Skip to main content
SpringerLink
Log in

The impact of outward foreign direct investment on green innovation: the threshold effect of environmental regulation

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

Outward foreign direct investment (OFDI) in an open economy has gradually become an important source of green innovation (GI). With the rapid development of China’s OFDI, this research studies the impact of OFDI on the country’s GI, employing panel data of 30 provinces from 2006 to 2017. We first use the Super-SBM model to measure GI performance and then test the impact of OFDI on GI with the system GMM model. Evidence finds that the negative impact of OFDI on GI is not significant on the whole, but the results of regional regression show that impact of OFDI on GI exhibits obvious regional differences. We then utilize the dynamic threshold panel model to determine the non-linear relationship between OFDI and GI through the perspective of environmental regulation in order to avoid the bias caused by ignoring the impact of institutional factors and time dynamic change. After dividing environmental regulations into command control environmental regulation and market incentive environmental regulation, the research results show that the double threshold effects of both environmental regulations are significant. Command control environmental regulation does not play a role in promoting the effect of OFDI on GI. When the intensity of market incentive environmental regulation is low, OFDI negatively affects GI. Moreover, only when the market incentive regulation shows high intensity can OFDI significantly promote GI. With the continuous growth of China’s OFDI, it is therefore necessary to determine the appropriate environmental regulation to improve the reverse spillover effect of OFDI enterprises on the country’s GI.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

Data availability

Data are available from the authors upon request.

References

  • Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econ 87:115–143

    Article  Google Scholar 

  • Chen Y, Lee CC (2020) Does technological innovation reduce CO2 emissions? Cross-country evidence. J Clean Prod 263:121550

    Article  CAS  Google Scholar 

  • Chiu YB, Lee CC (2020) Effects of financial development on energy consumption: the role of country risks. Energy Econ 90:104833

    Article  Google Scholar 

  • Coe DT, Helpman E (1995) International R&D spillovers. Eur Econ Rev 39:859–887

    Article  Google Scholar 

  • Dunning JH, Lundan SM (2008) Institutions and the OLI paradigm of the multinational enterprise. Asia Pac J Manag 25:573–593

    Article  Google Scholar 

  • Fu JY, Li LS (2010) Empirical study on environmental regulation, factor endowment and industrial international competitiveness—based on panel data of China's manufacturing industry. Manag World 10:87–98+187

    Google Scholar 

  • Gong XS, Li MJ, Zhang HZ (2017) Has OFDI promoted the industrial enterprises’ green innovation efficiency in China—evidence based on agglomeration economic effect. J Int Trade 11:127–137

    Google Scholar 

  • Han YJ, Wang L (2016) The effect of OFDI reverse technology spillover on China energy efficiency. On Econ Probl 3:95–101

    Google Scholar 

  • Hansen BE (1999) Threshold effects in non-dynamic panels: estimation, testing, and inference. J Econ 93:345–368

    Article  Google Scholar 

  • Hu YX, Qu XE, Dong MF (2016) The effect of green productivity growth of China’s FDI: an empirical analysis based on the perspective of spatiotemporal heterogeneity. Economist 12:61–68

    Google Scholar 

  • Jia J, Wei JY, Wang Y (2017) Different impacts of environmental regulations of green technological innovation on Chinese OFDI—from the perspective of heterogeneity of host countries. R&D Manag 29:81–90

    Google Scholar 

  • Jiang XC, Shen H, Lee CC, Cheng C (2021) Supply-side structural reform and dynamic capital structure adjustment: evidence from Chinese-listed firms. Pac Basin Financ J 65:101482

    Article  Google Scholar 

  • Kogut B, Chang SJ (1991) Technological capabilities and Japanese direct investment in the United States. Rev Econ Stat 73:401–413

    Article  Google Scholar 

  • Kong QX, Chen H, Ni YH (2019) How does OFDI reverse technology spillover of Chinese enterprises promote green technology innovation—based on empirical evidence of Yangtze River Economic Belt. J Guizhou Univ Finance Econ 4:100–111

    Google Scholar 

  • Lee CC, Wang CW (2021) Firms’ cash reserve, financial constraint, and geopolitical risk. Pac Basin Financ J 65:101480

    Article  Google Scholar 

  • Lee CC, Wang CW, Ho SJ, Wu TP (2020) The impact of natural disaster on energy consumption: international evidence. Energy Econ 2020:105021, In press. https://doi.org/10.1016/j.eneco.2020.105021

    Article  Google Scholar 

  • Lichtenberg FR (1998) International R&D spillovers: a comment. Eur Econ Rev 42:1483–1491

    Article  Google Scholar 

  • Li GX, Zhang W, Wang YJ (2016a) OFDI, environmental regulation and green technology innovation in China. Sci Technol Manag Res 36:227–231+236

    Google Scholar 

  • Li J, Roger S, Lu TN, Dylan S (2016b) Outward foreign direct investment and domestic innovation performance: evidence from China. Int Bus Rev 25:1010–1019

    Article  Google Scholar 

  • Li P, Su WZ (2014) Foreign direct investment and China’s technological innovation: from the perspective of heterogeneous investment host country. Int Bus 2:71–82

    Google Scholar 

  • Li X (2015) Analysis and outlook of the related researches on green innovation. R&D Manag 27:1–11

