42 Pages Posted: 7 Oct 2014 Last revised: 7 Mar 2017
Date Written: March 6, 2017
We examine the role of firm strategy in the global effort to combat pollution. We find that U.S. plants release less toxic emissions when their parent firm imports more from low-wage countries (LWCs). Consistent with the Pollution Haven Hypothesis, goods imported by U.S. firms from LWCs are in more pollution-intensive industries. U.S. plants shift production to less pollution-intensive industries, produce less waste, and spend less on pollution abatement when their parent imports more from LWCs. The negative impact of LWC imports on emissions is stronger for U.S. plants located in counties with greater institutional pressure for environmental performance, but weaker for more-capable U.S. plants and firms. These results highlight the role of local institutions and firm capability in explaining firms’ offshoring and environmental strategy.
Keywords: environmental strategy, pollution haven, offshoring, institutions, globalization, corporate social responsibility
JEL Classification: F18, Q56
Suggested Citation: Suggested Citation
Li, Xiaoyang and Zhou, Yue Maggie, Offshoring Pollution while Offshoring Production? (March 6, 2017). Strategic Management Journal, 2017; Ross School of Business Paper No. 1253; Fama-Miller Working Paper. Available at SSRN: https://ssrn.com/abstract=2506164 or http://dx.doi.org/10.2139/ssrn.2506164