MNC Strategy and Social Adaptation in Emerging Markets

Zhao, M., Park. S. and N. Zhou. 2014. MNC Strategy and Social Adaptation in Emerging Markets. Journal of International Business Studies. 45: 842–861

20 Pages Posted: 11 Feb 2014 Last revised: 29 Aug 2014

See all articles by Meng Zhao

Meng Zhao

Renmin University of China, Business School

Seung Ho (Sam) Park

Skolkovo Emerging Markets Research Institute - Moscow School of Management

Nan Zhou

Moscow School of Management SKOLKOVO

Date Written: February 11, 2014

Abstract

Emerging markets experience institutional and social changes over time that present different stakeholder expectations for multinational corporations (MNCs). MNCs are often accused of social misdeeds and experience public crises during the changes, leaving questions how they adapt to the local social transition to sustain operations. Conventional adaptation strategies put too much emphasis on maximizing economic returns by arbitraging national differences and catering to local market and consumer characteristics. The economic orientation may fail to address evolving and diverse stakeholder expectations, easily leading to public crises. This study conceptualizes economic adaptation and social adaptation as two sets of knowledge and capabilities that would have equally important impacts on MNCs’ sustainable operations in emerging markets. The empirical testing examines consumer rights-related public crises experienced by 180 MNCs in China. The results suggest that MNCs’ social adaptation activities have significantly positive effects in mitigating public crises while certain aspects of economic adaption, such as early entry into China, reliance on local leadership, and speedy expansion of local employees, lead to public crises. The significant interaction effects confirm that MNCs need to follow a balanced approach paying attention to both economic and social components to avoid public crises and sustain growth in emerging markets.

Keywords: Multinational corporations, emerging markets, public crisis, stakeholder environment, social adaptation, event history analysis

Suggested Citation

Zhao, Meng and Park, Seung Ho (Sam) and Zhou, Nan, MNC Strategy and Social Adaptation in Emerging Markets (February 11, 2014). Zhao, M., Park. S. and N. Zhou. 2014. MNC Strategy and Social Adaptation in Emerging Markets. Journal of International Business Studies. 45: 842–861, Available at SSRN: https://ssrn.com/abstract=2393820

Meng Zhao (Contact Author)

Renmin University of China, Business School ( email )

Beijing
China

Seung Ho (Sam) Park

Skolkovo Emerging Markets Research Institute - Moscow School of Management ( email )

1st Kadashevsky pereulok, 10, bld. 3
Moscow 115035
Russia

Nan Zhou

Moscow School of Management SKOLKOVO ( email )

1st km of Skolkovo highway
Odintsovsky District

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