Escaping institutional constraints: how environmental proactivity shapes the environmental international diversification of emerging market firms?

Abstract

In the context of emerging market firms, this paper considers the relationship between their environmental international diversification and environmental proactivity, incorporating the influence of home country institutional constraints, with particular regard to the moderating roles of home country corruption and innovation. The study was conducted using a panel dataset obtained from the LSEG Workspace database to analyse the published results of 370 firms across ten business sectors for the period 2012–2022. The main findings provide evidence of a significant relationship between firms’ environmental proactivity and their international expansion. The findings indicate that environmental proactivity serves as a critical legitimacy building mechanism for firms seeking to escape corrupt home-country institutions, thereby strengthening its effect on environmental international diversification. In contrast, strong domestic innovation systems reduce the need for such legitimacy driven internationalisation, weakening the relationship between environmental proactivity and environmental international diversification. The present study contributes to the international business literature by revealing how institutional factors in emerging markets influence the relationship between environmental proactivity and environmental international diversification. It also offers valuable insights for policymakers and business leaders wishing to enhance emerging market firms’ global market presence through policies focused on environmental proactivity.