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Do green foreign direct investments increase the innovative capability of MNE subsidiaries?

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  • Amendolagine, Vito
  • Hansen, Ulrich Elmer
  • Lema, Rasmus
  • Rabellotti, Roberta
  • Ribaudo, Dalila

Abstract

Technologies to mitigate climate change may diffuse from lead markets to the rest of the world through several mechanisms and make important contributions to the global green transformation. In this paper, we explore the role played by multinational enterprises (MNEs) in transferring knowledge and innovative capabilities in green technologies to their global subsidiaries. We posit that the degree of green knowledge transfer and innovative capability development in subsidiaries depend on: (i) the host country characteristics, (ii) the specific technology in question, and (iii) the mode of entry. The empirical analysis combines data on foreign direct investments with patent analysis. The results suggest that being a subsidiary of a green MNE has a positive impact on the number and quality of green patents produced locally. This green innovative advantage vis-à-vis domestic companies is larger in less developed countries and in those that are less reliant on oil rents, in particular if they already possess higher levels of relevant domestic innovative capacity. Furthermore, firm and sectoral characteristics also matter. The analysis suggests that green FDIs are more effective when technologies are characterized by low tradability and tacit knowledge. Finally, cross-border acquisitions are more efficient at strengthening green innovative capabilities than subsidiaries established with greenfield investments.

Suggested Citation

  • Amendolagine, Vito & Hansen, Ulrich Elmer & Lema, Rasmus & Rabellotti, Roberta & Ribaudo, Dalila, 2023. "Do green foreign direct investments increase the innovative capability of MNE subsidiaries?," World Development, Elsevier, vol. 170(C).
    • Handle: RePEc:eee:wdevel:v:170:y:2023:i:c:s0305750x23001602
    DOI: 10.1016/j.worlddev.2023.106342
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    5. Benjamin Cornejo Costas & Nicola Cortinovis & Andrea Morrison, 2025. "How external linkages and informal institutions enable green innovation in EU regions," Papers in Evolutionary Economic Geography (PEEG) 2503, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Feb 2025.
    6. He Cheng & Jianquan Guo & Natalia Ribberink, 2025. "Just Do It! Performance Feedback on Green Innovation and Postmergers' and Acquisitions' Green Innovation Performance: Evidence From Emerging Economy Firms," Business Strategy and the Environment, Wiley Blackwell, vol. 34(7), pages 8152-8171, November.
    7. João Bento & Miguel Matos Torres & Hicham Nachit, 2026. "Income Inequality, US MNEs and Green Technology Innovation: Evidence from OECD," LIS Working papers 914, LIS Cross-National Data Center in Luxembourg.
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    9. Tao, Zhe & Liu, Hanchao, 2024. "Compensation stickiness and firms' innovative capacity," Finance Research Letters, Elsevier, vol. 69(PA).
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