Formal and informal institutional pressures on corporate social responsibility: A cross‐country analysis

Abstract

Abstract This study examines the influences of cross‐country institutional pressures on multinational enterprises' corporate social responsibility (CSR). Building on institutional and stakeholder theory, we propose that different formal and informal environments have direct impacts on firm CSR. Specifically, we investigate informal institutions as they relate to self‐transcendent and self‐enhancement values. We propose that the firm's consideration of multiple stakeholder expectations moderates these complex formal and informal institutional relationships. Utilizing hierarchical linear modeling, this study analyzes institutional constraints on nearly 1,000 firms in 47 different countries. The empirical results reveal that informal values that are aligned with the firm's strategies and stakeholder desires have a strong impact on firms' CSR actions. Multiple stakeholder consideration strengthens this important relationship. These findings provide insight on how managers can utilize informal institutions to meet the global challenge of satisfying profit needs and still maintain social responsibility.