Business group affiliation and corporate sustainability performance in emerging economies: Evidence from South Korea

Abstract

AbstractDoes business group (BG) affiliation enhance corporate sustainability performance (CSP) in emerging economies? This paper focuses on the unique roles of BG affiliation in enhancing CSP amid increasing institutional pressures for more contributions to the society and stakeholders. The empirical evidence on the relationship between BG affiliation and CSP is inconclusive. Although BGs effectively insulate their affiliate firms from external shocks and pressures by internalizing various resources, they are vulnerable to institutional pressures for enhanced CSP. We argue that BG affiliates tend to have higher CSP than their non‐affiliated counterparts because their unique roles and history of BG development in emerging economies exert stronger institutional pressures on them. However, affiliate centrality and foreign ownership reduce the positive effect of BG affiliation on CSP in emerging economies because BG firms can exercise agency in response to institutional pressures.