Impact of Institutional Distance on Environmental and Social Practices in Host Countries: Evidence from International Construction Companies
Publication: Journal of Construction Engineering and Management
Volume 148, Issue 1
Abstract
Construction businesses expanding internationally often need to devise corporate social responsibility (CSR) as an indispensable component of their competitive strategies. Companies will customize their CSR programs to be in line with host countries’ institutional environments. Meanwhile, this customization will be unavoidably influenced by the institutions in their home countries. This research aims to explore whether the institutional distance between home and host countries matters to CSR, in particular, its related environmental and social practices. Data regarding the CSR practices in host countries are extracted from CSR/sustainability reports by using content analysis and text mining. Logistic regression models are then applied to test the roles of institutional distance and host country contexts on the two types of CSR practices. It is found that the institutional distance has no impact on environmental practices in host countries, but the embedded contexts of host countries positively affect the practices. It is also found that the institutional distance is positively correlated with social practices; however, the positive relationship is less pronounced when the host country’s development level is higher. The novelty of this research lies in considering both host countries’ contexts and the institutional distance. The findings offer companies new insights on how to engage in environmental and social practices and develop CSR strategies in international construction markets.
Get full access to this article
View all available purchase options and get full access to this article.
Data Availability Statement
Some or all data, models, or code that support the findings of this study are available from the corresponding author upon reasonable request.
Acknowledgments
Some part of the work described in this paper was extracted from the Ph.D. thesis supported by the University of Hong Kong.
References
Aguilera-Caracuel, J., N. E. Hurtado-Torres, J. A. Aragón-Correa, and A. M. Rugman. 2013. “Differentiated effects of formal and informal institutional distance between countries on the environmental performance of multinational enterprises.” J. Bus. Res. 66 (12): 2657–2665. https://doi.org/10.1016/j.jbusres.2013.04.002.
Ando, N., and Y. Paik. 2013. “Institutional distance, host country and international business experience, and the use of parent country nationals.” Hum. Resour. Manage. J. 23 (1): 52–71. https://doi.org/10.1111/j.1748-8583.2012.00201.x.
Babiak, K., and S. Trendafilova. 2011. “CSR and environmental responsibility: Motives and pressures to adopt green management practices.” Corporate Social Responsibility Environ. Manage. 18 (1): 11–24. https://doi.org/10.1002/csr.229.
Bondy, K., J. Moon, and D. Matten. 2012. “An institution of corporate social responsibility (CSR) in multi-national corporations (MNCs): Form and implications.” J. Bus. Ethics 111 (2): 281–299. https://doi.org/10.1007/s10551-012-1208-7.
Bustamante, S. 2011. Localization vs. standardization: Global approaches to CSR management in multinational companies. Berlin: Institute of Management Berlin at the Berlin School of Economics and Law (HWR Berlin).
Campbell, J. L. 2007. “Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility.” Acad. Manage. Rev. 32 (3): 946–967. https://doi.org/10.5465/amr.2007.25275684.
Campbell, J. T., L. Eden, and S. R. Miller. 2012. “Multinationals and corporate social responsibility in host countries: Does distance matter?” J. Int. Bus. Stud. 43 (1): 84–106. https://doi.org/10.1057/jibs.2011.45.
Castelló, I., and J. M. Lozano. 2011. “Searching for new forms of legitimacy through corporate responsibility rhetoric.” J. Bus. Ethics 100 (1): 11–29. https://doi.org/10.1007/s10551-011-0770-8.
Chi, B., W. Lu, M. Ye, Z. Bao, and X. Zhang. 2020. “Construction waste minimization in green building: A comparative analysis of LEED-NC 2009 certified projects in the US and China.” J. Cleaner Prod. 256 (May): 120749. https://doi.org/10.1016/j.jclepro.2020.120749.
Chowdhury, S., J. Zhu, K. Rasoulkhani, A. Mostafavi, E. Jaselskis, R. Stoa, Q. Li, S. Banerjee, A. Alsharef, and L. Brannen. 2020. “Guidelines for robust adaptation to environmental regulations in infrastructure projects.” J. Constr. Eng. Manage. 146 (10): 04020121. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001908.
