Abstract
Stories of firms that exceed local compliance requirements in their environmental performance appear routinely. However, we have limited theoretical explanations of what propels these firms to exceed compliance. Our theory suggests that global competitive and institutional pressures lead multinational firms to develop highlevel, environmental management systems (EMS) that make them more competitive. For economic and other reasons, select firms make the choice to rationalize their collective environmental performance to the highest common denominator rather than the lowest. Regulations around the world differ widely and are a moving target in many settings. The need to comply with such myriad, shifting rules leads to firms creating EMS to help stay ahead of regulations worldwide. Using institutional and internationalization theories as our basis, we offer a propositional model concerning global competitive/institutional pressures and their effects on corporate environmental performance. We conclude the paper with a discussion of the implications of the model.
Highlights
The University of OklahomaStories of firms that exceed local compliance requirements in their environmental performance appear routinely
AUTHORS’ NOTE: The authors wish to thank Petra Christmann, Jeanne Logsdon, and several reviewers for their helpful comments on this and earlier drafts of this article
As part of our review of the regulatory pressures, we examine existing literature that refutes what is called the pollution haven hypothesis that suggests multinational enterprises (MNEs) seek out low-regulation countries so they do not have to worry about their environmental performance
Summary
Stories of firms that exceed local compliance requirements in their environmental performance appear routinely. Such MNEs are more likely to face reputation effects and other sanctions if they fail to achieve higher levels of environmental performance Such a global strategy is fundamentally different from (a) what can be thought of as a multidomestic (or polycentric in Perlmutter’s, 1969, terms) strategy, that is, where firms develop “a multiplicity of identities to reflect each of the countries they operate in” The International Institute for Sustainable Development (IISD) summarized several more explanations why the pollution haven hypothesis has not been supported empirically They argued, The costs of environmental compliance are so low relative to other considerations (such as labour costs, political risk, and proximity to resources) that even if great differences in regulatory stringency existed between jurisdictions, they would not be enough to prompt a move. We present a propositional model (based on globalization and institutional theories) of the antecedents of high-level environmental performance
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