Overcoming the ESG Voids at Home: Supplier ESG Performance and the Internationalization of Emerging Market Multinational Enterprises

This article investigates the link between supplier environmental, social, and corporate governance (ESG) performance and the internationalization of focal firms. Drawing on stakeholder theory, institutional theory, and the specific context of emerging market multinational enterprises (EMNEs), we propose that supplier ESG performance positively influences the degree of internationalization of focal firms from emerging economies. Specifically, ESG voids in the home country incentivize firms to leverage supplier ESG strengths to overcome legitimacy challenges and then enhance their internationalization. We conceptualize this motivation as the gain of supply chain-specific advantages (SCSAs). Furthermore, supplier ESG performance generates productivity spillovers that improve focal firm productivity, formulating firm-specific advantages (FSAs) that further support internationalization. We also argue that the impact of SCSAs is more pronounced for state-owned firms and those investing in host countries with stronger institutional development. Using data from 401 Chinese MNEs and their supplier-customer linkages, we empirically validate our hypotheses. Our findings highlight the strategic importance of supply chain ESG management for advancing internationalization and provide managerial insights for EMNEs, which aim to mitigate home-country ESG voids and enhance their global competitiveness.