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Multinational energy utilities in the energy transition: A configurational study of the drivers of FDI in renewables

Author

Listed:
  • Samuli Patala

    (Aalto University)

  • Jouni K. Juntunen

    (Aalto University
    Aalto University)

  • Sarianna Lundan

    (Aalto University
    University of Bremen)

  • Tiina Ritvala

    (Aalto University)

Abstract

The global energy system has a long way to go to meet international climate goals, and significant investment in renewable energy is required to accelerate the energy transition (IRENA, 2016, 2019). We examine how firm- and country-specific conditions in the electric utility sector impact foreign direct investment (FDI) in renewables. Using a unique dataset of 289 greenfield investments by 17 multinational energy utilities, we employ a fuzzy set qualitative comparative analysis (fsQCA) that yields five causal configurations leading to FDI in renewables and four configurations leading to investment in non-renewables. Our results indicate that private MNEs are at the forefront of investment in renewables, and while state-owned MNEs (SOMNEs) do invest in them, they tend to follow strategies that are less risky compared to private MNEs and more responsive to host-country incentives. Our analysis suggests that for private MNEs, international experience is strongly associated with investment in renewables, while for SOMNEs it is associated with investment in non-renewables. Further, we also identify instances where MNEs contribute simultaneously to a ‘race to the top’ and a ‘race to the bottom’ by investing in both renewables and non-renewables in different markets, thereby reducing the pace of the energy transition.

Suggested Citation

  • Samuli Patala & Jouni K. Juntunen & Sarianna Lundan & Tiina Ritvala, 2021. "Multinational energy utilities in the energy transition: A configurational study of the drivers of FDI in renewables," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(5), pages 930-950, July.
    • Handle: RePEc:pal:jintbs:v:52:y:2021:i:5:d:10.1057_s41267-020-00387-x
    DOI: 10.1057/s41267-020-00387-x
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