Managing corporate-government relationships in a multi-cultural setting: How political corporate social responsibility (PCSR) as a response to legitimacy pressures affects firm reputation

Abstract

As many multinationals set up subsidiaries in emerging markets, they face legitimacy pressures from the host countries. This pressure leads firms to engage in political corporate social responsibility (PCSR) activities. We distinguish two types of attributions of PCSR activities – public-serving and self-serving – and study how these two types of PCSR attributions affect firm reputation. Analyzing 463 PCSR activities by 104 firms in China between 2015 and 2017, we find that public-serving PCSR enhances firm reputation, while self-serving PCSR diminishes it. In addition, we document a negative interaction effect between the two attributions of PCSR. We also find that CEO participation attenuates the negative effect of self-serving PCSR whereas administrative distance accentuates the positive effect of public-serving PCSR. Our research contributes to the nascent literature on government relation networks and sheds light on how firms should manage their relationships with the host countries in a multi-cultural setting.