Impact of Institutional Distance on Environmental and Social Practices in Host Countries: Evidence from International Construction Companies

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.