Abstract
This study contributes to the understanding of how firms respond to a new environmental regulation, and how cognitive framing and institutional context influence firms’ responses. Literature on cognitive framing and strategic issue interpretation is combined with institutional theory to develop a theoretical framework, with emphasis on natural resources based incumbents, and a conceptual model is presented. When faced with a new environmental regulation firms may engage, or not engage, in a range of business or political activities depending on how they perceive the regulation, and the overall context in which they operate. Specifically this thesis explores how cognitive framing and perceptions of (i) the environmental regulation itself, (ii) the implementation process and (iii) regulatory uncertainty influence firms’ responses. Furthermore, it explores how this interplays with the institutional context in which the firms are embedded. After developing the theoretical framework, the conceptual model and associated propositions were assessed through a case study of the Norwegian hydropower industry and the Water Framework Directive (WFD) in an early phase of implementation. Using empirical data from five of the largest hydropower producers, combined with a contextual analysis, I explored how the three perceptual regulatory variables and the institutional context influenced HP producers’ responses to the WFD. This thesis contributes to the understanding of firms’ responses to a new environmental regulation, by demonstrating the importance of addressing perceptual and contextual variables associated with a new environmental regulation, beyond just the environmental regulation per se. Furthermore, the study offers insight into the moderating role of cognitive framing and institutional context on the environmental regulation - firm response relationship. Implications of the study and suggestion for further research are given.