Determinants of Organisational Political Reaction to Emissions Trading Bill: Evidence from New Zealand

Abstract

This paper aims to examine the impact of environmental strategy, industry and firm-level characteristics on the choice of a firm’s political strategy in response to a proposed Emissions Trading Scheme (ETS). Using sample of 33 firms and organisations in four industries that are affected by the introduction of the ETS Bill in New Zealand, this study found a contingency relationship between political strategy and environmental strategy, with more environmentally reactive firms more likely to challenge and resist the Bill proposal. Evidence is also found for the impact of industry and firm characteristics. Resistance-oriented strategies are more likely in agriculture and forestry than stationery energy and liquid fossil fuels and in sub-industry sectors with high market concentration and low field cohesion. Firms that participate more actively and allocate more resources to the Bill’s consultation process and with a formalized issue management organisational structure are likely to pursue a negotiation-based political strategy. The study also found that firms that challenge the Bill are likely to be small in size, low emissions level, exposed to international competition and have little experience in carbon management. The findings of the study confirm natural resource based view of the firm (Hart,1995) and Porter (1980)’s model that a firm’s reaction and participation in policy process depends on the extent to which its competitiveness is enhanced or threatened due to the policy’s impact.