Drivers and performance outcomes of MNC’s sustainable strategy for their international subsidiaries in emerging markets: An empirical examination

Abstract

Previous studies on multinational corporations (MNCs) have not clearly explained how internal firm capabilities and external country factors together influence the MNC’s choice of sustainability strategies for their subsidiaries in emerging markets. This study aims to find out which factors drive MNCs to use a standardized or adapted sustainability strategy for their subsidiaries and how these choices affect their subsidiary performance. The research is based on two main theories: The Resource-Based View (RBV) and Institutional Theory. RBV explains how a firm's size, resources, and experience contribute to the application of common global systems, and the Institutional theory provides an insight into how local rules, culture, and stakeholder pressures drive the firms to change. A qualitative multiple-case study was carried out with five Finnish MNCs having manufacturing subsidiaries in emerging markets. The data included five interviews with sustainability managers and ten sustainability and annual reports for each company (2020–2024). Thematic analysis was used to identify common drivers and outcomes. The results indicate that standardized strategies are encouraged by strong internal capabilities and experience, whereas large markets, cultural differences, and stakeholder expectations encourage adaptation. Both adapted and standardized strategies work well when they suit the situation at the local level. Before deciding on a sustainability strategy, managers must evaluate the level of capability of their firm and the host-country environment to realize both efficiency and legitimacy.