How does an MNE with a sustainable business model use institutional entrepreneurship to foster sustainability-oriented change in emerging markets, specifically in South Africa?

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How does an MNE with a sustainable business model use institutional entrepreneurship to foster sustainability-oriented change in emerging markets, specifically in South

Africa?

Abstract

There is a worldwide need for sustainable development in order to preserve the environment, economy, and society, especially in emerging markets (EMs) where sustainable practices are relatively new. It has been acknowledged that multinational enterprises (MNEs) play an important role in contributing to sustainable development. It has also been recognised that firms with sustainable business models (SBMs) can contribute to such a development, as they create value for the economy, environment and society. This research considers the combined power of MNEs and SBMs by investigating whether and how these actors use institutional entrepreneurship in order to foster sustainability-oriented change in South Africa. Hence, this research develops institutional entrepreneurship mechanisms based on the frameworks of Battilana et al. (2009) and Regnér and Edman (2014) by adding country-specific, actor-specific, and cause-specific factors. In a multiple case study, three MNEs with SBMs from developed countries were interviewed about their engagement in South Africa. The findings were compared in a cross-case analysis and revealed that not all MNEs use all identified institutional entrepreneurship mechanisms. Therefore, this research paper claims that the existing institutional entrepreneurship frameworks should be more specific and integrate who is fostering institutional change where and for what cause.

MSc Business Administration – International Management Student: Charlotte Löhr

Student-ID: 11386495

Supervisor: Dr. Francesca Ciulli Date of submission: June 23, 2017

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Statement of originality

This document is written by Student Charlotte Löhr who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Business is responsible solely for the supervision of completion of the work, not for the contents.

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Acknowledgements

I would first like to thank my thesis supervisor Dr. Francesca Ciulli of the Business School at Universiteit van Amsterdam. The door to Dr. Ciulli’s office was always open whenever I ran into a trouble spot or had a question about my research or writing. She consistently allowed this paper to be my own work, but steered me in the right the direction whenever he thought I needed it.

I would also like to thank the respondents who were involved in the validation survey for this research project: Chesney Bradshaw, Lizelle Schindler, Asanda Fogqo. Without their

passionate participation and input, the validation survey could not have been successfully conducted.

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Index of tables

Table 1: Institutional entrepreneurship mechanisms ... 26

Table 2: Interview partners ... 37

Table 3: Type of written material analysed ... 41

Table 4: Codes adapted for data analysis ... 42

Table 5: ABB Group relevant quotes adapted for data analysis ... 48

Table 6: Daimler AG relevant quotes adapted for data analysis ... 51

Table 7: Siemens AG relevant quotes adapted for data analysis ... 55

Table 8: Cross case analysis ... 56

Table 9: Accepted or rejected propositions ... 63

Index of figures

Figure 1: Theoretical Framework ... 33

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1. Introduction

According to the World Economic and Social Survey, released in 2013, there is a worldwide need for environmentally, economically, and societally sustainable development, which is even more crucial in emerging markets (EMs). Due to rapid urbanisation, malnutrition and hunger, income inequality, and the negative impacts of climate change in EMs (Jayanti & Gowda, 2014), it is crucial to foster sustainable development to preserve the environment, economy, and society. Sustainable development is defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987, p. 41). Scholars have argued that firms have a core responsibility towards sustainable development; they have thus developed the concept of ‘corporate sustainability’, which encompasses the need for companies to attain a threefold objective, the so-called triple bottom line, in order to contribute to a sustainable development. The triple bottom line includes economic sustainability (i.e. the ability of firms to increase their short-term performance without compromising their future growth), social sustainability (i.e. the social obligation of the firm to the communities), and environmental sustainability (i.e. decreases in the firm’s impact on natural resources, pollution, waste, and emission, among others) (Jayanti & Gowda, 2014).

Like EMs in general, South Africa needs to become more sustainable in all three bottom lines of sustainability. Despite major improvements since the end of the apartheid regime, South Africa’s social sustainability is still characterised by racial discrimination, poor education, poverty and corruption. An unqualified workforce, a lacking infrastructure and insufficient rules and laws guiding corporations characterise the country’s degree of economic sustainability. Environmental sustainability remains insufficient in energy and water usage and efficiency, and stronger legal frameworks and awareness of the need for sustainability are needed (Casson et al., 2010). Social, economic, and environmental

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sustainability are “interconnected, with the economy dependent on society and the environment while human existence and society are dependent on, and within the environment” (Giddings et al., 2002, p. 187).

There is interplay between the sustainable development of a country and its institutional environment as the sustainable development of a country depends on the presence of sustainable policies in the country and whether there are sustainable customs and behaviour. Institutions shape how actors such as a country’s governmental and non-governmental organisations (NGOs) and society behave, since they create order and reduce uncertainty (North, 1991). Thus, in relation to sustainability, institutions determine how sustainable a single person or society behaves. More specifically, formal and informal institutions have to be taken into account, since the first comprise the rules and laws that all actors have to follow, and the second constitute norms and beliefs that guide people’s and organisations’ behaviour (North, 1991).

It is widely acknowledged that the institutional environment also influences multinational enterprises (MNEs) entering a foreign country (Child & Tsai, 2005), and both formal and informal institutions have an impact on the way MNEs do business in a particular country (North, 1991). In order to become viable in the host country, MNEs have to adapt to the institutional environment (Scherer et al., 2013). However, as some scholars have stressed, MNEs not only adapt to the institutional environment, but also coevolve with it. Thus, at the same time MNEs adapt to and influence the institutions of the host country in which they operate (Cantwell et al., 2010).

Along the extensive focus on adaptation to and coevolution with the institutional environment of the host country, more attention has recently been paid to MNE-driven institutional change (Kostova, 2008). Institutional change is the process of transforming existing or creating new institutions (DiMaggio, 1988 in Battilana et al., 2009). It is the

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change of an institutional environment’s laws, rules, norms and values (Holm, 1995). Actors (such as MNEs) can play an important role in driving institutional change (Battilana et al., 2009) by engaging in ‘institutional entrepreneurship’ (Maguire et al., 2004). Institutional entrepreneurs are defined as ”actors with sufficient resources to change existing institutional arrangements in their own interest” (Dieleman & Sachs, 2008, p. 1277). Institutional entrepreneurs can introduce institutional changes and actively participate in implementing these changes by using institutional entrepreneurship mechanisms (Battilana et al., 2009). Despite the growing institutional entrepreneurship literature, little attention has been given to how institutional entrepreneurship can be used to foster sustainability-oriented change in EMs, specifically by MNEs.

