Influence of institutions and internationalization on environmental performance of metallurgical MNEs
DOI:
https://doi.org/10.21638/spbu18.2023.406Abstract
Goal: the paper aims to uncover how institutions and internationalization influence the environmental performance of metallurgical multinational enterprises (MNEs). More specifically we pose the following research questions: what is the effect of internationalization and institutions in both home and host market on MNEs environmental performance; whether MNEs mitigate institutional pressure in their home countries by expanding their internationalization.
Metodology: the paper builds on quantitative analysis based on panel data regression. We analyze a dataset of the largest metallurgical MNEs from different countries, covering the period from 2017 to 2020. We focus on metals and mining sector which is a major contributor to the global greenhouse gas emissions.
Findings: we find that internationalization and stringent climate policies in home country are positively associated with environmental performance of metallurgical MNEs. Additionally, we observe that general institutional factors in the home country, such as the protection of minority shareholders also contribute to the environmental advancement of MNEs. Though, the extensive internationalization of metallurgical firms negatively moderates the relationship between stringent climate regulations in the home country and their environmental performance.
Originality and contribution of the authors: our findings indicate that despite the overall trend of improving environmental performance, metallurgical MNEs with a higher proportion of foreign sales exhibit worse environmental performance hinting that they may adopt “carbon haven” logic when faced with stringent climate regulations in their home country.
Keywords:
MNEs, environmental performance, internationalization, 'carbon haven', metal industry, ESG
Downloads
Download data is not yet available.
References
References
Accenture. 2022. How investors view mining’s new role as a champion of decarbonization. [Electronic resource]. clck.ru/3AA2UH (accessed: 15.08.2023).
Aguilera-Caracuel J., Hurtado-Torres N. E., Aragón-Correa J. A., Rugman A. M. 2013. Differentiated effects of formal and informal institutional distance between countries on the environmental performance of multinational enterprises. Journal of Business Research 66 (12): 2657–2665.
Ahmadova G., Bueno García M., Delgado-Márquez B., Pedauga, L. 2022. Firm- and сountry-specific advantages: Towards a better understanding of MNEs’ environmental performance in the international arena. Organization & Environment 36 (3): 468–497. https://doi.org/10.1177/10860266221129699
Aragón-Correa J. A., Marcus A., Hurtado-Torres N. 2016. The natural environmental strategies of international firms: Old controversies and new evidence on performance and disclosure. Academy of Management Perspectives 30 (1): 24–39.
Attig N., Boubakri N., El Ghoul S., Guedhami O. 2016. Firm internationalization and corporate social responsibility. Journal of Business Ethics 134 (2): 171–197.
Babiker M. H. 2005. Climate change policy, market structure, and carbon leakage. Journal of International Economics 65 (2): 421–445.
Bansal P. 2005. Evolving sustainably: A longitudinal study of corporate sustainable development. Strategic Management Journal 26 (3): 197–218.
Barnea A., Rubin A. 2010. Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics 97 (1): 71–86.
Bass E. A., Grøgaard B. 2021. The long-term energy transition: Drivers, outcomes, and the role of the multinational enterprise. Journal of International Business Studies 52 (5): 807–823.
Berry H., Kaul A., Lee N. 2021. Follow the smoke: The pollution haven effect on global sourcing. Strategic Management Journal 42 (13): 2420–2450.
Boermans M., Galema R. 2019. Are pension funds actively decarbonizing their portfolios? Ecological Economics 161: 50–60. https://doi.org/10.1016/j.ecolecon.2019.03.008
Brammer S. J., Pavelin S., Porter L. A. 2009. Corporate charitable giving, multinational companies and countries of concern. The Journal of Management Studies 46 (4): 575–596.
Branger F., Quirion P. 2014. Would border carbon adjustments prevent carbon leakage and heavy industry competitiveness losses? Insights from a meta-analysis of recent economic studies. Ecological Economics: The Journal of the International Society for Ecological Economics 99: 29–39.
