The Impact of Sister-City Relationship on Foreign Subsidiary CSR

Abstract

This article extends social identity theory to research on corporate social responsibility (CSR) of foreign subsidiaries. We complement prior research on CSR by emphasizing the significance of city-identity in stakeholders’ identification and exploring factors that influence this process. Our empirical analysis of 90 foreign subsidiaries in China from 2009 to 2018 shows that the sister-city relationship promotes local CSR of foreign subsidiaries. The positive relationship is weakened when foreign subsidiaries are older or two countries have high political affinity, while it is strengthened when foreign subsidiaries are large. Our findings suggest that inter-city relationships influence CSR of foreign subsidiaries and host cities can benefit themselves by signing treaties of sister-city relationship.