Abstract:*

Our research explores the relationship between MNEs’ international diversification and sustainability actions, focusing on multimarket contact where MNEs encounter and, likely, compete against each other in multiple geographical markets simultaneously. We identify two opposing forces: while international diversification generally promotes sustainability actions, multimarket contact may induce MNEs to forbear—i.e., implicitly coordinate to avoid competing intensely—by decreasing such actions. We propose that the decision to forbear is influenced by how foreign competitors interpret an MNE’s sustainability actions—either as normative or innovative—resulting in two types of reputation for the MNE: capability and character. These reputations create varying levels of threat to an MNE’s competitors. Specifically, when competitors see sustainability actions as indicative of capability reputation, the competitive threat increases. This may advance the likelihood they retaliate, prompting the MNE to engage in forbearance and decrease its sustainability actions. In contrast, if they are viewed as indicative of character reputation, the competitive threat and retaliation likelihood weaken, allowing the MNE to enhance its sustainability actions. Our empirical study in the global extractive industries supports these ideas.

*Co-authored with P.C. Symeou (Cyprus University of Technology)

General information:

Attendance to this seminar is possible by invitation only. Please send an e-mail to secbs-abs@uva.nl if your are interested in attending this seminar.