MNEs are key actors for institutional change, since they have the power and experience to deal with different institutions worldwide (Cantwell et al., 2010). Developed-market MNEs are especially powerful in fostering change in less developed Developed-markets since they have a stable and advanced system of corporate governance and business practices based on rule of law, which are supported by an effective judicial system (McCarthy & Puffer, 2016). This research paper will investigate whether and how such developed-market MNEs are fostering institutional change in EMs. Thus, this paper will refer to developed-market MNEs throughout unless mentioned otherwise. According to Kostova (2008), internationalisation strengthens the power of firms and since MNEs operate in many countries they are typically experienced with internationalisation. While scholars have investigated how market-based organisations can drive positive social change (Stephan et al., 2016) and how niche market players and mass-market players tend to engage in transforming the market and the society in which they operate towards sustainability (Schaltegger et al., 2016b), only Regnér and Edman (2014) have focused on the role that an MNE’s subsidiary plays in institutional change. Yet, Regnér and Edman (2014) do not address

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sustainability-oriented institutional change and the role played by MNEs with a sustainable business model (SBM) in driving it.

An SBM “helps describing, analysing, managing, and communicating a company’s sustainable value propositions to its customer and all other stakeholders” (Schaltegger et al., 2016a, p. 268). SBMs are designed to create organisational value and avoid destruction for future generations (Schaltegger et al., 2016a). Conforming to Schaltegger et al. (2016a), the difference between conventional business models and SBMs is that SBMs focus on “organizational value creation [and] “organizational, market and societal transformations” (p. 268). Thus, an SBM does not focus solely on profit maximisation, but also considers “the consequences for the wider social and ecological contexts” (p. 5). As noted by Bocken et al. (2014), business models are the underlying basis for sustainable development because they help companies reduce energy, intensity, emissions, and waste, and integrate sustainable innovations in their core business. Thus, it can be said that SBMs create value for the society and environment now and in the future, as opposed to traditional business models (Roome & Louche, 2016), and that they can foster a positive sustainability-oriented change (Schaltegger et al., 2016a; Stephan et al., 2016).

Existing literature has focused on the role of institutions (Cantwell et al., 2010; North, 1991; DiMaggio & Powell, 1983; Holm, 1995) and the specifics of the institutional environment in EMs by identifying a lack of environmental regulations to make organisations and people more sensitive to sustainability (Jayanti & Gowda, 2014). Yet, little attention has been given to how institutional entrepreneurs can foster sustainability-oriented institutional change in EMs. Also, the features of SBMs have been widely acknowledged (Bocken et al., 2014; Schaltegger et al., 2016a; Schaltegger et al., 2016b; Roome & Louche, 2016). Nevertheless, the impact an MNE with an SBM can have in changing institutions through institutional entrepreneurship has not been examined. Moreover, the existing literature

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explains institutional entrepreneurship, and several institutional entrepreneurship mechanisms have been identified by, among others, Battilana et al. (2009) and Regnér and Edman (2014). Yet, these mechanisms have not been analysed in the specific context of EMs. Also, limited attention has been given to the role MNEs with an SBM can play in fostering institutional change, even though scholars argued that the subsidiaries of MNEs can play a major role in establishing institutions, because they possess the necessary resources (Kwok & Tadesse, 2006) and they are able to transfer them through their multinationality (Regnér & Edman, 2014).

MNEs are powerful as they are different from local actors and contribute to local variety (Cantwell et al., 2010). Thus, they address sustainable issues and introduce sustainable practises in developing markets as well as EMs (Pinkse & Kolk, 2012). Accordingly, in EMs, more focus should be given to MNEs with SBMs, because they possess the necessary sustainability knowledge in their core business. Therefore, this study aims to answer the following research question:

How does an MNE with a sustainable business model use institutional

entrepreneurship to foster sustainability-oriented change in emerging markets, specifically in South Africa?

In order to answer this question, this research will explore institutional entrepreneurship mechanisms through which MNEs with an SBM foster institutional change, and thereby a sustainability-oriented transformation, in South Africa. It analyses whether and how MNEs with an SBM are using the institutional entrepreneurship mechanisms identified in extant literature (cf. Battilana et al., 2009; Regnér and Edman, 2014) in order to seek to drive sustainability-oriented institutional change in South Africa. Moreover, this research aims to discover additional mechanisms through which MNEs with SBMs may foster such institutional change.

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A multiple case study was chosen to explore the phenomenon: Three developed-market MNEs with an SBM and operating in South Africa have been selected, namely Asea Brown Boveri (ABB), Siemens AG, and Daimler AG. Data was collected through primary data: The MNEs were interviewed about their impact on institutional change towards sustainability and the institutional entrepreneurship mechanisms they use to seek the change. In addition to the findings in the interviews, secondary sources such as newspaper articles, company reports, and company press releases were used to supplement investigation of whether the MNEs used institutional entrepreneurship mechanisms and how they were used. Thereby, this research paper focuses on whether the MNEs used the mechanisms to foster environmental sustainability, as it is the closest related to the MNEs’ core businesses.

By answering the research question, this research paper contributes to existing literature on institutional entrepreneurship, on SBMs, and on MNEs in EMs. Thereby, it adds to institutional entrepreneurship literature by further developing the existing frameworks of Battilana et al. (2009) and Regnér and Edman (2014) by including actor-specific, country-specific, and cause-specific factors, namely developed-market MNEs with SBMs, South Africa, and sustainability-oriented institutional change. Second, it adds to literature on SBMs by proving that SBMs can strengthen the institutional entrepreneurship mechanisms used by MNEs. The research adds to literature on MNEs in EMs by showing their power in fostering institutional change. Also, managers of developed-market MNEs can learn from the results of this study as they can see the impact one single MNE can have in changing an EM towards environmental sustainable development.

The paper is organised as follows: Chapter 2 discusses the key concepts of the study through a literature review, with Section 2.6 developing this study’s concepts in a theoretical framework. The methods of the study are detailed in Chapter 3. Chapter 4 presents the results followed by a discussion in Chapter 5. Chapter 6 outlines the academic and managerial

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implications, followed by limitations and future research in Chapter 7. Lastly, in Chapter 8, conclusions are drawn.

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2. Literature Review

In this chapter, the existing literature and core concepts of this study are analysed: SBMs, EM’s and South Africa’s institutional environment, institutional change and institutional entrepreneurship. For each section the important literature will be discussed and the literature gap will be analysed. A theoretical framework with propositions will follow.

2.1. Sustainable business models and multinational enterprises

The need for sustainable development worldwide and especially in EMs calls for the integration of sustainable practices (Roome & Louche, 2016, p. 12), into MNEs’ business operations. This section introduces the concept of business models and SBMs by first considering a general firm perspective, followed by an MNE-specific perspective.

