There is mounting agreement that the global economy is at the nascent stage of a green transformation. In response, multinational enterprises (MNEs) are seeking to enhance their capabilities for ...sustainable innovation and many have started to globalise their green efforts. But to what extent and how (if at all) do green Foreign Direct Investments (FDIs) contribute to the deepening of sustainability capabilities? To address this question, we employ a novel dataset of 1217 green FDI in renewable energy sectors worldwide, during the period 1997 to 2015. A propensity score matching and difference-in-difference econometric strategy provides three main results. First, green FDIs enhance the overall orientation to sustainability of MNEs. They have both a greening effect on the firms’ overall technology bases and increases specialization in specific green technologies. Second, green FDIs have a significant positive impact on the degree and quality of MNEs innovative capacity in sustainable technologies. In other words, the MNEs extend their innovative capabilities towards more sustainability-oriented direction and strengthen their innovation activities related to green technologies. Third, we find that the globalisation process mode matters: in the long run, green FDIs result in newly-established subsidiaries contributing more to innovativeness and greening than acquisition of foreign firms. These findings have important implications for policies designed to increase the sustainability transition.
•GFDI enhances the overall sustainability-orientation of MNEs.•GFDI enhances the quantity and quality of green innovative capacity in MNEs.•GFDI enhances MNEs' specialization in specific green technologies.•Effects hold true for both green pure-players and multi-technology MNEs.•Effects from newly established subsidiary last longer than those from overseas acquisitions.
The following research paper conducts a comprehensive analysis into the intricate dynamics governing the relationship between Foreign Direct Investment (FDI) and International Trade, with a specific ...focus on the Western Balkan Countries-6 (WB-6). This research spans the period from 2000 to 2020 and seeks to shed light on the interplay between FDI and International Trade within this region. To analyse and interpret these dynamics, various regression models, including Ordinary Least Squares (OLS), Fixed Effects, Random Effects, and the Hausman-Taylor model, are employed as analytical tools. Moreover, the research takes into consideration the influence of specific institutional factors within each country, which play a pivotal role in shaping foreign investors' decisions to invest in a particular country. The study's results reveal that gravity factors, in conjunction with institutional determinants such as economic integration, control of corruption, political stability, and other indicators of governance quality, significantly impact the attractiveness of the WB-6 countries to foreign investors. The findings of this paper hold substantial relevance for the development of an analytical framework aimed at evaluating national policies and institutions geared towards enhancing the appeal of Western Balkan countries to foreign investors. Furthermore, the research underscores the importance of these host countries prioritizing efforts to bolster the effectiveness of governmental institutions, combat corruption, streamline bureaucratic processes, and improve overall economic conditions to attract and retain foreign investment.
Emphasizing the importance of informed location choice, prior strategy research has examined how private information about locations affects foreign direct investment. Publicly available media ...information has received little attention, however, perhaps because its impact on location choice is expected to be trivial. This study examines the relationship between the extent of a location's media coverage and the number of entering foreign firms in Russia, using a novel instrumental variable for media coverage, a major anniversary of a city's establishment date. The results suggest that extensive foreign media coverage of a city increases the number of foreign entrants. This effect is stronger for firms with less private information about Russian cities; i.e., more socially and geographically distant firms and foreign entrepreneurs.
Reducing GHG emissions and mitigating climate change would require significant investments in renewable energy technologies. Foreign direct investments (FDI) in renewable energy (RE) have increased ...over the last years, contributing to the diffusion of RE globally. In the field of climate policy, there are multiple policy instruments aimed at attracting investments in renewable energy. This article aims to map the FDI flows globally including source and destination countries. Furthermore, the article investigates which policy instruments attract more FDI in RE sectors such as solar, wind and biomass, based on an econometric analysis of 137 Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. The results show that Feed in Tariffs (FIT) followed by Fiscal Measures (FM), such as tax incentives and Renewable Portfolio Standards (RPS), are the most significant policy instrument that attract FDI in the RE sector globally. Regarding carbon pricing instruments, based on our analysis, carbon tax proved to be correlated with high attraction of FDI in OECD countries, whereas Emissions Trading Schemes (ETS) proved to be correlated with high attraction of FDI mainly in non-OECD countries.
Key policy insights
Feed in Tariffs is the most significant policy instrument that attracts FDI in the Renewable Energy sector globally.
Fiscal Measures (FM), such as tax incentives, show a significant and positive impact on renewable energy projects by foreign investors, and particularly on solar energy.
Carbon pricing instruments, such as carbon taxation and emissions trading, proved to attract FDI in OECD and non-OECD countries respectively.
