Uncovering the nonmarket side of internationalization: the Belt and Road Initiative and Chinese firms' CSR reporting quality

Prior studies have generally assumed that firm internationalization is more of a pure market strategy seeking economic opportunities in host country markets. In this study, we argue that in the case of China's Belt and Road Initiative (BRI), international expansion into designated countries can simultaneously bear a nonmarket nature because this can enhance a firm's political legitimacy. This in turn generates a trade-off effect on another nonmarket activity of the firm, namely CSR reporting. Based on a difference-in-difference analysis of a sample of 261 Chinese firms from 2010 to 2017, we find that Chinese firms' engagement in the BRI negatively influences the quality of their CSR reporting. However, this negative impact is weaker when firms have invested less in the BRI, possessed greater slack resources, and come from a more institutionally developed province of China. We conclude by discussing the implications of our findings for future research and policymakers.