Active Contributors or Compliers? Using the Friedman Doctrine to Explain Multinational Enterprises’ Response to Climate Change

Abstract

This study examines how multinational enterprises (MNEs) in the automotive sector respond to stakeholder and institutional pressures to mitigate climate change. Drawing on institutional, stockholder (Friedman doctrine), and stakeholder theories, we analyze how formal regulatory frameworks and informal stakeholder demands influence corporate environmental strategies. The research demonstrates that, while MNEs face increasing pressure to be environmentally responsible, substantive sustainability initiatives are predominantly driven by formal institutional mechanisms rather than by voluntary stakeholder responses. This confirms the Friedman doctrine, which holds that firms will respond to mandates when required by law. Through a systematic analysis of two leading electric vehicle manufacturers, Tesla and BYD, we explore how varying institutional environments shape corporate climate strategies. The findings reveal that regulatory frameworks serve as primary catalysts for meaningful environmental action, while informal pressures primarily influence communication strategies and corporate social responsibility (CSR) initiatives. This study contributes to the growing literature on corporate environmental responsibility by illuminating the relationship between institutional pressures and strategic responses in the context of climate change mitigation.