MNE Subsidiaries' Strategic Commitment to CSR in Emerging Economies: The Role of Administrative Distance, Subsidiary Size, and Experience in the Host Country

Abstract

Multinational enterprises (MNEs) venturing into emerging economies operate in relatively unfamiliar environments that, compared with their home countries, often display a high degree of administrative distance (i.e., differences in social rules, regulations, and governmental control and enforcement mechanisms). At the same time, many MNEs face the question of how intensely to commit to corporate social responsibility (CSR) in emerging economies, given the often relatively lower social standards in those countries. This research addresses the question of how administrative distance, MNE subsidiary size, and experience in the host country relate to the extent to which MNEs strategically commit to CSR in their emerging economy subsidiaries. We argue that the greater the administrative distance between MNEs' home and host countries, the lesser the MNE subsidiaries strategically commit to CSR. At the same time, we predict that the larger the size of MNE subsidiaries (as a proxy for local subsidiaries' available resources), and the longer their experience in the host country, the more the MNE subsidiaries strategically commit to CSR. To test our hypotheses, we use data from a large-scale, cross-industry survey of 213 subsidiaries of Western MNEs in Asia, Eastern Europe, and Latin America. We complement the survey data with country-level data from the World Bank Governance Indicators.