The pro-active environmental approach to internationalization. An advantage? A China case study

Susanne Jensen & Justine Hebert

Student thesis: Master thesis


Today’s severe global environmental conditions have greatly broadened the focus on the environment as well as encouraged governments to strengthen environmental regulation. Environmental regulation has often been seen as a constraint on business, driving cost up and putting companies at a disadvantage in their internationalization, however, interestingly enough an increasing number of companies are performing beyond compliance. Whereas the relationship between high environmental performance and advantages has been studied before, the effects of HEP on the internationalization has to our knowledge never been studied before and can be considered a gap in the current literature. Thus, the objective of this research paper is to investigate whether MNCs with high environmental performance can gain advantages in their internationalization. In this study we have interviewed five companies that are considered as environmental leaders within their industry. These MNCs all voluntarily adhere to different environmental standards, management systems and other initiatives such as the World Wide Fund, the Dow Jones Sustainability Index, the Ethibel Sustainability Index, the ISO 14001 etc. On the criteria of their membership to these standards, we have characterized them as pro-active environmentally. These companies are Novo Nordisk, Novozymes, Vestas, Nokia and Ecco. The companies were also selected on the background of their presence in China. China has been selected as location setting due to its severe environmental degradation that is putting its economic growth at danger and due to the fact that it is the largest FDI recipient in the world. On the background of the conventional theoretical literature on the subject, we outline three areas where companies can gain advantages by having high environmental performance. These are within competitive advantages, efficiency and stakeholder advantages. In the first part of the analysis we determined that the five HEP companies do not only see environmental investments as costly, but also as drivers to different opportunities. Instead of being plagued by the cost and hassle of strict environmental regulations in the host country, HEP companies can use this to their benefit when internationalization by letting them slide past these barriers to entry The five companies indicated that they have been able to grasp the benefits of operating under strict regulations in their home country, to further create an advantage in their internationalization. In the area of competitive advantages, we were able to establish different advantages that companies can achieve in their internationalization. This was particular in terms of great environmental reputation that endows companies with the best assets for the internationalization; financial support, faithful and dedicated employees and honorable status. Furthermore HEP companies can benefit from first mover advantages and create entry barriers, it can boost innovation and make them more competitive. Moreover by optimizing the organization of their environmental resources the companies can differentiate themselves from their competitors. However, we were not able to determine whether HEP products favor internationalization. Nevertheless, we conclude that, in most cases, HEP increases companies’ competitive advantage and favor their internationalization. In the area of efficiency we found out that having a high environmental performance implies costs, but that global activities reduce transaction, coordination and factor costs. Companies’ environmental pro-activeness can also create profitable opportunities, economies of scale and diminish risks. Last, we concluded that the five companies did not particularly benefit from stakeholder advantages in China, although some of the companies were able to influence local regulations due to their experiences and long partnering-relationship with the Chinese government. In general we do believe that companies can benefit from HEP in their internationalization in terms of bargaining power, favored treatments and by lobbying the local government. However, we do not consider China to be the best example of the political advantages a company can benefit from due to its HEP. We argue that it is because China’s market is already attractive enough in itself and that therefore they don’t need to directly attract foreign companies through favored treatments. Nonetheless, if China needs environmental expertise, which is likely in the future, considering its increasing environmental degradation, it might further facilitate the entry of environmental companies. On the background of these areas we were able to conclude that HEP companies can gain advantages in their internationalization, where the main advantages stem from efficiency, and competitive advantages.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
Publication date2009
Number of pages183