Institutional Pressures of Home Country as A Moderator in the Curvilinear Relationship of MNC Corporate Competitiveness to Corporate Social Performance (CSP)

Abstract

Responding to researchers? calls for more attention to the institutional mechanisms that may influence CSR behavior and the society?s responsibility in keeping corporations accountable, an empirical study was conducted examining the effects of institutional pressures of home country on CSR behavior. The purpose of this study is to provide clues towards two questions presented by CSR literature reviewers as future research directions: ?Why would corporations engage in CSR?? and ?How can society make institutional changes to promote CSR?? Results have shown that institutional pressures of home country exerted a direct positive impact on CSP and also moderated the curvilinear competitiveness ? CSP relationship through a quadratic-by-linear interaction with competitiveness. The moderating effect was as follows: when institutional pressures of home country were low, the competitiveness ? CSP relationship was an inverted U-shaped one. The downward curvilinearity diminished as institutional pressures of home country increased linearly; when institutional pressures of home country reached a high level, the competitiveness ? CSP relationship changed into a positive linear one. Further investigations were conducted into the respective moderating effects of three elements of institutional pressures of home country----the governmental pressure, corporate pressure, and social pressure. Results showed that governmental pressure accounted for the largest portion of the moderating effect that institutional pressures of home country exerted on the competitiveness ? CSP relationship, followed by social pressure, and then corporate pressure. These finds answered the first question of ?why would corporations engage in CSR? from the institutional perspective by arguing that institutional pressures they encounter force and induce corporations to engage in CSR for the purpose of both avoiding punishments and reaping competitive benefits. These findings also answered the second question of ?how can society make institutional changes to promote CSR? by suggesting the government?s establishing of CSR-relevant formal institutions and strengthening the enforcement capabilities of those formal institutions, as well as the society?s reinforcing normative calls for CSR and the power of monitoring corporate behavior and enforcing CSR. This study provides a first attempt to empirically examine the moderating effects of institutional environment on the relationship of a corporation?s economic condition to CSP. It helps to fill the empirical research void in the institutional literature on CSR and contributes to the exploring of the institutional aspect of CSR research. Meanwhile, this study examined CSR from the ?social? side of the corporation ? society equation and investigated the ?highly intriguing interactions between society and business?, which were consistent to the future direction of CSR research suggested by many scholars in this field.