Geopolitical risk and green outward foreign direct investment location choice: evidence from Chinese listed companies.

Abstract

Green outward foreign direct investment (OFDI) has become an important driving force for sustainable economic and environmental development. However, increasing geopolitical risks (GPR) pose a critical obstacle to the green OFDI of multinational enterprises. Drawing upon international production eclectic theory, we explore the impact of GPR on the green OFDI of Chinese enterprises and discuss the moderating role of firms' green technological and political capabilities including different moderating effects of these types of capabilities in the Belt and Road Initiative (BRI) and non-BRI countries. Using the BvD Cross-border Investment database and annual reports of Chinese A-listed companies, we constructed a unique micro-firm overseas green project dataset in 2013-2020. Negative binomial models were used for empirical testing. The GPR has a significant negative impact on Chinese enterprises' green OFDI location choices. The impact intensity varies with the firms' green technological and political capabilities. In addition, compared with non-BRI countries, the role of firms' green technological capability in BRI countries is stronger, while firms' political capability is not significant. These findings expand research on the relationship between GPR and green development by emphasizing the differential impact of GPR on enterprises' green OFDI location choices under different firm capabilities and bilateral country relations.