General Management Department's Lecture

Theme：Foreign Subsidiary CSR as a Buffer Against Parent Firm Reputation Risk

Speaker：Nan Zhou (Associate Professor, NaiKai University, Business School)

Time：2019-10-24 12:00

Address：Room 1008, Mingde Business Building

Language：Chinese/English

Abstract：

This study examines the influence of parent firm reputation risk on the level of corporate social responsibility (CSR) activities of foreign subsidiaries. We first argue that a strong reputation risk spillover effect occurs from parent firms to their foreign subsidiaries due to the high visibility of multinationals, the perceived control of parent firms over their subsidiaries, and the liability of foreignness (LOF) associated with foreign firms in host countries. Then, we argue that subsidiaries likely resort to CSR in building social legitimacy in their host country to reduce the spillover effect. Moreover, we explore several contingency factors (whether subsidiaries have a local country head, subsidiary age, the multinational’s organizational structure, and institutional distance) that affects the likelihood of spillover and the need for subsidiaries to use CSR as a buffer against parent firm reputation risk. We test our hypotheses using a unique sample of subsidiaries of large multinationals in China from 2009 to 2016 and find general support.