Environmental Regulation and MNE’s Resource Commitment: Considering Impacts of COVID-19 Pandemic

Abstract

The COVID-19 pandemic is an unprecedented exogenous shock in the global economy and has caused noticeable disruptions to international business activities. In this study, we attempt to investigate how COVID-19 influences multinational enterprises' (MNE) strategic decisions in global markets. More specifically, we examine how MNE’s resource commitment is linked to a target market’s environmental regulation. We find that MNEs commit more resources in host countries with more stringent environmental regulations. This paper’s findings also reveal that MNE’s environmental capability and multiple dimensions of institutional distance, including environmental regulation distance and cultural distance, positively moderate the relationship between MNE’s resource commitment and the degree of environmental regulation in foreign markets. Finally, we underscore a significant impact of COVID-19 on MNE’s responses to cross-border activities. An analysis of 3,679 by 1,135 MNEs from 30 countries offers support for the hypotheses.