Department of Marketing
Foreign direct investment, institutional development, and environmental externalities: Evidence from China
The question of how foreign direct investment (FDI) affects a host country's natural environment has generated much debate but little consensus. Building on an institution-based theory, this article examines how the institutional development of a host setting affects the degree of FDI-related environmental externalities in China (specifically, industrial sulfur dioxide emissions). With a panel data set of 287 Chinese cities, over the period 2002-2009, this study reveals that FDI in general induces negative environmental externalities. Investments from OECD countries increase sulfur dioxide emissions, whereas FDI from Hong Kong, Macau, and Taiwan shows no significant effect. Institutional development reduces the impacts of FDI across the board. By focusing on the moderating role of institutions, this study sheds new light on the long-debated relationships among FDI, institutions, and the environments of the host countries. © 2014 Elsevier Ltd.
China, Environmental externalities, Foreign direct investment, Industrial sulfur dioxide emission, Institutional development
Source Publication Title
Journal of Environmental Management
Wang, Danny T., and Wendy Y. Chen. "Foreign direct investment, institutional development, and environmental externalities: Evidence from China." Journal of Environmental Management 135 (2014): 81-90.