Cultural Distance and the Value Effects of Global Diversification - WUN

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					Leeds University Business School

Greenhouse Gas-Reduction
Strategising and the Multinational

Hinrich Voss & L. Jeremy Clegg
February 2011




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Leeds University Business School
Largest GHG emitters
  Country                 MtC02e in 2000                         MNE#                     MtC02e (Scope 1-3)
  USA                                        6,928               Royal Dutch Shell                               848
  China                                      4,938               Rio Tinto                                        711
  EU-25*                                     4,725               Total                                           695
  Russia                                     1,915               BP                                              595
  India                                      1,884               BHP Billiton                                    382
  Japan                                      1,317               ENI                                             375
  Brazil                                        851              Philips                                         320
  Canada                                        680              Arcelor Mittal                                  205
  South Korea                                   521              Repsol YPF                                      203
  Mexico                                        512              RWE                                             187
                                                                           ‘Global 500’                    ca. 15%
Note: *(Germany: 1009, UK: 654, Italy: 531, France: 513) = 57%

                                                                                              CDP (2008); WRI (2005)
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Largest MNEs
                                       No                                          No
  Country           GDP bn, 2006            MNE#                Sales bn, 2006
  USA                         13,202   1    Wal-Mart                       365     22

  Japan                        4,340   2    ExxonMobil                     351     23

  Germany                      2,907   3    Royal Dutch Shell              319     26

  China                        2,668   4    BP                             274     30

  UK                           2,345   5    GM                             207     37

  France                       2,231   6    Toyota                         205     39

  Italy                        1,845   7    Chevron                        201     40

  Canada                       1,251   8    DaimlerChrysler                191     42

  Spain                        1,224   9    Conoco-Philips                 173     45

  Brazil                       1,068   10   Total                          168     46

                                                                         Peng (2009)
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Current Perspective

               The MNE

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Multinational Organisation

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

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

                                   Dicken (2011) based on Barlett & Goshal (1989)
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Global Factory
                                               Parts            Parts           Parts
                                              Supplier         Supplier        Supplier

                 Engineering                                         Contract
                  Branding                                          Assembler
                BRAND OWNER
                                                                               Parts Supplier

                                  Design                            Assembler
  Engineering                                                                                        Warehousing,
                                 Contractor                                                          Distribution
                                                                           Parts                     Adaptation
                   R&D                            Parts
                 Contractor                      Supplier

                Core Functions                           Distributed Manufacturing          Local market adaptation

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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

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Leeds University Business School
A framework
                                  MNE’s headquarter           MNE’s affiliate

                                            Individual’s concerns

  Issue salience

                                                                                                        GHG strategy
                                       Strategic             Strategic
  Field cohesion                       FSA                   FSA
                                       development           deployment

                                       Formulation          Implementation

  t                                                   t+1                                                          t+n

                                                               Hutzschenreuter & Kleindienst (2006), Bansal & Roth (2000),
Leeds University Business School                               Kolk & Pinkse (2008)                                          13
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)
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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)

Implications for the ‘Global Factory’ and its legitimacy in home and host
countries (Buckley & Ghauri, 2004; Kostova et al., 2008)

                                                                            Bansal & Roth (2000)
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Proposition 1

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

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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)

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)
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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

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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)
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Proposition 3

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

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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)
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Propositions 4a, b

   Only those strategies for greenhouse gas management
   that are developed within strategic units of an MNE are

   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

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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

                                                                           Bansal & Roth (2000)
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Propositions 5a, b

   Individuals’ concerns in stand-alone MNEs are influential
   on the firm to generate greenhouse gas-reduction

   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

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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?

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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


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