IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i13p3538-d243443.html
   My bibliography  Save this article

Impact of Foreign Direct Investment on Environmental Performance

Author

Listed:
  • Zhenghui Li

    (Guangzhou International Institute of Finance and Guangzhou University, Guangzhou 510006, China)

  • Hao Dong

    (School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China)

  • Zimei Huang

    (School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China)

  • Pierre Failler

    (Economics and Finance Subject Group, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK)

Abstract

The paper presents the results of a study that attempts to investigate the impact of foreign direct investment (FDI) on environmental performance (EP) by constructing a panel quantile regression model. Based on panel data from 1990 to 2014, this study contributes to evaluate the EP of each of the 40 countries using a directional slack-based model considering undesirable output. Our findings reveal several key conclusions: first, FDI has an insignificant influence on EP for the full sample. Second, the impact of FDI on EP between developed and developing countries exists heterogeneity. Furthermore, there is heterogeneity regarding the effect of FDI on EP at different quantiles of EP in developed countries. Specifically, in the developed countries, the effect is statistically insignificant at the lower quantile of EP, then it turns significantly positive at the middle and high quantile, and the positive effect rises with the increase of quantiles of EP. Finally, based on the conclusions of quantitative analysis, some important policy recommendations are proposed: different governments ought to enact different strategies for the introduction of FDI, according to different development situations of different countries.

