Seeking Moral Legitimacy through Corporate Social Responsibility: Evidence from Chinese Manufacturing Multinationals

Abstract

Recently, concerns have been raised as to how Chinese multinational companies (MNCs) can achieve organizational legitimacy and sustainable development in host countries, especially given China’s weak institutional environment. One strategic approach to establish and maintain legitimacy is by promoting corporate social responsibility (CSR). This study examined the relationship between Chinese manufacturing MNCs’ engagement in terms of CSR and gaining moral legitimacy in host countries, and whether the institutional distance between countries is an important moderating factor in this relationship. Using a hierarchical regression analysis and a bootstrapping method on data obtained from 303 questionnaires completed by a sample of Chinese manufacturing MNCs, this paper finds that CSR engagement at both aggregate and disaggregate levels (specifically, customer- and community-related CSR engagement) is likely to be an effective strategy for Chinese manufacturing MNCs’ subsidiaries to gain moral legitimacy in host countries. Furthermore, Chinese MNCs’ subsidiaries are more likely to gain moral legitimacy by means of engagement in customer- and government-related CSR when the institutional distance from China is greater. Overall, this paper contributes to our understanding of the gaining of moral legitimacy by Chinese manufacturing MNCs in host countries. The findings can support Chinese manufacturing MNCs in shaping the CSR strategy of their international businesses.

1. Introduction

China is a major player in global investment markets, with outbound foreign direct investment (FDI) flows of USD 154 billion in 2020 [1]. A large number of overseas investment projects have, however, failed to be completed. According to the China Global Investment Tracker (CGIT), over 300 large projects were classified as “troubled transactions” from 2005 to 2019, with the individual investment amounts ranging from USD 100 million to USD 19,500 million [2]. When taking a closer look at the identified troubled projects, it is observed that a high percentage of these projects can be attributed to non-market forces. Constraints on FDI projects concern a series of formal and informal institutions such as regulations, social norms, and culture. As institutional theory emphasizes, organizations cannot be fully explained through economic and technological variables, but organizational behavior is shaped as such by institutional forces [3,4]. Multinational companies’ (MNCs) subsidiaries must behave according to the institutional environments of host countries in an attempt to gain organizational legitimacy. Obtaining organizational legitimacy will reduce ambiguity and uncertainty, and will assist in overcoming the ‘liability of foreignness’ (LOF) [5].

Despite notable growth, China is still endeavoring to acquire full legitimacy in the international investment arena. The cultural and social norms and values in China differ from those in most Western societies, which, to a certain extent may cause suspicion when stakeholders in Western host countries view China [6]. The identity of Chinese MNCs perceived by stakeholders in Western and non-Western host countries is largely influenced and shaped by home country imprinting [7]. This phenomenon is known as ‘liability of origin’ (LOO) [8]. Compared with MNCs of developed economies, emerging market counterparts are more likely to suffer LOO. LOO in this context can also be understood as ‘liability of emergingness’ (LOE), defined by Madhok and Keyhani as the “additional disadvantage that emerging MNCs tend to suffer by virtue of being from emerging economies” [9]. The identities of ‘foreignness’, ‘origin’, and ‘emergingness’ are of importance in enabling (or hindering) the gaining of legitimacy in the institutional environments of host countries [7,10]. Given China’s weak institutional environment [11], concerns have been raised regarding how Chinese MNCs can overcome identity liabilities (i.e., LOF and LOO) and achieve legitimacy. Concerns regarding the capacity of Chinese companies to properly address corporate social responsibility (CSR) issues have also been raised. Gaining legitimacy in host countries through CSR practices was the focus of this study.

A strategic response for MNCs to close the legitimacy gap is to be socially responsible. This can lead to support and positive evaluations from stakeholders and ultimately achieving greater legitimacy [12,13]. Due to the existence of heterogeneous dimensions of CSR and organizational legitimacy, as well as the institutional differences between home and host countries, CSR engagement is not always an efficient way to achieve legitimacy [14]. Although the relationship between CSR engagement and legitimacy gap reduction has been discussed for some time, research on this subject is still limited, especially from the perspective of emerging markets.

To improve our understanding of Chinese MNCs’ use of CSR to overcome their LOF and LOO, as well as to build legitimacy in international markets, we built a theoretical framework of the relationship between CSR engagement and the achievement of organizational legitimacy, with specific emphasis on moral legitimacy. A total of 303 FDI projects from Chinese manufacturing MNCs were used in empirical analyses to enrich the relevant research in the field of CSR practices and organizational legitimacy. In addition, this study also introduces institutional distance to the research framework and reveals its moderating role in the relationship between CSR engagement and gaining moral legitimacy. We find that Chinese manufacturing MNCs’ subsidiaries engaged in customer- and community-related CSR in host countries, are likely to have gained moral legitimacy. Furthermore, customer-related CSR engagement in host countries with greater institutional distance from China is more likely to gain FDI moral legitimacy. Government-related CSR, on the other hand, does not directly play a prominent role in the pursuit of moral legitimacy, but seems to be a more effective strategy to advance moral legitimacy in countries with greater institutional distance from China.

This paper makes several contributions to institutional theory and the CSR literature. Firstly, it provides deeper insight into the gaining of moral legitimacy, as opposed to most studies that focus on pragmatic and cognitive legitimacy. Secondly, this paper adds to the emerging body of empirical research relating to moral legitimacy and CSR, by adopting the perspective of Chinese MNCs. Finally, this paper responds to calls to develop an alternative view of the corporate strategy of Chinese MNCs, using an institutional theory-based perspective.

2. Literature Review and Hypothesis Development

2.1. Organizational Legitimacy

Organizational legitimacy is defined by Suchman as a “generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions” [15]. This is an all-encompassing definition that incorporates both the institutional and strategic perspectives of legitimacy research. Legitimacy from an institutional perspective emphasizes how an organization gains support for its legitimacy from a set of embedded constitutive societal beliefs [3], whereas a strategic perspective focuses on how legitimacy can be managed and used by an organization in pursuing its goals [16]. In short, legitimacy is gained by organizations when stakeholders view their activities as appropriate [17].

