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Multinational enterprises and climate change: Exploring institutional failures and embeddedness

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Abstract

This paper explores how climate change affects multinational enterprises (MNEs), focusing on the challenges they face in overcoming liabilities and filling institutional voids related to the issue. Climate change is characterized by institutional failures, because there is neither an enforceable global agreement nor a market morality. Climate change is also a distinctive international business issue, as its institutional failures materialize differently in different countries. As governments are still highly involved, MNEs need to consider carefully their strategies to cope with non-market forces, including their embeddedness in multiple institutional settings. Using some illustrative examples of MNE responses to climate-related components in stimulus packages, we explore MNEs’ balancing act concerning their institutional embeddedness (or lack thereof) in home, host and supranational contexts as input for further research on the dynamics of MNE activities in relation to climate change.

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Notes

  1. In the first phase of the EU trading scheme (2005–2007), EU member states provided industry with more emission allowances than required. As a consequence, firms were in compliance with the scheme by continuing business as usual. In the second phase (2008–2012), the number of allowances was reduced but the financial crisis slowed economic growth to such an extent that industry was again not facing a shortage of allowances.

  2. We are grateful to one of the reviewers for alerting us to this point.

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Authors and Affiliations

  1. Grenoble Ecole de Management, France

    Jonatan Pinkse

  2. University of Amsterdam Business School, The Netherlands

    Ans Kolk

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  1. Jonatan Pinkse
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  2. Ans Kolk
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Correspondence to Ans Kolk.

Additional information

Accepted by Alain Verbeke, Area Editor, 26 October 2011. This paper has been with the authors for three revisions.

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Pinkse, J., Kolk, A. Multinational enterprises and climate change: Exploring institutional failures and embeddedness. J Int Bus Stud 43, 332–341 (2012). https://doi.org/10.1057/jibs.2011.56

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