The effects of environmental regulation on outward foreign direct investment’s reverse green technology spillover: Crowding out or facilitation?

Abstract

This study provided statistical evidence for the moderating effect of environmental regulations on the reverse green technology spillover of outward foreign direct investment (OFDI). Static and dynamic panel data model and three estimation methods were used to control for potential endogeneity and ensure the robustness of the results. Chinese provincial-level data were used in the empirical study to reveal the existence, nature, and regional heterogeneity of the moderating effect of environmental regulations. The results showed that environmental regulations served as a moderator to facilitate the reverse green technology spillover of OFDI from the national perspective. After switching to the regional perspective, environmental regulations changed into a moderator that produced a significant crowding-out effect on the reverse green technology spillover of OFDI in eastern regions. In contrast, in the mid-west regions, environmental regulations had no significant moderating effect on this knowledge transfer process. Taken together, our findings indicate that the reverse green technology spillover brought by OFDI can be amplified through well-designed environmental regulations and improved knowledge transfer ability of OFDI.