1475: Small Worlds Within Global Value Chains: Implications for MNEs’ ESG Controversies (15232)

With increasing public attention on corporate sustainability, environmental, social, and governance (ESG) controversies such as toxic waste spills and modern slavery are becoming more prominent in global value chains (GVCs). Having suppliers located in diverse countries has its benefits but it has limitations in terms of information access and regulating supplier behavior. This paper investigates whether multinational enterprises (MNEs) with heterogeneous GVCs are more prone to ESG controversies and proposes a structural characteristic of the GVCs as network governance that can mitigate MNEs’ exposure to such controversies. Building on the literature on small-world networks, we suggest that the small-worldness of an MNE in its GVC and beyond can mitigate the impact of the GVC heterogeneity on ESG controversies. Our analysis of Fortune 500 firms from 2010 to 2019 reveals that MNEs with heterogeneous GVCs indeed suffer more from more ESG controversies, while small-worldness attenuates the negative impact of GVC heterogeneity. Our findings contribute to the international business and network studies literature by highlighting small-worldness as complementary network governance available for MNEs in managing the negative aspect of complex GVCs.

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