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

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.

Covert allyship: Implementing LGBT policies in an adversarial context

“…Together these actions have led to a culture of fear and secrecy among LGBT people in Indonesia, and a reluctance among organizations to openly promote or implement supportive LGBT policies because of potential legal repercussions and public backlash (Röell et al, 2022).…”

“…These issues are evident from media coverage, such as the controversial removal of rainbow flags from MNEs' logos during the FIFA and politics are frequently intertwined (Röell et al, 2022), MNEs may forgo promoting values that are sensitive locally to avoid jeopardizing relationships with key stakeholders. However, ignoring, and breaching…”

“…These issues are evident from media coverage, such as the controversial removal of rainbow flags from MNEs' logos during the FIFA World Cup in Qatar. Similarly, in emerging markets, where religion and politics are frequently intertwined (Röell et al, 2022), MNEs may forgo promoting values that are sensitive locally to avoid jeopardizing relationships with key stakeholders. However, ignoring, and breaching LGBT individuals' human rights is likely to have consequences for MNEs' accountability and reputation.…”

The Management of Socio‐Political Issues and Environments: Toward a Research Agenda for Corporate Socio‐Political Engagement

“…Thus, it has crucial bearings on subsequent empirical inquiries into CSPE in this unique institutional context. Röell et al (2023) explore how MNEs and their emerging-market subsidiaries proactively negotiate engagement with local socio-political stakeholders. Drawing on institutional theory as it relates to local embeddedness and using a qualitative inductive, interpretative approach, they investigate how Dutch MNEs operating in Indonesia seek to leverage their expatriate managers and local employees to attain legitimacy with both political and social actors.…”

“…Psychological and ideological characteristics. Several studies in the special issue capture psychological and cognitive frames (Blake et al, 2023;Moschieri et al, 2023;Röell et al, 2023). From these studies, and their application of organization theory, we gain a deeper understanding of how institutional circumstances influence various corporate nonmarket activities across countries, as well as the potential downside and unintended implications of such actions.…”