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Emerging market MNEs and social responsibility: An institutional pressure perspective

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Lise Johnson
Lise Johnson
Lise Johnson
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Victor Z. Chen at Fidelity Investments
Victor Z. Chen
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Emerging market multinational enterprises (EMNEs) represent a rising share in global outward foreign direct investment (FDI), growing from only 10 per cent in 2000 to 40 per cent in 2013 (UNCTAD, 2014). Like their developed market counterparts, these EMNEs can have important and potentially transformative impacts on their home and host countries, raising crucial questions regarding the appropriate law and policy frameworks that should govern their activities. To answer these questions, however, requires deeper and more comprehensive understanding of these new actors and their implications. To date, little is known about the impacts EMNEs have on issues related to sustainable development at home and abroad (Gugler and Shi, 2009), and the factors that are shaping those impacts. While there is a growing body of literature focusing on EMNEs (for reviews, see Gammeltoft, Barnard, and Madhok, 2010; Luo and Tung, 2007; Ramamurti, 2012), many issues about these firms’ development effects remain underexplored. It is for this reason that we organized this special issue. The three articles that are part of this collection highlight the most salient and pressing issues regarding EMNEs: In what sectors and locations are EMNEs investing, and what impacts might these investments have on sustainable development? Are EMNEs dedicating efforts to corporate social responsibility (CSR) and if so, through what types of activities? What is driving the firms’ engagement with CSR? And how can and should institutions in home countries, host countries, and on the international plane shape corporate conduct and development outcomes?
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... Insight into these tradeoffs is of likely interest to scholars in the FDI-development domain, where future research may address the magnitude of such effects and establish whether the economic benefits of spillovers are greater than direct employment losses, or vice versa. The integration of two parallel IB literatures may not only benefit each of the strands by highlighting areas of crossfertilization, it may also restore balance in discussions about EMNE activity wherein scholars tend to primarily focus on either the positive or the negative consequences of their behavior (e.g., Fiaschi, Giuliani, & Nieri, 2017;Chen & Johnson, 2015). ...
... Many different aspects of EMNE investment have been examined, followed by a vibrant discussion about the uniqueness of its characteristics (e.g., Cuervo-Cazurra, 2012;Ramamurti, 2012), which resulted in a vast literature that matured relatively fast over the last decade (see for reviews, Hernandez & Guillen, 2018;Paul & Benito, 2018;Luo & Zhang, 2016). Despite its relative maturity, this literature has not yet addressed the impact of EMNE investment on economic development, whether in the host market or at home (Buckley et al., 2017;Chen & Johnson, 2015). A good starting point is the eclectic paradigm with its consideration of O, L, and I advantages which tend to be different for EMNEs vis-à-vis their developed economy counterparts, and importantly, likely also shape how economic development consequences materialize in their respective home countries. ...
... As mentioned above, one area that was left relatively unexplored relates to EMNEs" impact on development (Buckley et al., 2017). The few recent studies that started to look into the topic have taken somewhat more extreme perspectives on the spectrum, either mainly focusing on positive (e.g., Hendriks, 2017;Chen & Johnson, 2015), or negative development consequences in relation to EMNE internationalization (e.g., Tashman, Marano, & Kostova, 2019;Fiaschi et al., 2017). This study"s framework may help to restore balance in that discussion, as the six propositions that were developed to give direction to that research endeavor suggest that there may be positive and negative development consequences associated with distinct characteristics of EMNE investment. ...
How outward investment from emerging markets affects economic development at home: using the eclectic paradigm to synthesize two IB literatures
Article
Full-text available
  • May 2020
Purpose This paper aims to use the eclectic paradigm as a broad organizing framework to bring together two somewhat parallel international business (IB) literatures, one on the development effects of multinational enterprise activity and the other on the internationalization of emerging market multinationals (EMNEs). The author does so to better understand how outward foreign investment shapes economic development in firms’ home countries. Design/methodology/approach Considering that the characteristics of foreign investment by EMNEs likely differ from that of their developed economy counterparts and that such characteristics may have unique development consequences, the author revisits one of IB’s overarching theories to rethink how ownership, location and internalization advantages take shape and stimulate diverse development outcomes. Findings My narrative review and conceptual analysis indicate that the eclectic paradigm is a valuable framework that can be used to shed light on underexplored phenomena and thereby inform important policy debates. The analysis suggests that unique characteristics of EMNE investment simultaneously have positive and negative development consequences in their home countries. Practical implications The author sets out a research agenda that revolves around six propositions that separately relate one of these three distinct characteristics of EMNE investment to two development outcomes, namely, spillovers and direct effects on home-country employment. My propositions suggest that important policy dilemmas potentially apply, in that each of the three characteristics positively affects one of the aspects of development, but negatively the other. Originality/value My research agenda presents international business scholars with new opportunities to build on a history of policymaking impact, now geared toward resolving society’s grand challenge of underdevelopment.
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... Whereas such thinking is shaped primarily by the investment behaviour of firms from developed countries, recent decades reflect a reality in which MNEs from emerging markets (EMNEs) have become increasingly important investors worldwide (Chen and Johnson, 2013). Although classification systems vary, EMNEs are generally considered to be firms from countries that share certain characteristics with developed markets but cannot be fully considered as such (CCSI, 2016). ...
... Although knowledge about the relationship between foreign investment and development has been built up over an extended period of time, much of the evidence relates to developing countries that attract investment from western MNEs (Narula, 2014). However, EMNEs are increasingly important investors in developing economies, too (Chen and Johnson, 2013). For example, 75% of China's FDI stock, which totalled US$789 billion in 2014, is invested in Asian developing economies (UNCTAD, 2016). ...