Suggested Citation

  • Zhenghui Li & Hao Dong & Zimei Huang & Pierre Failler, 2019. "Impact of Foreign Direct Investment on Environmental Performance," Sustainability, MDPI, vol. 11(13), pages 1-16, June.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3538-:d:243443
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/13/3538/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/13/3538/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Picazo-Tadeo, Andrés J. & Castillo-Giménez, Juana & Beltrán-Esteve, Mercedes, 2014. "An intertemporal approach to measuring environmental performance with directional distance functions: Greenhouse gas emissions in the European Union," Ecological Economics, Elsevier, vol. 100(C), pages 173-182.
    2. Hettige, Hemamala & Huq, Mainul & Pargal, Sheoli & Wheeler, David, 1996. "Determinants of pollution abatement in developing countries: Evidence from South and Southeast Asia," World Development, Elsevier, vol. 24(12), pages 1891-1904, December.
    3. Machado, José A.F. & Santos Silva, J.M.C., 2019. "Quantiles via moments," Journal of Econometrics, Elsevier, vol. 213(1), pages 145-173.
    4. Dong-hyun Oh, 2010. "A global Malmquist-Luenberger productivity index," Journal of Productivity Analysis, Springer, vol. 34(3), pages 183-197, December.
    5. Ivan A. Canay, 2011. "A simple approach to quantile regression for panel data," Econometrics Journal, Royal Economic Society, vol. 14(3), pages 368-386, October.
    6. Kortelainen, Mika, 2008. "Dynamic environmental performance analysis: A Malmquist index approach," Ecological Economics, Elsevier, vol. 64(4), pages 701-715, February.
    7. Huang, Zhehao & Liao, Gaoke & Li, Zhenghui, 2019. "Loaning scale and government subsidy for promoting green innovation," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 148-156.
    8. Sourafel Girma, & Holger Görg, 2003. "Foreign direct investmant, spillovers and absorptive capacity: Evidence from quantile regressions," The Institute for International Integration Studies Discussion Paper Series iiisdp01, IIIS.
    9. Omri, Anis & kahouli, Bassem, 2014. "The nexus among foreign investment, domestic capital and economic growth: Empirical evidence from the MENA region," Research in Economics, Elsevier, vol. 68(3), pages 257-263.
    10. Emrouznejad, Ali & Yang, Guo-liang, 2016. "A framework for measuring global Malmquist–Luenberger productivity index with CO2 emissions on Chinese manufacturing industries," Energy, Elsevier, vol. 115(P1), pages 840-856.
    11. Shahbaz, Muhammad & Nasreen, Samia & Abbas, Faisal & Anis, Omri, 2015. "Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries?," Energy Economics, Elsevier, vol. 51(C), pages 275-287.
    12. Fukuyama, Hirofumi & Weber, William L., 2009. "A directional slacks-based measure of technical inefficiency," Socio-Economic Planning Sciences, Elsevier, vol. 43(4), pages 274-287, December.
    13. Hyun S Kim & Jungho Baek, 2011. "The Environmental Consequences of Economic Growth Revisited," Economics Bulletin, AccessEcon, vol. 31(2), pages 1198-1211.
    14. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    15. Ma-Lin Song & Ron Fisher & Jian-Lin Wang & Lian-Biao Cui, 2018. "Environmental performance evaluation with big data: theories and methods," Annals of Operations Research, Springer, vol. 270(1), pages 459-472, November.
    16. Sapkota, Pratikshya & Bastola, Umesh, 2017. "Foreign direct investment, income, and environmental pollution in developing countries: Panel data analysis of Latin America," Energy Economics, Elsevier, vol. 64(C), pages 206-212.
    17. Liu, Zuankuo & Xin, Li, 2019. "Has China's Belt and Road Initiative promoted its green total factor productivity？——Evidence from primary provinces along the route," Energy Policy, Elsevier, vol. 129(C), pages 360-369.
    18. Natalia Zugravu-Soilita, 2017. "How does Foreign Direct Investment Affect Pollution? Toward a Better Understanding of the Direct and Conditional Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 293-338, February.
    19. Cole, Matthew A. & Elliott, Robert J.R. & Strobl, Eric, 2008. "The environmental performance of firms: The role of foreign ownership, training, and experience," Ecological Economics, Elsevier, vol. 65(3), pages 538-546, April.
    20. Al-mulali, Usama & Foon Tang, Chor, 2013. "Investigating the validity of pollution haven hypothesis in the gulf cooperation council (GCC) countries," Energy Policy, Elsevier, vol. 60(C), pages 813-819.
    21. Mohamed Abdouli & Sami Hammami, 2018. "The Dynamic Links Between Environmental Quality, Foreign Direct Investment, and Economic Growth in the Middle Eastern and North African Countries (MENA Region)," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 833-853, September.
    22. Junfeng Zhang & Hong Fang & Bo Peng & Xu Wang & Siran Fang, 2016. "Productivity Growth-Accounting for Undesirable Outputs and Its Influencing Factors: The Case of China," Sustainability, MDPI, vol. 8(11), pages 1-13, November.
    23. Baek, Jungho, 2016. "A new look at the FDI–income–energy–environment nexus: Dynamic panel data analysis of ASEAN," Energy Policy, Elsevier, vol. 91(C), pages 22-27.
    24. Seker, Fahri & Ertugrul, Hasan Murat & Cetin, Murat, 2015. "The impact of foreign direct investment on environmental quality: A bounds testing and causality analysis for Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 347-356.
