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In Search of Environmental Spillovers

  • Facundo Albornoz
  • Matthew A Cole
  • Robert J R Elliott
  • Marco G Ercolani

There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental spillovers from foreign firms. On the basis that foreign owned firms may encourage firms in their extended supply chain to improve their environment related management practices, evidence for the existence of environmental spillovers should be easier to find than productivity spillovers where firms naturally attempt to minimize intra-industry knowledge leakage. In this paper we show that first, foreign owned firms are more likely to implement environmental management systems (EMS) and second, that the presence of foreign owned firms in those sectors that a firm supplies can encourage good environmental practice. This is especially true if a firm is foreign, has high absorptive capacity, and operates in the presence of formal and informal networks.

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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 08-03.

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Length: 35 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:bir:birmec:08-03
Contact details of provider: Postal: Edgbaston, Birmingham, B15 2TT
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