Sustainability as a Strategy in the Chinese Automotive Industry: Managing Legitimacy Demands when Expanding to the EU

Abstract

Sustainability refers the capacity to endure both environmentally and economically. In this paper, we take a look at both aspects of sustainability as we analyze the effects that new environmental sustainability standards, and compliance with those standards have on the Chinese automotive industry. We sought to understand if these new regulations provide an opportunity to enhance the success of Chinese automotive MNCs as they seek to expand to the European Union.
In this analysis, we drew upon institution-based theory to understand the way Chinese automotive MNCs could leverage environmental compliance domestically as a competitive advantage when looking to expand internationally. Through investigating both formal and informal institutions within China and the European Union, we were able to identify overlapping environmental regulations. We then conducted interviews with credible sources to gain insight into how companies could leverage sustainability as a strategy to establish and maintain legitimacy in the European automotive industry. Through our research and qualitative analysis, we were able to develop three strategies that Chinese automotive MNCs could utilize to manage legitimacy demands when expanding into the EU.