International diversification, legitimacy, and corporate social performance of extractive industry multinationals

This article examines how different international diversification strategies impact the legitimacy challenges multinationals face and the way they manage their corporate and social responsibilities. Analyzing these questions in a sample of companies in extractive industries, we find that those who pursue resource-seeking investments that involve locating extraction operations overseas respond with the largest improvement in their corporate-level social performance (CSP). Those pursuing efficiency-seeking by establishing processing subsidiaries abroad increase their CSP less, with the smallest increase for those pursuing market-seeking through marketing and sales operations overseas. For each type of activity established overseas, the increase in CSP becomes greater the more developed the company's home country and the larger its international footprint, but is not dependent on the host country's level of development. These findings suggest that, in today's globalized world, the legitimacy challenges that result from subsidiaries' activities increasingly need to be managed at a global, corporate level