Institutional Determinants of Environmental Corporate Social Responsibility: Are Multinational Entities Taking Advantage of Weak Environmental Enforcement in Lower‐Income Nations?

Published date01 March 2018
AuthorClyde Eirikur Hull,Stephen R. Luxmore,Zhi Tang
DOIhttp://doi.org/10.1111/basr.12138
Date01 March 2018
Institutional Determinants of
Environmental Corporate
Social Responsibility: Are
Multinational Entities Taking
Advantage of Weak
Environmental Enforcement in
Lower-Income Nations?
STEPHEN R. LUXMORE, CLYDE EIRIKUR HULL, AND ZHI TANG
ABSTRACT
Multinational enterprises (MNEs) are often accused of
taking advantage of lax environmental regulations in
developing countries. However, no quantitative analysis of
the impact of doing business in nations of different
income levels on environmental corporate social responsi-
bility (ECSR) has been done prior to this study. Incorpo-
rating institutional factors in our approach, we argue that
endoisomorphic and exoisomorphic pressures relating to
ECSR impact MNEs differently according to the MNEs’
level of activity in low-, lower-middle-, upper-middle-, and
high-income nations. We predict and, using data from
113 companies, find that selling in poorer nations is
Stephen R. Luxmore is Senior Lecturer at the Saunders College of Business, Rochester Insti-
tute of Technology, Rochester, NY. E-mail: sluxmore@saunders.rit.edu. Clyde Eirikur Hull is
Professor at the Saunders College of Business, Rochester Institute of Technology, Rochester,
NY. E-mail: chull@saunders.rit.edu. Zhi Tang is Associate Professor at the Saunders College of
Business, Rochester Institute of Technology, Rochester, NY. E-mail: ztang@saunders.rit.edu.
V
C2018 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by
Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington
Road, Oxford OX4 2DQ, UK.
Business and Society Review 123:1 151–179
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positively associated with increased levels of ECSR. Our
research suggests that MNEs may not be participating in
a “race to the bottom” but may instead be responding to
global institutional pressure by exceeding local norms for
environmental stewardship. Alternative interpretations of
our findings are discussed.
INTRODUCTION
Do multinational entities (MNEs) pollute more in coun-
tries where they think they can get away with it? How
can we understand what makes one MNE pursue envi-
ronmental corporate social responsibility (ECSR) and another
one not? Aguinis and Glavas (2012) suggest that stakeholders’
expectations of economic, social, and environmental perfor-
mance define corporate social responsibility (CSR) and thus
influence organizations’ CSR policies and actions. Sandhu
(2010) proposes that MNEs are increasingly pressured to be envi-
ronmentally responsible.
Pressures from internal and external stakeholders may explain
why MNEs behave as they do. Endoisomorphic pressure, the pres-
sure to conform to standards internal to the MNE, and exoisomor-
phic pressure, the pressure to conform to the standards of the
external environment, may push an organization in different direc-
tions (Souitaris et al. 2012). How these pressures interact to influ-
ence the ECSR of MNEs has not yet been studied. Our study
examines ECSR in an international context, drawing on institu-
tional theory to explore the endoisomorphic and exoisomorphic
pressures they face and observe how these pressures interact to
shape how MNEs approach ECSR.
Institutional differences are important to international business
research, and thus to studying ECSR in an international context
(Kolk and van Tulder 2010). Institutional differences influence the
scope of strategic options and decision making (Lu et al. 2009;
Meyer et al. 2009; Peng 2003; Rothenberg 2007; Tan 2009; Tang
and Hull 2012). Peng (2003) argues powerfully that institutional
pressures shape strategy, and that strategies change in response
to different institutional pressures. Lu et al. (2009) found that
152 BUSINESS AND SOCIETY REVIEW

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