Reputational judgments of foreign MNEs’ societal impact in frontier markets: the role of compatible, crossed, and conflicting signals

Abstract How do host country stakeholders evaluate foreign MNEs’ local impact? Although MNEs’ desire for a reputation for positive societal impact is well-established in the literature, much less is known about how to actually obtain one—especially in less developed frontier markets. In this inductive, qualitative study across seven countries in sub-Saharan Africa, we examine why host country stakeholders deem some foreign MNEs to have a better reputation for societal impact than others and how firms’ actions and attributes influence these stakeholder perceptions. Leveraging signaling theory, we identify three distinct types of signals (compatible, crossed, and conflicting) and three critical factors (benefit diffusion, empowerment, and hybrid solutions) that shape MNEs’ reputation for societal impact. We also shed light on the role of contextual factors at the country, industry, and community levels. In addition to these theoretical contributions, our study also yields practical implications for MNEs of including local stakeholders’ perspectives when crafting market and nonmarket strategies, fostering constructive communication between headquarters and subsidiaries as well as between expatriate and local actors, and finding ways of going beyond ‘fitting in’ to instead ‘stand out’ in order to gain a reputation for providing tangible and intangible forms of societal impact in frontier markets.