Abstract
This study investigates how reverse knowledge spillover (RKS) generated through outward foreign direct investment (OFDI) promotes sustainable development in an investment home country. Economic, social, and environmental dimensions are the pillars of sustainable development and their indicators are developed upon the concept of institutional quality. To this end, we use a balanced panel of 30 Chinese Mainland provinces from 2003 to 2016 and employ a simultaneous equation model to analyze the data in order to observe the direct and indirect effects of OFDI-induced RKS on sustainable development. The current study adopts several indicators to capture the economic, social, and environmental aspects of sustainable development. Additionally, we classify RKS into two types, given the investment destinations in terms of developed economies and emerging economies. On the one hand, our findings confirm that OFDI-induced RKS from developed economies facilitates domestic innovation but negatively affects progress on social and environmental development. On the other hand, OFDI-induced RKS from emerging economies is not conducive to domestic innovation, but it directly fosters sustainable development.
Highlights
Received: 28 December 2020Sustainable development has become a universal goal for both developed and emerging economies since the United Nations endorsed the 2030 Agenda for Sustainable Development [1]
The purpose of this research is to use the case of China to explore whether OFDIinduced reverse knowledge spillover (RKS) in developing countries promotes sustainable domestic development by influencing innovation performance
This paper argues that innovation has a positive impact on sustainable development in terms of economic, social, and environmental dimensions
Summary
Received: 28 December 2020Sustainable development has become a universal goal for both developed and emerging economies since the United Nations endorsed the 2030 Agenda for Sustainable Development [1]. Accomplishing sustainable development goals is innately associated with the institutional level and quality of a government. Both well-structured institutions and well-designed execution systems embody institutional quality, which is the conceptual foundation of sustainable development. Improvement of institutional quality enhances the innovation of a firm, which in turn helps it to acquire competitive advantage and to contribute to the sustainable development of a nation [3]. For this reason, measures and indicators of sustainable development have been developed on the basis of institutions
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