Pollution Haven, Private Politics, and Competitive Dynamics: How Do Irresponsible MNEs Challenged by an International NGO Compete to Act Responsibly?

Given its detrimental impact on a broad spectrum of stakeholders, corporate social irresponsibility (CSI) of multinational enterprises (MNEs) has garnered increasing scholarly interest. The dominant theoretical perspective suggests that the irresponsible practices of MNEs are primarily driven by the deficiencies in institutional frameworks within host countries. The underlying assumption posits that in the absence of regulatory changes in host countries, subsidiaries of MNEs will continue their irresponsible practices and are unlikely to engage in corporate social responsibility (CSR). We challenge this long-standing assumption through novel empirical evidence by integrating theories of private politics and competitive dynamics to investigate MNE CSI. Our findings demonstrate that global normative pressures, manifested through a private politics campaign by an international NGO, can drive MNEs operating in pollution havens to adopt CSR practices without changing regulatory demands from host countries. Drawing from an innovative research setting where polluting MNEs face challenges from the private politics of an international NGO, our qualitative research shows how these MNEs competed beyond mere compliance with the international NGO's requirements, actively participating in CSR-oriented competitive dynamics in three global arenas: the product market, the factor market, and sustainability-report discourses, even post-campaign. Our examination of dyadic action-reaction dynamics indicates that to retain global clients who have become more environmentally conscious, MNEs have transitioned from perceiving CSR as a financial burden to embracing it as a contest.