Strategic Responses to Global Climate Change
Author | : David L. Levy |
Publisher | : |
Total Pages | : 0 |
Release | : 2003 |
Genre | : |
ISBN | : |
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Multinational enterprises (MNEs) are increasingly facing global environmental issues which require coordinated market and non-market strategic responses. This article analyses the strategic responses by US and European multinational enterprises in the oil industry to the global climate change issue, considering the changes over time as well. Conventional drivers of strategy could not adequately explain the marked differences observed in the companies' responses. Instead, the study focused on the influence of the institutional environment. MNCs facing global issues such as climate change are immersed in multiple institutional contexts, subjecting them to competing pressures. The disparate reactions of U.S. and European oil companies in the early phase of the climate issue were found to be related to regulatory expectations, norms concerning the conduct of business-government relations, and cognitive assumptions regarding the future of fossil fuels and substitute technologies. These regulative, normative, and cognitive influences were associated with the institutional context of the MNCs' home country as well as with the specific history of each company. The oil companies perceived climate change as a major threat, and three of them adopted assertive responses; Exxon adopted an adversarial political strategy while BP and Shell pursued more accommodative and technologically oriented strategies. As the climate change issue matured, corporate perceptions were increasingly subject to convergent institutional pressures, which arose from the companies' common location in the global oil industry and from the emergence of climate change as a global issue arena. As a result of frequent interactions in these institutional environments, the companies have developed similar outlooks on markets and technologies. The emerging, more optimistic view of the future of the oil and gas business reduces the stakes and thus the need for assertive political or technological strategies. Moreover, companies are converging on the view that the flexible Kyoto mechanisms will provide only weak constraints on carbon emissions, reducing the cost of compliance. As a result, there are few rewards for proactively taking the risk of being a technological first-mover, and a resistant strategy that aggressively challenges policy may not be worth the cost in political and social legitimacy.