Bu M., Wagner M. 2016. Racing to the bottom and racing to the top: The crucial role of firm characteristics in foreign direct investment choices. Journal of International Business Studies 47 (9): 1032–1057.
Buckley P. J., Doh J. P., Benischke M. H. 2017. Towards a renaissance in international business research? Big questions, grand challenges, and the future of IB scholarship. Journal of International Business Studies 48 (9): 1045–1064.
Candau F., Dienesch E. 2017. Pollution haven and corruption paradise. Journal of Environmental Economics and Management 85: 171–192.
Christmann P., Taylor G. 2001. Globalization and the environment: Determinants of firm self-regulation in China. Journal of International Business Studies 32 (3): 439–458.
Cox B., Innis S., Kunz N. C., Steen J. 2022. The mining industry as a net beneficiary of a global tax on carbon emissions. Communications Earth and Environment 3 (17). https://doi.org/10.1038/s43247-022-00346-4
Errendal S., Ellis J., Jeudy-Hugo S. 2023. The role of carbon pricing in transforming pathways to reach net zero emissions: Insights from current experiences and potential application to food system. OECD Environment Working Papers 220. [Electronic resource]. https://clck.ru/3AA3ic (accessed: 28.11.2023).
George G., Howard-Grenville J., Joshi A., Tihanyi L. 2016. Understanding and tackling societal grand challenges through management research. Academy of Management Journal 59 (6): 1880–1895.
Gómez-Bolaños E., Ellimäki P., Hurtado-Torres N. E., Delgado-Márquez B. L. 2022. Internationalization and environmental innovation in the energy sector: Exploring the differences between multinational enterprises from emerging and developed countries. Energy Policy 163. https://doi.org/10.1016/j.enpol.2022.112867
Gross S. 2021. The challenge of decarbonizing heavy industry. Foreign Policy at Brookings. The Brookings Institution. [Electronic resource]. https://www.brookings.edu/articles/the-challenge-of-decarbonizing-heavy-industry/ (accessed: 15.08.2023).
Hall J., Vredenburg H. 2013. The challenges of innovating for sustainable development. MIT Sloan Management Review. [Electronic resource]. https://sloanreview.mit.edu/article/the-challenges-of-innovating-for-sustainable-development/ (accessed: 13.08.2023).
Hennart J. M. A., Sheng H. H., Carrera J. M. 2017. Openness, international champions, and the internationalization of Multilatinas. Journal of World Business 52 (4): 518–532.
Huang C.-Y., Huang S. W.-L. 2009. Ownership structure and corporate social performance. [Electronic resource]. http://www.jgbm.org/page/23Wei-Ling%20Huang.pdf. (accessed: 15.08.2023).
Hyatt D. G., Berente N. 2017. Substantive or symbolic environmental strategies? Effects of external and internal normative stakeholder pressures. Business Strategy and the Environment 26 (8): 1212–1234.
IEA. 2020. Iron and steel technology roadmap. Towards more sustainable steelmaking. [Electronic resource]. https://iea.blob.core.windows.net/assets/eb0c8ec1-3665-4959-97d0-187ceca189a8/Iron_and_Steel_Technology_Roadmap.pdf (accessed: 15.08.2023).
Johanson J., Vahlne J.-E. 1978. The internationalization process of the firm. Thunderbirb International Business Review 20 (1): 19–21.
Kassinis G., Vafeas N. 2006. Stakeholder pressures and environmental performance. Academy of Management Journal 49 (1): 145–159.
Kavadis N., Castañer X. 2014. Ownership effects on unrelated diversification: An institutions’ perspective. In: Villalonga B. (ed). Finance and Strategy issue of Advances in Strategic Management 31: 253–288.
Khan A., Muttakin M. B., Siddiqui J. 2013. Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics 114 (2): 207–22.
Khanna T., Palepu K. G. 2004. Globalization and convergence in corporate governance: Evidence from Infosys and the Indian software industry. Journal of International Business Studies 35 (6): 484–507.
