Overseas stakeholders do not always appreciate the corporate social responsibility (CSR) efforts of multinational corporations (MNCs), a PolyU study has found.

Are the efforts of MNCs to be socially responsible always viewed positively by overseas stakeholders? Probably not, argued Dr Ni Na and Dr Jiang Yuwei from PolyU’s Department of Management and Marketing and Dr Donal Crilly from the London Business School in a recently published study.

Drawing on attribution theory, the researchers considered two heuristics that guide stakeholders in evaluating MNCs’ CSR efforts: “foreignness” or the inherent disadvantage that foreign firms have in host countries due to their non-native status, and the “intrinsic attractiveness” of MNCs’ social responsibility.

The study comprised two parts: a field study of secondary stakeholders to identify how they evaluate the social performance of domestic and foreign MNCs, and an experimental study involving 129 non-governmental organizations to gather evidence about what drives stakeholders to distinguish the social performance of domestic and foreign MNCs. The researchers also analysed MNCs’ sustainability reports to determine whether their CSR efforts were designed to “do good” or “do no harm”.

As Dr Ni put it, “more and more MNCs hope to gain more legitimacy and increased financial performance by engaging and investing in CSR activities; however, these investments are generally undervalued by local constituencies”. The findings are consistent with attribution theory’s prediction that the liability of foreignness is minimised when firms engage in “do good” social responsibility but is substantial when they engage in “do no harm” social responsibility focused on limiting the negative implications of their actions. These evaluations also have consequences for whether stakeholders subsequently cooperate, or sow conflict, with MNCs.

Dr Jiang commented that “this is problematic because perceptions of social performance matter for how easily MNCs gain resources from stakeholders”. He also highlighted the importance of communicating with intermediaries that the effectiveness of CSR strategy depends on the receptivity of actors outside the firm, such as analysts, customers and governments.

The study was published in the Strategic Management Journal. ♦