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Host Country Sourcing of Multinational Enterprises: A Corporate Social Responsibility Perspective

Abstract

Through corporate social responsibility (CSR) activities, a firm can develop the capability for managing and benefiting from stakeholder relationships. This study refers to such a capability as stakeholder influence capacity (SIC). In a host country, locally sourcing parts and/or materials can generate economic value and improve social welfare. Moreover, local sourcing provides opportunities for a foreign firm to apply and advance SIC while closely interacting with host-country stakeholders. Accordingly, we expect that a firm, having gained SIC through CSR activities in its home country, will be more likely to source parts and/or materials in the host country. We also expect that the relationship between SIC (gained from CSR in the home country) and host-country sourcing is conditional upon a foreign firm’s intangible resources and liabilities of foreignness. Our empirical analysis, using Korean datasets, supports the positive relationship between CSR and local sourcing. We find that this positive relationship is more pronounced either when the firm is committed to technology development or when its home and host countries are geographically or culturally distant.

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Notes

  1. For further details, please refer to their respective websites.

  2. In this paper, we used geographic distance as both a control variable and a moderator. We included it as a moderator in the model for its moderation effect. In all other models, it was included as a control variable.

  3. This study also considered the logistics performance index (by the World Bank), which can influence sourcing costs. Due to its high correlation with other variables, however, we report the results without the logistics performance index.

  4. Although not reported in tables, industry dummies showed statistically significant effects. The textiles industry showed a significantly positive effect on the level of local sourcing, while the tobacco products, apparel, chemicals, primary metals, electronic equipment, industrial machinery, and transportation equipment industries showed significantly negative effects on the level of local sourcing.

  5. We appreciate an anonymous reviewer’s insightful feedback.

  6. Result tables are available upon request.

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Correspondence to Jae C. Jung.

Appendix

Appendix

See Table 4.

Table 4 Dimensions of the KEJI index and scores

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Jung, J.C., Lee, KP. Host Country Sourcing of Multinational Enterprises: A Corporate Social Responsibility Perspective. J Bus Ethics 152, 683–701 (2018). https://doi.org/10.1007/s10551-016-3333-1

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Keywords

  • Corporate social responsibility (CSR)
  • Local sourcing
  • Stakeholder influence capacity (SIC)
  • Intangible resource
  • Liability of foreignness
  • Stakeholder theory