Reputation of multinational companies

Javier Aguilera-Caracuel,Encarnación García-Sánchez,Jaime Guerrero-Villegas

doi:10.1108/ejmbe-10-2017-019

Javier Aguilera-Caracuel, Encarnación García-Sánchez + Show 1 more

Open Access

https://doi.org/10.1108/ejmbe-10-2017-019

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Abstract

PurposeThe purpose of this paper is to use stakeholder theory as the theoretical reference framework to study the influence of internationalization (geographic international diversification) and social performance on multinational companies’ (MNCs) reputation.Design/methodology/approachThe authors confirm the research hypotheses using a sample of 113 US MNCs in the chemical, energy and industrial machinery sectors during the period 2005-2010.FindingsThis study contributes to the literature in three ways. First, it incorporates literature on internationalization to study the possible connection between geographic international diversification and social performance in MNCs. Second, it sheds light on the debate between corporate social responsibility (CSR) and the reputation of MNCs in a very diverse transnational context in which MNCs must meet the needs of stakeholders at both local and global levels. Third, it incorporates the mediating role of social performance in the relationship between geographic international diversification and the firm’s reputation.Originality/valuePrior studies have hardly analyzed this relationship, which becomes especially relevant for MNCs, since their implementation of advanced CSR practices in the different markets in which they operate will gain them a good reputation, not only in specific local contexts but also globally, benefitting the organization as a whole and enabling it to gain internal consistency (improvement in internal efficiency), transparency and legitimacy.

Highlights

Corporate social responsibility (CSR) has acquired great relevance in the academic world and in firm management in recent years (Barrena et al, 2016; Madorran and Garcia, 2016)
The results show that the multinational companies’ (MNCs) with the highest levels of social performance that can fulfil the expectations of stakeholders in both local and global contexts obtain a better reputation, as their stakeholders come to see them as responsible, consistent organizational entities
2.4 Mediating role of the MNC’s social performance As we argued above, MNCs with a high level of geographic international diversification operate in the presence of a broader group of stakeholders and suffer greater public scrutiny

Summary

Introduction

Corporate social responsibility (CSR) has acquired great relevance in the academic world and in firm management in recent years (Barrena et al, 2016; Madorran and Garcia, 2016). Prior studies have hardly analyzed this relationship, which becomes especially relevant for MNCs, since their implementation of advanced CSR practices in the different markets in which they operate will gain them a good reputation, in specific local contexts and globally, benefitting the organization as a whole and enabling it to gain internal consistency (improvement in internal efficiency), transparency and legitimacy. Stakeholder theory is especially useful for explaining why firms decide to put into practice socially responsible management, such as promotion of social progress in the local community, protection of disadvantaged groups, improvement of workers’ labour conditions or commercialization of ecological products and services According to this theory, negative actions in social issues such as polluting the environment or abusing employees have a very negative effect on stakeholders’ perception of the firm (Freeman, 1984). By responding appropriately to stakeholders’ expectations, firms can obtain licence to operate in foreign markets (Park et al, 2015)

Geographic international diversification and social performance in MNCs

Results

Reputation

Conclusions

Social performance