senate.gov/hearings/the-global-engagement-center-leading- the-united-states-governments-fight-against-global-disinformation-threat

Cadell, C. 2017. Apple says its removing VPN services from China App Store. Reuters. Retrieved from: https://www.reuters.com/article/us-china-apple-vpn/apple-says-it-is-removing- vpn-services-from-china-app-store-idUSKBN1AE0BQ

Cain, A. 2018. Mercedes-Benz deleted an Instagram post quoting the Dalai Lama – and there is a chilling reason why. The Business Insider. Retrieved from: https://www.businessinsider.nl/mercedes-benz-apologize-china-dalai-lama-instagram-censorship- 2018-2?international=true&r=US

Carpenter, N. 2017. Overwatch reaches 35 million players. DotEsports. Retrieved from: https://dotesports.com/overwatch/news/overwatch-apex-finals-ogn-runaway-gc-busan-18017

Chan, K. 2019. South Park, games company swept up in China censorship fury. APNews. Retrieved from: https://apnews.com/1a05fe5fee124a769f32dca046dc08ad

Chen, G. 2018. How intellectual property and censorship have haunted a century of China- US trade talks. South China Morning Post. Retrieved from: https://www.scmp.com/comment/insight-opinion/united-states/article/2176723/how-intellectual- property-and-censorship-have

Chesser, P. 2018. Amnesty International Joins Criticism of Apple CEO Tim Cook on China. National legal and policy center. Retrieved from: https://nlpc.org/2018/03/26/amnesty- international-joins-criticism-apple-ceo-tim-cook-china/

Congress of the United States. 2019. Activision Blizzard. Congress of the United States. Retrieved from: https://www.wyden.senate.gov/imo/media/doc/101819%20Wyden%20Letter%20to%20Activisio n%20Blizzard%20RE%20Hong%20Kong.pdf

Congress of the United States. 2019. NBA. Congress of the United States. Retrieved from: https://gallagher.house.gov/sites/gallagher.house.gov/files/NBA%20China%20Letter.pdf

Conklin, A. 2019. Security At NBA Game Confiscates Pro-Hong Kong Signs From Fans. Conservative Daily News. Retrieved from: https://www.conservativedailynews.com/2019/10/security-at-nba-game-confiscates-pro-hong- kong-signs-from-fans/

Cook, S. 2018. House Oversight and Government Reform Subcommittee on Information Technology Hearing; "Countering China: Ensuring America Remains the World Leader in Advanced Technologies and Innovation." U.S. House of Representatives documents. Retrieved from: https://republicans-oversight.house.gov/hearing/countering-china-ensuring-america- remains-the-world-leader-in-advanced-technologies-and-innovation/

Cunningham, L. 2019. Countering Chinese Censorship. US Agency for Global Media. Retrieved from: https://www.usagm.gov/2019/08/08/countering-chinese-censorship/

Deb, S. 2020. NBA expects to lose ‘Hundreds of Millions’ from China rift, Silver says. The New York Times. Retrieved from: https://www.nytimes.com/2020/02/15/sports/nba-adam-silver- china-kobe.html

Denyer, S. 2017. Apple CEO backs China's vision of an 'open' Internet as censorship reaches new heights; Apple chief is criticized for putting business before principles and legitimizing Chinese censorship. Washington Post. Retrieved from: https://www.washingtonpost.com/gdpr- consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fnews%2fworldviews%2fwp% 2f2017%2f12%2f04%2fapple-ceo-backs-chinas-vision-of-an-open-internet-as-censorship- reaches-new-heights%2f

Eades, M. C. 2013. Tear Down This Firewall: Challenging Internet Censorship in China. Foreign Policy Blogs Network. Retrieved from: https://foreignpolicyblogs.com/2013/12/23/tear-down- this-firewall-challenging-internet-censorship-in-china/

Economy, E. C. 2018. Chinese citizens. But today the country has the largest and most sophisticated online censorship operation in the world. The Guardian.

Economy, E. C. 2020. The great firewall of China: Xi Jinping's internet shutdown; Before Xi Jinping, the internet was becoming a more vibrant political space for Chinese citizens. But today the country has the largest and most sophisticated online censorship operation in the world. TheGuardian. Retrieved from: https://www.theguardian.com/news/2018/jun/29/the-great- firewall-of-china-xi-jinpings-internet-shutdown

England, R. 2019. Google officially closes ‘Dragonfly’, its controversial Chinese search project. Engadget. Retrieved from: https://www.engadget.com/2019-07-17-google-officially-closes- dragonfly-chinese-search.html

Fried, I. 2019. Tech companies are having to choose sides between Hong Kong and China. Axios. Retrieved from: https://www.axios.com/hong-kong-tensions-with-united-states-tech-23b464b8- 4272-4cf0-bec3-010d9f4b84e7.html

Gallagher, R. 2018. Google CEO hammered by members of Congress on China censorship plan. The Intercept. Retrieved from: https://theintercept.com/2018/12/11/google-congressional- hearing/

Gallagher, R. 2018. Google plans to launch censored search engine in China, leaked documents reveal. The Intercept. Retrieved from: https://theintercept.com/2018/08/01/google-china-search- engine-censorship/

Greatfire. 2014. China collecting Apple Icloud data; Attack coincides with launch of new iPhone. Greatfire.org. Retrieved from: https://en.greatfire.org/blog/2014/oct/china-collecting-apple- icloud-data-attack-coincides-launch-new-iphone