Kim N., Sun J., Yin H., Moon J. J. 2022. Do foreign firms help make local firms greener? Evidence of environmental spillovers in China. Journal of International Business Studies 53 (7): 1370–1393.
Kolk A., Pinkse J. 2008. A perspective on multinational enterprises and climate change: Learning from “an inconvenient truth”? Journal of International Business Studies 39 (8): 1359–1378.
Kyriazidou E. 1997. Estimation of a panel data sample selection model. Econometrica 65 (6): 1335–1364
Li X., Zhou Y. M. 2017. Offshoring pollution while offshoring production? Strategic Management Journal 38 (11): 2310–2329.
Maffet M., Nakhmurina A., Skinner D. 2022. Importing activists: Determinants and consequences of increased cross-border shareholder activism. Journal of Accounting and Economics 74 (2–3). https://doi.org/10.1016/j.jacceco.2022.101538
Martus E. 2019. Russian industry responses to climate change: the case of the metals and mining sector. Climate Policy 19 (1): 17–29.
McKinsey. 2023a. Regulatory efficiency will be essential for the energy transition. [Electronic resource]. https://www.mckinsey.com/industries/metals-and-mining/our-insights/regulatory-efficiency-will-be-essential-for-the-energy-transition (accessed: 13.08.2023).
McKinsey. 2023b. The net-zero materials transition: Implications for global supply chains. [Electronic resource]. https://www.mckinsey.com/industries/metals-and-mining/our-insights/the-net-zero-materials-transition-implications-for-global-supply-chains (accessed: 14.08.2023).
Mungai E. M., Ndiritu S. W., Rajwani T. 2020. Do voluntary environmental management systems improve environmental performance? Evidence from waste management by Kenyan firms. Journal of Cleaner Production 265. https://doi.org/10.1016/j.jclepro.2020.121636
Naegele H., Zaklan A. 2019. Does the EU ETS cause carbon leakage in European manufacturing? Journal of Environmental Economics and Management 93: 125–147.
Nippa M., Patnaik S., Taussig M. 2021. MNE responses to carbon pricing regulations: Theory and evidence. Journal of International Business Studies 52 (5): 904–929.
North D. C. 1991. Institutions. The Journal of Economic Perspectives: A Journal of the American Economic Association 5 (1): 97–112.
Nuruzzaman N., Singh D., Gaur A. S. 2020. Institutional support, hazards, and internationalization of emerging market firms. Global Strategy Journal 10 (2): 361–385.
OECD. 2017. A first look at the steel industry in the context of global value chains. DSTI/SC20174. [Electronic resource]. https://one.oecd.org/document/DSTI/SC20174/en/pdf (accessed: 01.12.2023).
Oh W. Y., Chang Y. K., Martynov A. 2011. The effect of ownership structure on corporate social responsibility: Empirical evidence from Korea. Journal of Business Ethics: JBE 104 (2): 283–297.
Özen S., Küskü F. 2009. Corporate environmental citizen- ship variation in developing countries: An institutional frame- work. Journal of Business Ethics 89 (2): 297–313.
Panibratov A. 2012. Russian Multinationals: From Regional Supremacy to Global Lead. London, New York: Routledge.
Panibratov A. Ju., Veselova A. S., Ermolaeva L. A. 2015. Institutional and macroeconomic factors of Russian cross-border mergers and acquisitions geographical choice. Russian Management Journal 13 (3): 59–78. (In Russian)
Pinkse J., Kolk A. 2012. Multinational enterprises and climate change: Exploring institutional failures and embeddedness. Journal of International Business Studies 43 (3): 332–341.
Pryor J., Agnolucci P., Montes de Oca Leon M., Fischer C., Heine D. 2023. Carbon pricing around the world. International Monetary Fund, Data for a Greener World: A Guide for Practitioners and Policymakers. https://doi.org/10.5089/9798400217296.071
Reboredo J., Otero L. 2021. Are investors aware of climate-related transition risks? Evidence from mutual fund flows. Ecological Economics 189. https://doi.org/10.1016/j.ecolecon.2021.107148
Rossetto D. 2023. The long-term feasibility of border carbon mechanisms: An analysis of measures proposed in the European Union and the United States and the steel production sector. Sustainable Horizons 6. https://doi.org/10.1016/j.horiz.2023.100053
Rugman A. M., Verbeke A. 2001. Subsidiary-specific advan- tages in multinational enterprises. Strategic Management Journal 22 (3): 237–250.
