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Corporate Environmental Strategies in Emerging Economies


  • Dietrich H. Earnhart
  • Madhu Khanna
  • Thomas P. Lyon


Many companies are adopting environmentally friendly management practices in developed countries. However, the benefits of a corporate environmental strategy are less clear in emerging (developing and transition) economies, where environmental regulations may be poorly enforced and social pressures to comply are weak. Thus it is important for business leaders, policymakers, and environmental activists to understand the causes and consequences of corporate environmental strategy in these economies so that they are able to implement effective strategies, develop useful policies, and promote meaningful activities, respectively. Drawing on both the theoretical and empirical literature, this article examines a broad array of drivers behind corporate environmental strategies including internal characteristics of firms, market pressures, and pressures from government and civil society. The empirical findings for developing economies (i.e., those whose physical and human resources, along with institutions, are still developing) suggest that government and civil society provide weak incentives for corporate environmental compliance, foreign ownership and foreign customer pressure improve environmental management practices, and information disclosure programs offer some promise for improving corporate environmental performance. The empirical findings for transition economies (i.e., those transitioning from reliance on the government’s allocation of resources to market-based allocations) also suggest a positive, albeit weaker, role for foreign ownership and foreign customer pressure in improving firms’ environmental performance. However, the findings also indicate that government policies, such as stricter enforcement, granting of permits, and higher rates for emission charges, are more effective in transition economies than in developing economies. (JEL: D21, D22, K32, M14, O13, P28, P31, Q53, Q56)

Suggested Citation

  • Dietrich H. Earnhart & Madhu Khanna & Thomas P. Lyon, 2014. "Corporate Environmental Strategies in Emerging Economies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(2), pages 164-185.
  • Handle: RePEc:oup:renvpo:v:8:y:2014:i:2:p:164-185.

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    References listed on IDEAS

    1. Lyon,Thomas P. & Maxwell,John W., 2004. "Corporate Environmentalism and Public Policy," Cambridge Books, Cambridge University Press, number 9780521819473, December.
    2. Garcã A, Jorge H. & Sterner, Thomas & Afsah, Shakeb, 2007. "Public disclosure of industrial pollution: the PROPER approach for Indonesia?," Environment and Development Economics, Cambridge University Press, vol. 12(6), pages 739-756, December.
    3. Jorge García & Shakeb Afsah & Thomas Sterner, 2009. "Which Firms are More Sensitive to Public Disclosure Schemes for Pollution Control? Evidence from Indonesia’s PROPER Program," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(2), pages 151-168, February.
    4. Jorge H. García & Randy Bluffstone & Thomas Sterner, 2009. "Corporate Environmental Management in Transition Economies: The Case of Central and Eastern Europe," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(5), pages 410-425, December.
    5. Lin, Liguo, 2013. "Enforcement of pollution levies in China," Journal of Public Economics, Elsevier, vol. 98(C), pages 32-43.
    6. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-737, September.
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    Cited by:

    1. Atonu Rabbani, "undated". "Can Leaders Promote Better Health Behavior? Learning from a Sanitation and Hygiene Communication Experiment in Rural Bangladesh," Working papers 118, The South Asian Network for Development and Environmental Economics.
    2. James J. Cordeiro & Ambra Galeazzo & Tara Shankar Shaw & Rajaram Veliyath & M. K. Nandakumar, 2018. "Ownership influences on corporate social responsibility in the Indian context," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 1107-1136, December.
    3. Yun Wang & Yanxi Li & Zhuang Ma & Jinbo Song, 2019. "The Deterrence Effect of a Penalty for Environmental Violation," Sustainability, MDPI, Open Access Journal, vol. 11(15), pages 1-19, August.
    4. Shivananda Shetty & Surender Kumar, 2017. "Are voluntary environment programs effective in improving the environmental performance: evidence from polluting Indian Industries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(4), pages 659-676, October.
    5. Sangeeta Bansal & Madhu Khanna & Sonakshi Jain, 2017. "The Corporate Social Responsibility Act in India: An Early Assessment," Working Papers id:11922, eSocialSciences.
    6. D. D’Amato & M. Wan & N. Li & M. Rekola & A. Toppinen, 2018. "Managerial Views of Corporate Impacts and Dependencies on Ecosystem Services: A Case of International and Domestic Forestry Companies in China," Journal of Business Ethics, Springer, vol. 150(4), pages 1011-1028, July.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth


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