Haas, B. 2018. Mariott apologizes to China over Tibet and Taiwan error. The Guardian. Retrieved from: https://www.theguardian.com/world/2018/jan/12/marriott-apologises-to-china- over-tibet-and-taiwan-error

Hamilton, I. A. 2019. Blizzard's president admitted to fans that the company failed in its response to the 'Hearthstone' Hong Kong controversy. The Business Insider. Retrieved from: https://www.businessinsider.nl/blizzard-president-admits-failure-responding-to-blitzchung-ban- 2019-11/

Hamilton, I. A. 2019. China's grip on Apple tightens as it boots a Hong Kong police-tracking app and news app Quartz. The Business Insider. Retrieved from: https://www.businessinsider.nl/apple-boots-hong-kong-police-tracking-app-hkmap-live-2019- 10?international=true&r=US

Hardwick, T. 2020. Apple Declines Request to Testify at U.S. Congressional Hearing Probing Ties to China. Macrumors. Retrieved from: https://www.macrumors.com/2020/02/25/apple- declines-us-hearing-probing-ties-to-china/

Hersko, T. 2019. From Apple to 'South Park,' Entertainment Companies Grapple With Profit Versus Ethics in China. IndieWIRE. Retrieved from: https://www.indiewire.com/2019/10/american-companies-working-with-china-analysis- 1202183078/

Holland, O. & Wang, S. 2019. Coach, Givenchy join Versace in apologizing to Chinese consumers amid T-shirt outcry. CNN. Retrieved from: https://edition.cnn.com/style/article/coach- givenchy-versace-t-shirt-controversy/index.html

Irfan, M. 2019. US Companies Unlikely To Duplicate NBA's Defiant Stance Against China. UrduPoint. Retrieved from: https://www.urdupoint.com/en/world/us-companies-unlikely-to- duplicate-nbas-defi-733727.html

Johnson, K. 2018. Google employees reportedly sign letter in protest of China censorship project. VentureBeat. Retrieved from: https://venturebeat.com/2018/08/16/google-employees- reportedly-sign-letter-in-protest-of-china-censorship-project/

Jowitt, T. 2018. US Congress Grill Google On China Censorship Plans. Silicon. Retrieved from: https://www.silicon.co.uk/e-regulation/censorship/us-congress-google-china-censorship-236915

Kesel, A. 2019. Top U.S. General Criticizes Google For Working With China And Not With The U.S. ActivistPost. Retrieved from: https://www.activistpost.com/wp- content/uploads/2018/08/google-china-ban-1024x628-1.jpgBy

Lane, S. 2019. Ocasio-Cortez, Ted Cruz join colleagues blasting NBA for 'outrageous' response to China. The Hill. Retrieved from: https://thehill.com/policy/finance/465111-lawmakers-blast- nba-for-outrageous-response-to-chinese-boycott

Lee, D. 2019. Few convinced by Apple’s case for Hong Kong app removal. BBC. Retrieved from: https://www.bbc.com/news/technology-50009971

Lee, E. 2019. US, China Experience NBA Controversy Backlash. VOAnews. Retrieved from: https://www.voanews.com/usa/us-china-experience-nba-controversy-backlash

Loeb, S. 2016. Facebook said to be developing censorship tool for China. Vator news. Retrieved from: https://vator.tv/news/2016-11-23-facebook-said-to-be-developing-censorship-tool-for- china

Mozur, P. 2017. Apple Removes Apps From China Store That Help Internet Users Evade Censorship. The New York Times. Retrieved from: https://www.nytimes.com/2017/07/29/technology/china-apple-censorhip.html

Nakashima, R. 2018. More than 1,000 Google workers protest censored China search. The Business Insider. Retrieved from: https://www.businessinsider.com/ap-more-than-1000-google- workers-protest-censored-china-search-2018-8?international=true&r=US&IR=T

O’Connor, S. & Armstrong, M. 2015. Directed by Hollywood, Edited by China: How China’s Censorship and Influence Affect Films Worldwide. U.S.-China security and review commission. Retrieved from: https://www.uscc.gov/research/directed-hollywood-edited-china-how-chinas- censorship-and-influence-affect-films-worldwide

Palmer, J. 2019. U.S. Businesses Like the NBA Are China's Willing Tools. Foreign Policy. Retrieved from: https://foreignpolicy.com/2019/10/07/us-businesses-like-the-nba-are-chinas- willing-tools/

Pandey, E. 2019. NBA-China standoff raises awareness of threat of Chinese censorship. Axios. Retrieved from: https://www.axios.com/nba-china-censorship-adam-silver-17bd49f8-a681-4e95- a7a3-63f6f73cf01b.html

Park, G. 2019. Blizzard won't ban American players after Hong Kong protest, but team plans to forfeit over boycott; In an effort to highlight Blizzard's censorship of a Hong Kong athlete, American University students kept up the pressure by holding up a sign during a recent collegiate esports match. Washington Post. Retrieved from: https://www.washingtonpost.com/gdpr- consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fvideo- games%2fesports%2f2019%2f10%2f09%2fblizzard-wont-ban-american-players-after-hong- kong-protest-team-plans-forfeit-over-boycott%2f

Parker, E. 2013. China’s government is scaring foreign journalists into censoring themselves. The News Republic. Retrieved from: https://newrepublic.com/article/115851/censorship-china- how-western-journalists-censor-themselves

Reuters. 2018. Pence says Google should halt Dragonfly app development. Reuters. Retrieved from: https://mobile.reuters.com/article/amp/lta/idLTAL2N1WK0VF