Sancha C., Gutierrez-Gutierrez L., Tamayo-Torres I., Gimenez Thomsen C. 2023. From corporate governance to sustainability outcomes: the key role of operations management. International Journal of Operations & Production Management 43 (13): 27–49. https://doi.org/10.1108/IJOPM-01-2022-0043
Song D., Xu C., Fu Z., Yang C. 2023. How does a regulatory minority shareholder influence the ESG performance? A quasi-natural experiment. Sustainability 15. https://doi.org/10.3390/su15076277
Sparkes R., Cowton C. J. 2004. The maturing of socially responsible investment: A review of the developing link with corporate social responsibility. Journal of Business Ethics 52 (1): 45–57.
Stout L. A. 2012. The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public. A BK business book, 1st ed. Berrett- Koehler: San Francisco.
Sullivan R., Mackenzie C. 2008. Can investor activism play a meaningful role in correcting market failures? Journal of Corporate Citizenship 31: 77–88.
Tashman P., Marano V., Kostova T. 2019. Walking the walk or talking the talk? Corporate social responsibility decoupling in emerging market multinationals. Journal of International Business Studies 50 (2): 153–171.
Tobin J. (1958). Estimation of relationships for limited dependent variables. Econometrica 26: 24–36.
Tost M., Hitch M., Lutter S., Feiel S., Moser P. 2020. Carbon prices for meeting the Paris agreement and their impact on key metals. The Extractive Industries and Society 7 (2): 593–599. https://doi.org/10.1016/j.exis.2020.01.012
Udayasankar K. 2008. Corporate social responsibility and firm size. Journal of Business Ethics 83 (2): 167–175.
Young S. L., Makhija M. V. 2014. Firms’ corporate social responsibility behavior: An integration of institutional and profit maximization approaches. Journal of International Business Studies 45 (6): 670–698.
Zeng H., Huang Z., Zhou Q., He P., Cheng X. 2023. Corporate environmental governance strategies under the dual supervision of the government and the Public. Business and Society 62 (4): 860–907
World Economic Forum (WEF). 2022. Fostering effective energy transition 2022 edition. Insight Report. [Electronic resource]. https://www3.weforum.org/docs/WEF_Energy_Transition_Index_2022.pdf (accessed: 01.12.2023).
Wood G., Pereira V., Temouri Y., Wilkinson A. 2021. Exploring and investigating sustainable international business practices by MNEs in emerging markets. International Business Review 30 (5). https://doi.org/10.1016/j.ibusrev.2021.101899
World Bank. 2023. State and trends of carbon pricing 2023. [Electronic resource]. https://openknowledge.worldbank.org/items/58f2a409-9bb7-4ee6-899d-be47835c838f. (accessed: 01.12.2023).
World Steel Association 2019. The role of steel manufacturing in the global economy. [Electronic resource]. https://worldsteel.org/wp-content/uploads/The-role-of-steel-manufacturing-in-the-global-economy.pdf (accessed: 15.08.2023).
Zhu B., Xu C., Wang P., Zhang L. 2022. How does internal carbon pricing affect corporate environmental performance? Journal of Business Research 145: 65–77.
Downloads
Published
2024-04-19
How to Cite
Ermolaeva, L. A., Klishevich, D. S., Garanina, O. L., & Panibratov, A. Y. (2024). Influence of institutions and internationalization on environmental performance of metallurgical MNEs. Russian Management Journal, 21(4), 579–599. https://doi.org/10.21638/spbu18.2023.406
Issue
Section
Theoretical and Empirical Studies
License
Articles of the Russian Management Journal are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.
