Coping with Globalization

By Aseem Prakash; Jeffrey A. Hart | Go to book overview

3

Environmental regulations and the global strategies of multinational enterprises

Alan M. Rugman and Alain Verbeke


Introduction

One under-researched aspect of globalization as it can affect multinational enterprises (MNEs) is the manner in which environmental regulations call forth new and different strategies. Some MNEs can afford to ignore environmental regulations while others must develop new green capabilities. The chapter explores the general conditions which determine the appropriate strategies for MNEs in a global environment where environmental regulations are of increasing importance. This chapter advances on a recent paper by Rugman and Verbeke (1998a). In that paper both domestic and international environmental regulations have been identified and the firm-level response to these analyzed. Also explored were the Porter and Van der Linde (1995) and "pollution haven" hypotheses. In this paper this work will be extended by a focus upon the environmental strategies of MNEs. First, we shall define globalization and then develop a framework for coping with globalization at firm and government levels. Second, we shall reinterpret recent work on first-mover advantages from an international perspective. Finally, we shall present a model of corporate strategy and environmental regulations, at the global level.


Coping with globalization

For globalization we use the definition proposed earlier in this book, namely that "economic globalization is the increasing integration of input, factor and final process markets." The agent of globalization is the MNE. Its activities reflect an "increasing salience of cross-national value-chain networks in the global economy." The 500 largest MNEs, 442 of which are from the "triad" economies of the United States, European Union and Japan, account for over half of the world's trade, much of it intra-firm and about 80 percent of the world's stock of foreign direct investment (United Nations, 1997).

Although there may be winners and losers due to globalization it has long been recognized that the activities of MNEs are basically economically

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