Literature distinguishes between three main types of organizational legitimacy, namely, pragmatic, moral, and cognitive legitimacy [15,17,18,19,20]. Pragmatic legitimacy is gained when an organization serves the interests, needs, and aspirations of its most immediate stakeholders [18,21]. Moral legitimacy rests on the belief that the organization is effectively promoting societal welfare, which is defined by the society’s value system [15,19,22]. These two types of organizational legitimacy involve the active evaluation of an organization’s expected value and conformity to social norms and values. The third type of legitimacy, cognitive legitimacy, entails stakeholders’ passive evaluation of an organization’s taken-for-grantedness and comprehensibility [15,23,24]. The three-dimensional legitimacy framework of Suchman [15] is widely used as an analytical tool to understand the gaining of organizational legitimacy (e.g., [25,26,27]).

Gaining organizational legitimacy is essential for organizations because it influences social and economic exchange and consequently market access [17]. The organization’s legitimacy consequently generates and provides better access to resources necessary for the company to grow and ultimately survive [22]. Legitimate organizations are better equipped with financial and reputational capital, as well as government support, which can promote their market access, reduce some competition and enhance the chance of survival [27,28]. The majority of legitimacy studies focuses on the consequences of legitimation (growth and survival) for organizations; however, research on how to gain organizational legitimacy is limited. In particular, the gaining of FDI legitimacy has received limited attention.

Even though institutional theory is mainly concerned with how organizations withhold or confer legitimacy on MNCs [29], institutional theory studies have placed insufficient emphasis on FDI legitimacy [30]. FDI legitimacy is defined as a “generalized evaluation of whether FDI fulfills the institutional requirements as a legitimate form of business in the host country” [31]; therefore, to gain FDI legitimacy (no matter the pragmatic, moral, or cognitive dimension), MNCs’ subsidiaries must behave according to the institutional environments of host countries.

Although the presence of LOF and LOO makes the gaining of moral legitimacy especially challenging for MNCs that operate FDI in multiple institutional environments with conflicting institutional pressures and diverse expectations from stakeholders [32,33], moral legitimacy is becoming increasingly important in the international arena. The loss of moral legitimacy is often related to stigmatization, leading to a decrease in company performance [34,35] as stakeholders tend to avoid transacting with entities that are considered illegitimate [17]. Bowen argued that researchers have paid too little attention to moral legitimacy. Pragmatic and cognitive legitimacy are the dominant forms of legitimacy employed by companies in an increasingly globalized market [36]. These two types of legitimacy should, however, be complemented by moral legitimacy to gain full access to international markets [33,37].

Zimmerman and Zeitz proposed that companies can exercise strategic actions that can facilitate acquiring and maintaining legitimacy [27]. In seeking legitimacy and consequently, overcoming LOF and LOO, MNCs use market as well as non-market strategies [38,39]. The objective of non-market strategies is to enhance performance by managing the organization’s institutional context [40,41]. Xie et al. proposed three non-market strategies, namely, corporate political strategy, CSR strategy, and corporate public relation strategy that can be used to gain organizational legitimacy [42]. In the context of legitimacy, and especially moral legitimacy, CSR strategy has been emphasized [20,43]. The role of CSR engagement in gaining support from local stakeholders and improving the moral legitimacy of MNCs is under-researched. This is especially the case for research on MNCs in China. For the purposes of this study, emphasis was placed on moral legitimacy (consistent with Jones et al. [44], Ali [45], Chen et al. [46]) as a result of MNCs’ engagement in CSR activities.

2.2. Corporate Social Responsibility and Gaining Moral Legitimacy

CSR can be defined as “the integration of an enterprise’s social, environmental, ethical and philanthropic responsibilities towards society into its operations, processes and core business strategy in cooperation with relevant stakeholders” [47]; therefore, in addition to seeking profits, organizations should behave in an ethical manner, contribute to sustainable economic development, and promote the welfare of society [48]. The idea that companies should engage in socially responsible activities has become a legitimate expectation [49]. By implementing CSR practices, companies can interact with stakeholders and convey to the public a signal of compliance with social norms. This is a way to gain public recognition and consequently achieve organizational legitimacy [12,50]. CSR has transgressed from being a minimal commitment to becoming a strategic necessity for companies to enhance the likelihood of survival and to acquire moral legitimacy [51,52]. In short, CSR practices enhance the ability of a company to be regarded as legitimate in the eyes of stakeholders [53].

Although CSR practices are widely recognized to enhance the reputation and moral legitimacy of an organization, it should be noted that simply adopting CSR practices without taking the particular institutional setting into account will not lead to the social acceptance of MNCs [33,37]. Yang and Rivers investigated legitimacy associated with local CSR practices in MNCs’ subsidiaries, and illustrated the importance of local stakeholder demands when the subsidiaries operate in unfamiliar institutional environments [54]. The beholders of legitimacy, therefore, consist of internal and external stakeholders [27]. To gain external legitimacy, MNCs must satisfy the expectations of stakeholders in host countries, and they must conform to the CSR practices of the parent company to achieve internal legitimacy [54].

Buckley and Casson noted that MNCs, in general, lack external legitimacy in host countries because of their external identities and the resulting LOF [55]. Indeed, it is easier for MNCs to prove their trustworthiness and moral legitimacy to internal stakeholders than to external stakeholders. At the same time, MNCs often struggle with the strategic management of relationships with their external stakeholders [56]. This study thus explored the regulatory or normative evaluation of MNCs and their activities from the perspective of external stakeholders. External stakeholder groups considered in this study were the government, customers, and the local community. These three groups have been identified as important external stakeholder groups to MNCs in the globalization context [57], and have specifically received special attention from Chinese MNCs [58]. The main objective of this research was therefore to assess the relationship between the engagement in government-, customer-, and community-related CSR, and the gaining of moral legitimacy by Chinese MNCs’ subsidiaries in host countries.

2.2.1. Government-Related CSR

The government is the most influential stakeholder in most countries because it controls important resources and opportunities that shape the competitive environment of companies [59]. The subsidiaries of MNCs are directly impacted by the regulatory environments of host countries, and due to the LOF and LOO, seeking moral legitimacy becomes more complex [60]. To be effective, MNCs should have an in-depth knowledge of the countries in which they operate because they must abide by the regulations of those local markets [61]. The recent rise of deglobalization is expected to exacerbate this phenomenon [61]. MNCs’ subsidiaries must, therefore, effectively adapt to the political environment of the host country and seek to build strong relationships with local governments [39]. Gaining moral legitimacy in host countries is critical, since it can reduce the rigidness of regulations imposed on MNCs and can result in more institutional support [29]. CSR engagement communicates to local governments that MNCs are good corporate citizens, making governments more willing to provide policy support and subsidies [62]. In this regard, the following hypothesis was proposed:

Hypothesis 1.1 (H_1.1).

There is a relationship between Chinese manufacturing MNCs’ engagement in government-related CSR and gaining moral legitimacy in host countries.

