Effects of local legitimacy on certification decisions to global and national CSR standards by multinational subsidiaries and domestic firms

We explore the impact of local legitimacy on the imitation of certification by subsidiaries of foreign multinational enterprises and domestic firms. We propose that MNE (multinational enterprise) subsidiaries and domestic firms differ in their propensity to imitate geographically proximate firms when deciding whether to adopt national vs global CSR (corporate social responsibility) certifications for two reasons. First, there are differences in the legitimacy they can expect to gain in different communities from adopting these certifications. Second, there are differences in their knowledge about the local legitimacy of these certifications. We test our hypotheses by studying the decisions of automotive suppliers in Mexico to certify either to ISO 14001, a global certification, or to Clean Industry, a national certification. We find that geography matters: MNE subsidiaries imitate national certifications by geographically proximate firms to overcome a liability of foreignness, while domestic firms imitate global certifications by proximate firms to overcome the disadvantages of localness. We explore the implications of our findings for institutional theory and future research.