MULTINATIONAL COMPANIES AND THE NATURAL ENVIRONMENT: DETERMINANTS OF GLOBAL ENVIRONMENTAL POLICY STANDARDIZATION.

Abstract

The environmental conduct of multinational companies (MNCs) is very controversial. On the one hand, it has been argued that MNCs exploit cross-country differences in environmental regula tions by locating dirty operations in countries with lax environmental regulations and by adapting their subsidiaries' environmental policies, technol ogies, and standards to local country conditions (Gladwin, 1987; K?rten, 1995; Vernon, 1998). On the other hand, it has been suggested that MNCs increasingly self-regulate their environmental con duct (Christmann & Taylor, 2001; Rappaport & Fla herty, 1992; United Nations, 1993). Self-regulation refers to a firm's adoption of environmental poli cies or performance standards that exceed the re quirements of government regulations. MNCs can self-regulate their environmental conduct by stan dardizing their environmental policies worldwide, thus reducing their ability to exploit cross-country differences in environmental regulations. Although evidence from the 1970s and 1980s supports the adaptation of MNCs' environmental policies and standards to local conditions (Gladwin, 1987; United Nations, 1988), more recent evidence sug gests that MNCs are increasingly implementing more globally uniform environmental policies (Brown, Derr, Renn, & White, 1993; Dowell, Hart, & Yeung, 2000; Rappaport & Flaherty, 1992). How ever, little is known about the factors that cause MNCs to standardize their environmental polices on a global basis, and more research is needed to address this question (Dowell et al., 2000). In this paper, I identify determinants of MNCs' global en vironmental policy standardization and empiri cally analyze their importance. To address this issue, I drew on the international management and environmental management liter atures. The international management literature suggests that MNCs can implement strategies that range from nationally responsive and adapted to country markets to globally integrated and stan dardized (Bartlett & Ghoshal, 1989; Prahalad & Doz, 1987; Yip, 1992). Empirical studies have analyzed determinants of global standardization for MNCs' overall strategies as well as for different functional strategies (Hannon, Huang, & Jaw, 1995; Johansson & Yip, 1994; Kobrin, 1991; Laroche, Kirpalani, Pons, & Zhou, 2001). In the environmental manage ment literature, studies have examined determi nants of firms' environmental conduct in single country settings (Arag?n-Correa, 1998; Arora & Cason, 1995; Christmann & Taylor, 2001; Hen riques & Sadorsky, 1996; Sharma, 2000). Both ex ternal stakeholders and internal firm characteris tics have been identified as determinants of firms'