Firm internal network, environmental regulation, and plant death

Journal Article (Journal Article)

This article examines the role of a firm's internal network in determining plant shutdown decisions in response to environmental regulations. Using unique plant-level data for U.S. manufacturing industries from 1990 to 2007, we find evidence that, in response to increasingly stringent environmental regulations at the county level, multi-plant firms do exercise their greater flexibility in adjusting production, relative to single-plant firms. Specifically, in regulated counties, the likelihood of a plant shutting down is higher for multi-plant firms. Moreover, we measure the firm internal network effect at the local, neighborhood, and the wider-area levels, as defined by the number of affiliated plants clustered in different regional levels. Their effects on plant closure decisions for dirty subsidiaries vary with the network level. We further decompose the neighborhood network into those in regulated and unregulated neighborhood counties, and examine how these network metrics are associated with closure decisions of dirty plants affiliated with multi-plant firms. The presence of more sibling plants residing in neighboring counties that are free from regulatory controls are associated with a higher closure probability of dirty plants in a regulated county.

Full Text

Duke Authors

Cited Authors

  • Cui, J; Moschini, GC

Published Date

  • May 1, 2020

Published In

Volume / Issue

  • 101 /

Electronic International Standard Serial Number (EISSN)

  • 1096-0449

International Standard Serial Number (ISSN)

  • 0095-0696

Digital Object Identifier (DOI)

  • 10.1016/j.jeem.2020.102319

Citation Source

  • Scopus