Degree of Internationalization and Corporate Environmental Performance: Is There a Link?

This study examines the relationship between the degree of internationalization of a firm and its corporate environmental performance. For a sample of 138 U.S.-based manufacturing firms tested using 1993 and 1998 data, firms with a higher level of internationalization also exhibited higher measures of environmental performance. Similarly, a longitudinal test of data from 1991 through 1996 showed positive correlations that, in fact, grew stronger over time. These results lend support to the proposition that multinational corporations, rather than leading a "race to the bottom" in environmental standards, may in fact be proactive agents of positive environmental performance. Introduction It is difficult to overemphasize the importance of multinational corporations (MNC's). With their massive financial, technological, human, intellectual, and organizational resources, they are acknowledged by many to be perhaps the dominant social institutions on the planet (Barnet, 1994; Barnet & Cavanagh, 1994; Barnet & Mueller, 1974; Hawken, 1993; Kanter, 1995; Korten, 1995,1999; Vernon, 1992, 1998; Viederman, 1997). Indeed, the number of such multinationals now totals some 63,000 parent firms with approximately 690,000 foreign affiliates (UNCTAD, 2000). Of the world's one hundred largest economies, fifty-one are multinational corporations (Anderson & Cavanagh, 1996). As primary instruments of globalization, however, they have also served as lightning rods for those concerned with the broader social and environmental effects of globalization. Certainly, they continue to arouse strong, and mixed, emotions. If anything, as recent protests against the WTO and IMF demonstrate, such concerns over globalization have heightened rather than abated. This study concerns itself with the impact of multinational corporations upon the natural environment, a patently global issue. The debate over the environmental performance of MNC's has been characterized by a stark dichotomy of views, an excess of emotion, a reliance on anecdotal evidence, and a dearth of empirical investigation. Supporters of globalization argue that MNC's, armed with a powerful array of capabilities and resources, are agents for the propagation of higher environmental standards around the world, as their own practices, policies and standards are diffused throughout their worldwide operations. To these supporters, MNC's help to "raise all boats" in the arena of environmental performance. Critics of MNC's, however, see quite the opposite. MNC's are accused of spearheading a "race to the bottom" as they comb the globe for locations where they may exercise the very lowest environmental standards commensurate with maximization of their economic bottom line. Although the theoretical underpinnings of both perspectives are hardly robust, the battle lines are clearly drawn. To critics, MNC's are quite literally destroying the planet. To supporters, MNC's may be the planet's best hope. Empirical evidence, no matter how limited, is essential to begin to sort out this complex and deeply contentious issue. Specifically, we address the following question: Is there a positive relationship between the degree of internationalization of a firm and its environmental performance? Theoretical Framework Critics of the environmental performance of multinational corporations are neither silent nor in short supply. They embody a radical, critical view that sees the impacts of MNC's as beneficial only for the organizations, their agents and owners, and detrimental to the societies, and to the natural environments, in which they are embedded. While some academicians have entertained the possibility of such negative impacts, (Kindleberger, 1974; Vernon, 1971, 1975), critics have adopted as an article of faith that MNC's engender negative environmental impacts as a natural consequence of their place in the vanguard of a global capitalist system. To these critics (Barnet, 1994; Barnet & Mueller, 1974; Barnet & Cavanagh, 1994; Hawken, 1993; Korten, 1995, 1999) MNC's have become mobile, 'footloose', and beyond the control of any nationstate, including their own home country. …