Institutional Theory and MNEs’ Contributions to Social Safety Net in Local Markets: Subsidiary Perspective

Sinkovics, Rudolf R.; Park, Byung-Il

Abstract

Using institutional theory, this paper attempts to identify key external and internal institutional pressures that act to facilitate MNE subsidiaries' contributions to social safety nets in local markets. According to regression results, coercive law (i.e., regulatory pillar) enacted by governments does not function as a vehicle to enhance this phenomenon. By contrast, normative pillars encompassing traditions and social customs enforce MNE subsidiaries to be good citizens. Moreover, cognitive pillars represented by morals and ethics were found to be the most significant determinant among the external institutions. With respect to internal institutions, it was unexpected to find that parent firms, which are interested in the improvement of organizational efficiency and profit maximization through foreign direct investment, actually played a negative role when it comes to building social safety nets in host economies. The results of this paper found that the internal managers were a decisive factor and powerful role in establishing local social safety nets. Based on these results, this paper provides useful implications to managers and policy makers.

Citation

Sinkovics, R. R., & Park, B.-I. (2017). Institutional Theory and MNEs’ Contributions to Social Safety Net in Local Markets: Subsidiary Perspective. International Business Journal, 28(1.2), https://doi.org/10.14365/ibj.2017.28.1.2

• Journal Article Type: Article
• Publication Date: 2017
• Deposit Date: Oct 2, 2024
• Journal: International Business Journal
• Print ISSN: 1598-2718
• Electronic ISSN: 2465-9738
• Peer Reviewed: Peer Reviewed
• Volume: 28
• Issue: 1.2
• DOI: https://doi.org/10.14365/ibj.2017.28.1.2
• Keywords: Multinational Enterprises, Foreign Direct Investment, Social Safety Net, Institutional Theory, Korea
• Public URL: https://durham-repository.worktribe.com/output/2773152
• Related Public URLs: https://eprints.gla.ac.uk/262828/