Abstract

This paper addresses how corporate social responsibility of multinationals in China influences their Chinese subsidiaries’ performance. Using panel data regression, (1) we investigate the effects of corporate social moderating effects of institutional and geographic distances between their home countries and China. Our findings show, first, that subsidiaries’ corporate social performance is associated positively with their profit in China. Second, we find that the greater the cultural, economic, and geographic distances between the home country and China, the less likely it is that a subsidiary will benefit from corporate social responsibility. We enrich the theoretical understanding of the institutional conditions under which corporate social responsibility leads to specific outcomes by adding new institutional elements—the differences of culture and the economies between multinationals’ host and home countries. Our findings suggest that although corporate social responsibility is still new to China, being socially responsibility provides financial benefits to multinationals. Their global and local corporate social responsibility strategies have to adjust based on local cultures and economic levels, especially with respect to fundamental beliefs about spirituality and values. The paper fulfilled the research gap between multinationals’ social practices and their performance in host countries at the subsidiary level by providing empirical evidence concerning the responses to corporate social responsibility initiatives in emerging markets and clarifying the conditions under which foreign affiliates’ corporate social responsibility engagement in the host country can gain better returns in local markets.

This work is licensed under a Creative Commons Attribution 4.0 License.