2.2.2. Customer-Related CSR

Several studies have emphasized the influence of CSR on customer behavior [63,64,65,66]. The majority of studies conclude that positive CSR engagement by organizations is associated with increased purchasing behavior, customer satisfaction, and long-term customer loyalty [63,67,68]. Indeed, several studies have confirmed that customers are more willing to purchase the products of organizations with better CSR engagement [69], and will not support those organizations that they perceive as being insincere in their CSR engagement [70]. According to Marin and Ruiz, CSR activities attract customers because they can identify with the beliefs and values of that company [71]. This positive association between CSR and customer behavior has motivated the use of CSR as a marketing instrument to build strong and long-term relationships with customers [64,65]. Using CSR engagement as a marketing instrument is especially significant to MNC’s subsidiaries seeking moral legitimacy in unfamiliar markets across the globe. In seeking profitability, MNCs should build lasting relationships with local customers by providing products and services in an efficient, ethical, reliable, and environmentally conscious manner [72]. Accordingly, the following hypothesis was formulated:

Hypothesis 1.2 (H_1.2).

There is a relationship between Chinese manufacturing MNCs’ engagement in customer-related CSR and gaining moral legitimacy in host countries.

2.2.3. Community-Related CSR

Community involvement is regarded as the most dominant form of CSR [73]. MNCs are not only expected to promote economic development, but also have moral and ethical responsibilities to improve the quality of local community life and society at large [74,75]. The local communities within which MNCs operate, provide the human resources necessary for their operations. Thus, to gain access to these resources and consequently achieve success, MNCs must gain the support from and trust of the local citizens [57,76]. MNCs’ subsidiaries can make a significant contribution to the local community by providing a workplace with high social standards, assuring jobs, education, and public health [77]. Successfully implementing community-related CSR activities will reduce the LOF and LOO, and will establish the belief among residents and community authorities that the presence of the MNC subsidiary is benefitting the community [57]. These arguments led to the following hypothesis:

Hypothesis 1.3 (H_1.3).

There is a relationship between Chinese manufacturing MNCs’ engagement in community-related CSR and gaining moral legitimacy in host countries.

2.3. Moderating Effect of Institutional Distance

Institutional distance between two countries is defined as the difference between the two countries’ regulatory, normative, and cognitive institutions [29]; therefore, countries that have different cognitive, regulatory and normative institutions also demonstrate different ways of conducting certain functions that are regarded as ‘legitimate’ [78]. A greater institutional distance between two countries can make it more difficult for MNCs to gain moral legitimacy due to the vast differences in the respective institutional environments [29,79,80]. When companies conduct business across borders, they are required to meet and satisfy the heterogeneous expectations of diverse local stakeholders to achieve local legitimacy [37]. MNCs must also comply with different and possible conflicting institutional rules in the host countries, which can result in tension between MNCs and the local environment in which they operate. Non-compliance with local legitimacy requirements may lead to sanctions, which may ultimately threaten the survival and success of MNCs’ subsidiaries in foreign institutional settings [81]; therefore, institutional distance may constitute a hindrance for MNCs in the process of seeking moral legitimacy in host countries.

Prior studies have confirmed that the significant differences between institutional environments are associated with different CSR practices’ expectations. Moreover, the level, component, and motivation of CSR activities vary across countries [82]. Chinese MNCs have a relatively limited knowledge of how things should be done to gain and maintain moral legitimacy when they must operate in a host country with an unfamiliar institutional environment [83]. If Chinese MNCs have a better understanding of what is required to gain moral legitimacy in specific host countries, it will ultimately affect the corporate strategies that are adopted and the effectiveness of the implementation of such strategies [32,84]. Chinese MNCs that operate across a range of Western and non-Western countries need to adapt to local expectations and requirements when seeking moral legitimacy instead of simply adopting universal CSR practices or the CSR practices that are employed in China; therefore, when CSR is used as a strategy to respond to institutional pressure, its impact on the acquisition of moral legitimacy will also be affected by institutional distance. In this regard, the following hypotheses were formulated:

Hypothesis 2.1 (H_2.1).

Institutional distance between China and host countries moderates the relationship between Chinese manufacturing MNCs’ engagement in government-related CSR and gaining moral legitimacy in host countries.

Hypothesis 2.2 (H_2.2).

Institutional distance between China and host countries moderates the relationship between Chinese manufacturing MNCs’ engagement in customer-related CSR and gaining moral legitimacy in host countries.

Hypothesis 2.3 (H_2.3).

Institutional distance between China and host countries moderates the relationship between Chinese manufacturing MNCs’ engagement in community-related CSR and gaining moral legitimacy in host countries.

The proposed relationship between CSR (government-, customer-, and community-related CSR), institutional distance, and moral legitimacy is graphically presented in Figure 1.

3. Research Design

3.1. Sample and Data Collection

For data collection a quantitative research approach was followed, using structured interviews accompanied by structured questionnaires. The data concerning CSR engagement and moral legitimacy gaining were collected by employing a 5-point Likert scale, with 1 indicating strongly disagree to 5 indicating strongly agree. This method of data collection is a commonly used research design in business and management research. The use of a structured interview is the preferred method of administering a survey research instrument, to maximize the quality of the data being collected from the interviewees, and to minimize the number of nonresponses [85]. The questionnaire was first presented to 12 respondents from Chinese manufacturing MNCs in a pilot study. The questionnaire was amended based on the suggestions made by the respondents. The primary data were collected by fieldworkers who administered the questionnaire. The fieldworkers were familiar with the research project and received adequate guidance from the lead author before commencing the field visits. The formal investigation was undertaken from September 2019 to January 2020. The fieldworkers briefed the respondents on the purpose of the research after which the questionnaire was provided to them to complete.

A sample of 326 Chinese manufacturing MNCs, involved in FDI projects, was identified and visited by the fieldworkers, following the attendance of international exhibitions and investment forums held in China. Individuals in senior management positions, who were either the key decision-makers or at least part of the FDI project decision-making process in their respective companies, were selected to participate in the study. These individuals were therefore equipped with the relevant knowledge and were familiar with their companies’ FDI projects. An important consideration is that MNCs may operate FDI projects in different countries where the institutional pressures and the corresponding CSR practices differ. In a bid to prevent bias from this heterogeneity, and to ensure the accuracy of their answers, interviewees were asked to answer the questionnaire based on their most recent FDI project. After a thorough review of the questionnaires obtained from the 326 field visits, 303 questionnaires were deemed usable for data analysis; therefore, the final sample for this study consisted of 303 FDI projects from 303 respective Chinese manufacturing MNCs, representing an effective response rate of 93%.

