The two faces of FDI in environmental performance: a meta-analysis of empirical evidence in China

Abstract

The extant literature has raised debates concerning environmental performance of foreign direct investment (FDI) in China. We applied meta-analysis of 121 estimates reported in 40 studies to quantitatively synthesize our knowledge and understanding of the topic. Our findings indicate that FDI leads to better environmental performance through a pollution abatement effect, but not through enhancements in green total factor productivity. The metaregression analysis reveals that the degree of environmental pollution abatement effects is moderated by environmental regulations, FDI measurement, and the consideration of endogeneity in empirical estimations. The results are discussed with references to scholarly and practical implications.

Global eco‐innovation and its local impact in emerging economies: Boundary conditions of environmental regulations and pollution intensity

“…The institutional rationality advocated by IBV also suggests the positive moderating effects of environmental regulations on the relationship between FDI and the eco‐innovation of DOEs. Institutional pressures triggered by environmental regulations spur FIEs to improve their environmental pollution performance (for reviews, see Demena & Afesorgbor, 2020; Wei et al, 2022), as well as eco‐innovation, as argued in the section leading to Hypothesis 1a. The higher standards set by FIEs as a result of more stringent environmental regulations facilitate DOEs' adoption of the eco‐innovation strategy through institutional isomorphism in line with the discussions proceeding Hypothesis 2.…”

“…Additionally, MNEs conducted eco‐innovation in host countries and about 17% of environmental patents owned by MNEs came from their overseas R&D activities (Kawai et al, 2018; Marin & Zanfei, 2019; Noailly & Ryfisch, 2015). However, the debates on the environmental impact of FDI and MNEs have largely centered on environmental pollution and much less attention has been paid to their role in eco‐innovation (for reviews, see Demena & Afesorgbor, 2020; Wei et al, 2022). As highlighted by Marin and Zanfei (2019, p. 2089), there is “… sparse and largely anecdotal evidence that MNEs play a substantial role in the generation and diffusion of green innovation through their R&D facilities both in their home countries and in foreign locations.” Recent research (Castellani et al, 2022) further notes that existing studies concerning the impact of MNEs on local eco‐innovation are scant and mainly based on case studies and national surveys whose findings have limited generalizability.…”

“…Our empirical analysis is based on firms in China where significant environmental challenges are present, and environmental stringency varies among its regions (Bu & Wagner, 2016; Dean et al, 2009; Marquis et al, 2011). The salient role played by FDI in China has led to a large number of studies on FDI and environmental pollution and the meta‐analysis by Wei et al (2022) shows that FDI improves environmental performance through pollution abatement effects. However, there are few firm‐level studies examining the eco‐innovation effects of FDI.…”

Does Eco-Innovation of Emerging Market Firms Benefit from Knowledge Spillovers of MNC in a Multi-dimensional Task Environment?

“…China provides an appropriate empirical setting because of the country's significant deterioration of ecological environment and fast growth of eco-innovation activities, as well as her leading position as FDI recipient for past decades. China pledged to peak carbon emissions by 2030 and to reach carbon-neutral by 2060 (Wei et al, 2022); and eco-innovation holds the key to achieve these targets, whereas the role of regional MNC knowledge spillovers and its interplay with environmental factors in fostering eco-innovation are a critical aspect. Our empirical evidence lends support to hypotheses, pointing to the significant role played by MNC knowledge spillovers in shaping eco-innovation of EMFs in a multi-dimensional environment.…”

“…The two recently published meta-analysis studies aim to systematically analyze this large collection of findings. Demena and Afesorgbor (2020)'s research is based on 65 primary studies published between 2006 and 2018, covering multiple countries Wei et al (2022). focus only on one country-China and their sample includes 40 primary studies published between 2001 and 2020.…”