Abstract
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.
| Original language | English |
|---|---|
| Article number | 127381 |
| Journal | Journal of Cleaner Production |
| Volume | 310 |
| ISSN | 0959-6526 |
| DOIs | |
| Publication status | Published - 10 Aug 2021 |
Bibliographical note
Funding Information:This research was supported by Aalborg University ( AAU grant 771107 ).
Funding Information:
It is not surprising that GFDIs increase the sustainability-orientation of pure green players, that is MNEs focused specifically on environmental technologies. It confirms the idea that any type of FDI supports MNE innovativeness (Amendolagine et al., 2018). Since the pure players in our sample are focused on green innovation, this effect is expected. However, our finding that GFDIs increase the overall sustainability focus in multi-technology corporations, which constitute the bulk of our sample, is novel. In particular, we show that GFDIs increase green specialization in these firms. Given that the world's largest and most influential manufacturers are multi-technology firms, this insight is not trivial and is good news from a green transformation perspective. If large MNEs are increasingly focusing their innovation activities on making green technologies more efficient, affordable and accessible, their contribution to the green transformation will be remarkable.This research was supported by Aalborg University (AAU grant 771107).
Publisher Copyright:
© 2021
Keywords
- Foreign direct investments
- Global connectedness
- Green innovation
- Multinational enterprises
- Renewable energy
- Sustainability transition