Reuters. 2020. Apple, Huawei boost market share, as first-quarter China smartphone shipments fall: Canalys. Reuters. Retrieved from: https://www.reuters.com/article/us-smartphone-sales- china/apple-huawei-boost-market-share-as-first-quarter-china-smartphone-shipments-fall- canalys-idUSKBN22D44U

Roberts, M. C. & Pan, J. These 3 factors explain why the NBA and other companies struggle to push back against Chinese censorship. Washington Post. Retrieved from: https://www.washingtonpost.com/gdpr- consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fpolitics%2f2019%2f10%2f16 %2fthese-factors-explain-why-nba-other-companies-struggle-push-back-against-chinese- censorship%2f

Roberts, M. C. 2017. Foreign affairs; Committee: US-China economic and security review commission. Capitol Hill hearing testimony. Retrieved from:

56 https://www.uscc.gov/hearings/chinas-information-controls-global-media-influence-and-cyber- warfare-strategy

Rodrigo, C. M. 2019. NBA star James Harden apologizes to China amid Hong Kong furor. The Hill. Retrieved from: https://thehill.com/homenews/464622-james-harden-apologizes-to-china- amid-hong-kong-furor

Rogin, J. 2020. Congress moves to stop China's censoring of Americans; Companies can't be left to fend for themselves. Our government and society must make clear we are not going to stand for it. Washington Post. Retrieved from: https://www.washingtonpost.com/gdpr- consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fopinions%2f2020%2f02%2f1 3%2fcongress-moves-stop-chinas-censoring-americans%2f

Rogin, J. 2020. China’s coronavirus campaign is putting lives at risk. Washington Post. Retrieved from: https://www.washingtonpost.com/gdpr- consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fopinions%2f2020%2f03%2f1 8%2fchinas-coronavirus-propaganda-campaign-is-putting-lives-risk%2f

Shanley, P. 2019. Alexandria Ocasio-Cortez, Ted Cruz, More Lawmakers Condemn Blizzard, Apple in Open Letter. The Hollywood Reporter. Retrieved from: https://www.hollywoodreporter.com/news/alexandria-ocasio-cortez-ted-cruz-more-lawmakers- condemn-blizzard-apple-open-letter-1248770

Shepherd, C., Ahmed, M., Nicolaou, A. 2019. Beijing's full-court press; With one tweet about Hong Kong's protests, the NBA's huge business in China is now under threat. The dispute is part of a broader contest between Beijing and Washington over trade, the internet and values. Financial Times. Retrieved from: https://www.ft.com/content/993aac9e-ec09-11e9-a240- 3b065ef5fc55

Sherman, J. & Raymond, M. 2019. The U.N. passed a Russia-backed cybercrime resolution. That's not good news for Internet freedom.; Moscow is becoming far more skilled in advancing its agenda at the U.N. The Washington Post. Retrieved from: https://www.washingtonpost.com/gdpr- consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fpolitics%2f2019%2f12%2f04 %2fun-passed-russia-backed-cybercrime-resolution-thats-not-good-news-internet-freedom%2f

Su, J. 2019. Confirmed: Google terminated Project Dragonfly, its censored Chinese search engine. Forbes. Retrieved from: https://www.forbes.com/sites/jeanbaptiste/2019/07/19/confirmed-google-terminated-project- dragonfly-its-censored-chinese-search-engine/

Takahashi, D. 2019. Blizzard president apologizes and takes responsibility for Hearthstone free speech blunder. VentureBeat. Retrieved from: https://venturebeat.com/2019/11/01/blizzard- president-apologizes-and-takes-responsibility-for-hearthstone-free-speech-blunder/

Titcomb, J. 2020. Apple faces investor rebellion over China censorship disclosure. The Daily Telegraph. Retrieved from: https://www.telegraph.co.uk/technology/2020/02/26/apple-survives- shareholder-revolt-free-speech/

Tufekci, Z. 2019. Are China's Tantrums Signs of Strength or Weakness? Atlantic Online. Retrieved from: https://www.theatlantic.com/international/archive/2019/10/why-does-china-care- about-daryl-moreys-hong-kong-tweet/600001/

Turvill, W. 2020. Apple may be forced to disclose censorship requests from China. The Guardian. Retrieved from: https://www.theguardian.com/technology/2020/feb/25/apple- censorship-requests-china-shareholder-groups-proposal

United States Senate. 2018. Letter to Mr. Pichai Re Censorship in China. United States Senate. Retrieved from: https://www.rubio.senate.gov/public/_cache/files/9b139bf6-d0c1-4969-aaf2- 4a4aede8ed35/397FE4632728A13B6EEABDB5956550AC.8-3-18-letter-to-mr.-pichai-re- censorship-in-china.pdf

Webb, K. 2019. Blizzard broke its silence to say China didn't influence its decision to ban a professional gamer from Hong Kong, but fans aren't buying it. The Business Insider. Retrieved from: https://www.businessinsider.nl/blizzard-fans-plan-protests-after-response-hong-kong- china-blitzchung-2019-10/

Webb, K. 2019. Furious fans are firing back at Blizzard by using one of its characters in anti- China memes after the gaming company punished a pro-gamer for defending the Hong Kong protests. The Business Insider. Retrieved from: https://www.businessinsider.in/entertainment/news/furious-fans-are-firing-back-at-blizzard-by-

58 using-one-of-its-characters-in-anti-china-memes-after-the-gaming-company-punished-a-pro- gamer-for-defending-the-hong-kong-protests/articleshow/71546420.cms

