MNEs’ CSR Decoupling: How Host-Country Stakeholder Pressures Matter

The literature suggests that organizations tend to use corporate social responsibility (CSR) as a means to establish and enhance legitimacy, particularly when they operate internationally. Meanwhile, organizations that adopt voluntary CSR initiatives, such as the United Nations Global Compact (UNGC), may decouple symbolic CSR claims from actual CSR performance. Despite extensive research on organizational decoupling and the legitimation strategies of multinational enterprises (MNEs), we have limited understanding of how host-country conditions affect MNEs’ CSR decoupling. Building on the idea of decoupling in institutional theory and the research on corporate adoption of voluntary codes of conduct, this paper analyzes how host-country stakeholder pressures will discourage CSR decoupling of MNEs that adopt the UNGC. We also identify possible contingencies, host country press freedom, and institutional and normative distances between home and host countries, and investigate how they moderate MNEs’ responses to host-country stakeholder pressures. We test our theory using an international sample of the UNGC signatories during the period 2007-2018. Our main analyses rely on a dataset containing 4,359 observations for 305 listed firms from 36 home countries, with negative CSR events (i.e., corporate violations of the UNGC principles) taking place in 117 host countries. The results support our predictions.