Market or Community? An Institutional Logics Interpretation of how MNE Subsidiaries Respond to Mandated Social Innovation in India

Abstract

AbstractDespite growing concern in the social innovation (SI) literature about the tackling of grand challenges, our understanding of the role of multinational enterprises (MNEs) remains in its infancy. This article examines foreign MNE subsidiaries’ SI investments focusing on United Nations’ Sustainable Development Goals (UNSDGs) in host countries. Using financial data from large, listed subsidiaries of foreign MNEs operating in India, along with hand-collected data from firms’ disclosures of corporate social responsibility (CSR) activity for five years starting in 2015, we utilise the externalities framework propounded by Montiel et al. (2021). This neatly translates the 17 UNSDGS into actionable goals to examine the efforts of foreign MNE subsidiaries in increasing positive externalities as opposed to reducing negative externalities via SI-related investment in host countries. The study also evaluates the effects of the local embeddedness of the foreign MNE subsidiaries on SI investment. We find that MNE subsidiaries tend to favour increasing positive externalities as compared to reducing negative externalities through their SI investments. Also, older subsidiaries tend to prioritize greater investments in SI projects related to reducing negative externalities and subsidiaries with higher MNE ownership tend to reduce investments in SI projects related to increasing positive externalities. We discuss possible interpretations of the exploratory results using the institutional logics perspective and conclude with implications for policy and future research.