1 “Corporate Environmental Strategies in Developing and Transition Economies”

In developed countries, businesses are adopting environmentally friendly management practices, possibly because they are proving profitable. However, the benefits of a corporate environmental strategy are less clear in developing and transition economies, where environmental regulations are poorly enforced and social pressures are weak. Given this lack of clarity, understanding the causes and consequences of corporate environmental strategy in these economies is important for business leaders, policymakers, and environmental activists. Drawing from both theoretical and empirical research, we explore a broad array of drivers behind corporate environmental strategies: internal characteristics, market pressures, government, and civil society. The empirical findings for developing economies suggest that ineffective regulatory agencies, limited law enforcement capacity, and underdeveloped green pressure groups provide weak incentives for environmental compliance, but foreign ownership and foreign customer pressure improve environmental management practices, and information disclosure schemes offer some promise for improved performance. The empirical findings for transition economies also suggest a positive role, albeit weaker, for foreign ownership and foreign customer pressure, but additionally reveal that government factors – greater enforcement, permit issuance, and higher emission charge rates – are more effective than in developing economies.