راهبرد کسب و کار تحت محدودیت سازمانی Business Strategy Under Institutional Constraints: Evidence From China’s Energy Efficiency Regulations

1. Introduction Decision making by firms regarding energy efficiency investment is often viewed as an economic problem. Being a factor of production, energy can be substituted by other factors of production, such as fixed capital. Energy savings, which are often recurrent, can reduce production costs and preserve financial assets over the long term. Although empirical evidence confirms that the adoption of energy-saving technologies is responsive to energy pricing, a gap has long been recognized between the current energy efficiency level and economic or social optimal levels (Jaffe and Stavins, 1994). Such an “energy efficiency gap” has been explained systematically in terms of market failures and non-market behavioral barriers (Gillingham et al., 2009; Jaffe et al., 2004). These broad-scale explanations, however, do not fully address how related policy mechanisms and behaviors are perceived within a specific institutional context and how firms vary in response to regulation and other inputs. In contrast, the management literature discusses institutional constraints more explicitly as well as strategic decision-making and organizational behavior of firms. Causal mechanisms can be identified to help build theories and propose propositions of firm behaviors for further examination and policy recommendations. Building on the insight provided by the observation of the energy efficiency gap, then, this paper adds perspectives from the corporate environmental management literature, to define a model that helps to explain firms’ motivations and decisions for energy saving in the context of substantive regulations on energy efficiency in China. The model considers how multiple policy instruments are interpreted and implemented, and explains how institutional and industrial contexts shape firms’ behaviors, conditional on their capabilities. The model is developed based on interviews with industrial firms about their strategies during 2006–2015 and both within-case and between-case analyses. The geographical setting is China, not only because of its magnitude of energy consumption and significance to global climate mitigation, but also, more importantly, because it offers researchers an ideal setting to confirm or extend previous discussions about energy efficiency decisions. Four case studies are included in the Appendix A to illustrate the decision-making process of example firms doing business in China. The policies that went into force in 2006 in China featured mixed use of policy instruments beyond simple command-and-control or market approaches and immediate tightening of industrial energy consumption. The findings herein are contingent on contextual factors identified explicitly, which help to advance the knowledge of firms’ responsiveness in energy saving and inform policy makers on the effect of different policy instruments and their specific dynamics in China.