So good but so far away? How institutional distance shape subsidiaries’ reputation building from multinationals’ corporate social responsibility

Abstract

Multinational Enterprises (MNEs) build a reputation across their host countries using Corporate Social Responsibility (CSR). Corporate reputation results from the host country stakeholders’ judgment on the reliability of MNEs’ CSR signals. Institutional factors can be decisive in these assessments. We focus on the institutional distance between home and host countries. We argue that MNEs’ CSR signals tend to lose reliability to the host country stakeholders as the institutional distance widens. We empirically test our hypotheses on a panel of MNEs’ subsidiaries operating in Latin America. We use a multi-stakeholder indicator of local reputation representing the host country’s stakeholders. Additionally, we use country-level, firm-level, and subsidiary-level variables, including one variable built using big data. Results show that institutional distance dilutes the effect of MNEs’ CSR on subsidiaries’ reputations.