Webb, K. 2019. Here's a timeline of Activision Blizzard's terrible week, as it faces fan protests after an esports athlete was punished for voicing support for Hong Kong (ATVI). The Business Insider. Retrieved from: https://www.businessinsider.com/blizzard-boycott-hong-kong-protests- activision-blitzchung-blizzcon-2019-10?international=true&r=US&IR=T

WITNESS. 2018. WITNESS AND 13 ORGANIZATIONS JOIN HANDS TO TELL GOOGLE TO CANCEL CHINA CENSORSHIP PLAN. WITNESS. Retrieved from: https://www.witness.org/witness-and-18-organizations-join-hands-to-tell-google-to-cancel-china- censorship-plan/

Yuan, L. & Wakabayashi, D. 2018. Google, Seeking a Return to China, Is Said to Be Building a Censored Search Engine. The New York Times. Retrieved from: https://www.nytimes.com/2018/08/01/technology/china-google-censored-search-engine.html

Zhang, J. Y. 2020. Harmoniously denied: The wider implications of China’s censorship on Covid-19. OpenDemocracy. Retrieved from: https://www.opendemocracy.net/en/democraciaabierta/harmoniously-denied-the-wider- implications-of-chinas-censorship-on-covid-19/

Zilgitt, J. & Medina, M. 2019. As impasse over pro-Hong Kong tweet simmers, what's at stake for the NBA in China? USAToday. Retrieved from: https://eu.usatoday.com/story/sports/nba/2019/10/09/nba-china-hong-kong-whats-at- stake/3912447002/

7. APPENDIX Appendix 1: Coding Scheme

Document Group Codes First order codes (# of Quotations) Second order codes (# of Quotations) The effect of 25 Apple conflicts with stakeholders Actions by Apple (13) censorship in business (41) Complying with demands from China (6) Influence of Apple (3) Stakeholder response to activity in China (19)

Blizzard conflict with stakeholders Actions of Blizzard (4) (48) Complying with demands from China (8) Reasons to stay in China (3) Stakeholder response to activity in China (33)

Company stakeholder perception LinkedIn (1) (10) Rising awareness of stakeholders (9)

Google conflict with stakeholders Google's plan for re-entry (5) (50) Google's previous experiences in China (6) Implications following Google's return to China (1) Requirements for doing business in China (7) Stakeholder response (31)

NBA conflict with China (65) Actions of the NBA (15) China using power to curtail free speech (9) Influence of NBA (7) Stakeholder response (31) Stakeholder response in China (3)

Censorship in China 31 Controlled speech of organizations by Continuous censorship developments (3) China (32) Forced apologies (9) Influence on US pop culture (5) Methods against censorship (4) Methods for controlled speech (10) Stakeholder response (1)

Forced self-censorship in Western Intimidation from China (1) media by China (6) Silencing of social media (3) Silencing of Western media (1)

Implications of Chinese censorship on Disruption of knowledge (2) Economy, companies and US-China Implications for US businesses (9) relations (14) Implications on how Chinese view the US (1) Implications on US-China relationship (1)

Measures for censorship in China (28) Internet Censoring (6) Internet Control Jurisdiction (4) Policing the internet usage (4) Self-censoring of Western media (1) Silencing of Western Journalist on topic of China (3) Silencing the media in China (2) Three methods for censorship in China (7)

Reasons for censorship in China (11) Autonomy over the internet (5) Keeping the Chinese people in the dark (4) Shut down criticism of China (3)

Reasons to do business in China (6) China's financial promise (5) Maximizing shareholder value (1) US-China relations on 9 Conflicting legitimacy demands censorship China-US (6)

Potential strategies to combat Chinese Effect of stakeholder response (1) censorship(12) Leverage over China (1) Strategies to counteract Chinese censorship (10)

US-China relations (15) Free speech and censorship (11) Intellectual property (1) Trade frictions (3)

Appendix 2: Interview guide Date: April 17th, 2020. Robert Ross is a political science professor at Boston College and an associate at the John King Fairbank center for Chinese studies at Harvard university. Professor Ross’ research focuses on US-China relations, East Asian security and Chinese security and defense policy. He is also an advisor for US government agencies, and he serves on the US-China working group of the US Congress. He therefore has significant experience and knowledge of US-China relations and Chinese policies, meaning that an interview with him will significantly increase the research quality of this thesis. Introduction In this interview, I hope to obtain an in-depth understanding of US-China relations and how Chinese policies such as the censorship requirements can affect the United States and American MNEs. I also hope to obtain information related to the current awareness of China’s censorship policy in the United States in order to assess whether the American stakeholders consider it an issue if an American MNE complies with censorship demands in China. Guideline questions Several guideline question were composed in order to be able to steer the conversation into certain relevant topics. 1. What is the current situation like between the United States and China, I saw various congressional documents in which the censorship in China is considered problematic, what are your thoughts on this? 2. Are the people in the US aware of the censorship in China and how this affects various US companies? Are the ethics of a company considered when making purchasing decisions? 3. Legitimacy requirements in the United States are very different from those in China, to the extent in which, following the legitimacy requirements in China is in conflict with legitimacy requirements in the United States. How does this affect the business decisions companies in the US make? 4. Blizzard example of boycott. How does complying with the legitimacy demands in China affect the stakeholder perception of an MNE in the United States? 5. If doing business in China negatively affects a company’s business in their home market, why do companies attempt to do so anyway? Is the market in China considered more important than the home market? 6. Google was recently considering re-entering China to the dismay of many of their employees, who thought they were going against one of their key principles (Do no evil). To what extent do you think US companies will change their organizations to appease China?

