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Linking FDI and Sustainable Environment in EU Countries

Author

Listed:
  • Adina Dornean

    (Department of Finance, Money and Public Administration, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi, 700505 Iasi, Romania)

  • Irina Chiriac

    (Social Sciences and Humanities Research Department, Institute of Interdisciplinary Research, Alexandru Ioan Cuza University, 700107 Iasi, Romania)

  • Valentina Diana Rusu

    (Social Sciences and Humanities Research Department, Institute of Interdisciplinary Research, Alexandru Ioan Cuza University, 700107 Iasi, Romania)

Abstract

The aim of this study is to emphasize the link between the foreign direct investments (FDIs) and the sustainable environment in EU countries. We also focus on investigating the influence of other factors related to business environment on FDIs, considering the investors’ sustainable choice for the host countries, grouped according to FTSE Russell criteria. Using panel methodology and applying Ordinary Least Squares (OLS) method of data analysis, the authors reached the conclusion that a better-rated business environment, with concern for sustainability, has more of a chance to attract larger sums of FDIs, mostly in the case of developed economies. This fact proves that the main advantage considered by a foreign investor in developed EU countries is represented by CO 2 emissions (sustainable environment) and a good ease of doing business environment. The study highlights the factors that influence the decision of investing in developed countries, rather than in emerging and frontier ones. This paper contributes to the existing literature by identifying the group of countries which need a more sustainable approach to attract a large amount of FDIs, given that the inflow of FDIs is a crucial factor of economic growth, a possible source of innovation and technology, and a way to reduce poverty.

Suggested Citation

  • Adina Dornean & Irina Chiriac & Valentina Diana Rusu, 2021. "Linking FDI and Sustainable Environment in EU Countries," Sustainability, MDPI, vol. 14(1), pages 1-16, December.
    • Handle: RePEc:gam:jsusta:v:14:y:2021:i:1:p:196-:d:711275
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    References listed on IDEAS

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    1. Scholes, Myron S & Wolfson, Mark A, 1990. "The Effects of Changes in Tax Laws on Corporate Reorganization Activity," The Journal of Business, University of Chicago Press, vol. 63(1), pages 141-164, January.
    2. Jiangyan Yu & Mr. James P Walsh, 2010. "Determinants of Foreign Direct Investment: A Sectoral and Institutional Approach," IMF Working Papers 2010/187, International Monetary Fund.
    3. Ghosh Indradeep, 2007. "The Relation between Trade and FDI in Developing Countries -- A Panel Data Approach," Global Economy Journal, De Gruyter, vol. 7(3), pages 1-32, October.
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    Cited by:

    1. Magdalene Williams & Ahmad Abu Alrub & Mehmet Aga, 2022. "Ecological Footprint, Economic Uncertainty and Foreign Direct Investment in South Africa: Evidence From Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Approach," SAGE Open, , vol. 12(2), pages 21582440221, April.
    2. Aristide Karangwa & Zhan Su, 2023. "Towards a Multidimensional Model for Evaluating the Sustainable Effect of FDI on the Development of Host Developing Countries: Evidence from Africa," Sustainability, MDPI, vol. 15(5), pages 1-23, March.

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