Impact of Firm-Based Environmental Standards on Subsidiaries and Their Suppliers: Evidence from Motorola-Penang

Authors


Department of Economics Bryn Mawr College 101 North Merion Ave. Bryn Mawr, PA 19010 USA, <mrock@brynmawr.edu>

Abstract

How successful are multinational corporations in extending their firm-based environmental standards to their subsidiaries and those subsidiaries' local suppliers in their global production networks in developing countries? We address this question through an in-depth case study of how Motorola, a prominent multinational electronics firm with an extensive global production network, is using a set of firm-based standards to meet several new stringent European Union environmental directives. The case study demonstrates that these firm-based standards appear to be enabling a major subsidiary and its suppliers in one developing economy to reduce the environmental intensities of their production activities. This finding suggests that the firm-based environmental standards of multinationals with extensive global production networks might contribute to a leveling up of environmental standards in subsidiaries and their local suppliers, rather than a “race to the bottom”, thus reinforcing the technique or intensity effects associated with open trade, investment, and technology policies.

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