Appendix 3: Interview with Prof. Robert Ross of Boston College D: The first question I wrote down is, what is the current situation like between the United States and China. Because I saw various congressional documents in 2017 on a global media influence and censorship in 2020, but the initial discovery by coronavirus, in which the censorship in China is considered problematic. What are your thoughts on this. RR: Well, I don’t know what the word problematic means. Problematic for what? We don’t like Chinese censorship, well, we don’t like a lot of countries’ censorship. I am not sure, problematic for what? For our values, policy or national security? I am not sure what that means. D: That is a fair question. I meant the question that the congressional meetings are quite general but where I am going with this is.. RR: What congressional meeting was this? D: There was one in 2017 concerning the global media influence. RR: Let me think, the security committee? D: It was the security review commission. RR: You have to understand that that commission is not a congressional commission. That commission is a congressionally mandated commission in which the hearings are held by independent people, not by congress. It is a congressionally funded independent non- congressional commission. So to understand, that commission has a very conservative bent. So they write issues about Chinese political systems, Chinese censorship that would appeal to members of congress who would advocate a foreign policy based on values, ideology, ideological opposition to the Chinese system. If you are asking what the implications of Chinese censorship for American security policies are, that is a very different question and more of a question that would address that commission. Our feeling is that Chinese censorship is not a major driver of American policy towards China and that censorship in China does not have major intrication for American security in East Asia or for the relationships we have with our allies. D: Let me just tell you where I was coming from with the question and my research. I initially stumbled upon the topic when I saw how US multinationals were effectively altering their business on request of China, for example with the NBA or with Apple and Google. They were featured a lot in media. RR: So the question you were asking if I recall was the implications of complying with Chinese domestic regulations for the reputation of American companies? D: Yeah, pretty much. It is about how the stakeholders in the United States perceive them complying with various legitimacy demands abroad compared to how they would behave in the US. RR: I think generally our companies are very adaptive at adjusting to domestic conditions. Whether it is in Vietnam, in China, in Burma, in Indonesia, in Singapore. Of course, Singapore has had major issues in control over information on the web. So I think that our companies

63 understand that in a globalized world, you cannot simply carry American values with you if you want to do business in other countries. There is no single global value that can inform policy around the globe. I think our companies understand that. The question you asked is to what extent can they accommodate the domestic political systems of other countries without damaging their brand. The evidence to date shows that the brand is not harmed. Nike, for some time, had issues in Vietnam which haven’t hurt Nike in the long term. I am fairly confident that the NBA’s controversy over Hong Kong will not harm NBA sales or popularity when the NBA comes back after the corona virus. Certainly Google has not been harmed, they remain the number one search engine. None of these companies like bad press, and they will work hard to avoid that press, but it would be very hard to establish that the controversies and the combination of the political systems in other countries has hurt their brand or their revenue or profits. D: I indeed found some contradictory results on the topic. One saying that a controversy like this would hurt their brand. A videogame company called Blizzard who effectively removed a player from a tournament after he indicated that he was a part of the free Hong Kong movement. This caused a massive boycott of people not wanting to play the game or their games anymore. RR: I think that is a very narrow community. Yes, I can imagine that people who are online, playing online videogames might be subjected to various criticisms if you will, and then it becomes far more personal. When you are dealing with personal interactions on the web between people rather than going into a store buying basketball shoes. D: I can see that. So you don’t think these large companies have anything to fear in their home market? RR: I think they always have something to fear. So they have a very well-staffed public relations department whose job it is to do damage control. They are very quick to respond and are often very effective. How you would establish whether the revenue would have been greater if it had not been for the bad publicity, is very hard to establish because it is what we call a counterfactual, proving a negative. Having said that, it seems like the companies that were in earlier controversies with China are still thriving. Whether it is Google, whether it is Nike in Vietnam, maybe in China as well. These large companies in which the interaction with the consumer is somewhat removed from the controversy, if not hurt by the controversy. One way to do this is to do interviews with the public relation departments of these companies. That would be one way to try to assess how they approach these issues. D: Another example with Google is that they were trying to start a new project in China or a new search engine which would be censored called Dragonfly. What happened there is that employees of Google in combination with some NGO’s were not happy that Google was re-censoring their search engine. They basically asked Google to stop the project because they thought they were going against their own company policy of “do no harm”. Google ended up stopping the project as a response to these pressures. RR: Well, there are a few things. Google is no longer operating in China, they are trying to get back in, but they left the Chinese markets. That would seem to be prima facie evidence that they thought that operating, and cooperating with the Chinese censorship laws would do more harm