    Google Scholar 

  • Liu DL, Liu H (2017) Research on the impact of China’s Foreign Direct Investment on innovation ability—based on the perspective of the supply-side reform. Int Bus 6:98–108

    Google Scholar 

  • Liu HY, Gong MQ (2018) Factor market distortion and scale effect of two-way FDI on carbon emissions. China Popul Res Environ 28:27–35

    Google Scholar 

  • Luo LW, Liang SR (2017) The spatial effect of international R&D capital technology spillovers on the efficiency of China’s green technology innovation. Bus Manag J 39:21–33

    Google Scholar 

  • Mao QL, Xu JY (2014) Does FDI of Chinese enterprises promote enterprise innovation? J World Econ 8:98–125

    Google Scholar 

  • Nie H, Wu Q (2020) Does the reverse green technology spillover effect of FDI really exist? Modern Manag 40:7–11

    Google Scholar 

  • Piperopoulos P, Wu J, Wang C (2017) Outward FDI, location choices and innovation performance of emerging market enterprises. Res Policy 47:232–240

    Article  Google Scholar 

  • Seo MH, Shin Y (2016) Dynamic panels with threshold effect and endogeneity. J Econ 195:169–186

    Article  Google Scholar 

  • Tone K (2001) A slacks-based measure of efficiency in data envelopment analysis. Eur J Oper Res 130:498–509

    Article  Google Scholar 

  • Walter I, Ugelow JL (1979) Environmental policies in developing countries. Technol Dev Environ Impact 8:102–109

    Google Scholar 

  • Wang SL, Wang XL, Teng ZW (2017) The productivity effect of China’s two-way FDI: based on the perspective of resource and environment constraints. Int Bus 5:65–78

    CAS  Google Scholar 

  • Wang ZJ, Wei J, Ren BP (2020) The impact of two-way FDI on green economic efficiency under the background of heterogeneous environmental regulation. Finance Trade Res 31:1–16

    CAS  Google Scholar 

  • Wen H, Lee CC, Zhou F (2021) Green credit policy, credit allocation efficiency and upgrade of energy-intensive enterprises. Energy Econ 94:105099

    Article  Google Scholar 

  • Xie RH, Yuan YJ, Huang JJ (2017) Different types of environmental regulations and heterogeneous influence on “green” productivity: evidence from China. Ecol Econ 132:104–112

    Article  Google Scholar 

  • Yang SD, Han XF, Song WF (2017) Does OFDI affect China’s green total factor productivity. J Shanxi Univ Finance Econ 39:14–26

    Google Scholar 

  • Yang ZJ, Wang DY (2019) Research on the interaction between outward direct investment, foreign direct investment and green innovation: based on PVAR model. Ecol Econ 35:55–63

    Google Scholar 

  • Yuan H, Feng Y, Lee CC, Chen Y (2020) How does manufacturing agglomeration affect green economic efficiency? Energy Econ 92:104944

    Article  Google Scholar 

  • Zhang J, Li ZF (2020) Does OFDI promote green TFP growth in China—an empirical study based on dynamic system GMM estimation and threshold model. J Int Trade 7:159–174

    Google Scholar 

  • Zheng Q, Ran GH (2018) Effects of two-way FDI on green productivity spillover in China: an empirical test based on dynamic panel model. Stat Inform Forum 33:54–61

    Google Scholar 

  • Zhu WT, Lv CR, Gu NH (2019) Research on the influence of OFDI and reverse technology spillover on green total factor productivity. China Popul Res Environ 29:63–73

    Google Scholar 

Download references

Acknowledgements

The authors are grateful to the Editor and two anonymous referees for helpful comments and suggestions.

Funding

This research has been financially supported by the Project of the National Social Science Fund of China (Grand No. 20BJL054), Shandong Social Science Planning Fund Program (Grant No. 18DJJJ02), and Natural Science Foundation of Shandong Province (Grant No. ZR2018BG010). Chien-Chiang Lee is grateful to the Jiangxi Humanities and Social Sciences Project of University (NO. JJ20125).

Author information

Authors and Affiliations

  1. School of Economics, Shandong Normal University, Jinan, China

    Lihua Dai & Xiuru Mu

  2. School of Economics and Management, Nanchang University, Nanchang, China

    Chien-Chiang Lee

  3. Business School, University of Jinan, Jinan, China

    Wei Liu

Authors
  1. Lihua Dai
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Xiuru Mu
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Chien-Chiang Lee
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Wei Liu
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

Four authors provided critical feedback and helped shape the research, analysis, and manuscript. Lihua Dai—conceptualization, investigation, and writing of the original draft and analysis. Xiuru Mu—software, data curation, and corresponding author. Chien-Chiang Lee—visualization, reviewing and editing. Wei Liu—data curation and writing.

Corresponding author

Correspondence to Xiuru Mu.

Ethics declarations

Ethics approval

This is an original article that did not use other information that requires ethical approval.

Consent to participate

All authors participated in this article.

Consent for publication

All authors have given consent to the publication of this article.

Competing interests

The authors declare no competing interests.

Additional information

Responsible Editor: Ilhan Ozturk

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Dai, L., Mu, X., Lee, CC. et al. The impact of outward foreign direct investment on green innovation: the threshold effect of environmental regulation. Environ Sci Pollut Res 28, 34868–34884 (2021). https://doi.org/10.1007/s11356-021-12930-w

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-021-12930-w

Keywords

Search

Navigation