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How Can Foreign Direct Investment Trigger Green Growth? The Mediating and Moderating Role of the Energy Transition

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  • Rafaela Vital Caetano

    (Management and Economics Department, University of Beira Interior, 6201-001 Covilhã, Portugal
    Department of Management and Economics, NECE-UBI—Research Unit in Business Science and Economics, University of Beira Interior, Rua Marquês d’Ávila e Bolama, 6201-001 Covilhã, Portugal)

  • António Cardoso Marques

    (Management and Economics Department, University of Beira Interior, 6201-001 Covilhã, Portugal
    Department of Management and Economics, NECE-UBI—Research Unit in Business Science and Economics, University of Beira Interior, Rua Marquês d’Ávila e Bolama, 6201-001 Covilhã, Portugal)

  • Tiago Lopes Afonso

    (Management and Economics Department, University of Beira Interior, 6201-001 Covilhã, Portugal
    Department of Management and Economics, NECE-UBI—Research Unit in Business Science and Economics, University of Beira Interior, Rua Marquês d’Ávila e Bolama, 6201-001 Covilhã, Portugal)

Abstract

Developed countries have the resources/technologies to combat pollution even at the expense of economic growth. Developing countries are in a less fortunate position. Foreign Direct Investment (FDI) can be a tool for developed countries to transfer polluting industries, which increases pollution in host countries. However, as FDI might reduce pollution by reducing energy consumption, the pollutant effect might also be influenced. Therefore, this study examines the mediating effect of energy consumption on the impact of FDI on pollution, and the role of FDI to attain Green Growth via energy transition. The main findings indicate that FDI impacts pollution through energy consumption and that energy transition plays a vital role in reducing this mediating effect. Developing countries appear to use non-renewable energy to fill energy demand. In both groups of countries, FDI is a driver of Green Growth. However, developing countries require larger efforts to achieve Green Growth through the energy transition.

Suggested Citation

  • Rafaela Vital Caetano & António Cardoso Marques & Tiago Lopes Afonso, 2022. "How Can Foreign Direct Investment Trigger Green Growth? The Mediating and Moderating Role of the Energy Transition," Economies, MDPI, vol. 10(8), pages 1-14, August.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:8:p:199-:d:891717
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    References listed on IDEAS

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    1. Adom, Philip Kofi & Opoku, Eric Evans Osei & Yan, Isabel Kit-Ming, 2019. "Energy demand–FDI nexus in Africa: Do FDIs induce dichotomous paths?," Energy Economics, Elsevier, vol. 81(C), pages 928-941.
    2. Sultana, Nasrin & Turkina, Ekaterina, 2020. "Foreign direct investment, technological advancement, and absorptive capacity: A network analysis," International Business Review, Elsevier, vol. 29(2).
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    Cited by:

    1. Serge Mandiefe Piabuo & Janice Tieguhong Puatwoe & Paule Pamela Tabi Eckebil & Tieminie Robinson Nghogekeh & Divine Foundjem-Tita, 2024. "Foreign direct investment and carbon emissions from land use, land-use change, and forestry (LULUCF): empirical evidence from tropical forest countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(6), pages 15639-15665, June.
    2. Brahim Bergougui & Ousama Ben-Salha, 2025. "The Impact of Environmental Governance on Energy Transitions: Evidence from a Global Perspective," Sustainability, MDPI, vol. 17(19), pages 1-24, September.
    3. Maza, Adolfo & Hierro, Maria, 2025. "Delving into the FDI-economic growth relationship at the regional level: Headquarters effect in FDI data," International Review of Economics & Finance, Elsevier, vol. 97(C).
    4. Xu Tian & Umar H. A. Kohar & Saleh F. A. Khatib & Yan Wang, 2024. "Nudging Sustainable Development: Reviewing Energy Transition and Economic Development," Sustainability, MDPI, vol. 16(8), pages 1-29, April.
    5. Scalamonti, Francesco, 2024. "The foreign investments-growth nexus in underdeveloped countries: the state-of-art of research analysing a selected and recent empirical literature (2020-2022)," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    6. Liao, Xiaoli & Nawi, Hafizah Mat & An, Pham Hoang & Mabrouk, Fatma & Kholikova, Rukhsora & Arnone, Gioia & Sahawneh, Nizar M.F., 2024. "Influence of fintech, natural resources, and energy transition on environmental degradation of BRICS countries: Moderating role of human capital," Resources Policy, Elsevier, vol. 92(C).
    7. Caetano, Rafaela Vital & Marques, António Cardoso, 2023. "Could energy transition be a game changer for the transfer of polluting industries from developed to developing countries? An application of game theory," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 351-363.
    8. Esposito, Luca & Jalal, Raja Nabeel-Ud-Din, 2025. "Environmental awareness and pro-environmental behavior impact on renewables investments: A moderating role of environmental concerns," Socio-Economic Planning Sciences, Elsevier, vol. 101(C).

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