3.2. Description of the Sample

Table 1. The Sample.

	N	%		N	%
Information of MNCs
Scale of overseas investment			Years engaged in international business
Less than USD 1 million	113	37.5%	Less than 3 years	144	47.5%
USD 1–5 million	102	33.6%	3–5 years	87	28.7%
USD 5–10 million	48	15.7%	6–10 years	57	18.8%
USD 10–50 million	27	8.8%	Over 10 years	15	5.0%
Over USD 50 million	13	4.4%
Information of subsidiaries overseas
Established year			Location
1 year	60	19.8%	Asia	90	29.7%
2 years	90	29.7%	Europe	45	14.9%
3 years	66	21.8%	Northern America	27	8.9%
4 years	57	18.8%	Southern America	15	5.0%
5 years	30	9.9%	Africa	108	35.6%
			Oceania	18	5.9%
Number of employees			Entry mode
Less than 10	58	19.2%	Wholly owned subsidiaries (WOS)	128	42.4%
11–30	76	25.2%	Joint venture	175	57.6%
31–50	55	18.2%
51–100	71	23.3%
Over 100	43	14.1%

provides a description of the demographics of the sample of 303 Chinese manufacturing MNCs involved in FDI projects.

More than 70% of the sample of Chinese manufacturing MNCs were involved in overseas investments with investment amounts below USD 5 million. A mere 4.4% of the MNCs reported large-scale investments of USD 50 million or more. The main FDI destinations for the sample of MNCs are Africa (35.6%) and Asia (29.7%), respectively. Due to geographic and cultural proximity, Asia has become the top FDI destination for Chinese investors [1], whereas African countries are emerging destinations for Chinese investors, especially following the Forum on China-Africa Cooperation (FOCAC) Johannesburg Summit held in 2015 [1].

Different modes of entry are available to MNCs and vary in their scale of entry [86]. The most common modes of entry into foreign markets are joint ventures, wholly owned subsidiaries (WOS), exporting, and contractual agreements such as licensing [87]. For this study, emphasis was placed on WOS and joint ventures because these two modes require a high commitment of resources, due to a direct establishment taking place in the host country [88]. Table 1 reports that 42.4% of the sample of Chinese manufacturing MNCs entered the host countries via a WOS, whereas the remaining 57.6% entered via a joint venture.

The vast majority of the sample (76.2%) have less than five years of experience in the international business arena, and all the MNCs’ subsidiaries included in this study were established over the most recent five years. Only 14% of the sample employ more than 100 employees at their subsidiaries in host countries.

3.3. Variables and Measurement

3.3.1. Corporate Social Responsibility

The three CSR dimensions considered in this study were government-, customer-, and community-related CSR. Zhao et al. developed a framework for CSR indicators as a tool for CSR performance [89]. Based on the stakeholder theory, CSR performance issues pertinent to different stakeholders were developed to highlight important factors of CSR performance. CSR performance issues and associated CSR indicators were identified for each of the three stakeholder groups that were considered in this study. One CSR indicator per stakeholder group was identified for the purposes of this study. These indicators included obeying the requirement of laws and policy (government-related CSR), building a harmonious community (community-related CSR), and to meet the needs and expectations of customers (customer-related CSR). Based on the findings of Zhao et al. [89] and on CSR practices implemented by Chinese MNCs, seven items were developed to measure government- (A1–A2), customer- (B1–B3), and community-related (C1–C2) CSR. These seven items are provided in

Table 2. Questionnaire (selected items).

Corporate Social Responsibility (1 = Totally Disagree, 5 = Totally Agree)
Government (GOV) - A1: We comply with the host country’s laws and regulations - A2: We have never received local administrative and judicial sanctions due to violations of laws and regulations Customer (CUS) - B1: We implement strict confidentiality of customer information - B2: We can quickly respond to customers’ requests and make them satisfied - B3: The safety and quality of our products and services are in a leading position in the industry (e.g., compliance with leading international standards, such as ISO 9001) Community (COM) - C1: We are actively engaged in philanthropic activities (e.g., specific budget, specific team) - C2: We create many local jobs and make significant contributions to promoting socio-economic development in local communities
Moral Legitimacy (1 = Totally Disagree, 5 = Totally Agree)
- D1: The procedures we follow to provide products and services are proper - D2: The product and services we provide are desirable - D3: The techniques we employ to produce products and to deliver services are appropriate

.

3.3.2. Moral Legitimacy

Of the three types of legitimacy, moral legitimacy is the most closely associated with CSR [12,33,90]. Moral legitimacy reflects a positive normative or regulatory evaluation of the organization and its activities [15], and is normally assessed based on the appropriateness of the outputs, techniques, and procedures used to achieve objectives [91,92]. In short, moral legitimacy depends on the judgment of whether the activities of companies are promoting the social welfare of a given society [90]. Following Suchman [15] and You [93], three statements (D1–D3) were used to measure moral legitimacy (LEG). The three moral legitimacy statements are provided in Table 2.

3.3.3. Institutional Distance

In recent years, especially after the China–US trade dispute, a considerable number of Chinese MNCs have been suffering acute LOO, which intensely influences the implementation of their internationalization strategies and operations in host countries. Since LOO mostly concerns formal institutions [94], we investigated formal institutional distance to explore its effect on gaining moral legitimacy in host countries.

Unlike an informal institutional distance that pertains to culture, values, norms, and beliefs, a formal institutional distance for a company concerns laws and rules that influence corporate strategy [95]. After a critical 20-year review of the literature on institutional distance, Kostova et al. reported that formal institutional distance is typically measured by using the World Governance Indicators (WGI) that are based on six dimensions: “voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption” [78]. Based on the WGI, we constructed an institutional distance (INS) score by using the calculation method of Kogut and Singh [96]. The formula is as follows:

$$INS=\frac{1}{6}{{\displaystyle \sum }}_{i=1}^6{\left(I_{ij}-I_{ic}\right)}^2/V_i$$

(1)

where I_ij stands for WGI’s dimension i of host country j, V_i is the variance of index of dimension i, c indicates China, and INS is institutional distance of the host country j from China. It should be noted that MNCs from mainland China only are discussed in this study.

