Internationalization, institutional pressures in foreign markets, and environmental sustainability

Abstract

This study contributes to the internationalization processes and sustainability literatures by looking into how, when, and why companies respond differently to formal and informal institutional pressures in favor of environmentally friendly practices during international expansion processes. When companies enter new foreign markets or expand their sales into existing ones they can be subject to increased formal and informal pressures. I show, theoretically and empirically, that in these cases the informal pressures' tacit and experiential nature affects the timing and the likelihood of compliance with these pressures. First, compliance with informal pressures takes longer than for formal ones. Second, companies that cannot afford learning about informal pressures, because of resource constraints or a limited learning efficiency due to a narrow previous international experience, tend to forgo compliance with these pressures. Failure to comply with these pressures or to do so in a timely manner can have devastating consequences for internationalizing companies' legitimacy.