Firms with an SBM are key drivers in fostering sustainable development (Bocken et al., 2014; Abdelkafi & Täuscher, 2016). The literature has argued that firms committed to sustainability can seek to transform the field (market and industry) towards sustainability (Stephan et al., 2016; Schaltegger et al., 2016a), but scholars have given limited attention to how they do that.

The concept of SBMs is based on the notion of general business models. Wirth et al. (2016) review several definitions of business models, formulating thefollowing definition: “A business model is a simplified and aggregated representation of the relevant activities of a company. It describes how marketable information, products and/or services are generated by means of a company's value-added component” (p. 41). The three main aspects of a business model are the value proposition, value creation, and value capture (Schaltegger et al., 2016a). According to Schaltegger et al. (2016a), a value proposition stands for the supply of valuable products to a corporation’s customers, value creation entails the infrastructure and customer interface, and value capture ensures the profitability for the company, thus referring to the

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financial model. While a conventional business model focuses on providing value to its shareholders and customers, an SBM takes all stakeholders into account: customers, investors, governmental and non-governmental bodies, society and the environment (Schaltegger et al., 2016a).

Recently, scholars have focused more and more on SBMs (e.g. Schaltegger et al., 2016a; Schaltegger et al., 2016b; Bocken et al., 2014; Abdelkafi & Täuscher 2016; Boons & Lüdeke-Freund 2013; Lüdeke-Freund 2010; Roome & Louche, 2016; Birkin et al., 2009), which were first introduced in 2008 by Stubbs and Cocklin (2008). A firm with an SBM sustains natural, social, and economic value beyond its organisational boundaries (Schaltegger et al., 2016a). Schaltegger et al. (2016b) reviewed the existing literature on SBMs and formulated a definition:

“A business model for sustainability helps [in] describing, analysing, managing, and communicating (i) a company’s sustainable value proposition to its customers, and all other stakeholders, (ii) how it creates and delivers this value, (iii) and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries.” (p. 6)

Firms thus integrate an SBM to create value for their customers, the environment, and the society (Abdelkafi & Täuscher, 2016); sustainability is integrated into the organisation and its business model (Marrewijk, 2003). Firms with an SBM can stimulate positive social change (Stephan et al., 2016) and engage in transforming the market and the society in which they operate to be more sustainable (Schaltegger et al., 2016a). An SBM considers the treatment of the nature and the society in accordance with the company’s organisational goals (Schaltegger et al., 2016b). By not solely focusing on the company but creating value for stakeholders and the environment (Abdelkafi & Täuscher, 2016), SBMs make the sustainable impact of a company tangible and visible. Thereby, firms with SBMs can encourage efficiency and develop scale-up solutions (Bocken et al., 2014).

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While many scholars have looked at SBMs from a general firm perspective, no attention has been given to the greater impact that MNEs with an SBM can have in particular. According to Dahan et al. (2010), MNEs have “advantages of financial and organizational size, managerial and marketing expertise and operational scale and scope” (p. 335). MNEs are able to provide countries with knowledge and technology and motivate local actors to improve their business (Spencer, 2008). An MNE is considered a network of “cross-border value creating activities” (p. 569), which involves sourcing of foreign knowledge and skills (Cantwell et al., 2010). Thus, an MNE is able to transfer important knowledge from its subsidiaries in one country to another. Moreover, MNEs are more and more interconnected with other market and non-market players, which allows them to engage in experimental connections to generate novelty (Cantwell et al., 2010). Also, MNEs might be valued in the host country for being different, as they increase the local variety of products and services (Cantwell et al., 2010). Despite this valuable ability to transfer knowledge between countries, MNEs’ engagement in partnerships, and their crucial role in a country’s development, little attention has been given to the particular impact MNEs with an SBM can have on the institutional environment of a host country.

2.2. Institutions and multinational enterprises

In order to explore the impact of MNEs with SBMs in EMs through institutional entrepreneurship mechanisms, institutions have to be defined, since the change of institutions is necessary to succeed in fostering a sustainability-oriented development. All corporations conduct business in a specific institutional environment, which leads to a coevolution of the corporation and the institutional environment of a country. Coevolution refers to the fact that all actors in one country influence each other (Dieleman & Sachs, 2008). While corporations that operate in one country only coevolve within a single institutional environment, MNEs

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have to deal with many different institutional environments worldwide, since they operate in several different countries. Thus, it is important to understand the characteristics of the institutional environment and how the institutional environment influences both firms in general and MNEs in particular.

“Institutions are the humanly devised constraints that structure political, economic and social interaction,” writes North (1991, p. 97). They effect the thoughts, feelings, and behaviours of individual and collective actors (Lawrence & Suddaby, 2006). Holm (1995) claims that institutions are a mean to resolve contradictions between individual and collective interests. Thus, interests of individuals within a country align through its institutions and common rules, laws and norms are created (Holm, 1995).

Furthermore, scholars have distinguished between formal and informal institutions. Formal institutions comprise laws, constitutions, and regulations. Informal institutions comprise codes of good conduct, and the norms and values of a society (North, 1992, cited by Cantwell et al., 2010). Both types of institutions impact corporations, as they act as guidelines that corporations have to follow in order to be legitimised in a certain country (North, 1991). Thus, a firm does not solely have to correspond to a country’s policy, but also adapt to the people’s behaviour in a country, which is based on their norms and values (Cantwell et al., 2010; Child & Tsai, 2005). Therefore, corporations in a country have to conform to both its formal and its informal institutional environment.

Like corporations, MNEs try to fulfil role expectations from the local actors in the host country in order to be legitimised (Regnér & Edman, 2014). Thereby, they conform to formal and informal institutions. North (1991) affirms that combined, “institutions provide the incentive structure of an economy [and] shape the direction of economic change towards growth, stagnation, or decline” (p. 97). Formal and informal institutions play a big role when MNEs are entering a new market, because they have to conform to them. According to

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DiMaggio and Powell (1983), “organizations compete not just for resources and customers, but for political power and institutional legitimacy” (p. 150). In order to achieve this goal, MNEs need to be aware of non-market forces and consider their institutional embeddedness in the host country (Pinkse & Kolk, 2012). Pinske and Kolk (2012) argue that only in this way can MNEs “overcome the liabilities of being an outsider” (p. 337) and not be constrained by the host country.

In this chapter, formal and informal institutions have been identified and their impact on MNEs has been considered. The important role of the institutional environment and the deep anchoring in a country show how difficult it is to change institutions. Since this study analyses whether and how MNEs are able to foster institutional change in EMs, it must still identify EMs’ institutional environments and the link to sustainable development.

