Being credited while being censured: Multinationality and sustainability of EMNEs

Abstract

Based on the liability of origin and the attention-based view of firms, we examine how the international business of emerging economy multinationals (EMNEs) affects their corporate sustainability (CS). We develop a contrasting perspective with respect to the dual impacts of international diversification on CS strengths (“being credited” for sustainability), and CS concerns (“being censured” for sustainability). On the one hand, we contend that international diversification improves CS strengths because the firm managers of EMNEs that rely on foreign sales are highly motivated to adopt CS as a global business norm for overcoming the liability of origin and the legitimacy challenge in foreign markets. On the other hand, we argue that international diversification also increases CS concerns since the firm managers in foreign subsidiaries of EMNEs may be less motivated to internalize CS. The results from a 2SLS instrumental variable approach support our hypotheses. Our results reaffirm that “it is misleading to simply say that international diversification is either good or bad” for corporate social responsibility and sustainability (Strike, Gao, & Bansal, 2006: 859). We contribute to the literature on CS antecedents by empirically showing that firm internationalization is a driver of CS in emerging economies. Our findings present implications for future research on CS and international business.