Corporate misconduct in GVCs: challenges and potential avenues for MNEs

Corporate misconduct can have serious harmful consequences for business if it is revealed and sanctioned. For this reason, the literature argues that Multinational Enterprises’ (MNEs) involvement in misconduct depends on the regulatory pressures exerted by the governments of the countries where they deploy their global value chain (GVC). We argue that regulatory pressures are not the only determinant of corporate misconduct, and that these pressures interact with civil liberties generating more complex outcomes than a linear low to high regulatory pressure scenario. In countries where regulatory pressures are high and that enjoy a high degree of civil liberties, firms avoid misconduct because it is in their interest. In countries with low regulatory pressures and a low degree of civil liberties, misconduct is likely to go unpunished. In these situations, MNEs may be under pressure to conform to local norms, including engaging in misconduct, or risk being expelled or sanctioned by the authorities. Finally, countries with a low level of regulatory pressures but a high degree of civil liberties may be better at avoiding firm misconduct than countries with high regulatory pressures and low degrees of civil liberties. Access to technology for information and communication purposes makes it so that even when regulatory pressures are low, as long as there is a certain degree of civil liberties, corporate misconduct can be exposed and punished by stakeholders. Implications of this interaction are discussed.