64 than good to the company. Otherwise they would not have pulled out. It could have been more harm than good to the bottom line, it could have been more harm than good to the corporate culture, I cannot answer that question. My guess is that it is probably more in consideration of the corporate culture. Because, I don’t think most people are going to start to use Bing or Yahoo search instead of Google. Now, I don’t know, I am just guessing. So I think the larger issue for a company like Google would be the corporate culture. D: But that is also a quite important stakeholder group right? For Google? RR: Yes. So on the one hand they are sensitive, on the other hand they are censored. If you try and use Google in China, you get Google Hong Kong with a lot of blocks. They are blocked in China. Whether or not it is Google Hong Kong or Google somewhere else, they will still be censored. So the issue should be, not whether or not they are censored but whether they are cooperating in that censorship. Google made the decision not to cooperate by operating only in Hong Kong. And again the question is why, maybe it was because of the cooperate culture. Of course, it is difficult to tell. Are they concerned or nervous should they undermine that corporate culture there would be a backlash from employees that would make a lot of headlines. I don’t know, but for all the controversies, Google seems to be doing just fine. D: Yeah, you are right. It is. But do you think that a company could effectively comply with legitimacy demands at home and in China at the same time or should they choose between the two markets? RR: Well, it depends on the product, obviously. The other issue involved is labor policies. Labor policies are different in China and in the United States. If companies would be sensitive to US domestic values on labor policies there would be no business in China. So clearly the investors in China, at the cost of testing Chinese labor policies are far smaller than the benefit of operating inside China. As is obviously the case, because everyone who is operating in China is operating in an economy or economic system which has very different regulatory practices than the United States to protect workers. And yet they are there anyway because they have a vision and it is profitable to be there and to incur any controversy. There have been controversies because of the outsourcing of labor. In many ways the Trans Pacific Partnership sought to address these disparities in regulatory systems throughout Asia. The opposition by unions towards the TPP was that the TPP did not do enough to address the differences in regulatory policies for labor. That was an inside baseball issue in American politics, in democratic party politics but not a major issue for public opinion. The opinion issue was simply trade agreements, they didn’t like trade agreements. With Mexico, with Canada, they don’t like the outsourcing of American labor. That was the issue, not he political values of the country they were exporting to. D: So you don’t think that the extent to which American companies engage with the censorship requirements realistically affects their home market? RR: Let’s take Bloomberg for example. Bloomberg had censorship which was retaliated against for stories on. So censorship is basically a news issue, right? Basically, newspapers, and that is a very narrow audience right? Who do you have to test it with? Who publishes in China? I don’t know, I mean you got Google, who else are you looking at for case studies on censorship?

D: I have got Google, Apple, the NBA and Blizzard, the videogame company. I was looking for quite varied cases but which still kind of encompass the same things. RR: Well, clearly the NBA is very sensitive to the brand. There is a famous Michael Jordan statement. I don’t know if you have heard it. Michael Jordan was asked many, many years ago why he didn’t use his presence, his profile for society, to promote civil rights for African Americans. His answer was, republicans buy sneakers too. I think that is a statement representative of any corporation dealing in the American market, dealing in the Chinese market, so these companies are all going to focus on what is best for their bottom line. The NBA sells sneakers in China. The Chinese buy sneakers too. So they are focused on the bottom line, that’s their job. There is a legal term for that called fiduciary responsibility. So they quickly let the owner of the Houston rockets know that he made a mistake on speaking out. Then the harm is gone. That issue is long gone. So I think they are sensitive to it, but on the other hand, the answer to the sensitivity in the case of the NBA is to say nothing. And then to be proactive in promoting values is to say nothing, that is the best thing for their problems. D: I am also considering the legitimacy differences between the United States and China because the NBA basketballers can for example make certain statements about where they stand politically in the US or how they feel about the state of their country but they cannot mention anything about the situation in China which I thought was quite conflicting in their policy but I assume that is because of the different legitimacy requirements. RR: There are two things here, one they don’t go to China to talk about, I mean how often are they in China. They are there as ambassadors for the NBA, not as human rights activists. When I go to China, I don’t start protesting for human rights in China. Why should they go to China to broadcast about human rights? That’s not their job. Then second, what they say in the United States, whether it is covered in China or not, is not their problem. Chinese journalists are going to cover what they want to cover and Chinese censors are going to censor what they want to censor. Third, someone in the United States has the responsibility, perhaps, and maybe this is controversial, to promote American values in America. But do we the responsibility for promoting American values in South Africa? In India? In Singapore? China? They have a primary responsibility for participating in the society in their home country. And whether they participate in Chinese civil society is no different than whether they should participate in South African civil society. Or Singapore civil society. There are different expectations what the responsibility is. D: Often times, stakeholders at home also take into account what companies do abroad and whether they agree with that from an ethical standpoint. RR: I don’t think so. Or it is very rare, and for the most part, they tend to follow what Michael Jordan said. I am trying to sell more sneakers and that is my job. There are a few who will speak out, that is fine, and it would be interesting to see whether those who speak out sell a lot of sneakers in China. It is easy for people to speak out when they do not have a stake. So stakeholders are maybe more cautious. Often, the people who are speaking out the most have nothing to lose, right?