Collinge, W. 2020. “Stakeholder engagement in construction: Exploring corporate social responsibility, ethical behaviors, and practices.” J. Constr. Eng. Manage. 146 (3): 04020003. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001769.
DiMaggio, P. J., and W. W. Powell. 1983. “The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields.” Am. Sociol. Rev. 48 (2): 147–160. https://doi.org/10.2307/2095101.
Duran, J. J., and N. Bajo. 2014. “Institutions as determinant factors of corporate responsibility strategies of multinational firms.” Corporate Social Responsibility Environ. Manage. 21 (6): 301–317. https://doi.org/10.1002/csr.1308.
Eden, L., and S. R. Miller. 2004. “Distance matters: Liability of foreignness, institutional distance and ownership strategy.” Adv. Int. Manage. 16 (187–221): 187–222. https://doi.org/10.1016/S0747-7929(04)16010-1.
Gaur, A. S., and J. W. Lu. 2007. “Ownership strategies and survival of foreign subsidiaries: Impacts of institutional distance and experience.” J. Manage. 33 (1): 84–110. https://doi.org/10.1177/0149206306295203.
Gokkon, B. 2018. “Environmentalists are raising concerns over China’s Belt and Road Initiative.” Accessed August 5, 2020. https://psmag.com/environment/environmental-concerns-over-chinese-infrastructure-projects.
GRI (Global Reporting Initiative). 2014. “GRI-G4-Construction and real estate sector disclosures.” January 15, 2018. https://www.globalreporting.org/resourcelibrary/GRI-G4-Construction-and-Real-Estate-Sector-Disclosures.pdf.
Hernández, V., and M. J. Nieto. 2015. “The effect of the magnitude and direction of institutional distance on the choice of international entry modes.” J. World Bus. 50 (1): 122–132. https://doi.org/10.1016/j.jwb.2014.02.002.
Hilbe, J. M. 2009. Logistic regression models. New York: CRC Press, Taylor & Francis.
Human Rights Watch. 2019. “China: ‘Belt and Road’ projects should respect rights.” Accessed July 10, 2021. https://www.hrw.org/news/2019/04/21/china-belt-and-road-projects-should-respect-rights.
Jackson, G., and A. Apostolakou. 2010. “Corporate social responsibility in Western Europe: An institutional mirror or substitute?” J. Bus. Ethics 94 (3): 371–394. https://doi.org/10.1007/s10551-009-0269-8.
Jackson, G., and N. Rathert. 2016. “Private governance as regulatory substitute or complement? A comparative institutional approach to CSR adoption by multinational corporations.” In Multinational corporations and organization theory: Post millennium perspectives, 445–478. Bingley, UK: Emerald Publishing.
Jacqueminet, A. 2017. “CSR implementation in MNEs: The role of distance and prioritization of demands.” In Distance in international business: Concept, cost and value, 363–378. Bingley, UK: Emerald Publishing.
Jiang, W., and J. K. Wong. 2016. “Key activity areas of corporate social responsibility (CSR) in the construction industry: A study of China.” J. Cleaner Prod. 113 (Feb): 850–860. https://doi.org/10.1016/j.jclepro.2015.10.093.
Jones, P., D. Comfort, and D. Hillier. 2006. “Corporate social responsibility and the UK construction industry.” J. Corporate Real Estate 8 (3): 134–150. https://doi.org/10.1108/14630010610711757.
Kolk, A. 2005. “Environmental reporting by multinationals from the Triad: Convergence or divergence?” Manage. Int. Rev. 45 (1): 145–166. https://doi.org/10.1007/978-3-322-91005-9_9.
Konara, P., and A. Mohr. 2019. “Why we should stop using the Kogut and Singh index.” Manage. Int. Rev. 59 (3): 335–354. https://doi.org/10.1007/s11575-019-00378-7.
