Are Global Companies Better in Environmental Efficiency in India? Based on Metafrontier Malmquist CO 2 Performance

Yongrok Choi, Hyoungsuk Lee and Jahira Debbarma
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Yongrok Choi: Program in Industrial Security Governance, Inha University; 100 Inha-ro, Incheon 22212, Korea
Hyoungsuk Lee: East Asia Environment Research Center, Inha University, Inharo 100, Nam-gu, Incheon 22212, Korea
Jahira Debbarma: Program in Industrial Security Governance, Inha University; 100 Inha-ro, Incheon 22212, Korea

Sustainability, 2020, vol. 12, issue 20, 1-19

Abstract: There is a rapid increase in inflows of foreign direct investment (FDI) into developing countries such as India. Some researchers argue that FDI has a positive impact on sustainable development in terms of environmental efficiency and brings innovative green technology to the host country. In contrast, others claim that FDI brings considerable pollution to the host country, and their motive is only to yield profit. To address this issue, this paper analyzes environmental efficiency between FDI and domestic firms in India for seven years between 2012 and 2018. The research aims to evaluate the performance of FDI firms in terms of environmental efficiency in India after implementing certain policy regulations, nationally and globally. In this analysis, we use the non-radial metafrontier Malmquist CO 2 performance index (NMMCPI) with three decomposition indices: efficiency change index, best practice gap index, and technological gap change index. Our empirical results indicate that domestic firms have performed well in terms of better catch-up and innovation performance. On the other hand, FDI firms only demonstrated higher technology leadership performance, indicating weaker catch-up performance and weaker innovation performance. From the results, we proposed that policymakers should harmonize between the FDI promotion and regulation in its sustainable performance because global companies are not sensitive to the local regulations, and not very proactive in implementing the global standard of eco-friendliness.

Keywords: foreign direct investment; environmental efficiency; non-radial metafrontier Malmquist index; partial-factor CO 2 emission performance; India (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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