3.3.4. Control Variables

Based on prior related studies (e.g., [60,97,98]), MNCs’ subsidiary size (SIZE), investment history (AGE), and entry mode (MOD) were included as control variables. Large MNCs in the form of a joint venture with a long operation history in host countries are equipped with more local knowledge and experience in business management. These companies are, therefore, more likely to be identified by local stakeholders. They also experience less LOF and LOO, consequently resulting in establishing and maintaining moral legitimacy. Thus, for the entry mode, 0 represented a joint venture and 1 represented a WOS. The number of employees of the MNCs’ subsidiaries was used as an indicator of MNCs’ subsidiaries size (SIZE) by using its natural log, which is consistent with Zheng et al. [13], and Banerjee and Venaik [60]. The MNCs’ investment history (AGE) was proxied by the number of years the MNCs’ subsidiaries have been operating in the host country, and transformed into its natural log function, which consistent with Zheng et al. [13].

3.4. Validity and Reliability Test

To evaluate the content validity of the measurement instrument, the questionnaire was first sent to five academics to review. Their suggestions on the content and structure were then incorporated to improve the questionnaire. As advised by DeVellis [99], the draft questionnaire was also reviewed by eight practitioners who are experts in the area of corporate strategy, to assess the scales used in the questionnaire. The final draft of the questionnaire was completed by 12 respondents from Chinese MNCs in a pilot study, after which the formal investigation commenced.

As indicated in Section 3.3, an initial list of seven items to determine the three CSR factors, and another three items to determine the moral legitimacy factor, were developed. Construct validity was tested by means of an exploratory factor analysis (EFA), using SPSS 26.0.

Table 3. KMO and Bartlett’s tests for items in CSR and moral legitimacy subscales.

		Items in CSR Subscale	Items in Moral Legitimacy Subscale
Kaiser–Meyer–Olkin measurement with sampling sufficient		0.763	0.710
Bartlett’s test of sphericity	Approx. Chi-Square	698.645	90.395
	Df	120.000	3.000
	Sig.	0.000	0.000

shows that the KMO values of items in the subscales of CSR and moral legitimacy were 0.763 and 0.710, respectively, which are greater than 0.7, suggesting it is suitable for factor analysis. The Bartlett’s test was also significant at the 1% level for both subscales, indicating the existence of correlation between the items; therefore, three common factors for CSR (GOV, CUS, COM), and one common factor for moral legitimacy (LEG), were obtained from the EFA, of which the characteristic roots explained 74.856% (71.376%) of the overall variance.

To address concerns of convergent validity, an average variance extracted (AVE) was adopted. An AVE should be 0.50 or higher to suggest a construct that satisfies the convergent validity requirement.

Table 4. Inter-construct correlation matrix and square root of AVE construct.

	Mean	SD	1	2	3	4
1. GOV	2.980	1.229	0.916
2. CUS	3.346	1.022	0.205	0.840
3. COM	3.574	0.896	0.050	0.151	0.873
4. LEG	3.544	1.022	0.091	0.263	0.213	0.843

Note: N = 303. Square root of AVE = figures in shaded area. For 1 = government-related CSR (GOV); 2 = customer-related CSR (CUS); 3 = community-related CSR (COM); 4 = moral legitimacy (LEG).

indicates that the AVE for GOV, CUS, COM, and LEG was 0.839, 0.706, 0.763, and 0.711, respectively. These reported values are higher than the cut-off value of 0.5, indicating good convergent validity.

The constructs were also subjected to discriminant validity, which was evaluated based on the correlations between the constructs and the square root of AVE. A threshold of 0.85 for correlations between constructs has been proposed by researchers [100]. According to Hair et al. [101] the level of the squared root of an individual construct’s AVE should be greater than its correlation with another one. Table 4 reports that the correlation coefficients among the constructs were lower than the 0.85 threshold, and the squared root of each construct’s AVE was greater than the inter-construct correlation. These results suggested that the measurement instrument has achieved desirable discriminant validity.

To assess the internal consistency and stability of the scales used in the questionnaire, Cronbach’s alpha coefficients were analyzed. As indicated in

Table 5. Validity and reliability assessment.

Variables	Measures	Factor Loading	Cronbach’s Alpha	CR	AVE
GOV	A1	0.962	0.826	0.912	0.839
	A2	0.867
CUS	B2	0.877	0.809	0.878	0.706
	B3	0.844
	B1	0.798
COM	C2	0.897	0.705	0.865	0.763
	C1	0.849
LEG	D1	0.867	0.797	0.880	0.711
	D2	0.847
	D3	0.814

, the respective Cronbach’s alpha coefficients for GOV, CUS, COM, and LEG were 0.826, 0.809, 0.705, and 0.797, which are higher than the generally accepted limit of 0.7 [98]. The Cronbach’s alpha coefficients, therefore, confirmed the reliability of the CSR and moral legitimacy scales. Composite reliability (CR) was also conducted as an additional test for internal consistency. A CR estimate equal to or higher than 0.7 suggests good reliability and indicates the presence of internal consistency [101]. Table 5 reports that the CR of all constructs exceeded the requirement of 0.70, thus suggesting that all the measures consistently represent the same latent constructs.

At the same time, a confirmatory factor analysis (CFA) was conducted by employing AMOS 17.0, to assess the distinctiveness of the study’s key measures: GOV, CUS, COM, and LEG. The proposed measurement model (Model 1) was tested against five other alternative measurement models (i.e., Models 2–6) by using fit indices as suggested by Kline [100]. As displayed in

Table 6. Summary of CFA fit indices.

	χ2	df	χ2/df	RMSEA	TLI	CFI	NFI
Model 1	28.409	29	0.980	0.000	1.000	1.000	0.919
Model 2	125.320	32	3.916	0.171	0.571	0.695	0.643
Model 3	63.902	32	1.997	0.100	0.853	0.896	0.818
Model 4	66.958	32	2.092	0.105	0.839	0.886	0.809
Model 5	131.370	34	3.864	0.169	0.579	0.682	0.626
Model 6	207.310	35	5.923	0.222	0.276	0.437	0.409

Note: Model 1 (four factors: GOV, CUS, COM, LEG); Model 2 (three factors: GOV + CUS, COM, LEG); Model 3 (three factors: GOV, CUS + COM, LEG); Model 4 (three factors: GOV + COM, CUS, LEG); Model 5 (two factors: GOV + COM + CUS, LEG); Model 6 (one factor: GOV + COM + CUS + LEG). And RMSEA = Root Mean Square Error of Approximation, TLI = Tucker Lewis Index, CFI = Comparative Fit Index, NFI = Normed-Fit Index.