Kostova, T. 1997. “Country institutional profiles: Concept and measurement.” In Academy of management proceeding, 180–184. New York: Academy of Management. https://doi.org/10.5465/ambpp.1997.4981338.
Kostova, T., and S. Zaheer. 1999. “Organizational legitimacy under conditions of complexity: The case of the multinational enterprise.” Acad. Manage. Rev. 24 (1): 64–81. https://doi.org/10.2307/259037.
Landauer, T. K., P. W. Foltz, and D. Laham. 1998. “An introduction to latent semantic analysis.” Discourse Process. 25 (2–3): 259–284. https://doi.org/10.1080/01638539809545028.
Lee, K.-W., S. H. Han, H. Park, and H. David Jeong. 2016. “Empirical analysis of host-country effects in the international construction market: An industry-level approach.” J. Constr. Eng. Manage. 142 (3): 04015092. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001083.
Lu, W., M. Ye, K. W. Chau, and R. Flanagan. 2018. “The paradoxical nexus between corporate social responsibility and sustainable financial performance: Evidence from the international construction business.” Corporate Social Responsibility Environ. Manage. 25 (5): 844–852. https://doi.org/10.1002/csr.1501.
Lu, W., M. Ye, R. Flanagan, and K. Ye. 2016. “Corporate social responsibility disclosures in international construction business: Trends and prospects.” J. Constr. Eng. Manage. 142 (1): 04015053. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001034.
Lu, Y., Q. Cui, and Y. Le. 2013. “Turning green to gold in the construction industry: Fable or fact?” J. Constr. Eng. Manage. 139 (8): 1026–1036. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000676.
Mahfouz, T., and A. Kandil. 2010. “Unstructured construction document classification model through latent semantic analysis (LSA).” In Proc., 27th Int. Conf. on Applications of IT in the AEC Industry (CIB-W78 2010). Ottawa: International Council for Research and Innovation in Building and Construction.
Menard, S. W. 1995. Applied logistic regression analysis. Thousand Oaks, CA: SAGE.
Meyer, J. W., and W. R. Scott. 1983. “Centralization and the legitimacy problems of local government.” In Organizational environments: Ritual and rationality, edited by J. W. Meyer and W. R. Scott, 199–215. London: SAGE.
Mio, C., S. Panfilo, and B. Blundo. 2020. “Sustainable development goals and the strategic role of business: A systematic literature review.” Bus. Strategy Environ. 29 (8): 3220–3245. https://doi.org/10.1002/bse.2568.
Prahalad, C. K., and Y. L. Doz. 1987. The multinational mission: Balancing local demands and global vision. New York: Free Press.
Qiu, L., D. Hu, and Y. Wang. 2020. “How do firms achieve sustainability through green innovation under external pressures of environmental regulation and market turbulence?” Bus. Strateg. Environ. 29 (6): 2695–2714. https://doi.org/10.1002/bse.2530.
Quer, D., L. Rienda, R. Andreu, and S. Miao. 2019. “Host country experience, institutional distance and location choice of Chinese MNEs: The moderating effect of government official visits.” Cross Cult. Strategic Manage. 26 (1): 24–45. https://doi.org/10.1108/CCSM-02-2018-0028.
Rasoulkhani, K., L. Brannen, J. Zhu, A. Mostafavi, E. Jaselskis, R. Stoa, Q. Li, A. Alsharef, S. Banerjee, and S. Chowdhury. 2020. “Establishing a future-proofing framework for infrastructure projects to proactively adapt to complex regulatory landscapes.” J. Manage. Eng. 36 (4): 04020032. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000794.
Rathert, N. 2016. “Strategies of legitimation: MNEs and the adoption of CSR in response to host-country institutions.” J. Int. Bus. Stud. 47 (7): 858–879. https://doi.org/10.1057/jibs.2016.19.
Salomon, R., and Z. Wu. 2012. “Institutional distance and local isomorphism strategy.” J. Int. Bus. Stud. 43 (4): 343–367. https://doi.org/10.1057/jibs.2012.3.
