Varieties of Capitalism, Environmental Risk and Readiness, and MNCs’ Environmental Performance

The environmental impacts of large multinational companies (MNCs) are attracting increasing scrutiny as the climate crisis intensifies. In this study, we extend prior research that has examined the role of country-level institutions on MNCs’ corporate environmental performance (CEP) by exploring interdependencies between home- and host-country conditions and between institutional and ecological country characteristics. Specifically, we theorize that multinational companies’ home-country Variety of Capitalism (VoC) affects their CEP by shaping firms’ comparative advantages in environmental performance, and by acting as an interpretive schema by which host-country conditions are evaluated and responded to. We test our theoretical propositions using a large sample of 3,994 MNCs headquartered in 72 countries over the time period 2009 to 2018 Findings show that MNCs’ environmental performance is shaped significantly by host-country characteristics, and that MNCs’ home-country VoC also significantly moderates the impacts of host-country influences on MNCs’ CEP. We find that firms’ home country variety of capitalism asymmetrically affects how home- and host-country institutional conditions influence CEP: for CME MNCs, home country institutional readiness complements firm CEP, but host-country institutional readiness substitutes for firm CEP, with the opposite being true for LME MNCs. Thus, add to debates regarding how varieties of capitalism influence forms of pro-social firm behavior by highlighting their asymmetric importance for home and host-country conditions.