Host-country characteristics, corporate sustainability, and the mediating effect of improved knowledge: A study among foreign MNCs in Malaysia

Abstract

Purpose

Under the premise of resource-based view (RBV), this study aims to examine the influence of host-country characteristics (i.e. market environment, cultural factors, government policies and absorptive capacity) on improved knowledge acquired by means of intra-firm technology transfer and the latter’s subsequent effect on corporate sustainability among subsidiaries of foreign multinational corporations (MNCs) in Malaysia.

Design/methodology/approach

The following study adopted a cross-sectional design. Quantitative data were collected through structured interview from the representatives of selected 252 subsidiaries of foreign-based MNCs located in Peninsular Malaysia.

Findings

The findings of this study revealed that market environment, government policies and absorptive capacity significantly affect the adoption of innovative knowledge, which also has a significant positive effect on corporate sustainability. The findings also revealed a partial mediation of improved knowledge between market environment, government policies and absorptive capacity on corporate sustainability.

Research limitations/implications

This study recommends that the host country should formulate and adopt trade and FDI friendly policies, as well as stricter intellectual property laws, and, at the same time, provide higher education and training to its citizens to maximize foreign investment and knowledge transfer.

Originality/value

Apart from highlighting the under-researched issue of organizational sustainability, this study is unique in its approach of connecting the external environment of the host country with the internal knowledge of the firm and corporate sustainability in a single framework. The empirical findings of this study support the hypothesized relationships and thereby extend the scope of the contingency theory and RBV in addition to simultaneously enriching the existing intra-firm knowledge management literature, particularly in the Malaysian context.

Citation

Fazal, S.A., Al Mamun, A., Wahab, S.A. and Mohiuddin, M. (2017), "Host-country characteristics, corporate sustainability, and the mediating effect of improved knowledge: A study among foreign MNCs in Malaysia", Multinational Business Review, Vol. 25 No. 4, pp. 328-349. https://doi.org/10.1108/MBR-07-2017-0042