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There are rising expectations for multinational companies (MNCs) to engage in innovation to improve social inclusion in emerging markets. We advance an integrated capability-institution model, where MNC managerial capabilities are a strategic driver of innovation for social inclusion through the establishment of a social inclusion logic that guides MNCs’ strategic decisions in emerging markets, and home-country institutions shape the formulation of this logic by affecting the altruistic motivation of managers to address social problems. Results from 759 MNCs from 47 countries from 2005-2016 verify that three attributes of managerial capabilities–managerial diversity, cross-sector connectivity, and long-term orientation–help MNCs to develop a social inclusion managerial logic, and ultimately engage in social innovation in emerging markets. The effect of managerial capabilities on social innovation is higher for MNCs from home countries with higher government activism but lower for MNCs from home countries with greater power distance. Furthermore, we discuss how the above arguments differ between different types of social innovation.
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