Abstract
By analyzing how multinational enterprises (MNEs) implement initiatives to adopt the Sustainable Development Goals (SDGs), this study examines how two types of multinationality affect MNEs’ application of strategic dynamic capabilities. We enhance the theory of dynamic capabilities by incorporating considerations of institutional change. To do this, we analyze the contextual impact of institutional changes related to the implementation of the SDGs, using a difference-in-differences approach. This method compares two time periods across two groups – specifically, the three years before and after the launch of the global SDG initiative in 2015. Our findings reveal that MNEs’ degree of internationalization is positively associated with the three key strategic capabilities: ambidexterity, innovation, and reconfiguration. However, we also found that international diversification has the opposite effect. Theoretical implications include that although adopting SDG goals benefits MNEs by enabling them to leverage their non-location-bound firm-specific advantages across geographies, diverse local challenges in emerging markets may increase transaction costs and impede the internal embeddedness of dynamic capabilities.