Technical Report Environmental regulation and international expansion of MNEs : The moderating role of pollution reduction resources and firm multinationality on location choice

MALEN, Joel  ,  YAMANOI, Junichi

2016-12 , Institute of Innovation Research, Hitotsubashi University
We examine how stronger environmental regulations influence MNE international expansion decisions by attending to two sources of firm heterogeneity that moderate this effect: possession of pollution reduction capabilities and firm multinationality. Empirical tests on 523 cases of international manufacturing expansion into 49 potential host countries by 124 Japanese chemical industry firms between 2001 and 2010 reveal that the market entry deterring effect of stronger environmental regulations is weaker for firms possessing unique capabilities for pollution reduction and for more multinational firms. Moreover, because more multinational firms have greater incentives and skills for modifying capabilities to create value in host-country environments, the positive moderating effect of PR-capabilities are strengthened yet further for high multinationality firms.

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