, the data fit Model 1 the best out of all the models that were examined (χ²/df = 0.980, RMSEA = 0.000 < 0.080, TLI = 1.000 > 0.9000, CFI = 1.000 > 0.900, NFI = 0.919 > 0.900). The standardized loadings of all indicators on their specific constructs were significant at the 1% level. Models 2–6 showed worse fits than Model 1, as obtained from the fit indices; therefore, this result testified to the distinctiveness of the key measures used in this study.

3.5. Common Method Bias Assessment

Multiple approaches were followed to address common method bias concerns. The first approach was implemented in the research design stage. As suggested by Podsakoff et al. different sources should be used to obtain the dependent and the independent variables of the study [102]. Accordingly, to reduce the possibility of common method bias, data on institutional distance and data on CSR and moral legitimacy were collected by relying on different sources. Considering that subjective measures were used to measure CSR and moral legitimacy, common method bias may still exist when one respondent provides answers to most of the variables [102]; therefore, a second approach to control for common method bias was employed using statistical controls. For this purpose, Harman’s one-factor test was conducted. The results indicated that the total variance explained by one general factor was 27.04% (less than 50%), thus indicating that common method bias is not present. Furthermore, a factor analysis of 10 items measuring the CSR and moral legitimacy variables presented four distinct factors with eigenvalues larger than 1.0. This also suggested that no single factor emerged.

3.6. Regression Model

To test the impact of government-, customer-, and community related CSR engagement on gaining moral legitimacy, the regression model was constructed as follows:

$$LE{G}_i={\mathsf{\alpha }}_0+{\beta }_{1}GO{V}_i+{\beta }_{2}CU{S}_i+{\beta }_{3}CO{M}_i+{\beta }_{4}SIZ{E}_i+{\beta }_{5}AG{E}_i+{\beta }_{6}MO{D}_i+{\epsilon }_i$$

(2)

In addition, the impact of CSR on gaining moral legitimacy on an aggregate level was also tested. A composite indicator of CSR (CSR) was calculated by means of factor analysis. To capture the effect of aggregate CSR engagement on Chinese manufacturing MNCs subsidiaries gaining moral legitimacy, the following regression model was constructed:

$$LE{G}_i={\alpha }_0+{\beta }_{1}CS{R}_i+{\beta }_{2}SIZ{E}_i+{\beta }_{3}AG{E}_i+{\beta }_{4}MO{D}_i+{\epsilon }_i$$

(3)

To explore the moderating effect of institutional distance on the relationship between CSR and gaining moral legitimacy, regression Equations (4) and (5) were used.

$$\begin{gathered} LE{G}_i={\alpha }_0+{\beta }_{1}GO{V}_i+{\beta }_{2}CU{S}_i+{\beta }_{3}CO{M}_i+{\beta }_{4}IN{S}_j+{\beta }_{5}GO{V}_i\ast IN{S}_j+{\beta }_{6}CU{S}_i\ast IN{S}_j+{\beta }_{7}CO{M}_i\ast IN{S}_j \\ +{\beta }_{8}SIZ{E}_i+{\beta }_{9}AG{E}_i+{\beta }_{10}MO{D}_i+{\epsilon }_i \end{gathered}$$

(4)

$$LE{G}_i={\alpha }_0+{\beta }_{1}CS{R}_i+{\beta }_{2}IN{S}_j+{\beta }_{3}CS{R}_i\ast IN{S}_j+{\beta }_{4}SIZ{E}_i+{\beta }_{5}AG{E}_i+{\beta }_{6}MO{D}_i+{\epsilon }_i$$

(5)

where LEG_i represents the moral legitimacy of Chinese manufacturing MNC subsidiary i, and GOV_i, CUS_i, and COM_i denote government-, customer-, and community-related CSR practices of MNC subsidiary i, respectively; CSR_i is the aggregate score of CSR; INS_j denotes the institutional distance between host country j and China; SIZE_i, AGE_i, and MOD_i represent size, investment history, and entry mode of MNC subsidiary i, respectively. α₀ and β are the intercept and the regression coefficient, respectively, whereas ε_i represents the error term.

4. Empirical Results

To address the research hypotheses, a hierarchical regression analysis was conducted to investigate the direct and moderation effects. The analyses of moderation depicted in Figure 1 were constructed using Hayes’s PROCESS macro [103] at SPSS 26.0. Continuous variables were standardized, and these standardized scores were used to compute the interaction terms. To obtain robust standard errors for parameter estimation, the bootstrapping method was employed in addition to the hierarchical regression, to assess the significance of all the effects [103]. From 5000 resamples of the data, 95% bias-corrected confidence intervals of these effects are produced by the bootstrapping method. Significant effects are indicated by confidence intervals that do not include zero [103].

4.1. CSR and Gaining Moral Legitimacy

As indicated in

Table 7. Relationship between CSR engagement and gaining moral legitimacy.

Variables	1	2	3	4	5	6
SIZE	−0.243 ** (−2.391)	−0.175 ** (−2.202)	−0.236 ** (−2.342)	−0.197 * (−1.936)	−0.243 ** (−2.556)	−0.198 ** (−2.100)
AGE	0.266 ** (2.603)	0.166 * (1.695)	0.243 ** (2.366)	0.250 ** (2.480)	0.205 ** (2.124)	0.186 * (1.901)
MOD	−0.278 ** (−2.403)	−0.254 ** (−2.305)	−0.247 ** (−2.114)	−0.221 * (−1.896)	−0.365 *** (−3.937)	−0.338 *** (−3.645)
CSR		0.193 ** (2.025)
GOV			0.146 (1.507)			0.121 (1.337)
CUS				0.211 ** (2.115)		0.188 ** (2.032)
COM					0.198 ** (2.053)	0.162 * (1.678)
N	303	303	303	303	303	303
R2	0.234	0.327	0.253	0.270	0.302	0.360

Note: Dependent variable is moral legitimacy. Coefficients are standardized betas. T-values are in parentheses. * p ≤ 0.10, ** p ≤ 0.05, and *** p ≤ 0.01. The max variance inflation factor (VIF) is 1.534 (less than rule of thumb cut-off of 10).

