Publication Type

Journal Article

Version

acceptedVersion

Publication Date

7-2020

Abstract

This study examines the influence of parent firm reputation risk on the level of corporate social responsibility activities of foreign subsidiaries. We first argue that a strong reputation risk spillover occurs from parent firms to their foreign subsidiaries due to the high visibility of multinationals, the control of parent firms over their subsidiaries, and the liability of foreignness associated with foreign firms in host countries. Then, we argue that subsidiaries may resort to CSR in their host country to reduce the spillover effect. Thus, we hypothesize a positive relationship between parent firm reputation risk and foreign subsidiary CSR activities. Moreover, we explore several contingency factors at both the parent firm and subsidiary levels that affect the extent of spillover and the need for subsidiaries to use CSR as a buffer against parent firm reputation risk. We find that the positive relationship between parent firm reputation risk and foreign subsidiary CSR activities is weaker for foreign subsidiaries that directly report to the parent firm, with longer operations in the host country and larger institutional distance between host and home countries. Using a unique sample of subsidiaries of large multinationals in China from 2009 to 2016, we find general support for our arguments.

Keywords

reputation risk spillover, corporate social responsibility, foreign subsidiary, headquarters-subsidiary relationship

Discipline

Business Law, Public Responsibility, and Ethics | International Business | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Journal of International Business Studies

Volume

51

Issue

8

First Page

1256

Last Page

1282

ISSN

0047-2506

Identifier

10.1057/s41267-020-00345-7

Publisher

Palgrave Macmillan (part of Springer Nature): Hybrid journals [society-owned]

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1057/s41267-020-00345-7

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