2.3. Emerging market institutions and sustainable development

Since this research paper investigates the impact of MNEs with an SBM in EMs, the institutional environment of EMs and the direct link to sustainable development has to be analysed. There is no overall definition for EMs, because they vary drastically (Peng, 2003), yet they share some characteristics, which are outlined in this chapter.

What MNEs face in EMs are called ‘institutional voids’ (McCarthy & Puffer, 2016). In contrast to developed markets, corporate governance systems and business practices are not entirely based on rule of law and supported by a judicial system (McCarthy & Puffer, 2016). Instead, there is an institutional instability in EMs, which includes political instability (McCarthy & Puffer, 2016). According to McCarthy and Puffer (2016), institutional voids lead to less stimulation of innovation and sustainable restructuring. The institutional environment of EMs is different than the environments of developed markets, as technological and economic backwardness is constitutive of EMs (Ramamurti, 2012).

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Conforming to Ramamurti (2012), this term, ‘backwardness’, refers to a large inward foreign direct investment and the inability to form efficient MNEs themselves. Therefore, firms and MNEs having EMs as home countries are characterised by poor governance, lack of global experience and professional expertise, a low accountability, little managerial competence, and weak technological and innovation capabilities (Luo & Tung, 2007). This institutional weakness is important to consider, since it holds back MNEs and firms from EMs to innovate and foster sustainable development themselves.

According to Child and Tsai (2005) and Peng (2003), the institutional environment in EMs is weak and is derived from a lack of enforcement and qualified personnel. This weakness can lead to an abuse and exploitation of trust (Peng, 2003) and a “culture of corruption” (Child & Tsai, 2005, p. 101). While the formal institutional environment of EMs is characterised as weak, the informal institutions are very important in guiding the way business is carried out (Lieberherr & Truffer, 2015). In accordance with Lieberherr and Truffer (2015), if “rule-based markets do not function well due to institutional weaknesses, informal, relationship-based activities will fill the void” (p. 210). Yet, due to a country’s actor’s unawareness of the need for sustainable development, the institutional environment does not provide a sufficient base to fill the void (Jayanti & Gowda, 2014). In EMs, people behave less sustainably, because sustainable behaviour and practices are not integrated into their daily behaviour, thoughts and values (Child & Tsai, 2005).

EMs do experience high levels of growth, however, which leads to a rapid mass urbanisation, leading in turn to threats, malnutrition and hunger, to income inequality, and to negative impacts of climate change (Jayanti & Gowda, 2014). Child and Tsai (2005) claim that the environmental protection and rules in EMs are improving, yet there is a high level of unawareness of the need for a sustainable transformation (Jayanti & Gowda, 2014). Due to the weak informal institutional environment in EMs, NGOs play a big role in these contexts,

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as they provide informal institutions, such as norms and values (Peng, 2003), which are non-binding, yet essential to guide all actors in terms of social, economic and environmental sustainability; they have such importance because they influence “business and politics towards acting more responsibly and operating in a more sustainable way” (Marrewijk, 2003, p. 98). Marrewijk (2003) argues that NGOs expect from firms and local and foreign MNEs to participate in responsible business practices and request transparency and responsibility.

A country’s sustainable development is linked to its institutions (Casson et al., 2010). Thus, the lack of sustainable development in EMs is linked to the formal and informal institutional environment (Pinkse & Kolk, 2012). For example, Pinkse and Kolk (2012) argue that in the case of climate change, both formal and informal institutions perform insufficiently. They argue that while laws and regulations are insufficient in addressing the issue of climate change adequately, people are not yet seeing the urgency of it, and thus there are no efficient informal constraints, such as codes of good conduct, to address climate change sufficiently. This lack of rules and laws and awareness of climate change leads to an inefficient usage of energy and material (Azahaf & Schraad-Tischler, 2012). This inefficiency then leads to high emissions because there are no binding reduction targets for local firms and society (Azahaf & Schraad-Tischler, 2012).

In conclusion, EMs feature weak institutions and the lack of sustainable regulations by the government. This research paper focuses on South Africa, thus the specific institutional environment of South Africa and the degree of integration of sustainable development have to be discussed.

2.4. Institutional environment and sustainable development in South Africa

As described before, the institutional environment is linked to the sustainable development of a country (Casson et al., 2010). Thus, South Africa’s institutional

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environment impacts the social, environmental, and economic sustainability of the country. Despite the fact that South Africa needs sustainable development in all aspects of sustainability, this research focuses on environmental sustainability and South Africa’s environmental institutions will be analysed.

South Africa is characterised by poor regulatory, judiciaries and political systems, which lead to poor interpretation and implementation of the environmental law (Murombo, 2016). Moreover, South Africa’s laws and rules concerning environmental sustainability are insufficient and often violated due to corruption (Azahaf & Schraad-Tischler, 2014). In order to stop corruption, governance and the accountability of officials have to be improved.

The environmental sustainable development shows room for a strong institutional framework to provide clean water, housing, sanitation and basic energy services (Winkler, 2007). In South Africa, energy use is high, and energy is relatively cheap and therefore used inefficiently. Most of its energy (70%) comes from coal, which makes South Africa one of the “highest emitters of greenhouse gases” (Winkler, 2007, p. 27). Yet, renewable energy use has increased since 2003, when the government implemented an energy plan. Nevertheless, argues Winkler (2007), renewable energy needs “forceful and determined, even aggressive, implementation” (p. 31) through policies. The research by Murombo (2014) focuses on the legal system with regard to renewable and sustainable energy sources. He claims that the African legal policies on renewable energy remain uncertain, inconsistent and fragmented. Winkler (2007) focuses on ways to make South Africa’s future energy development more sustainable, asserting that the entire South African economy can benefit from a better tax system on coal and other unsustainable resources.

In South Africa, rules and laws and a general awareness of environmentally sustainable development are especially needed, since the country and the entire continent face water scarcity (Winkler, 2007). This water scarcity leads to challenges of clean water and

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sanitation. Thus, despite some improvement in the recent years, there is room for much more (Winkler, 2007).

The lacking education on technical knowledge in South Africa is another area that has to improve (Azahaf & Schraad-Tischler, 2012). Despite large spending on education—“the largest line item in the government’s budget” (p. 24)—improvement in education and vocational training is necessary to raise awareness on environmental issues and teach South Africa’s youth necessary skills to innovate and develop renewable energy tools and adopt sustainable practices. Education leads to innovation, which accelerates the growth and development of MNEs and firms, industries, societies, and the environment (Chesbrough, 2010). Diduck (1999) suggests that environmental education may be the solution to foster sustainable development, because scholars learn to critically think and solve environmental problems. Education on environmental issues improves public involvement in sustainable practices and “empower[s] local communities to take greater control of resource use decisions affecting their lives” (Diduck, 1999, p. 85). Not only education at a young age, but also training for all age groups is important since South Africa lacks qualified workers and has to invest heavily in education and training (Azahaf and Schraad-Tischler, 2014).