Scott, W. R. 2005. “Institutional theory: Contributing to a theoretical research program.” In Great minds in management: The process of theory development, edited by K. G. Smith and M. A. Hitt, 460–484. Oxford, UK: Oxford University Press.
Scott, W. R. 2008. Instituions and organizations: Ideas and interests. Los Angeles: SAGE.
Suddaby, R., A. Bitektine, and P. Haack. 2017. “Legitimacy.” Acad. Manage. Ann. 11 (1): 451–478. https://doi.org/10.5465/annals.2015.0101.
UNDP (United Nations Development Programme). 2016. Human development report 2016: Human development for everyone. New York: United Nations.
UN (United Nations). 2015. “Sustainable development goals.” Accessed April 10, 2020. https://www.undp.org/content/undp/en/home/sustainable-development-goals.html.
Wang, S., H. Wang, and J. Wang. 2019. “Exploring the effects of institutional pressures on the implementation of environmental management accounting: Do top management support and perceived benefit work?” Bus. Strateg. Environ. 28 (1): 233–243. https://doi.org/10.1002/bse.2252.
WorldBank. 2021. “What is governance?” Accessed July 12, 2021. https://info.worldbank.org/governance/wgi/.
Xu, D., and O. Shenkar. 2002. “Institutional distance and the multinational enterprise.” Acad. Manage. Rev. 27 (4): 608–618. https://doi.org/10.2307/4134406.
Yalcinkaya, M., and V. Singh. 2015. “Patterns and trends in building information modeling (BIM) research: A latent semantic analysis.” Autom. Constr. 59 (Nov): 68–80. https://doi.org/10.1016/j.autcon.2015.07.012.
Ye, M. 2018. The impacts of institutional distance on corporate social responsibility “glocalisation”: Evidence from international construction. Hong Kong: Univ. of Hong Kong Libraries.
Ye, M., W. Lu, and R. Flanagan. 2018. “Corporate social responsibility localization in international construction business.” In Proc., 21st Int. Symp. on Advancement of Construction Management and Real Estate, 553–564. Berlin: Springer.
Ye, M., W. Lu, R. Flanagan, and K. W. Chau. 2020. “Corporate social responsibility “glocalisation”: Evidence from the international construction business.” Corporate Social Responsibility Environ. Manage. 27 (2): 655–669. https://doi.org/10.1002/csr.1831.
Zhao, Z.-Y., X.-J. Zhao, K. Davidson, and J. Zuo. 2012. “A corporate social responsibility indicator system for construction enterprises.” J. Cleaner Prod. 29–30 (Jul): 277–289. https://doi.org/10.1016/j.jclepro.2011.12.036.
Zheng, Q., Y. Luo, and V. Maksimov. 2015. “Achieving legitimacy through corporate social responsibility: The case of emerging economy firms.” J. World Bus. 50 (3): 389–403. https://doi.org/10.1016/j.jwb.2014.05.001.
Information & Authors
Information
Published In
Copyright
© 2021 American Society of Civil Engineers.
History
Received: Apr 12, 2021
Accepted: Oct 5, 2021
Published online: Nov 10, 2021
Published in print: Jan 1, 2022
Discussion open until: Apr 10, 2022
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.
Cited by
- Liumiao Qin, Qinghua He, Xintian Fu, Yuxin Wang, Ge Wang, Peer Effects on Corporate Social Responsibility Engagement of Chinese Construction Firms through Board Interlocking Ties, Journal of Construction Engineering and Management, 10.1061/JCEMD4.COENG-14479, 150, 7, (2024).
- Liping Li, Igor Martek, Chuan Chen, Institutional Factors Impacting on International Construction Market Selection: Evidence from Chinese Contractors, Buildings, 10.3390/buildings12050543, 12, 5, (543), (2022).
- Gozal Ahmadova, Blanca L. Delgado-Márquez, Javier Aguilera-Caracuel, Reporting of environmental policies and internationalization of Asia–Pacific firms: the moderating role of innovation as a source of legitimacy, Asian Business & Management, 10.1057/s41291-022-00203-4, (2022).