How Institutions Influence Firms’ Climate Change Strategies: Extending the Perspectives of International Business and Global Value Chains with Business Systems

Abstract

The changing roles of the United Nations (UN) and national institutions have made addressing climate change a critical concern for many multinational enterprises’ (MNEs) survival and growth. This chapter discusses how such institutions, which vary in their nature and characteristics, shape firm strategies for climate change adaptation. Exploring different versions of institutional theory, the chapter demonstrates how and why institutional characteristics affect typical patterns of firm ownership, governance, and capabilities. These, in turn, influence companies’ internationalisation and climate-change strategies. Climate change poses challenges to how we understand firms’ strategic decisions from both an international business (IB) (HQ–subsidiary relations) and global value chains (GVC) (buyer–supplier relations) perspective. However, climate change also provides opportunities for companies to gain competitive advantages – if firms can reconfigure and adapt faster than their competitors. Existing IB and GVC research tends to downplay the importance of climate change strategies and the ways in which coherent or dysfunctional institutions affect firms’ reconfiguration and adaptation strategies in a globally dispersed network of value creation. This chapter presents a perspective on the institutional conditions that affect firms’ climate change strategies regarding ownership, location, and internalisation (OLI), and GVCs, with ‘investment’ and ‘emerging standards’ playing a significant role. The authors illustrate the discussion using several examples from the Global South (i.e. Bangladesh) and the Global North (i.e. Denmark, Sweden, and Germany) with a special emphasis on the garment industry. The aim is to encourage future research to examine how a ‘business systems’, or varieties of capitalism, institutional perspective can complement the analysis of sustainability and climate change strategies in IB and GVC studies.

Citation

Rana, M.B. and Allen, M.M.C. (2024), "How Institutions Influence Firms’ Climate Change Strategies: Extending the Perspectives of International Business and Global Value Chains with Business Systems", van Tulder, R., Grøgaard, B. and Lunnan, R. (Ed.) Walking the Talk? MNEs Transitioning Towards a Sustainable World (Progress in International Business Research, Vol. 18), Emerald Publishing Limited, Leeds, pp. 265-294. https://doi.org/10.1108/S1745-886220240000018018