, after considering the control variables, CSR and LEG are significantly and positively related, suggesting that CSR engagement in general is a useful strategy for Chinese manufacturing MNCs to gain FDI moral legitimacy. From a disaggregated view, CUS and COM are significantly and positively associated with LEG, indicating that conducting customer- and community-related CSR could be an effective way for Chinese manufacturing MNCs to achieve moral legitimacy in host countries. Based on these results, Hypotheses 1.2 and 1.3 could not be rejected. The findings from this study provide evidence that Chinese manufacturing MNCs can partly erase the stigma surrounding “made in China”, and gain moral legitimacy by providing high-quality products and services and satisfied customers. This finding also corresponds with prior studies reporting that improved customer-related CSR practices are accompanied by higher levels of trust, which leads to customer satisfaction and retention [104,105], which, in turn, can result in MNCs’ subsidiaries gaining moral legitimacy. The significant positive association between COM and LEG, to a certain extent, illustrates that Chinese manufacturing MNCs’ involvement in the communities of host countries can increase stakeholders’ familiarity with them and improve their reputation as a caring company [106]. This in turn makes it possible to overcome LOF resulting from misperceived organizational identification, and even the LOO caused by stigma.

Government-related CSR (GOV) has a positive, but not a statistically significant association with moral legitimacy (LEG), resulting in the rejection of Hypothesis 1.1; therefore, it appears that compliance with legislation and government regulations do not make a direct significant contribution to gaining moral legitimacy in host countries. Government-related CSR is, however, still a key component of pragmatic legitimacy. MNCs need to be cognizant of this, since pragmatic legitimacy can interact with moral legitimacy [36]; therefore, non-compliance with legislation and regulation could cause pragmatic legitimacy loss, which could further lead to a negative impact on moral legitimacy [37]. The results emphasize the importance of assessing CSR engagement on a disaggregate level, since not all CSR strategies are beneficial to achieve moral legitimacy. Assessing CSR engagement on a disaggregate level is beneficial to obtain an accurate relationship between CSR engagement and gaining moral legitimacy.

4.2. Testing the Moderating Effect of Institutional Distance

When INS is included in the empirical model, as reported in

Table 8. Moderating effect of institutional distance.

Variables	1	2	3	4	5
SIZE	−0.173 ** (−2.156)	−0.260 ** (−2.600)	−0.206 ** (−2.050)	−0.230 ** (−2.361)	−0.195 ** (−1.998)
AGE	0.167 * (1.687)	0.245 ** (2.440)	0.217 ** (2.181)	0.221 ** (2.150)	0.204 ** (1.991)
MOD	−0.254 ** (−2.269)	−0.227 ** (−2.198)	−0.201 * (−1.909)	−0.368 *** (−3.780)	−0.322 *** (−3.302)
CSR	0.192 ** (1.989)
GOV		0.139 (0.146)			0.098 (0.973)
CUS			0.212 ** (2.119)		0.203 ** (2.081)
COM				0.205 ** (2.067)	0.181 * (1.848)
INS	0.015 (0.196)	0.027 (0.286)	0.074 (0.760)	0.072 (0.690)	0.045 (0.478)
CSR * INS	0.096 (0.594)
GOV * INS		0.171 * (1.780)			0.189 * (2.025)
CUS * INS			0.164 * (1.744)		0.137 * (1.734)
COM * INS				0.001 (0.010)	0.001 (0.018)
N	303	303	303	303	303
R2	0.329	0.290	0.277	0.316	0.382

Note: Dependent variable is moral legitimacy. Coefficients are standardized betas. t-values are in parentheses. * p ≤ 0.10, ** p ≤ 0.05, and *** p ≤ 0.01. The max variance inflation factor (VIF) is 1.621 (less than rule of thumb cut-off of 10).

, it is observed that the institutional distance between China and host countries significantly and positively moderates the relationship between GOV and LEG. Based on this result, Hypothesis 2.1 could not be rejected. This result suggests that the greater the institutional distance between China and the FDI destination countries, the more likely these MNCs’ subsidiaries are to gain moral legitimacy when engaged in government-related CSR practices.

In addition, bootstrap confidence intervals were also used to test the moderation effect. The conditional effect of government-related CSR engagement in terms of gaining moral legitimacy was examined at three different values of institutional distance: the mean, one standard deviation above the mean, and one standard deviation below the mean. As shown in

Table 9. Conditional effects of the focal predictor at value of the moderator (bootstrapping).

	Effect	SE	t	p	LLCI	ULCI
focal predictor-GOV
−1 SD	−0.033	0.141	−0.239	0.812	−0.314	0.247
Mean	0.139	0.100	1.464	0.147	−0.050	0.329
+1 SD	0.313	0.132	2.378	0.019	0.052	0.575
focal predictor-CUS
−1 SD	0.045	0.138	0.329	0.743	−0.228	0.319
Mean	0.212	0.100	2.119	0.037	0.013	0.410
+1 SD	0.378	0.138	2.730	0.007	0.103	0.653

Note: N = 303. Bootstrap sample = 5000. LLCI = lower level of confidence interval, ULCI = upper level of confidence interval.

, the results indicated that one of the three conditional effects (based on moderator values at +1 standard deviation) is positive and significantly different from zero. Bootstrap confidence intervals (0.052, 0.575) corroborated these results. Thus, Hypothesis 2.1 is supported, such that the positive effect of government-related CSR engagement in terms of gaining moral legitimacy was observed when levels of institutional distance are high, but not when institutional distance between China and host countries are low to moderate.

Well-governed countries are usually equipped with sound legal systems and effective regulatory implementation and enforcement, which often strictly regulate the behavior of MNCs. Hence, conformance to the legislation and regulations of well-governed countries is more likely to be recognized by stakeholders, thus making government-related CSR an effective strategy to advance moral legitimacy. This finding, to a certain extent, confirms the argument that using government-related CSR as a response to institutional pressure is an effective corporate strategy to gain legitimacy in FDI destination countries.

Consistently, the interaction between CUS and INS has a significant and positive impact on LEG, indicating that a greater institutional distance between China and FDI destination countries strengthens the positive impact of customer-related CSR in gaining moral legitimacy. Hence, Hypothesis 2.2 was not rejected. We further examined the conditional effect of customer-related CSR engagement in terms of gaining moral legitimacy at three values of institutional distance: the mean, one standard deviation above the mean, and one standard deviation below the mean. As indicated in Table 9, two of the three conditional effects (based on moderator values at the mean and +1 standard deviation) are positive and significantly different from zero. The respective 95% bias-corrected confidence intervals substantiate the results. Hence, Hypothesis 2.2 is further supported, such that the positive effect of customer-related CSR engagement in terms of gaining moral legitimacy was observed when levels of institutional distance were moderate to high, but not when institutional distance between China and host countries was low.