D: It is definitely an interesting conflict between people who have a stake and people who do not have a stake because it is of course much easier to talk. So coming back to what we talked about earlier, you don’t think it realistically affects the perception in the United States. RR: Well, again, there are three issues here. One is damage control, which is very effective. So it could affect the reputation in the United States but the damage control is really good. Second is that the reputation does not take a hit at all because people still like Nike sneakers and people still use Google. The quality of the product matters more than anything else. Most people don’t focus on human rights in China, they really do not. Wherever you live in America, you will have far greater concerns shaping what you buy and how you spend your money than human rights in China. That is just the reality, China does not have a major presence in American culture. Third, is how it affected the bottom line in the past. I think they are all very sensitive to their brand, so they are very quick to respond, and that is their job, given the size of their stake. They will jump on every controversy and manage it. A very different question to ask is if they didn’t do such a good job whether the implications would be greater, we don’t know. But they have a responsibility to their shareholders and everything else to assume that it would. To assume that without Capital Management, the blowback would be significant, but we don’t know that. Is certainly true that they are very sensitive to that because they have a lot at stake in their brand. D: I think it is very interesting what you are saying. For example that companies would look for controversies if it means that they can be active in China. With these conflicting legitimacy demands it can be expected that the company will incur some controversies down the line but they still choose to be active in China anyway. RR: Yeah, they still choose to be active in China anyway because they have a market of 1.4 billion people which until recently was growing at 6% per year. Very large middle class in a consumer society. So they are going to weigh that decision. For the most part, it seems fairly clear that they have decided that any potential controversy will be less costly than the cost of not doing business in China. And second, they believe they can manage it. It certainly seems true that they can navigate it. Whether it is Google, whether it is Apple, so on and so forth. So of course there are other issues involved. Increasingly, Chinese companies are becoming competitive in their own way. Should you buy an Apple iPhone when you can buy a Huawei that is just as good? Every country would prefer to buy their domestic product. Why would you use Google when you can use Baidu? So it is difficult to gain a lot of market share in China while not accommodating Chinese censorship. D: I think that is true for Google or Apple when there are other products and other opportunities in China, but this would be different with the NBA for example when there is no other Chinese alternative. RR: The Chinese market for the NBA is going to do very well. They are still going to watch LeBron James. They love the NBA. And they have no domestic equivalent because the Beijing Ducks are just not very popular. In that respect, one could always follow the nationalist controversies online on the extent to which companies are creating controversies in China. But you need to be very careful in associating national hostility in online forums with the sentiment

67 of the Chinese consumer. The standard way in which we gather evidence on backlash in China is through online feedback but the online community is not representative of the people as a whole. D: What I was trying to say is that when there is no similar product in China, maybe the NBA has more influence than for example Google or Apple because they have more, lets say, power. RR: I do not think any American corporation is going to be less attentive to its brand than any other. The corporate culture is to protect the brand. No matter what. D: I think that is fair. Do you think in a general way that the US should intervene or do something in some way to counteract the censorship in China or should they leave it be? RR: That is a far more difficult question. There are a lot of things about China we do not like. Finding policies that could be effective without costs towards other values would be almost impossible. So for America when we are outspoken on the province Xinjiang, we would probably make the situation in Xinjiang worse. When there were rumors going around that Americans were supporting the protestors in Hong Kong, it created a more dangerous environment for the protestors. So the very act of trying to interfere in Chinese politics to promote American values can make the Chinese system more oppressed. And second, it is the purpose of a foreign policy to integrate various different objectives into a coherent single thread. This is not easy. When you have wide range of objectives, the policies for one are not always compatible with the policies for the other. So one policy can oppose costs on another policy, or another objective I should say. So the second problem is saying if we were more proactive with the ambitions, how would it influence America’s other objectives. Such as managing tensions in the South China Sea, such as managing a trade war. It is very difficult to evaluate the costs of that. For American objectives regarding the South China Sea, trade, and you have to make that cost benefit analysis. It is very hard to see the value of promoting human rights, with one, it would probably be counterproductive for the Chinese investing environment in which it would impose costs on other values. D: So basically, if they were to interfere it would potentially be counterintuitive to what they are actually trying to achieve. RR: Well, it would be counterproductive to what they are trying to achieve in domestic policies but it would impose costs on other American objectives. So it would be counterproductive for change in China and for managing the trade war. There would be no upside. So this is what we used to call in America feel good diplomacy. It makes you feel good to do these things but it is not at all clear that it is actually helping. D: It is a very interesting point. And good that you brought it up since it is important to take into account. When looking at situations like this they can be quite complicated in nature. I think that were my questions. I really appreciate that you took the time to talk to me. RR: I am glad to help. Good luck with your thesis.

Appendix 4: Table overview of business case comparisons Table 1: The NBA Theme NBA Actions by the company The NBA issued a public apology to China after a general manager stated his support for the protests in Hong Kong.

Supportive quote “It began when Houston Rockets general manager Dennis Morley tweeted an image that read, "Fight for freedom, stand with Hong Kong." This was during Hong Kong's demonstration over its basic human rights. The NBA released a statement in Mandarin expressing disappointment in Morey.” (Blumenthal, 2020) Complying with demands from China The NBA complies with censorship demands from China by silencing its players and workers related to sensitive topics in China.

Supportive quote “An American business, one that prides itself on supporting freedom of speech in America, became an arm of Chinese censorship. The NBA isn't just following Chinese law in China; it's imposing the Chinese Communist Party's rules internationally.” (Palmer, 2019) Influence of company The NBA has a larger influence in China due to its popularity and the lack of Chinese substitutes.

Supportive quote “Basketball has become a popular sport in China, and the NBA is the most popular sports league. Unlike Facebook and Google, there's not an equally attractive Chinese alternative. Even if nationalistic professional basketball fans in China are angry at the NBA, they may also be disappointed they can't watch their games.” (Roberts & Pan, 2019) Stakeholder response The NBA’s stakeholders in the United States responded negatively to the apology, stating that it was impeding the American right to freedom of speech.

“Eight members of Congress, including Supportive quote conservative Republican Ted Cruz and

progressive Democrat Alexandria Ocasio- Cortez, signed an open letter to Mr Silver arguing that the NBA had "sold out an American citizen" by not being more strident in its defence of Mr Morey. They called on the league to suspend activities in China.” (Shepherd, Ahmed & Nicolaou, 2019)

Degree of personal involvement The degree of personal involvement for American customers is relatively low since it does not directly affect them.

