Can Environmental, Social, and Governance Performance Promote the Participation of Emerging Economies in Multinational Supply Chains?

Dianfan Yu, Xin Li and Chao Wang

China & World Economy, 2025, vol. 33, issue 3, 33-75

Abstract: Multinational companies are increasingly recognizing the importance of integrating social responsibility initiatives into their business models as a means of building a sustainable competitive advantage. This study uses data from Chinese A‐share listed companies spanning from 2009 to 2020 to conduct an empirical analysis. The findings indicate that strong environmental, social, and governance (ESG) performance facilitated firms' integration into global supply chains. This effect was particularly pronounced among firms in heavily polluting and labor‐intensive industries, and those located in provinces with weaker institutional environments and underdeveloped industrial structures – regions often associated with greater ESG‐related identity challenges. The positive impact of ESG performance was also more evident in firms that supplied listed companies or operated closer to end consumers, due to increased public scrutiny. Mechanism analysis revealed that ESG performance served as a signaling tool by enhancing information transparency and building reputational capital. Further analysis showed that ESG performance not only supported firms' entry into host countries with stronger institutional environments but also contributed to longer lasting supply chain relationships. This article provides new insights into how emerging economies could integrate into the international supply chain system more effectively.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:chinae:v:33:y:2025:i:3:p:33-75

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