How Does Environmental Regulation Affect the Relationship between FDI and Technological Innovation: From the Perspective of Technology Transactions

Meng Zeng,Yigui Xiao,Fangyi Zhou,Lihang Liu

doi:10.3390/pr9081264

Abstract

Many studies have found that FDI can reduce the pollutant emissions of host countries. At the same time, the intensity of environmental regulation would affect the emission reduction effect of FDI in the host country. This study aims to reveal the internal mechanisms of this effect. Specifically, this paper studies the impact of FDI on technological innovation in China’s industrial sectors from the perspective of technology transactions from 2001 to 2019, and then analyzes whether the intensity of environmental regulation can promote the relationship. Results indicate that FDI promotes technological innovation through technology transactions. In addition, it finds that the intensity of environmental regulation significantly positively moderates the relationship between FDI and technological innovation, which is achieved by positively moderating the FDI–technology transaction relationship. Regional heterogeneity analysis is further conducted, and results show that in the eastern and western regions of China, FDI can stimulate technological innovation within regional industrial sectors through technology trading. Moreover, environmental regulation has a significant positive regulatory effect on the above relationship, but these effects are not supported by evidence in the central region of China.

Highlights

China, which is the largest developing country in the world, has attracted tremendous foreign direct investment (FDI) since the reform and opening-up policy [1]
This study aims to reveal (1) whether FDI stimulates technological innovation in China’s industrial sectors and whether this relationship is affected by the intensity of environmental regulation, (2) whether technology transactions play a role in the FDI
This study examines the impact of environmental regulation on the relationship between FDI, technology transactions, and technological innovation

Summary

Introduction

China, which is the largest developing country in the world, has attracted tremendous foreign direct investment (FDI) since the reform and opening-up policy [1]. FDI is an important source of access to technology and resources for some developing countries as foreign firm entry is accompanied by technology and knowledge transfer into the host economy [2]. There are many environmental issues caused by FDI from transnational corporations (TNCs) that aim to decrease labor costs and evade stringent environmental regulations in their home countries [3]. FDI embedded with high pollution and new technology brings in high-speed economic growth as well as huge environmental pollution in China. It was considered as one of the most important factors causing heavy pollution in China because developed countries have treated China as the “Pollution. Some studies indicate that high-quality FDIs may enhance the total technological level of host countries due to technology spillover [6]

Objectives

Results

Conclusion