Public investments, such as government funds for renewable energy projects, proved not as attractive to foreign private investors, perhaps because public funds are not perceived as stable in the long run.
The proliferation of bilateral and regional trade agreements has arguably been the main change to the international trading system since the end of the Uruguay Round in the mid-1990s. We argue that ...investment discrimination plays a major role in this development. Preferential trade agreements can lead to investment discrimination because of tariff differentials on intermediary products and as a result of provisions that relax investment rules for the parties to the agreement. Excluded countries are sensitive to the costs that this investment discrimination imposes on domestic firms and react by signing a trade agreement that aims at leveling the playing field. We test our argument using a spatial econometric model and a newly compiled data set that includes 166 countries and covers a period of eighteen years (1990–2007). Our findings strongly support the argument that investment discrimination is a major driver of the proliferation of trade agreements.
•This study aims to answer the following research question: how have internationalization experience, cultural distance, and host country context characteristics moderated the relationship between ...full versus partial acquisition strategy and survival of foreign acquired units?•In general the probability of survival does not differ significantly between full and partial acquisitions.•The likelihood of survival in full, relative to partial acquisitions, is positively associated with the acquisition-specific experience, but inversely related to general international and target country experience.•The relationship between full acquisitions and survival of foreign acquired units is stronger if the acquisitions are made in culturally similar countries, in host countries that are less economically developed than home country, and in markets where the country risk has increased after entry.
The high divestment rates of acquired foreign units indicate challenges connected to planning and management of foreign acquisitions. In this paper we analyze the moderating effect of internal and external variables on the relationship between acquirers’ ownership strategy and survival of acquired foreign units. We test our hypotheses on a sample of 1275 acquisitions conducted by Finnish firms in various countries during the period 1980–2005. The results indicate that the probability of survival does not differ significantly between full and partial acquisitions. We further find that the likelihood of survival in full, relative to partial acquisitions, is positively associated with the acquisition-specific experience, but inversely related to general international and target country experience. The results also reveal that the positive impact of full acquisitions is stronger if the acquisitions are made in culturally similar countries, in less developed economies, and in markets where the country risk has increased after entry.
Can FDI help to reduce regional air pollution emissions in Korea? Given the proclamation of a far-reaching national green growth strategy that requires a shift in public and private investments, this ...paper addresses the need for empirical estimates on the environmental consequences of FDI inflows into Korea. Using a simultaneous equations model the impacts of FDI inflows are decomposed into direct as well as indirect scale, composition, and technique effects. Thereby, the analysis utilizes panel data on six air pollutants in 16 Korean provinces and self-governing cities for the period 2000 to 2011. The estimation results show that FDI inflows concurrently stimulate regional economic growth and reduce air pollution intensities. However, the total level of air emissions mostly remains unchanged. While confirming the findings of the existing national level research on the FDI-growth relationship in Korea, the results are partly contrary to the respective earlier findings on the FDI-environment nexus. Given Korea's high level of development paired with the aforementioned impact on economic growth and air pollution intensities, foreign investments are, therefore, regarded as one potential pillar to achieve the goals of the green growth strategy.
•The paper analyzes regional panel data on six air emissions in 16 Korean provinces•A simultaneous equations model is employed to decompose the effects of FDI inflows•FDI inflows stimulate regional economic growth and reduce air emission intensities•The total level of air emissions mostly remains unchanged•FDI can contribute to the achievement of the goals of the green growth strategy
Many empirical examinations of foreign direct investment location choice have relied on the use of secondary data and surveys on the choices made by firms about the form and location of overseas ...investment. These studies have two inherent and related problems. First, they rely solely on the location choices made by different firms, and assume that the domains of possible options considered were the same. Second, there is an assumption about the rules used by firms to make these decisions, yet the decisions are made by boundedly rational managers. After reviewing the literature, this study examines managers' choices about foreign investment location through the use of structured experimentation. The results show that in creating sets of investments to 'consider', managers appear to follow fairly rational rules. However, the choice of actual 'investments' appears less aligned to traditional models.
The US Bureau of Economic Analysis (BEA) estimates that the return on investments of foreign subsidiaries of US multinational companies over the period 1982–2006 averaged 9.4 percent annually after ...taxes; US subsidiaries of foreign multinationals averaged only 3.2 percent. BEA returns on foreign direct investment (FDI) are distorted because most intangible investments made by multinationals are expensed. We develop a multicountry general equilibrium model with an essential role for FDI and apply the BEA's methodology to construct economic statistics for the model economy. We estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in BEA returns.
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