There is room for improvement of the formal and informal institutional environment with regard to environmental sustainable development in South Africa. In this research paper, the contribution of MNEs with SBMs to the sustainability-oriented institutional change will be investigated. Therefore, institutional change and entrepreneurship have to be analysed.

2.5. The role of MNEs in institutional change and institutional entrepreneurship

In order to analyse whether and how MNEs with SBMs are engaged in changing the institutional environment of EMs by using institutional entrepreneurship mechanisms, institutional change and institutional entrepreneurship in MNEs have to be defined.

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In Section 2.2., the impact of institutions on firms, and more specifically on MNEs, was explained. MNEs need to adapt to the specific institutional environment of a host country in order to achieve legitimacy. The fact that corporations have to adapt to the institutional environment raises the question of how actors can change institutions, even though norms and beliefs are institutionally determined and difficult to change (North, 1991).

This change is called institutional change, defined as “changes to and restructuring of the major collectivities and of institutional frameworks” (Eisenstadt, 1980, p. 842). Such institutional change involves changes in the political, social, and economic sphere and leads to a break with the past (Eisenstadt, 1980). Institutional change “can lead to increased entrepreneurial opportunity and ultimately changes in industry structure” (Sine & David, 2003, p. 185).

In recent years, the relationship between entrepreneurship and institutional change has received growing attention, even though institutions are known to be resistant to change (Sine & David, 2003). Existing studies of institutional change have focused on actors from inside the country fostering institutional change, yet little is known about actors from outside a country (Maguire & Hardy, 2009). This gap in the literature persists even though MNEs have been able to influence the institutional environment, and it has been said that even a “single corporation” can create this change (Dieleman & Sachs, 2008, p. 1276).

Cantwell et al. (2010) point out that institutional change occurs only if formal and informal institutions change, because informal institutions are those “underpinning the formal institutional system” (p. 572). Thus, in the event of an institutional change, both formal and informal institutions are transformed, because they are strictly connected. In fact, formal and informal institutions can be seen as complementary and as influencing each other (North, 1991).

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As mentioned before, in EM environments, institutional voids occur and are primarily a barrier for a foreign MNE when entering the EM. Yet, these institutional voids also offer opportunities for change agents (Lieberherr & Truffer, 2015). It has been said, furthermore, that immature institutions are easier to change and influence (Dieleman & Sachs, 2008; Oliver, 1992).

While Dieleman and Sachs (2008) have investigated whether EM firms themselves can change the institutional environments of their home markets, this research investigates whether and how such an inquiry accounts for foreign MNEs.

Changing institutions is a challenge that involves different forces and agents (Battilana et al., 2009; Seo & Creed, 2002; Regnér & Edman, 2014). Among these, institutional entrepreneurs are “actors who initiate changes that contribute to transforming existing, or creating new, institutions” (Battilana et al., 2009, p. 66). Paul DiMaggio first introduced the concept of institutional entrepreneurship in 1988.

Despite that extensive literature has addressed institutional entrepreneurship, little focus has been given to this role as played by MNEs (Regnér & Edman, 2014) and whether they have a positive impact on the host country. Moreover, scholars have focused more on the need of MNEs to adapt to the institutional environment to achieve legitimacy instead of changing the institutional environment (Cantwell et al., 2010). The need for adaptation is also important for institutional entrepreneurship. Foreign MNEs have to be deeply embedded in the host country’s environment—that is, to be legitimised and to follow the rules, laws, values, and norms—to implement change (Regnér & Edman, 2014; Seo & Creed, 2002).

Institutional entrepreneurship can be beneficial not only for the host country’s institutional change, but also for the MNE itself, since it eliminates disadvantage vis-à-vis the host country’s actors and sets standards that meet its interest (Regnér & Edman, 2014). It is favourable for entrepreneurs to change the institutional environment in their interest, because

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it enhances their legitimacy and market power (Oliver, 1992). According to Cantwell et al. (2010), MNEs “are at the forefront of contributing to the emergence of new institutions” (p. 569). They recognise that MNEs play a big role in generating the ‘rules of the game’ in host countries by also reducing uncertainty for their operations.

In order to foster institutional change, the existing institutional entrepreneurship mechanisms have to be analysed and compared. Several scholars have developed taxonomies and typologies of institutional entrepreneurship mechanisms. This research is focuses on the mechanisms identified by Battilana et al. (2009) and Regnér and Edman (2014). These categorisations were chosen because of their different focus areas. While Battilana et al. (2009) identify institutional entrepreneurship mechanisms that can be used by any type of entity in any country to foster any type of institutional change, Regnér and Edman (2014) focus on institutional entrepreneurship mechanisms of MNEs, however, they do not focus on a specific type of country or change for a specific cause. Thus, the above studies are complementary and important to consider in this research paper, as the aim is to investigate whether institutional entrepreneurship mechanisms are used in a country-specific, actor-specific and cause-actor-specific situation.

Battilana et al. (2009) highlight the challenges institutional entrepreneurs face when implementing changes. They define four institutional entrepreneurship mechanisms. Depending on the actor’s position, the impact institutional entrepreneurs can have by utilising institutional entrepreneurship mechanisms vary.

The first mechanism is ‘creating a vision for divergent change’, refers to “developing a vision and mobilizing people behind that vision, and motivating them to achieve and sustain it” (Battilana et al., 2009, p. 78). Its goal is to make the society aware of local issues, by identifying with the local environment, which includes the interests of others, secure cooperation with others, and appropriate behaviour.

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The second mechanism is ‘mobilizing allies’; it “includes activities undertaken to gain others’ support for and acceptance of new routines” (Battilana et al., 2009, p. 78). The specific actors who comprise potential allies have to be identified in each company’s case.

The third mechanism is the use of ‘discourse’, for which an MNE needs good communication skills and close cooperation with local market players to stimulate their acceptance and willingness to adopt new practices. The aim of discourse is to effect “the processes of social constructions that underlie institutions” (Battilana et al., 2009, p. 94). Thus, it is essential to link the need for change to the local institutional setting and support the local actors in going through the change.

The fourth and last mechanism is ‘resource mobilization’, which refers to the different types of resources that can be mobilised, such as financial resources, status, formal authority, and social capital.

