Market and regulative logics: How do emerging firms respond to CSR when they internationalize?

Abstract

A significant research gap exists in our understanding of how the multinationality influences corporate social responsibility (CSR) in the context of emerging firms. Previous studies mainly focused on the firms from the developed countries and find that multinationality can lead to an increase in the social performance, less attention has been paid to the firms from emerging countries where both regulations and norms of CSR are underdeveloped. We use a longitudinal dataset of Chinese public-listed firms from 2009 to 2014, and argue that CSR behavior of emerging firms is a balance between regulative and market logic. Given the expansion of the international markets can help firms to increase their international flexibility and reduce their resource dependence on government, firms with a high level of multinationality are less likely to engage in CSR activities to conform to the regulative logic developed by the governments, who are the most salient stakeholders in shaping the CSR behavior in emerging countries. Furthermore, Chinese firms with political connection are faced with both the market logic, which views them as the economic engines to seek the natural resources and obtain economic values from international markets in the eyes of the Chinese government, and regulative logic, which notes that they should conform to the environmental and social regulations. We find that the politically connected MNEs will decouple their CSR behavior when facing these two logics simultaneously, by issuing their CSR report to gain the institutional legitimacy, and fewer investments in substantive CSR activities to maximize their profits.