Corporate Strategy and Ecological Modernization: Industrial Water Management in North China

Abstract

In the ecological modernization of China, how firms respond to environmental constraints ought to be investigated to inform environmental reform in China. In industrial water management in particular, socio-economic development in China is boosting industrial water demand, yet water scarcity, severe in the drier north, has exacerbated the conflict between this natural resource and industrial need. While the Chinese government initiated various engineering projects, the largest being the South to North Water Transfer Project, to increase water supply in areas of demand, better management (e.g. changing consumption, reuse and recycling etc.) is argued to be of more urgency and sustainability in China. Positive changes in people’s values, attitudes and behaviours towards water could lead to efficient use of this limited resource.

Therefore, this thesis takes a behavioural approach to investigate water management strategies in North China industrial organizations through the lens of ecological modernization. Empirical research is based on firms located in two regions, Beijing and Hebei. It investigates how industrial firms, one of the major market actors in ecological modernization, respond to both physical and regulatory environmental constraints. The methods used are primarily qualitative: semi-structured in-depth interviews and direct observation, supported by secondary data collection. The physical and institutional water availability in the study areas is firstly assessed. Then firm strategies in water management that patterned organizational behaviour are identified. Through analyzing strategies in different firms, the impact of firms’ own characteristics within their borders and the impact of locality attributes are disentangled.

The thesis demonstrates ecological modernization a useful tool for understanding water management in China. It finds that North China’s industries are faced with both physical and regulatory water stress, though current prices fail to regulate industrial consumption. Environmental and institutional circumstances are driving environmental upgrading in this region. Firm-level adaptations featuring both upgrading and downgrading strategies include innovation, relocation, outsourcing, factory closure and rule breaking, depending on firm capabilities and orientations. I further argue that both firm characteristics (ownership, size/scale, financial status, market position, and sectoral character etc.) and locality factors (infrastructure and institution) play significant roles in shaping firm behaviour in water management, while interacting with each other. By building a tentative analytical framework to analyze the impact of firms’ own characteristics and locality on firms’ water strategy, this study contributes to both management and geographical theories within the framework of Chinese ecological modernization. And through the empirical analysis, water management suggestions for decision makers in both state and enterprise level are given.