The Thin Edge of the Wedge: Conflicting Institutional Demands and Climate Change Strategies

Despite transnational pleas that firms establish short-term and long-term actions to implement climate mitigation strategies because of the threat of exceeding planetary boundaries, management scholars demonstrate somewhat limited engagement with climate change research. The relatively narrow focus thus far typically employs a single theoretical approach and concentrates on a single predictor (or construct) in the institutional environment and the attendant direct effects. However, this study merges the institutional and resource dependence theories to more completely characterize the complexities in a firm’s organizational setting and what affects their actual decision-making. Specifically, firms choose different strategic responses because of different market conditions even though regulatory, normative and cultural isomorphic pressures influence firms to choose similar strategies to be perceived as legitimate. I test these hypotheses in a multilevel model (MLM) using nine years of longitudinal, secondary data from 741 firms in 42 developed and developing countries across four extractive industry sectors (6,669 total observations). Findings show that stronger climate change strategies only occur when market conditions are more cohesive. Further, firms will not pursue these strategies unless regulatory conditions first change the overall market conditions to encourage them to do so. Surprisingly, the normative forces reflected in the business conditions do not directly or indirectly influence the climate change strategies of firms. Finally, while several cultural dimensions do affect firm climate change strategies directly, correlations differ from some prior empirical findings. The integration of two complementary sociological theories contributes new insights about how national institutions affect business decisions.