Lost and Found in Translation: How Firms Use Anisomorphism to Manage the Institutional Complexity of CSR

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Abstract

Prior research on the internationalization of firms from emerging countries has fruitfully invoked institutional theory to emphasize the legitimacy benefits that firms that obtain from showing isomorphism with international norms such as Corporate Social Responsibility (CSR). Without denying the intuitive appeal for these firms to communicate acceptance of CSR, we suggest that firms face a legitimacy trade-off, where the hoped-for legitimacy benefits of isomorphism must be weighed against other home-country institutional considerations. We advance and test this notion that firms will navigate this institutional complexity by engaging in anisomorphism, i.e., espousing general acceptance with international values but with selective ‘translation’ based on home country differences. We test our predictions by analysing firms' communication of CSR, using a unique dataset comprised of 245 firms observed over the period from 2000 to 2018. Consistent with our predictions, we find that firms from countries more reliant on natural resource extraction (e.g., mining and fossil fuel industries) de-emphasize the environmental component of CSR, and firms from more autocratic countries de-emphasize the human rights component of CSR. Additionally, and consistent with our presumption of firms' weighing the international versus home-country legitimacy trade-off, we find that these main effects are sensitive to changes in firms' levels of internationalization.

Why Do Some Multinational Firms Respond Better Than Others to the Hostility of Host Governments? Proximal Embedding and the Side Effects of Local Partnerships

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Abstract

Using a multiple-case study of alleged expropriations reported before the World Bank, we examine how multinational companies (MNC) react to the escalating hostility of host governments. Our study reveals how different choices regarding the interaction with local nonmarket stakeholders – which we refer to as proximal vs. mediated embedding – shape how managers respond to these disputes by affecting their ability to collect, process and interpret information, and to act upon it in a way that effectively mobilizes local and international support. In contrast to the prevailing view that local partners in international joint ventures shelter MNCs from abuse from political authorities, our findings show that primary reliance on local partners to manage the local nonmarket environment can actually reinforce a liability of outsidership and even create a ‘liability of insidership’, to the extent that relying on local partners prevents the MNC from establishing quality connections with a broad range of nonmarket stakeholders, reducing its alertness and responsiveness to hostile acts from host governments.

A Blessing and a Curse: Institutional Embeddedness of Longstanding MNE Subsidiaries in Emerging Markets

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Abstract

This article examines the institutional strategies of multinational enterprises (MNEs) operating in an emerging market, drawing attention to how longstanding foreign subsidiaries proactively negotiate their involvement with socio-political actors. We build on institutional logics to explain how MNE subsidiaries develop sustained political, cultural, and cognitive embeddedness. Using an inductive, interpretive study of four century-old Dutch MNE subsidiaries with a colonial legacy in Indonesia, we examine these three dimensions of the institutional environment, finding that local employees embedded in both the MNE and the host country sets of logics ‒ rather than expatriate managers ‒ most effectively facilitated sustained institutional embeddedness. Our findings also suggest that embedding practices in host institutional contexts and developing structures that align with host institutional expectations provided a platform for the unfolding of institutional strategies by local employees. However, MNE subsidiaries face contrasting logics between home and host country institutions, placing significant strains on MNEs’ ability to enact change.

Have a Go or Lay Low? Predicting Firms’ Rhetorical Commitment versus Avoidance in Response to Polylithic Governmental Pressures

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This study extends prior research on corporate political behaviour (CPB) and firms’ pursuit of political legitimacy in response to monolithic government pressures by developing and testing a framework for analysis of CPB in response to polylithic pressures. We suggest that traditional forms of CPB may be ill-suited to polylithic governmental pressures, such as when firms need to navigate between conflicting home- and host-country political worldviews and policies. We posit that in such complex political situations, firms will turn to a more subtle form of CPB (i.e., rhetorical commitment versus avoidance) as a hoped-for solution to their international political legitimacy challenge. Our contingency perspective also highlights how geopolitical factors (i.e., whether governments of home and host countries are clearly aligned versus misaligned) will influence whether firms express their support for a home government’s foreign policy or avoid any such expression of support. We empirically test the predictive power of our framework by analysing how these political factors led Chinese firms to opt for rhetorical commitment versus rhetorical avoidance vis-à-vis the Chinese government’s Belt and Road Initiative (BRI). We conclude with a discussion of how our framework for analysis and our supportive findings can inform and extend research on CPB and political legitimacy.

Populist Syndrome and Nonmarket Strategy

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Abstract

Although recognized as a defining feature of the current political era, populism and its implications for non-market strategy remain undertheorized. We offer a framework that (a) conceptualizes populism and its progression over time; (b) outlines the risks populism generates for firms; and (c) theorizes effective nonmarket strategies under populism. Our framework anchors the political risk profile of populism in three interdependent elements: anti-establishment ideology, de-institutionalization, and short-term policy bias. These elements jointly shape the policymaking dynamics and institutional risks for firms under populism. Our analysis shows how firms can calibrate two nonmarket strategies – political ties and corporate social responsibility – to mitigate populism-related risks. We specify how particular configurations of political ties and CSR activities, aimed at the populist leadership, bureaucrats, political opposition, and societal stakeholders, minimize risk under populism. Further, we theorize how the effectiveness of specific attributes of political ties and CSR – namely their relative covertness (more vs. less concealed) and their relative focus (narrowly vs. widely targeted) – varies as a function of firm type (insiders vs. outsiders) and the probability of populist regime collapse. Finally, we address how motivated reasoning may bias firms' assessments of regime fragility and resulting strategy choices.

How Political Actors Co‐Construct CSR and its Effect on Firms’ Political Access: A Discursive Institutionalist View

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Abstract

This paper explores how corporate social responsibility (CSR) can incentivize political actors to increase firms' political access. Taking a discursive institutional perspective, I argue that the types of access negotiated depend on how political actors co-construct the multiplicity of CSR meanings. To study this process, I focus on the empirical case of the European Union (EU), offering a novel analysis of event observations, policy documents, and interviews with Commission officials, Euro-parliamentarians, and other stakeholders. I find that the value of CSR is highly contested in the EU political arena. I then elucidate four discursive strategies through which political actors interactively refined, reframed, and reinterpreted the meaning of CSR and its relevance for firm access in ways beneficial to their perceived interests. The findings highlight the importance for nonmarket strategy studies to conceptualize CSR as a co-constructed idea and access as negotiated, putting the micro-dynamic relationship between firms and political actors centre stage.

A balancing act between accuracy and timeliness: Evidence from analyst forecasts in China

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This paper investigates the impact of teamwork on analysts' ability to balance accuracy and timeliness. Surprisingly, team analysts demonstrate a lower ability compared to individual analysts. This trade-off ability is even worse in diverse teams. Further, we find that Confucianism negatively affects this ability. However, this ability significantly improves when star analysts serve on the analyst team, or when analyst team members come from the province where the covered firm is headquartered, or when analyst team members graduate from the same college. Overall, these findings suggest that it is crucial to consider the two performance dimensions simultaneously.

The impact of the organisational structure of tax authorities on tax and accounting fraud

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Using tax centralisation reform enacted to eliminate decentralised tax authorities, we find firms have lower probabilities of tax and accounting fraud since its implementation. Our analysis shows the negative impact of the reform on tax and accounting fraud becomes stronger among firms with weaker tax enforcement, indicating that the reform plays a corporate governance role through strengthening tax enforcement. Additionally, we find this effect is stronger when firm-level governance is weaker and stronger in firms with higher agency costs. Finally, the reform effect is weaker among non-state-owned enterprises with political connections to the central government.