Supportive quote “Ït becomes far more personal when you are dealing with personal interactions on the web between people rather than going into a store buying basketball shoes.” (Ross, 2020)

Table 2: Blizzard Theme Blizzard Actions by the company Blizzard suspended a professional E-sports player and took away his prize money after he spoke out in support of the protests in Hong Kong.

Supportive quote “Video game maker Activision Blizzard said Tuesday it kicked a Hong Kong esports pro out of a tournament and seized his prize money after he voiced support for Hong Kong's pro-democracy protest movement.” (Chan, 2019) Complying with demands from China Blizzard complies with censorship demands by China by punishing employees and players that speak out on sensitive topics in China.

Supportive quote “Under the game's rules, players can be removed for behaviour that results in public disrepute, offends the public or damages its image, Blizzard said, adding that the two hosts were also fired..” (Chan, 2019) Influence of company China is one of the largest markets in the world for video games, Blizzard is dependent on the Chinese market and therefore has little influence on potential policy changes.

Supportive quote “China is one of the world's largest gaming markets, where a mix of Chinese and foreign companies compete. Maintaining its Chinese user base while resisting government censorship demands would be difficult for Blizzard unless other gaming companies joined in.” (Roberts & Pan, 2019) Stakeholder response Blizzard’s stakeholders in the United States responded very negatively to the company’s actions. Employees staged a walkout and customers boycotted Blizzard’s products.

Supportive quote “Players threatened to boycott Blizzard's games in response and a small group of Blizzard employees staged a walkout to show support for the protesters in Hong Kong.” (Webb, 2019) Degree of personal involvement The degree of personal involvement for American customers is high since it involves an influential person being treated wrongly.

Supportive quote “I can imagine that people who are online, playing online videogames might be subjected to various criticisms if you will, and then it becomes far more personal when you are dealing with personal interactions on the web between people.” (Ross, 2020)

Table 3: Google Theme Google Actions by the company Google was looking into the possibility of re-entering China with a censored search engine.

Supportive quote “In 2018, reporters and Google employees revealed the company was working on a secret search engine, Dragonfly, to meet Chinese censorship demands by leaving off sensitive topics.” (Roberts & Pan, 2019) Complying with demands from China Google’s new search engine would censor sensitive topics, including Tibet, Taiwan and the Hong Kong protests.

Supportive quote “That decision to develop a mobile search app (Project Dragonfly) for China is hugely controversial, as it opens the firm up to allegations of supporting state censorship.” (Jowitt, 2018) Influence of company Google has a relatively low influence in China due to the presence of a domestic substitute called Baidu.

Supportive quote “Every country would prefer to buy their domestic product. Why would you use Google when you can use Baidu? So it is difficult to gain a lot of market share in China while not accommodating Chinese censorship.” (Ross, 2020) Stakeholder response Google’s stakeholders responded negatively to the idea of complying with Chinese censorship demands.

Supportive quote The project, codenamed "Dragonfly", would represent an alarming capitulation by Google on human rights. The Chinese government extensively violates the rights to freedom of expression and privacy; by accommodating the Chinese authorities' repression of dissent, Google would be actively participating in those violations for millions of internet users in China. (WITNESS, 2018) Degree of personal involvement The degree of personal involvement differs for different stakeholder groups. Employees feel a sense of betrayal since the company is not upholding its own code of conduct. It is not expected to affect consumers in a significant manner.

Supportive quote “Employees from Google opposed the controversial plan devised by executives within protesting the decision as Activist Post reported. Company employees even signed a public petition urging cancellation of the project. 'We deserve to know what we're building and we deserve a say in these significant decisions,' the petition said.” (Kesel, 2019)

Table 4: Apple Theme Apple Actions by the company Apple has removed various applications from its app store, and maintains a non- engaging CPA approach in China.

Supportive quote “This is not the first time that Apple has removed apps at the request of the Chinese government, but it is a new reminder of how deeply beholden the tech giant has become to Beijing at a moment when the leadership has been pushing to tighten its control over the internet.” (Mozur, 2017) Complying with demands from China Apple has complied with the legitimacy demands from China on multiple occasions.

Supportive quote “Throughout the years, the tech giant has also been complicit in censoring its Chinese users by cracking down on VPNs, removing the New York Times app from its China store, and censoring the Taiwan flag emoji.” (Abrougui, 2018) Influence of company Apple has a relatively low influence in China with a market share of only 8.5% and a large variety of available substitutes. China is also Apple’s second largest market.

Supportive quote “Greater China is Apple’s largest market outside the United States. That has left the company more vulnerable than almost any other American technology firm to a Chinese campaign to wean itself off foreign technology and tighten control over foreign tech companies operating there.” (Mozur, 2017) Stakeholder response The American stakeholders of Apple have become more aware of the company’s business operations in China, leading to a negative stakeholder perception regarding Supportive quote the censorship strategy.

“Apple has faced a large shareholder rebellion over how the company complies with government censorship, as it comes under growing pressure for its role in China. The revolt is much broader than on previous

shareholder proposals on Apple's human rights record, suggesting the company is coming under increasing pressure from investors.” (Titcomb, 2020) Degree of personal involvement The degree of personal involvement differs among Apple’s stakeholder groups. Customers will only be minimally affected, while the US government and NGOs feel that Apple is not maintaining American norms and values abroad.

Supportive quote “China is an essential business partner for the company, as much of its tech is manufactured there, and it's important for the two entities to maintain a profitable relationship. It is apparent that if Apple continues working with China, it will be doing so in spite of its purported company values” (Hersko, 2019)