Does Corporate Investment Drive a "Race to the Bottom" in Environmental Protection? A Reexamination of the Effect of Environmental Regulation on Investment

Many fear that the mobility of corporate investment creates a "race to the bottom" in international environmental regulations as firms invest in the countries with the weakest environmental protections. But the relationship between environmental regulation and investment is poorly understo...

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Bibliographic Details
Published in:Academy of Management journal 2009-12, Vol.52 (6), p.1297-1318
Main Author: Madsen, Peter M.
Format: Article
Language:English
Subjects:
Automobile industry
Automobiles
Automotive industries
Business investment
Business structures
Crowding-out effect
Environmental economics
Environmental institutions
Environmental management
Environmental policy
Environmental protection
Environmental regulation
Environmental regulations
Foreign investment
Globalization
Industrial regulation
Investment policy
Investment strategies
Management research
Manufacturing industries
Public policy
Regression analysis
Regulation
Regulatory policy
Spceial Research Forum: Public Policy and Mangement Research Finding the Common Ground
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Summary:Many fear that the mobility of corporate investment creates a "race to the bottom" in international environmental regulations as firms invest in the countries with the weakest environmental protections. But the relationship between environmental regulation and investment is poorly understood. I hypothesize that intercountry institutional distance and firm environmental capabilities moderate the relationship between the stringency of a country's environmental regulations and firms' investment in that country. Analysis of investment in the international automobile industry supports these hypotheses. Study results suggest that attracting corporate investment and preserving local environmental quality need not be opposing policy objectives.
ISSN:0001-4273
1948-0989
DOI:10.5465/AMJ.2009.47085173