The host country’s institution employs stereotypes and imposes different criteria to examine MNCs [107]. Stereotypes of China-made products and Chinese companies have been formed, and have remained unchanged for a long time. A greater institutional distance between home and host countries makes it more difficult to break the stereotypical perception of local customers in host countries [107]. The above result indicates that manufacturing MNCs’ subsidiaries with a greater institutional distance from the home country will benefit more from customer-related CSR in terms of lower LOF and LOO, as well as higher moral legitimacy. This result is consistent with the findings of Campbell et al. [50].

As shown in Column 1 of Table 8, the interaction between CSR and INS has a positive, but insignificant impact on LEG. This result indicates that institutional distance between China and host countries is unlikely to influence the positive relationship between CSR engagement at an aggregate level and gaining moral legitimacy. The same finding applies to Chinese manufacturing MNCs engaged in community-related CSR, as displayed in Column 5 of Table 8. Based on the result reported for the interaction between COM and INS, Hypothesis 2.3 was thus rejected. Chinese MNCs are widely learning how to properly address community-based CSR issues in overseas markets, and they have become more actively and efficiently involved in relationships with local communities in a considerable number of host countries [108], especially after the launch of the Belt and Road Initiative (BRI). It is thus not surprising that MNCs’ subsidiaries can attain moral legitimacy through community-related CSR engagement, irrespective of institutional distance.

To fully support the proposed hypotheses, we applied conventional procedures for plotting simple slopes (see Figure 2) at one standard deviation above and below the mean of the institutional distance measure. As depicted in Figure 2a, the slope of the relationship between government-related CSR engagement and gaining moral legitimacy was relatively strong (and positive) for MNCs in host countries with longer institutional distance (simple slope = 0.313, t = 2.378, p < 0.019), whereas the slope was relatively weak for MNCs in host countries with a shorter institutional distance (simple slope = −0.033, t = −0.239, p = ns). Consistently, the slope of the relationship between customer-related CSR engagement and gaining moral legitimacy was relatively strong (and positive) for MNCs in host countries with longer institutional distance (simple slope = 0.378, t = 2.730, p < 0.007), whereas the slope was relatively weak for MNCs in host countries with a shorter institutional distance (simple slope = 0.045, t = 0.329, p = ns), as shown in Figure 2b.

4.3. Other Results

As shown in Table 7 and Table 8, SIZE is significantly and negatively associated with LEG. As already mentioned, Chinese MNCs, in general, are suffering the stigma of being associated with China. As suggested by Du and Vieira [12], larger companies may experience more negative publicity, and they are considered more sinful compared with smaller companies. Thus, it appears that larger Chinese manufacturing MNCs have a greater possibility of being negatively affected by this stigma, and consequently, they suffer a loss of moral legitimacy.

A positive and statistically significant relationship between AGE and LEG is reported in Table 7 and Table 8. This result supports the findings of Zheng et al. [13]. It can be argued that MNCs’ subsidiaries that have been engaged in international business for a longer period are more familiar and experienced with local norms, values, and cultures of host countries compared with newcomers to international business. The behavior of more experienced Chinese manufacturing MNCs may therefore be more desirable, appropriate, and proper from the perspective of local stakeholders.

The relationship between MOD and LEG is negative and significant. This indicates that Chinese manufacturing MNCs’ subsidiaries should choose a joint venture, as opposed to a WOS, as the mode of entry into a foreign market, as it is more likely to gain moral legitimacy. Local partners can provide local know-how relating to the host country, as well as local resources that allow MNCs’ subsidiaries to reduce uncertainty and overcome LOF and LOO [109].

5. Conclusions and Implications

An increasing number of Chinese MNCs are expanding to markets across the globe, and to be effective across borders, they need to understand what strategies to implement. With the sample of 303 Chinese manufacturing MNCs, and by using a hierarchical regression analysis and the bootstrapping method, we find that CSR engagement at both the aggregate level and disaggregate level (specifically, customer- and community-related CSR engagement) is likely to be an effective strategy for Chinese manufacturing MNCs’ subsidiaries to gain moral legitimacy in foreign direct investment (FDI) destination countries. Furthermore, Chinese MNCs’ subsidiaries are more likely to gain moral legitimacy through engagement in customer- and government-related CSR, when the institutional distance from China is greater.

The following implications are proposed. Firstly, for Chinese manufacturing MNCs to enhance their moral legitimacy in host countries, emphasis must be placed on customer- and community-related CSR engagements. It is, however, important for these companies to remember that neglecting government-related CSR practices could indirectly impact moral legitimacy negatively via the loss of pragmatic legitimacy. Secondly, to gain the support of governments in host countries, Chinese MNCs must have a sound understanding of the regulatory environments in which they operate to conform to the regulations imposed on them. This is especially important when Chinese MNCs want to enter countries whose environments are vastly different from their home country. Thirdly, compared with domestic companies, MNCs are expected to do more in terms of customer-related CSR to achieve moral legitimacy in host countries, especially in ones with a long institutional distance from the home country. Subsidiaries operating in unfamiliar destination countries are suggested to provide differentiated CSR practices to meet their local customers’ needs, which may help enhance the MNCs’ reputation and build a positive image and identity.

This study has some limitations that can be addressed in future research. Firstly, this study considered the institutional environment (macro-level), as well as organizational strategies (micro-level) to assess their impact on gaining moral legitimacy. Legitimacy transfers among organizations within a given industry, or ones with a similar identity (meso-level), have not been investigated. In more recent years, this so-called legitimacy spillover phenomenon seems to largely influence the development and survival of Chinese MNCs [110]. Suggestions for future research are, therefore, firstly, to include legitimacy spillover to obtain a complete understanding of the relationship between CSR strategy and gaining moral legitimacy. Secondly, Chinese state-owned enterprises (SOEs) are often considered agents of the Chinese government. Their international expansion is, therefore, often regarded as an expression of the state’s interests in gaining control over strategic assets of host countries [6], resulting in FDIs from Chinese SOEs being regarded as predatory investments. Chinese SOEs are thus more likely to suffer moral legitimacy crises. It is recommended that a possible future study can consider differences in CSR strategies employed between Chinese SOEs and non-SOEs to gain moral legitimacy. Thirdly, this paper focused specifically on gaining moral legitimacy in relation to CSR, although the maintenance of moral legitimacy was not examined. Once legitimacy is gained, maintaining legitimacy becomes a function of the relationship between the MNC and its constituents [111]; therefore, future research is needed to explore (a) the impact of a CSR strategy on moral legitimacy maintenance, and (b) which CSR strategies can be used to deal with moral legitimacy crises at different development stages of MNCs in dynamic institutional environments.