Climate Change Strategies in Institutional Perspectives: A Reflection on International Business and the Global Value Chain

The changing roles of the United Nations and national institutions have made addressing climate change a critical concern for survival and growth in global business. This paper discusses how such institutions, which vary in their nature and characteristics, shape firm strategies for climate change adaptation. Exploring different versions of institutional theory, the chapter demonstrates how and why institutional characteristics affect firm climate change strategies for ownership, governance, capabilities, and internationalization. Climate change issues pose challenges to firms in both international business (IB) (HQ-subsidiary relations) and the global value chains (GVC) (buyer-supplier relations), but they also provide opportunities to gain a competitive advantage, provided firms can reconfigure and adapt faster than their competitors. However, the IB and GVC literatures have downplayed the importance of climate change strategies and the ways in which coherent or dysfunctional institutions affect the reconfiguration and adaptation strategies of firms in a globally dispersed network of value creation. With this in mind, this paper presents a perspective of the institutional conditions affecting firms’ choices on climate change strategies regarding OLI (ownership, location, internalization), and the GVC, with ‘investment’ and ‘emerging forces/standards’ playing a significant role. This discussion is illustrated using several examples from the Global South (i.e., Bangladesh) and the Global North (i.e., Denmark, Sweden, Germany) with a special emphasis on the garment industry. The aim is to encourage future research to consider the institutional perspective in examining sustainability and climate change strategies in IB and GVC studies.