Social License to Operate: Developing Stronger Social Activities at Home

Abstract

Non-market strategy is an area under current exploration in international business. Several studies focused on the political side of this theory, highlighting how important political connections can be for international expansion of emerging market multinationals (EMNEs). However, the social side is still requiring more attention, especially the role of philanthropy and the partnership with the third sector such as NGOs. In this study, we argue that multinational firms that had previously engaged with social activities will present a better performance in the short-term. We claim that social initiatives can be understood as a firm-specific advantage for EMNEs and it can help firms to overcome country-specific disadvantages from their home countries. Therefore, firms that developed familiarity with policymakers and social activities can be less affected by the institutional uncertainty than firms without such experience. In order to test our assumptions, we investigated Brazilian multinationals under the covid-19 pandemic crisis through panel data by analyzing 3,790 social initiatives. Our findings showed that social initiatives at home can lead to better performance, specially pressured by foreign investors.