Regnér and Edman (2014) take an international perspective to the study of institutional entrepreneurship among MNEs. By investigating how MNE subsidiaries shape, shift and evade the institutions of the host country, they considered at why and how MNEs change a host country’s institutions. They claim that MNEs use the institutional entrepreneurship mechanisms of reflexivity, role expectations and resources.

‘Reflexivity’ refers to the ability of MNEs to recognise differences in the host country’s institutional environment vis-à-vis their home environment. Thus, opportunities can be identified, and MNEs can see beyond current norms and regulations.

‘Role expectations’ refer to the host country’s beliefs and assumptions about the MNE: for example, assumptions and beliefs about what the MNE could legitimately do.

‘Resources’ refer to the transfer of resources from other international organisational fields to the host country. These resources include experience, knowledge, social skills and capital. This transfer of institutional experience and knowledge from the different locations of

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the MNE supports institution building and is important for the strategic responses of innovation and arbitrage.

Use of institutional entrepreneurship mechanisms is enabled through the multinationality and foreignness of MNEs. Multinationality and foreignness reflect the MNEs’ social position, which is boundary-spanning and allows the transfer of resources from MNEs’ operations in other operational fields. MNEs have experience from other institutional locations, and their international status allows them to introduce foreign institutions into the host country, influence actors, and transfer institutional knowledge and experience.

Table 1 displays the described institutional entrepreneurship mechanisms by Battilana et al. (2009) and Regnér and Edman (2014).

Battilana et al., 2009 Regnér & Edman, 2014 Creating a vision for divergent change Reflexivity for MNE

Mobilizing allies Role-expectations

Resources mobilization Resources

Use of discourse

Table 1: Institutional entrepreneurship mechanisms

Besides the similarities between the concept of ‘resource mobilization’, from Battilana et al. (2009), and that of ‘resources’, from Regnér and Edman (2014), the identified mechanisms are complementary as Regnér and Edman (2014) add a multinational perspective to institutional entrepreneurship. This study applies these concepts by investigating whether and how these mechanisms are used in South Africa by developed-market MNEs with an SBM in order to foster sustainability-oriented change.

2.6. Theoretical framework

The theoretical framework is shown in Figure 1. This research combines literature on SBMs, literature on MNEs in EMs, and institutional entrepreneurship literature.

While SBMs present an emerging area of research, scholars have focused mainly on the benefits for the company and the environment (Chesbrough, 2010). Yet, it has not been

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further examined whether SBMs enable MNEs to foster sustainability-oriented change, even though firms with an SBM tend to engage in moving the market and the society in which they operate towards sustainability (Schaltegger et al., 2016a). There is extensive literature on MNEs, which mainly focuses on the challenges they face when entering a country (Cantwell et al., 2010), and especially an EM (Child & Tsai, 2005). Yet, the positive impact of MNEs has not been researched in much depth, despite the awareness that MNEs are key actors in institutional change, since they have the power and experience to deal with different institutions worldwide (Cantwell et al., 2010). On the other hand, the literature on EMs, and more specifically South Africa, has been growing in conjunction with the EM’s important role in the worldwide economy.

Few scholars have investigated how actors can change institutions. In this vein, Regnér and Edman (2014) have researched whether and how MNEs use institutional entrepreneurship, depending on the MNE’s strategy, yet they do not consider whether and how MNEs with an SBM use them for a specific cause.

With the identified institutional entrepreneurship mechanisms from the existing literature, this study investigates whether and how these mechanisms are used by MNEs with SBMs in EMs. Moreover, their use in an EM environment, more specifically South Africa, has not yet been tested, despite that scholars are aware of the need for more sustainable development in EMs, including South Africa.

Focusing on South Africa, this research paper aims to fill this gap by answering the following question:

How does an MNE with a sustainable business model use institutional entrepreneurship to foster sustainability-oriented change in emerging markets, specifically in South Africa?

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In order to answer the research question, six propositions were formulated based on the institutional entrepreneurship mechanisms identified in the literature review. These mechanisms are customised for the country-specific, actor-specific, and cause-specific focus of this research, namely its focus on South Africa, MNEs with SBMs, and environmental sustainability.

‘Creating a vision for divergent change’ (Battilana et al., 2009) and ‘reflexivity’ (Regnér & Edman, 2014) are relevant mechanisms as MNEs need to recognise differences in the host country’s institutional environment vis-à-vis their home environment to mobilise people and motivate them to become more sustainable. More specifically, MNEs need to recognise the lack of environmental awareness and find the cause in the education system in South Africa, which lacks adequate training on environmental and scientific knowledge (Azahaf & Schraad-Tischler, 2012). Education and training lead to innovation (Chesbrough, 2010) and critical thinking, which are necessary to solve environmental problems and empower locals to take greater control of resource use (Diduck, 1999). Thus, a better education system teaches individuals about sustainability issues and about the skills necessary to innovate sustainable practices that reduce environmental impacts. Education and training also increase awareness of the urgency of a sustainable environmental transformation (Pinkse & Kolk, 2012; Jayanti & Gowda, 2014) and implementing sustainable behaviour and practices in people’s daily actions, thoughts, and values (Child & Tsai, 2005). Thus, MNEs have the necessary resources to support the education system (Regnér & Edman, 2014; Dahan et al., 2010). Particularly MNEs with an SBM, who consider the treatment of the nature and the society in accordance with the company’s organisational goals (Schaltegger et al., 2016b), are expected to have an interest in improving the South African education system in order to create awareness of environmental problems. This reasoning supports Proposition 1:

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Proposition 1: Multinational enterprises with an SBM are fostering a sustainability-oriented change in EMs by creating awareness through education and training. Another mechanism introduced by the literature is ‘discourse’ from Battilana et al. (2009). It is expected that MNEs address the non-existence of binding reduction targets for local firms and society (Azahaf & Schraad-Tischler, 2012) and thereby negotiate the poor interpretation and implementation of the environmental law (Murombo, 2016). Here again, ‘reflexivity’ is important, as MNEs need to realise the institutional differences between the host and home country in order to use discourse (Regnér & Edman, 2014). Because entrepreneurship is a discursive strategy with the aim to effect “the processes of social constructions that underlie institutions” (Battilana et al., 2009, p. 94), the right kind of communication and emphasis on the need for change in the country is needed. Thus, the way the institutional entrepreneur addresses the local government is crucial to foster a change in the institutional environment (Suddaby & Greenwood, 2005). This research paper expects the use of discourse in an EM context, especially when addressing the government, because it is of the utmost importance that sustainable policies be formulated and implemented (Murombo, 2016; Azahaf & Schraad-Tischler, 2012). MNEs do have political power and can influence the government (Cantwell et al., 2010). This research claims that especially MNEs with SBMs, who aim to create value beyond their organisational boundaries (Schaltegger et al., 2016a), are able to link the need for change to the institutional setting in South Africa and support the government in making that change (Battilana et al., 2009). Thereby, it is expected that MNEs search for a dialogue with the government to address issues and convince them to develop and implement sustainable rules and laws to combat sustainability issues; that is environmental issues, such as energy waste and air pollution. The following proposition expresses this expectation:

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Proposition 2: Multinational enterprises with an SBM foster sustainability-oriented change in EMs by using discourse concerning policy development and implementation.

