Global Compact, Global Reach: Sustainability Engagement and MNEs' Internationalisation

This paper examines the impact of multinational enterprises' (MNEs') engagement in sustainable development on their degree of internationalisation. Specifically, we investigate MNEs' participation in the United Nations Global Compact (UNGC) and find that their commitment to UNGC enhances their level of internationalisation. Further analyses indicate that the ‘learning effect’ and ‘reputational benefit’ are two key mechanisms through which UNGC engagement increases internationalisation. Furthermore, we explore the economic outcomes by distinguishing different UNGC endeavours and find that the enhanced internationalisation improves ESG performance and firm value only when MNEs align with the Sustainable Development Goals (SDGs) after joining the UNGC, rather than merely becoming signatories or fulfilling reporting requirements.