    25. Pao, Hsiao-Tien & Tsai, Chung-Ming, 2011. "Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, I," Energy, Elsevier, vol. 36(1), pages 685-693.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ibrahim A. Adekunle & Olumuyiwa G. Yinusa & Tolulope O. Williams & Rahmon A. Folami, 2021. "On the Determinant of Financial Development in Africa: Geography, Institutions and Macroeconomic Policy Relevance," Research Africa Network Working Papers 21/054, Research Africa Network (RAN).
    2. Dobdinga C. Fonchamnyo & Etoh-Anzah P. Angyie & Nges S. Afumbom & Gildas D. Dinga & Simplice A. Asongu, 2022. "Structural Change, Environmental Pollution and Health Expenditure: Evidence from a Global Panel," Working Papers of the African Governance and Development Institute. 22/071, African Governance and Development Institute..
    3. Talant Kaliyeva & Lyazzat Sembiyeva & Aida Zhagyparova & Azyk Orozonova & Gulzhan Tazhbenova & Zhanat Tulegenova, 2020. "Debt and investments: analysis of selected countries," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(2), pages 1267-1285, December.
    4. Liu, Yaping & Sadiq, Farah & Ali, Wajahat & Kumail, Tafazal, 2022. "Does tourism development, energy consumption, trade openness and economic growth matters for ecological footprint: Testing the Environmental Kuznets Curve and pollution haven hypothesis for Pakistan," Energy, Elsevier, vol. 245(C).
    5. Sahoo, Malayaranjan & Sethi, Narayan & Angel Esquivias Padilla, Miguel, 2023. "Unpacking the dynamics of information and communication technology, control of corruption and sustainability in green development in developing economies: New evidence," Renewable Energy, Elsevier, vol. 216(C).
    6. Sandra Nelly Leyva-Hernández & Antonia Terán-Bustamante, 2024. "Country-Level Environmental Performance: Investment, Education, and Research and Development," Social Sciences, MDPI, vol. 13(3), pages 1-13, March.
    7. Yue Liu & Siming Liu & Xueying Xu & Pierre Failler, 2020. "Does Energy Price Induce China’s Green Energy Innovation?," Energies, MDPI, vol. 13(15), pages 1-18, August.
    8. Fredrick Oteng Agyeman & Ma Zhiqiang & Mingxing Li & Agyemang Kwasi Sampene & Malcom Frimpong Dapaah & Emmanuel Adu Gyamfi Kedjanyi & Paul Buabeng & Yiyao Li & Saifullah Hakro & Mohammad Heydari, 2022. "Probing the Effect of Governance of Tourism Development, Economic Growth, and Foreign Direct Investment on Carbon Dioxide Emissions in Africa: The African Experience," Energies, MDPI, vol. 15(13), pages 1-24, June.
    9. Peng Hou & Yilin Li & Yong Tan & Yuanjie Hou, 2020. "Energy Price and Energy Efficiency in China: A Linear and Nonlinear Empirical Investigation," Energies, MDPI, vol. 13(16), pages 1-24, August.
    10. Satria Tirtayasa & A. Akrim & Ade Gunawan & Emilda Sulasmi & Hastin Umi Anisah, 2021. "Significance of Economic Activities in Environmental Protection: Evidence from a Panel of 4-ASEAN Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 420-426.
    11. Tarek Ghazouani, 2022. "The Effect of FDI Inflows, Urbanization, Industrialization, and Technological Innovation on CO2 Emissions: Evidence from Tunisia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 3265-3295, December.
    12. Nartraphee Tancho & Thanaporn Sriyakul & Changjiang Tang, 2020. "Asymmetric Impacts of Macroeconomy on Environment Degradation in Thailand: A NARDL Approach," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(4), December.
    13. Najabat Ali & Khamphe Phoungthong & Kuaanan Techato & Waheed Ali & Shah Abbas & Joshuva Arockia Dhanraj & Anwar Khan, 2022. "FDI, Green Innovation and Environmental Quality Nexus: New Insights from BRICS Economies," Sustainability, MDPI, vol. 14(4), pages 1-17, February.
    14. Valentina Vasile & Mirela Panait & Paolo Piciocchi & Maria Antonella Ferri & Maria Palazzo, 2022. "Performance management and sustainable development: an exploration of non-financial performance of companies with foreign capital in Romania," Italian Journal of Marketing, Springer, vol. 2022(3), pages 371-400, September.
    15. Wu, Wenhan & Wu, Wenzhuo & Wu, Kouhua & Ding, Chen, 2022. "The nexus between green innovations and natural resources commodity prices in China," Resources Policy, Elsevier, vol. 78(C).
    16. Yanhong Feng & Shuanglian Chen & Pierre Failler, 2020. "Productivity Effect Evaluation on Market-Type Environmental Regulation: A Case Study of SO 2 Emission Trading Pilot in China," IJERPH, MDPI, vol. 17(21), pages 1-27, October.
    17. Yue Liu & Hao Dong & Pierre Failler, 2019. "The Oil Market Reactions to OPEC’s Announcements," Energies, MDPI, vol. 12(17), pages 1-15, August.
    18. Xie, Peijun & Jamaani, Fouad, 2022. "Does green innovation, energy productivity and environmental taxes limit carbon emissions in developed economies: Implications for sustainable development," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 66-78.
    19. AM Priyangani Adikari & Haiyun Liu & DMSLB Dissanayake & Manjula Ranagalage, 2023. "Human Capital and Carbon Emissions: The Way forward Reducing Environmental Degradation," Sustainability, MDPI, vol. 15(4), pages 1-17, February.
    20. Yen Nguyen & Son Le & Nam Ngo & Huyen Nguyen, 2023. "Impacts of FDI and Environmental Pollution in ASEAN Countries: The Role of Institutions," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 242-250, September.
    21. Shaolong Zeng & Yiqun Liu & Junjie Ding & Danlu Xu, 2020. "An Empirical Analysis of Energy Consumption, FDI and High Quality Development Based on Time Series Data of Zhejiang Province," IJERPH, MDPI, vol. 17(9), pages 1-17, May.
    22. Song, Wenfei & Han, Xianfeng, 2022. "The bilateral effects of foreign direct investment on green innovation efficiency: Evidence from 30 Chinese provinces," Energy, Elsevier, vol. 261(PB).
