The effect of FDI motivations on Corporate Social Responsibility activities: legitimacy theory perspective

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This study adds to the previous research by examining the effect of FDI motivations on Corporate Social Responsibility activities. The underlying theory is based on the notion that MNEs use CSR activities to strengthen their legitimacy in a foreign country and overcome Liability of Foreignness. The study focuses on Market-seeking, Resource seeking, Efficiency-seeking, and Strategic asset-seeking and proposes that the effect of Liability of Foreignness and, subsequently, the incentives for CSR activities differ depending on which motivation the MNE is following. The sample contains panel data on 36 MNEs and 254 subsidiaries in foreign countries for the period from 2002 to 2020. The results indicate that FDI motivations have only limited influence on the level of CSR activities of the MNEs, with only Efficiency-seeking showing a significant positive effect. Additional analysis revealed that Market-seeking MNEs are likely to engage in more CSR activities than MNEs following other motivations in foreign countries. In contrast, MNEs driven by Strategic asset-seeking motivation engage in CSR activities to a lesser extent than MNEs following other FDI motivations. Such tendency is likely due to the high costs of CSR activities that are challenging to combine with other expensive practices, such as knowledge and technology adoption.
Faculteit der Managementwetenschappen