Emerging market MNEs, digital transformation and ESG performance: evidence from China’s listed companies

Abstract

ABSTRACT The importance of emerging market multinational enterprises’ (EM-MNEs) social responsibility has been realized in the literature, but how to enhance EM-MNEs’ ESG (Environmental, Social, and Governance) performance in the digital age has attracted limited attention. This article fills this gap by investigating whether EM-MNEs can improve ESG performance through digital transformation among Chinese listed companies. We employ text analysis techniques to measure the degree of digital transformation within MNEs and further construct a fixed-effects (FE) model to investigate the positive influence of digital transformation on EM-MNEs’ ESG performance. Results show that digital transformation within MNEs is positively related to ESG performance and such effect is verified for non-state-owned enterprises but not for state-owned enterprises. We suggest that MNEs with more foreign subsidiaries are more prone to be influenced by the positive effect of digital transformation on ESG performance than MNEs with fewer foreign subsidiaries. Moreover, the Belt and Road Initiative is valuable for MNEs to reap ESG benefits from digital transformation. The findings enrich international business studies by adding the digital economy and ESG to the discussion. Moreover, they provide valuable implications for policymakers and business leaders in emerging markets by delineating strategies for enhancing the ESG performance of EM-MNEs.