    23. Taiwo Akinlo & James Temitope Dada, 2021. "The moderating effect of foreign direct investment on environmental degradation-poverty reduction nexus: evidence from sub-Saharan African countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(11), pages 15764-15784, November.
    24. Yan, Dan & Ren, Xiaohang & Kong, Ying & Ye, Bin & Liao, Zangyi, 2020. "The heterogeneous effects of socioeconomic determinants on PM2.5 concentrations using a two-step panel quantile regression," Applied Energy, Elsevier, vol. 272(C).
    25. Fedaa Abd Almajid Sabbar Alaraji & Gruescu Riana Maria, 2023. "Foreinn Direct Investment – A Key Factor In Reducing Economic, Social And Environmental Gaps," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 168-177, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Demena, Binyam Afewerk & Afesorgbor, Sylvanus Kwaku, 2020. "The effect of FDI on environmental emissions: Evidence from a meta-analysis," Energy Policy, Elsevier, vol. 138(C).
    2. Muhammad Shahbaz & Mehmet Akif Destek & Michael L. Polemis, 2018. "Do Foreign Capital and Financial Development Affect Clean Energy Consumption and Carbon Emissions? Evidence from BRICS and Next-11 Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 68(4), pages 20-50, October-D.
    3. Opoku, Eric Evans Osei & Boachie, Micheal Kofi, 2020. "The environmental impact of industrialization and foreign direct investment," Energy Policy, Elsevier, vol. 137(C).
    4. Albulescu, Claudiu Tiberiu & Tiwari, Aviral Kumar & Yoon, Seong-Min & Kang, Sang Hoon, 2019. "FDI, income, and environmental pollution in Latin America: Replication and extension using panel quantiles regression analysis," Energy Economics, Elsevier, vol. 84(C).
    5. Yixing Sun & Mingyang Zhang & Yicheng Zhu, 2023. "Do Foreign Direct Investment Inflows in the Producer Service Sector Promote Green Total Factor Productivity? Evidence from China," Sustainability, MDPI, vol. 15(14), pages 1-19, July.
    6. Wilman-Santiago Ochoa-Moreno & Byron Alejandro Quito & Carlos Andrés Moreno-Hurtado, 2021. "Foreign Direct Investment and Environmental Quality: Revisiting the EKC in Latin American Countries," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    7. Mohamed Abdouli & Anis Omri, 2021. "Exploring the Nexus Among FDI Inflows, Environmental Quality, Human Capital, and Economic Growth in the Mediterranean Region," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 788-810, June.
    8. Shahbaz, Muhammad & Nasir, Muhammad Ali & Roubaud, David, 2018. "Environmental degradation in France: The effects of FDI, financial development, and energy innovations," Energy Economics, Elsevier, vol. 74(C), pages 843-857.
    9. Tan, Ruipeng & Xu, Mengmeng & Qiao, Gang & Wu, Huaqing, 2023. "FDI, financial market development and nonlinearities of energy and environmental efficiency in China: Evidence from both parametric and nonparametric models," Energy Economics, Elsevier, vol. 119(C).
    10. Liu, Liyun & Zhao, Zhenzhi & Su, Bin & Ng, Tsan Sheng & Zhang, Mingming & Qi, Lin, 2021. "Structural breakpoints in the relationship between outward foreign direct investment and green innovation: An empirical study in China," Energy Economics, Elsevier, vol. 103(C).
    11. Munther Al-Nimer & Salah Kayed & Rizwan Ullah & Najib Ullah Khan & Muhammad Sualeh Khattak, 2022. "Mapping the Research between Foreign Direct Investment and Environmental Concerns; Where Are We and Where to Go?," Sustainability, MDPI, vol. 14(24), pages 1-26, December.
    12. Farzan Yahya & Muhammad Rafiq, 2020. "Brownfield, greenfield, and renewable energy consumption: Moderating role of effective governance," Energy & Environment, , vol. 31(3), pages 405-423, May.
    13. Destek, Mehmet Akif & Okumus, İlyas, 2018. "Does pollution haven hypothesis hold in newly industrialized countries? Evidence from ecological footprint," MPRA Paper 106959, University Library of Munich, Germany.
    14. Chen, Wenhui & Lei, Yalin, 2018. "The impacts of renewable energy and technological innovation on environment-energy-growth nexus: New evidence from a panel quantile regression," Renewable Energy, Elsevier, vol. 123(C), pages 1-14.
    15. Marques, António Cardoso & Caetano, Rafaela, 2020. "The impact of foreign direct investment on emission reduction targets: Evidence from high- and middle-income countries," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 107-118.
    16. Duan, Yuwan & Jiang, Xuemei, 2021. "Pollution haven or pollution halo? A Re-evaluation on the role of multinational enterprises in global CO2 emissions," Energy Economics, Elsevier, vol. 97(C).
    17. Chunbin Zhang & Rong Zhou & Jundong Hou & Mengtong Feng, 2022. "Spatial-Temporal Evolution and Convergence Characteristics of Agricultural Eco-Efficiency in China from a Low-Carbon Perspective," Sustainability, MDPI, vol. 14(24), pages 1-24, December.
    18. Gyamfi, Bright Akwasi & Bein, Murad A. & Udemba, Edmund Ntom & Bekun, Festus Victor, 2021. "Investigating the pollution haven hypothesis in oil and non-oil sub-Saharan Africa countries: Evidence from quantile regression technique," Resources Policy, Elsevier, vol. 73(C).
    19. Zafar, Muhammad Wasif & Shahbaz, Muhammad & Sinha, Avik & Sengupta, Tuhin & Qin, Quande, 2020. "How Renewable Energy Consumption Contribute to Environmental Quality? The Role of Education in OECD Countries," MPRA Paper 100259, University Library of Munich, Germany, revised 08 May 2020.
    20. Lei, Ming & Yin, Zihan & Yu, Xiaowen & Deng, Shijie, 2017. "Carbon-weighted economic development performance and driving force analysis: Evidence from China," Energy Policy, Elsevier, vol. 111(C), pages 179-192.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3538-:d:243443. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.