Emerging market partners and reputational risk in the petroleum industry
This paper analyzes how reputational risk of petroleum companies from industrialized economies is affected by partnerships with companies from emerging markets with weaker regulatory standards. Using panel data analysis with company-host country pair and year fixed effects, we find that increased collaboration with companies from corrupt countries is associated with an increase in negative attention regarding local pollution. This negative reputational effect is driven by collaboration in corrupt host countries where emerging market companies have a comparative institutional advantage. Looking into mechanisms, we find no effect of collaboration on environmental conduct or policy, which is inconsistent with the mechanisms implied by institutional theory. Our results instead indicate that partnerships provide access to institutional capabilities of emerging market partners, suggesting collaboration is transactional rather than transformative.
https://doi.org/10.1002/gsj.70013