Corporate sustainability assessments: MNE engagement with sustainable development and the SDGs
Article
  • Aug 2017
The recent introduction of the Sustainable Development Goals (SDGs) calls for an understanding of how multinational enterprises (MNEs) engage with sustainable business practices and how the SDGs may be better implemented by the private sector. Through an examination of 112 MNEs operating in the region of the Association of South-East Asian Nations, this study focuses on evaluating sustainable business practices through the lens of a corporate sustainability assessment framework. The results show that headquarters commitments of MNEs to international sustainability standards and guidelines had a key influence on their sustainability practices. These commitments included the use of tools such as the materiality analysis to identify and prioritize sustainability issues of importance to the MNE and its stakeholders and reflects a focus at the local level of the subsidiary that was in alignment with the corporate strategies of company headquarters. The results of this exploratory study suggest that it is through the use of these international sustainability standards and guidelines (such as the Global Reporting Initiative standards) that a greater consideration and incorporation of SDGs within MNE practices can be achieved. These standards and guidelines are both well accepted and already adopted by MNEs, and have an important influence on what sustainability issues and goals they consider within their operations.
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... Whereas such thinking is shaped primarily by the investment behaviour of firms from developed countries, recent decades reflect a reality in which MNEs from emerging markets (EMNEs) have become increasingly important investors worldwide (Chen and Johnson, 2013). Although classification systems vary, EMNEs are generally considered to be firms from countries that share certain characteristics with developed markets but cannot be fully considered as such (CCSI, 2016). ...
... Although knowledge about the relationship between foreign investment and development has been built up over an extended period of time, much of the evidence relates to developing countries that attract investment from western MNEs (Narula, 2014). However, EMNEs are increasingly important investors in developing economies, too (Chen and Johnson, 2013). For example, 75% of China's FDI stock, which totalled US$789 billion in 2014, is invested in Asian developing economies (UNCTAD, 2016). ...
The sustainable development effects of investment by emerging-market multinationals: Shaping beneficial outcomes for home and host country
Article
Full-text available
  • Aug 2017
Emerging-market multinational enterprises (EMNEs) play an increasingly important role as investors in developing economies. When certain conditions are met, their foreign investment can contribute to host-country progress towards the Sustainable Development Goals (SDGs). Moreover, foreign investment by EMNEs could also bring positive development effects for the home economies from which they internationalize. However, some concern exists about the possibility that gains will not be equitably shared or that potential will be not realized in one or the other. This article aims to shed light on the conditions that will allow both the home country of an EMNE and the host country receiving its investment to make progress towards the SDGs. Five areas for policy action are presented, together with a research agenda. It is argued that the most promising measures encourage foreign investment to be long-term, stimulate linkages between EMNEs' home-country partners and host-economy firms, incentivize home-and host-country firms to take on new roles within global value chains, capitalize on institutional upgrading potential and tie certain conditions to the right to access natural resources. Both home and host countries could then potentially benefit from EMNEs' outward investment and make progress on goals related to poverty alleviation (SDG 1), economic growth and the creation of decent work (SDG 8), infrastructure development (SDG 9) and institutional upgrading (SDG 16).
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... In another study, Zhang et al. (2016) demonstrate that Chinese multinationals adopt philanthropy and sustainability initiatives to seek legitimacy in the foreign markets. Chen and Johnson (2015) conceptualize the role of corporate social activities in seeking legitimacy in overseas operations of emerging market multinationals. Marano et al. (2017) show that CSR reporting is an effective strategy for emerging markets firms making inroads into foreign markets to seek global stakeholders' legitimacy. ...
Institutional voids, liability of origin, and presence of women in TMT of emerging market multinationals
Article
  • Oct 2021
  • INT BUS REV
This study examines the association between the pervasiveness of institutional voids in emerging markets and the inclusion of women in top management teams (TMTs) by emerging market multinational corporations (EMNCs) as a legitimation strategy. Leveraging institutional theory, we argue that EMNCs increase women presence in TMTs as a legitimation strategy to overcome the challenges of stakeholders' skepticism in foreign markets by disassociating themselves from the image of their home markets. Using a subsidiary level dataset of 1047 EMNCs from 26 emerging countries between 2009 and 2018, we find robust evidence indicating that the pervasiveness of institutional voids at home is positively related to the percentage of women in TMT's EMNCs' foreign units. This effect is particularly stronger for firms operating in countries with high institutional gender parity and low level of corruption.
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... Some common synonyms of the term partnership are contracting-out, nongovernmental-governmental alliance, linkages, and community-local government cooperation (Rangan et al., 2006;Johnston & Romzek, 2005;Krishna, 2003). The public sector may be governmental bodies, whereas the private sector could be MNEs or other non-governmental firms (Chen & Johnson 2015;Rangan et al., 2006). ...
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Article
Full-text available
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Multinational Corporations are present in virtually every corner of the world, generating not only economic growth but foremost human rights abuses linked to environmental degradation. In view of this, the United Nations Human Rights Council mandated an intergovernmental working group to draft a binding instrument on business and human rights, potentially drawing obligations for private commercial entities with a transnational character. In that context, an analysis of the on-going negotiations will be conducted to identify and discuss the environmental law dimensions embedded therein. A dialogue between the content of the travaux préparatoires of the treaty's drafting process - including the official reports of the three sessions and other relevant documents - and the evolution of international corporate environmental accountability, will yield some possible pathways for environmental protection linked to human rights. Furthermore, special importance will be given to discussions with respect to the obligations of corporations and its implications for the protection of the environment. Some findings will show that the current state of negotiations falls short in reflecting environmental dimensions from a legal perspective, although the tools that might be developed in the process could be moulded as to integrate them in forthcoming negotiations.
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