It is widely acknowledged that partnerships of MNEs with local market players help MNEs to gain local market knowledge, overcome uncertainties, and adapt to the local environment (Dahan et al., 2010). This adaptation is essential in EMs, as market risk and uncertainty are higher than in developed markets (Jayanti & Gowda, 2014). These partnerships are not only beneficial for the foreign MNEs, but can also be crucial in fostering sustainability-oriented change in the market. Development goals can be achieved faster and more efficiently in collective action (Marano & Tashman, 2011). This notion builds upon the mechanism of ‘mobilizing allies’, from Battilana et al. (2009), and is based on mutual support between partners. In this research, MNEs are expected to engage in collective action with different local market players, including local firms and NGOs.

It is important to engage other market players and urge them to adapt to sustainable practices (Dahan et al., 2010), as the need for more sustainable development in EMs calls for the integration of sustainable practices into business operations (Roome & Louche, 2016, p. 12). As Dahan et al. (2010) state, “it is in the self-interest of businesses […] to support private sector capacity development, helping local firms improve the quality of their products and services so they can be globally competitive” (p. 339), because local actors in EMs, including South Africa, do not have the resources or knowledge to act more sustainably and are thus simply not aware of their negative impacts on the society and environment (Birkin et al., 2009; Luo & Tung, 2007). By engaging in collective action with these local firms, the MNE may have a direct impact on a sustainable development. As such, MNEs leverage their SBM and demonstrate to local firms the benefits of taking all stakeholders into account (Schaltegger et al., 2016a). While recent research has studied MNE-NGO partnerships,

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research has not addressed the direct impact MNEs can have on local players. The only scholar to address this issue, Spencer (2008), claims that local firms mirror foreign MNEs in partnerships and that MNEs are able to provide partners with knowledge and technology and to motivate local actors to improve their businesses. While many MNEs engage in partnerships with their suppliers, this research claims that, in order to foster sustainable change, MNEs engage in collective action with non-supplier firms to strengthen the entire economy. A partnership with local firms could introduce sustainable practices among them, making Proposition 3a an interesting supposition to investigate:

Proposition 3a: Multinational enterprises with an SBM are trying to influence the institutional environment in EMs by engaging in collective action with local firms. NGOs play a big part in EMs (Peng, 2003). They influence business and politics and provide guidelines on acting and operating more responsibly and sustainably (Marrewijk, 2003). Moreover, NGOs expect and request from local and foreign firms, including MNEs, to participate in responsible business practices (Marrewijk, 2003). Thus, MNEs fulfil the ‘role expectations’ (Regnér & Edman, 2014) of local NGOs, as they might be valued in the host country for being different and for increasing the local variety of products and services (Cantwell et al., 2010). The MNE-NGO partnership helps MNEs become legitimised in EMs and influence economic policy in the host country (Child & Tsai, 2005). The mutually beneficial MNE-NGO collective action that results in shared values and commitment (Dahan et al., 2015) can foster SBM development among local firms and a market transition towards sustainability (Schaltegger et al., 2016a; Dahan et al., 2010). The strategic position of NGOs is thereby essential, as they have considerable influence on all market players and the government (Dahan et al., 2010), yielding Proposition 3b:

Proposition 3b: Multinational enterprises with an SBM are trying to influence the institutional environment in EMs by engaging in collective action with NGOs.

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By entering a new market, MNEs are mobilising resources, which comprises the transfer and implementation of financial and non-financial resources. This notion builds upon the mechanisms of ‘resource mobilization’, from Battilana et al. (2009), and ‘resources’, from Regnér and Edman (2014). Battilana et al. (2009) define resources relating to mobilisation as “resources that might be mobilized to induce endorsement, and support for the implementation, of divergent change” (p. 38). They state that, next to financial means, social position can be used to increase an MNE’s legitimacy, and thus to mobilise actors. Other non-financial resources that can be mobilised include experience from previous similar institutional environments, knowledge and expertise, commitment and support. Regnér and Edman (2014) claim that multinationality allows MNEs to accumulate experience and know-how from previous institutional locations. Moreover, MNEs are able to transfer resources from other institutional environments, such as experience, social skills, knowledge, and capital (Regnér & Edman, 2014). MNEs with an SBM, who have already gone through the process of reducing energy, intensity, emissions, and waste, and integrating sustainable innovations in their core business (Bocken et al. (2014), can help local actors to achieve the same result by mobilising their resources and implementing them in South Africa. This research paper therefore expects MNEs with an SBM to see this opportunity and proposes the following:

Proposition 4a: Multinational enterprises with an SBM foster sustainability-oriented change in EMs’ institutional environment by mobilising international knowledge and experience.

The international status of an organisation can also play a role in fostering institutional change, as internationalisation strengthens the power of firms (Kostova, 2008). Regnér and Edman (2014) identify international status as an enabler of institutional entrepreneurship, since it allows an MNE to introduce foreign institutions in the host country,

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to use its international status to influence actors and to transfer institutional knowledge and experience. This research paper relates the international status of an MNE to the mechanism of ‘role expectations’, from Regnér and Edman (2014). Given that the host country’s actors have role expectations of the MNE and expect the MNE to change or defy institutions (Regnér & Edman, 2014), it is important to investigate whether and how the MNE exploits its international status to drive change towards sustainability. As such, MNEs with SBMs can foster positive sustainability-oriented change (Schaltegger et al., 2016a; Stephan et al., 2016), as they are expected to care about value proposition, creation and capture by caring about the environment and sustainable development of South Africa. These considerations motivate Proposition 4b:

Proposition 4b: Multinational enterprises with an SBM foster sustainability-oriented change in EMs’ institutional environment by leveraging international status.

Figure 1: Theoretical Framework

This section explained the existing literature, the research gaps, and the outcome expectations based on the findings. Six propositions have been drawn to answer the research question and explain whether and how developed-market MNEs foster sustainability-oriented

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institutional change in EMs and more specifically South Africa. In order to be able to confirm or reject the propositions, data has to be collected. Thus, in the following section, the methodology is illustrated. It contains the research method, case selection, data collection, and data analysis.

