Diplomacy and foreign policy

Environmental performance of foreign firms: Chinese and Japanese firms in Myanmar

Little is known about how the environmental approaches of foreign investors in developing countries are formed. The objective of this study is to conceptualize and investigate the drivers of the environmental performance of foreign firms. This is done through a comparative analysis of the environmental profiles of Chinese and Japanese firms in Myanmar. Applying institutional and resource-based theories, the study investigates the complex and multifaceted roles that domestic regulations and internal resources of firms play in their environmental performance. The study contributes to the literature on corporate environmental behaviour by constructing a novel set of environmental variables connected with FDI. The research is based on survey data covering 296 Chinese and 125 Japanese companies operating in Myanmar. The data are analysed using a hierarchical multiple linear regression. It is found that Japanese companies tend to adopt all-inclusive and comprehensive strategies driven by both regulatory pressure and firm capacity when addressing environmental issues, while the environmental choices of Chinese companies tend to be driven by intra-firm resources. For Chinese companies, neither ownership type nor operating in a polluting industrial sector necessarily influence the environmental profile, whereas both of these variables had significant effects on the environmental performance of Japanese firms. The findings indicate that both resource-based and institutional theories are useful when assessing the influence of environmental regulations on FDI in developing countries.