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Institutional Structure and Firm Social Performance in Transitional Economies: Evidence of Multinational Corporations in China

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Abstract

With the expansion of multinational corporations (MNCs), the alarming upsurge in widely publicized and notable corporate scandals involving MNCs in emerging markets has begun to draw both academic and managerial attention to look beyond home market practices to the pressing concern of CSR in emerging markets. Previous studies on CSR have focused primarily on Western markets, reserving limited discussions in addressing the issue of MNC attitudes and CSR practices in their emerging host markets abroad. Despite this incongruity in academic response to CSR in emerging markets, managers of multinational companies continue to face mounting and most often conflicting pressures to weigh among multiple strategic CSR responses in emerging markets. Such a task is often further complicated by the complexity of varying business norms and standards, regulatory environments, and stakeholder demands for CSR across national boundaries. With such a challenge in mind, I attempt to examine the explanatory factors in leading MNCs, otherwise recognized for accountability and integrity in their home markets, to employ inconsistent or negligent practices under CSR pressure in Chinese emerging economy. Preliminary findings reveal that discrepancies exist in how MNCs perform in CSR in home countries versus in host countries. While MNCs do have much to improve, the institutional environment in the emerging market, including the legal framework and the ethical culture, also needs to be improved by the host country governments, the industry associations, and local firms. Meanwhile, media interest and journalists, NGOs, third party monitors, industry stakeholders as well as consumer advocacy groups can raise the visibility of MNC’s contradictory practices between their origin nations and countries with emerging economies and offer the pressures and incentives for MNCs to amend their ethical shortcomings. This article also suggests implications for both theory and practice.

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Acknowledgments

This research was conducted while I was the Fulbright Distinguished Professor (China Program) from 2005 to 2006. Institutional support from the Fulbright Foundation, the US Embassy in China, and Nankai University in China is gratefully acknowledged. Research assistance from Lauris Apse and Lynn Yin is appreciated. All views and opinions are entirely my own.

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  1. Schulich School of Business, York University, Toronto, ON, M3J 1P3, Canada

    Justin Tan

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Tan, J. Institutional Structure and Firm Social Performance in Transitional Economies: Evidence of Multinational Corporations in China. J Bus Ethics 86 (Suppl 2), 171–189 (2009). https://doi.org/10.1007/s10551-009-0193-y

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