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3. Methodology

The aim of the study is to answer the research question and discover whether the propositions are confirmed or rejected. In order to answer the research question, the research design, case selection, and data collection and analysis are here detailed. A qualitative approach was chosen in order to investigate whether and how MNEs with an SBM foster institutional change in South Africa. More specifically, a multiple case study was selected. Thus, each case will be analysed and compared in a cross-case analysis. In order to proof whether the existing theory is adopted or if an alternative theoretical framework can be developed, an integrated approach of deductive and inductive research is chosen. Yet, the emphasis lies on the deductive approach. Data is collected in interviews with representatives from the MNEs in South Africa. Due to the small amount of interviews, secondary data is retrieved to fortify the findings. All data is collected and coded.

3.1. Research design

This research is of an exploratory nature, considering how MNEs with an SBM use institutional entrepreneurship mechanisms to foster institutional change towards sustainable development. These existing institutional entrepreneurship mechanisms are immeasurable in nature, and moreover the study aims to discover new mechanisms or combinations of existing ones. Therefore, a qualitative approach was chosen. Qualitative research can be controversial and contradictory, but also enlightening and inspiring (Brennen, 2012). It allows scholars to explore gaps in the literature and is designed to examine poorly understood singularities and weak links among actors (Maguire et al., 2014). Since this research aims to explore whether there are additional mechanisms that MNEs use in order to change institutions towards sustainable development and whether SBMs are the key for this institutional entrepreneurship, the qualitative approach allows the researcher to analyse this scenario.

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In order to answer the research question, a case study research design was chosen, which constitutes the most appropriate method to investigate MNEs’ institutional entrepreneurship in EMs. More specifically, a multiple case study research design was chosen, which allows findings to be replicated within categories (Eisenhardt, 1989). The reasons for this choice were that the present research question involves ‘how’ questions, which according to Yin (2003), often call for case study methods.

This study uses a mixed approach of a deductive and inductive research design, allowing the research paper to use identified categories from the literature while remaining open to the potential identification of new mechanisms, which makes it also partially inductive. In keeping with Ali and Birley (1999), integrating deductive and inductive approaches is common in the field of marketing or management, because researchers like to make use of existing theory to guide their investigations by also developing the research instead of only testing theory. As such, this research mainly uses a deductive approach and only encompasses inductive characteristics, as it requires open-ended questions and seeks new institutional entrepreneurship mechanisms.

In a deductive research design, the researcher first establishes a theoretical framework, then identifies variables for relevant constructs, develops instruments to gather the data, receives the answers to specific questions, analyses the answers, and finally tests the theory to find whether the theories are accepted or rejected (Ali & Birley, 1999). In an inductive approach, the researcher starts by identifying the area of enquiry identified; yet no theoretical framework is developed. Then, the respondents identify constructs and explain their understandings, and the researcher investigates the relationship between them. Subsequently, broad themes for discussion are identified and the respondents discuss general themes of interests. The researcher then develops theories based on the themes. Conforming to Ali and Birley (1999), in an integrated approach, a theoretical framework is developed based on

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constructs, and while some variables are identified, respondents can identify others. The researcher then converts the a priori theoretical framework into theoretical questions, which are discussed with the respondents. Thereby, the constructs, which are meaningful to the respondent, are identified. Afterwards, the data is analysed in line with existing theory, or a new theory is developed without reference to existing theory. Thus, the research either builds upon existing theory or an alternative theoretical framework is developed (Ali & Birley, 1999).

3.2. Case selection

In keeping with the research question, developed-market MNEs operating in EMs and adopting an SBM were selected. Thereby, 56 developed-market MNEs with an SBM and operating in EMs were contacted. Yet, only a limited number of contacted MNEs replied. Table 2 shows an overview of the selected cases and respondents.

MNE ABB Siemens AG Daimler AG

HQ location Zürich, Switzerland Berlin & Munich, Germany

Stuttgart, Germany Industry Electric equipment Conglomerate Automobile Number of locations

worldwide

117 91 49

Employees worldwide 132,000* 351,000** 282,488*** Employees South Africa 1,200* 1,441** 3,300* Interviewee Chesney Bradshaw, Head

of Sustainability Lizelle Schindler, Business Development Southern Africa Asanda Fongqo, Corporate Communications & External Affairs, Corporate Affairs Table 2: Interview partners

* n.d.

** as of Sept. 2016 *** as of Dec. 2016

The selected cases are appropriate to address the research question, because all chosen MNEs are developed-market MNEs with an SBM, operating in EMs. The subsidiaries of the MNEs are deeply embedded in the host country’s environment, which is important in becoming legitimised and implementing changes (Regnér & Edman, 2014; Seo & Creed,

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Asea Brown Boveri (ABB) is a global leader in power and automation technologies. The former companies of ABB, ASEA of Sweden and Switzerland's BBC, have been present in South Africa since 1926. They merged in 1988, and ABB was formed. Yet, the MNE withdrew its subsidiary from the country in 1988 when the apartheid regime was still in place and re-entered the country in 1994 after the apartheid regime ended. The MNE provides solutions to improve the efficiency, productivity and quality of its customers’ operations to minimise their environmental impact. Sustainability is part of their corporate strategy, which aims to contribute to a better world through the implementation of ABB’s Nine Sustainability Objectives 2014–2020. ABB serves the rising local demand and enhances the electrical infrastructure. Their product portfolio includes electrification products (robots), power grids, industrial automation, and dispreads motion and control.

It can be said that ABB has an SBM, as the MNE is creating value for the entire economy, society and especially for the environment with its sustainable products. The products are tailored to reduce the ecological footprint of industrial processes. The main focus of ABB’s SBM is on environmental sustainability, as the company aims to provide sustainable technology to customers worldwide and in South Africa. ABB also engages in creating value for the economy and society, but this activity is not related to its core business and will not be further investigated in this research, since most of its contributions to social and economic sustainability are based on philanthropy.

Siemens provides products, systems and solutions across the electrification, automation and digitalisation value chain. The company entered South Africa over 155 years ago as a pioneer in renewable energy. Thus, Siemens plays a constructive role in South Africa’s success story. Siemens engages in all areas of sustainable development.

Siemens’ business model is sustainable, as the MNE enables its customers to increase their energy efficiency by using Siemens’ products and improves people’s lives. Siemens

How does an MNE with a sustainable business model use institutional entrepreneurship to foster sustainability-oriented change in emerging markets, specifically in South Africa?

Table of Contents

Index of tables

Index of figures

1. Introduction

2. Literature Review