This article adds to the international business and corporate social responsibility (CSR) literature by investigating the impact of foreign ownership on the CSR expenditures of firms in a host country, within an emerging market context. Previous studies have examined the relationship between ownership structure and CSR engagement, primarily for the case of developed nations. This article explores the linkages between the CSR spending of foreign-owned firms in relation to their domestic counterparts for the Indian context. India provides a unique case because of the landmark legislation undertaken in 2014 that mandated CSR spending for firms based in India. This study examines the motivations that guide the CSR strategies of foreign firms in host nations and attempts to explain the usage of CSR spending as a tool to overcome Liability of Foreignness and achieve legitimacy using the neo-institutional theory. Within this unique setting, a sample of 3591 firm years in India for 2014–2018 is used to examine whether foreign-owned firms indulge in a higher CSR expenditure relative to domestic firms, using a random-effects model. Further, it is also examined whether business group-affiliated foreign firms spend differently on CSR than standalone foreign enterprises in the host nation. The results show that foreign ownership is associated with a higher CSR spending than domestic firms by an average of ₹1.35 million in the host country. Furthermore, among foreign firms, a business group affiliation leads to a higher CSR spending by an average of ₹1.55 million as compared to stand-alone foreign firms.

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Multinational enterprises resort to several market and nonmarket strategies to overcome the liability of foreignness (LOF) faced by them in overseas markets. A lesser explored nonmarket strategy to overcome LOF and gain legitimacy in the host country is through corporate social responsibility (CSR) expenditure. This paper empirically examines the role of “distance” on the CSR practices of foreign subsidiaries in India. Further, the study explores the role of market potential of the emerging market host country as proxied by the Gross Domestic Product in moderating the relation between distance variables and CSR expenditure. Our sample consists of CSR expenditure data of 69 foreign subsidiaries in India from 17 countries over the period from 2014 until 2018. The results show that cultural and economic distances impact the CSR expenditure of foreign subsidiaries positively and significantly. This relationship is negative and significant for administrative distance and insignificant for the case of geographic distance. Furthermore, it is observed that the market potential of the host country can make the foreign subsidiaries overlook the existence of distances.