Academic journal article Multinational Business Review

Extending the Literature on the Environmental Strategy of MNEs

Academic journal article Multinational Business Review

Extending the Literature on the Environmental Strategy of MNEs

Article excerpt

1 Introduction

The multinational enterprises' (MNEs') approach to the natural environment is one of the most controversial and widely studied in international business (IB) literature (e.g. [5] Bansal, 2005; [10] Christmann, 2004; [12] Christmann and Taylor, 2006). On the one hand, it has been argued that MNEs locate their most polluting activities in those countries with lax environmental regulations ([50] Stewart, 1993; [52] Vernon, 1992). On the other hand, other studies reveal that MNEs tend to use an environmental standardization strategy in the different countries where they operate (e.g. [11], [12] Christmann and Taylor, 2001, 2006). As a result, these firms would be able to adopt common environmental management practices and policies worldwide, independent of countries' environmental regulations' level of stringency ([10] Christmann, 2004; [17] Dowell et al. , 2000). Other scholars show that MNEs can adopt different international environmental strategies depending on country-specific advantages (CSAs) and firm-specific advantages (FSAs) ([44], [45] Rugman and Verbeke, 1998a, b). For instance, [25] Kolk and Pinkse (2008) explore whether and how an important environmental issue, such as climate change, cannot only give MNEs the opportunity to develop "green" FSAs, but also help reconfigure key FSAs that are viewed as the main sources of firms' profitability, growth, and survival.

This paper updates the traditional CSA/FSA framework to explain four different MNEs' international environmental strategies. The traditional CSA concept is advanced by introducing the notion of environmental institutional distance between the home and the host country. This better explains the MNE's level of legitimacy and the decision about transferring environmental standards within its network. Besides, this paper analyzes the role of MNEs' availability of slack internal resources as an antecedent to generating green FSAs within the MNE's internal network. Meanwhile, previous literature has used external (institutional) and internal (resource) arguments to analyze the firms' sustainable development at a country level ([5] Bansal, 2005) or the environmental regulations' influence ([44], [45] Rugman and Verbeke, 1998a, b). This approach answers calls from literature for new research using an integrated approach of both arguments ([4] Aragón-Correa and Sharma, 2003). The findings presented here contribute to helping managers and policy makers understand the great impact that MNEs' activities have on the natural environment, and encourage these firms to develop a socially responsible attitude.

This paper proceeds with the second section covering a theoretical review, discussing the important role that the CSA/FSA configuration has nowadays in explaining the MNEs' management activities in general, and the environmental management practices in particular. Using the CSA/FSA framework as a reference, the third section explains the different international environmental strategies that can be adopted by MNEs. The final section refers to the discussion and future research.

2 Firm- and country-specific advantages

MNEs are based in different countries (home and host countries) having their own institutional profiles, and need to gain legitimacy in all the contexts in which they operate ([30] Kostova and Zaheer, 1999). Moreover, these firms can generate a set of valuable resources and capabilities, sources of competitive advantage, which can be transferred within their internal network ([6] Barney, 1991; [7] Bartlett and Ghoshal, 1989). As a result, there is a set of firm-specific factors that determine the competitive advantage of these firms (FSAs). In addition, there are country factors, which can lead to CSAs. For these reasons, the CSA/FSA framework, widely recognized by the IB literature ([39] Rugman, 1981; b42 b43 b44 b45 Rugman and Verbeke, 1990, 1992, 1998a, b), is highly relevant to explaining the MNEs' management practices, since it is focused on firm-level strategy covering MNE activity in both home and host countries. …

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