On the Implementation of a 'Global' Environmental Strategy: The Role of Absorptive Capacity
International Business Review, Spring 2010
52 Pages Posted: 27 Nov 2009
Date Written: November 26, 2009
This paper sheds light on factors influencing to what extent MNCs are able to implement a global environmental strategy. We apply the concept of absorptive capacity to analyze what role the uptake and integration of external knowledge playsin implementing an environmental strategy and propose to make a distinction between shared and unit-specific levels of absorptive capacity. Based on an in-depth investigation of the multinational chemical company BASF, we derive three propositions about the influence of absorptive capacity on the implementation of global environmental practices on the regional headquarters and subsidiary level. The main finding is that a shared level of absorptive capacity across subsidiaries facilitates a common understanding and use of environment-related knowledge, but, asenvironment-related knowledge often applies to a specific context only, there is also a need to build unit-specific absorptive capacity on a subsidiary level. By allowing subsidiaries to build their absorptive capacity, MNCs can more efficiently adapt global environmental practices and lower the cost of implementing a globalenvironmental standard.
Keywords: Sustainable development, environmental management, absorptive capacity, knowledge sharing, headquarters-subsidiary relationship
JEL Classification: F23, L65, M14, O31, O32
Suggested Citation: Suggested Citation