Greenhouse Gas-Reduction Strategising and the Multinational Enterprise

1. Greenhouse Gas-Reduction Strategising and the Multinational Enterprise Hinrich Voss & L. Jeremy Clegg February 2011

2. Content Rational Framework Conclusion 2

3. Rational

4. Largest GHG emitters Note: *(Germany: 1009, UK: 654, Italy: 531, France: 513) = 57% CDP (2008); WRI (2005) 4

5. Largest MNEs Peng (2009) 5

6. Current Perspective The MNE 6

7. Multinational Organisation Dicken (2011) based on Barlett & Goshal (1989) 7

8. International Organisation Dicken (2011) based on Barlett & Goshal (1989) 8

9. Integrated Network Dicken (2011) based on Barlett & Goshal (1989) 9

10. Global Factory Parts Supplier Parts Supplier Parts Supplier Design Engineering Branding Marketing BRAND OWNER Contract Assembler Outsourced Parts Supplier Contract Assembler Design Contractor Warehousing, Distribution and Adaptation Engineering Contractor Parts Supplier Parts Supplier R&D Contractor Core Functions Distributed Manufacturing Local market adaptation 10

11. Objectives To investigate the factors promoting, or inhibiting greenhouse gas-neutral international organisational behaviour and business strategy on the part of MNEs, To explore the consequences for the competitiveness of MNEs, and To explore the mechanisms through which MNEs’ actions might lead to GHG-reducing outcomes. 11

12. Framework

13. A framework MNE’s headquarter MNE’s affiliate Individual’s concerns Issue salience Downstream Upstream GHG strategy Strategic FSA development Strategic FSA deployment Field cohesion Formulation Implementation t t+1 t+n Hutzschenreuter & Kleindienst (2006), Bansal & Roth (2000), Kolk & Pinkse (2008) 13

14. Global Factory • Fine-slicing of business operations and benchmarking • Increased resilience and flexibility Two-way channel of knowledge transfer Two-way channel of institutional entrepreneurship Controlled and orchestrated by the MNE Buckley & Ghauri (2004) 14

15. Issue Salience • Certainty attached to an environmental issue, • Transparency of who the culprit is, and • Emotivity of stakeholders with regard to the concern at hand. Increasing legislative and regulatory body (IPCC, 2007) Increasing stakeholder pressures to change (e.g., Australian Academy of Science, 2010) Piecemeal corporate reaction (Hoffman, 1999; Christman & Taylor, 2006) Institutional changes Implications for the ‘Global Factory’ and its legitimacy in home and host countries (Buckley & Ghauri, 2004; Kostova et al., 2008) Bansal & Roth (2000) 15

16. Proposition 1 Greenhouse gas friendly strategic responses by MNEs are weakly stimulated by institutional changes that target local issue salience alone. 16

17. Field Cohesion • Social and geographic proximity, and • Interconnectedness of actors. Opposing interpretations of data on climate change, potential causes, and actions required (Huhn, 2008) Cause institutional voids and uncertain munificence (Aragon-Corra & Sharma, 2003) Corporate changes Void of institutional clarity can create opportunities for leadership (Aragon-Corra & Sharma, 2003) Direct and indirect effects of MNEs on the host (and home) economies, e.g. green management in China (Zhu et al., 2004, 2007, 2008; Christmann & Taylor, 2001) Bansal & Roth (2000) 17

18. Propositions 2a, b Within the Global Factory, the orchestrating MNE is the primary influence upon the degree and effectiveness of field cohesion. MNEs’ GHG management is positively impacted by feedback from FDI 18

19. FSA Development • Questions of locality, nature, speed, and scope of change, and • Headquarters, affiliate or regional centre, or supplier network. Slow adaptation with extant capabilities -> fast change that requires a completely new set of capabilities (Kolk & Pinkse, 2008) Uncertainties regarding organisational resources and capabilities response (Aragon-Correa & Sharma, 2003), the degree of organisational slack, performance constraints (Bansal, 2005; Stanny & Ely, 2008), financial outcomes (Aragon-Correa & Rubio-Lopez, 2007) Decentralisation of environmental management required (Russo & Fouts, 1997; Aragon-Correa & Sharma, 2003) or Centralisation and organisation-wide standards (Epstein & Roy, 2007; Hoffman, 2005) Access to multiple knowledge pools (Kafourus & Buckley, 2008) Kolk & Pinkse (2008) 19

20. Proposition 3 The MNE’s greenhouse gas-related capabilities are developed through interaction within the network of its global factory 20

21. FSA Deployment • Transferability of resources and capabilities • Local rules and regulations ‘Global Factory’ approach (Buckley & Ghauri, 2004) Climate change of ‘strategic importance’ International strategy Institutional entrepreneurship by MNEs (Kostova et al., 2008) Better CO2 emissions by MNEs than local state-owned firms in developing countries (Talukdar & Meisner, 2001) Rugman & Verbeke (2001) 21

22. Propositions 4a, b Only those strategies for greenhouse gas management that are developed within strategic units of an MNE are capabilities-enhancing. Firms that operate at the intersection of global factories play a key role in stimulating the development of new capabilities for the MNE leading their primary global factory. 22

23. Individual’s Concern • Values towards the environment, and • Degrees of discretion on decisions. Greater uncertainty should lead to greater decision-making discretion (Aragon-Correa & Sharma, 2003) Sense making and strategising of individual employees, and the top management team (Cornelissen, 2005) Existing corporate environmental strategies support the sense-making process and environmental awareness Existing international strategy and corporate structure may prohibit decision-making discretion Corporate and country culture may inhibit the expression of individual’s concerns Bansal & Roth (2000) 23

24. Propositions 5a, b Individuals’ concerns in stand-alone MNEs are influential on the firm to generate greenhouse gas-reduction strategies. Individuals’ concerns in a MNE within a Global Factory setting are subordinated to the focal MNE’s existing greenhouse gas-management objectives, or absence of objectives. 24

25. Conclusion

26. Conclusion The very limited research has the weakness that it treats MNEs as if they operated in a single international environment and as a singularity. We employ a strategy process framework to locate extant research on corporate responses on climate change, and to relate it to the two literatures of environmental management and international business. We find that the antecedents of a CCCS are multi-faceted and dynamic; the process formulation and implementation is multi-layered and strongly influenced by the type of global corporate strategy that the MNE pursues. Pathways of climate change strategies therefore vary considerably by MNE. Our findings imply that a holistic antecedent-process-outcome approach is required to investigate corporate climate change strategies effectively. ‘Western’ MNEs versus Emerging Market MNEs?  26

27. Dr Hinrich Voss Centre for International Business (CIBUL) Leeds University Business School Maurice Keyworth Building University of Leeds Leeds LS2 9JT United Kingdom T: +44-(0)1133432633 M (UK): +44-(0)7910280996 M (AUS): +61-(0)439208821 F: +44-(0)1133436848 E: hv@lubs.leeds.ac.uk www.leeds.ac.uk/cibul