Beyond the Liability of Origin: Multidimensional Legitimacy and ESG Strategies of Emerging Market Multinationals

ABSTRACT

Drawing on a multidimensional legitimacy perspective, this study examines how internationalization shapes the ESG performance of emerging market multinational enterprises (EMNEs). EMNEs face not only external legitimacy pressures in host‐country markets but also internal legitimacy pressures in the home‐country institutional environment. These internal pressures are especially salient for state‐owned EMNEs because of their stronger political embeddedness and closer alignment with state priorities. Using panel data on 16,342 firm‐year observations from Chinese listed firms covering 2009–2022, the findings show that greater geographic breadth of internationalization is positively associated with ESG performance. This relationship is stronger for state‐owned EMNEs, suggesting that their ESG strategies are shaped by the need to maintain legitimacy both abroad and at home. Board overseas experience further strengthens this effect, indicating that internationally experienced directors help firms reconcile competing home‐ and host‐country expectations during international expansion. By integrating external and internal legitimacy into the analysis of EMNE ESG strategies, this study extends research on internationalization, legitimacy, and corporate governance and highlights the role of board‐level international experience in translating legitimacy pressures into stronger ESG engagement.