Multinational Enterprises’ Dual Agency Role: Formal Institutions and Corporate Social Responsibility in Emerging Markets

Abstract

This study systematically examines whether and how a nation’s extent of economic globalization, manifested by the presence of multinational enterprises (MNEs), and formal institutional development may jointly influence a nation’s overall corporate social responsibility (CSR) involvement across emerging markets. Drawing on institutional theory, we develop a dual agency model: on the one hand, MNEs take the role of CSR agents in demonstrating CSR practices and imposing direct influences on local firms in emerging markets; on the other hand, MNEs function as institutional agents, conducting activities of institutional entrepreneurship and channeling global institutional influences into emerging markets. Empirically, we conduct a bootstrapped test of mediation analysis across 83 developing countries. Our findings show that in the context of emerging markets, a more significant presence of MNEs in a nation positively links to its firms’ overall CSR involvement, and the nation’s formal institutional evolvement partially mediates such a positive relationship. This study ends with a conclusion and discussions on the contributions and implications.

Gender Diversity and Firms’ Sustainable Performance: Moderating Role of CEO Duality in Emerging Equity Market

“…These overcome the agency problems to hire more female directors onto the corporate board [40]. In this framework, the higher representation of female directors on the board reduces agency costs through better corporate control [15,41]. The prior literature shows strong and diverse corporate governance mechanisms that can improve financial performance to reduce agency problems [42] and enhance corporate board monitoring [36,43].…”