The influence of institutional factors on the environmental strategy of companies in the energy industry

Abstract

The energy industry is facing serious pressure to reduce carbon dioxide emissions. The purpose of this study was to investigate if there is a statistically significant correlation between certain institutional factors and type of environmental strategy employed by companies in the energy industry. The academic foundation upon which strategy was studied is Institutional Theory. Institutional theory is embedded in the school of sociology and prescribes that behaviour is a function of social norms and routines. At the organisational level, this translates to a high degree of interdependency between organisations and the environment which they operate in. The institutional factors selected for analysis in this study were economic growth, gross domestic product per capita, unemployment, poverty, income inequality, human development index, and national competitiveness. The environmental strategy of energy companies was categorised in two broad measures namely; carbon dioxide reduction and carbon independence. The study has found that there is no significant correlation between any of the institutional factors and combination of carbon reduction and independence strategies. However, an important finding is that the statistical significance of the bi-variate regression analysis increased considerably when national competitiveness was used as an explanatory variable of strategy.From this, it is concluded that it is critical to understand which institutional factors are expected to be determinants of strategy in the energy industry. More importantly, it is concluded that as energy is a primary requirement for national competitiveness, strategy in the energy industry is determined by a combination of factors and not just a single variable. This is an important distinction which must be clear in the mind of both policy makers and business leaders in the energy industry especially those who are seeking to expand into new markets. Copyright