MNE Buyers of Local Firms as an Opportunity Structure: How NGOs Promote Sustainability in China

Abstract

This paper presents new theory and evidence on how multi-stakeholder institutions affect the diffusion of sustainable practices in autocratic contexts. By highlighting the embeddedness of multinational enterprises (MNEs) in global supply chains, we study how this embeddedness helps non-governmental organizations (NGOs) promote sustainability in power-imbalanced institutional environments. Drawing on social movement and resource dependence theories, we argue that global supply chains that tie MNEs to foreign suppliers offer NGOs an opportunity structure to shift the balance of power across geographic boundaries by establishing MNE-NGO collaborations. This helps NGOs leverage competencies and resources to facilitate the adoption of sustainable practices by local firms within MNEs’ global supply chain networks. However, this mediated stakeholder effect decreases when governmentally produced structural conditions reduce the perceived effectiveness of this opportunity structure: greater priority given to environmental protection by governments substitutes private governance arrangements involving MNEs and NGOs. Additionally, greater curtailment of civil liberties suppresses their synergistic potential. To test our theory, we examine the relationship between Chinese NGOs’ collaborations with 168 MNEs across 25 countries and these MNEs’ local green supply chain ratings in the period 2014-2020. This study contributes to the literatures on multi-stakeholder institutions, social movements, and corporate sustainability.