Do international and product diversification strategies affect human rights and employee orientation disclosures? An across‐country empirical study of large multinational enterprises

Abstract

Research SummaryThis study examines the relationships between market strategies (international diversification and product diversification) and nonmarket strategies (human rights and employee orientation disclosures) in 335 largest global companies from 31 countries. Hypotheses generated from the Institutional and Stakeholder theoretical perspectives proposed two alternative nonmonotonic relationships (an inverted U‐shape and a U‐shape) between market and nonmarket strategies. Data on company human rights and employee disclosures were collected from the Annual Reports of the MNE's parent company. The results of Generalized Least Square (GLS) regressions generally support both hypothesized nonmonotonic relationships and the results vary by region (Europe, the Anglo‐Saxon cluster, and Asia and emerging markets).Managerial SummaryGlobal companies diversify internationally by entering new countries and at the same time also diversify into more and more products. Global firms also need to take into account the concerns of various stakeholders such as stockholders, employees, governments, suppliers, and nongovernmental organizations. We relate the diversification strategies (international and product) with nonmarket strategies in the form of human rights and employee disclosures made by global firms in their annual reports. We propose two alternative relationships (an inverted U‐shaped pattern and a U‐shape) between both types of market and nonmarket strategies. We find the relationships vary by the three regions of the world: Anglo‐Saxon cluster, Europe, and Asia and emerging markets. We speculate that national business systems and culture may account for these differences.