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Foreign production and the environment: does the type of FDI matter?

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  • Evangelina Dardati
  • Meryem Saygili

Abstract

We examine the relationship between foreign ownership and the environmental performance of firms. We make a distinction between export-oriented and horizontal multinationals as they have different motivations and firm characteristics. Horizontal foreign direct investment substitutes for exports when trade costs are high, while export-oriented vertical multinationals geographically separate the stages of production primarily to exploit production cost differences across countries. Theoretically, it is not clear which type of foreign direct investment is dirtier. In this paper, we use microdata from Chile and find that export-oriented foreign firms have lower emission intensity than horizontal affiliates and domestic firms.

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  • Evangelina Dardati & Meryem Saygili, 2020. "Foreign production and the environment: does the type of FDI matter?," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 721-733, November.
    • Handle: RePEc:taf:irapec:v:34:y:2020:i:6:p:721-733
    DOI: 10.1080/02692171.2020.1775791
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    Cited by:

    1. Bai, Hanyu & Irfan, Muhammad & Hao, Yu, 2022. "How does industrial transfer affect environmental quality? Evidence from China," Journal of Asian Economics, Elsevier, vol. 82(C).
    2. Shazia Kousar & Farhan Ahmed & María de las Nieves López García & Nimra Ashraf, 2020. "Renewable Energy Consumption, Water Crises, and Environmental Degradation with Moderating Role of Governance: Dynamic Panel Analysis under Cross-Sectional Dependence," Sustainability, MDPI, vol. 12(24), pages 1-16, December.
    3. Tu Thanh Hoai & Nha Nguyen Minh & Hien Vo Van & Nguyen Phong Nguyen, 2023. "Accounting going green: The move toward environmental sustainability in Vietnamese manufacturing firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 1928-1941, July.

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