Will more multinational corporations inflow approach closer toward carbon neutrality? Novel propensity score matching‐difference‐in‐difference evidence across 35 developing countries

Sajjad Ali, Amogh Ghimire, Xingle Long and Lili Chen

Business Strategy and the Environment, 2025, vol. 34, issue 2, 1625-1642

Abstract: This paper mainly investigates the roles of multinational corporations (MNCs) inflow on carbon neutrality across 35 developing countries. First, we testify the role of MNCs inflow on carbon neutrality. Next, we compare the heterogenous effects of the Kyoto Protocol and the Paris Agreement on CO2 emissions. Third, this study employs the propensity score matching (PSM) difference‐in‐difference (DID) with relatively higher internal validity to evaluate the policy shock impacts of the Kyoto Protocol and Paris Agreement. Furthermore, we also explore the impact of trade competitiveness on CO2 emissions to verify the structure, technique, and scale effects of international trade. Finally, we also analyze how human capital impacts CO2 emissions from the perspective of endogenous growth, departing from exogenous growth. The findings indicate that MNCs inflow has mixed effect on CO2 emissions, due to pollution haven and halo effect. Kyoto Protocol increased CO2 emissions, whereas Paris Agreement decreased CO2 emissions. Human capital decreased CO2 emissions according to the DID model, suggesting its crucial role in achieving carbon neutrality through endogenous growth mechanisms. Renewable energy consumption reduced CO2 emissions, highlighting the importance of sustainable energy practices. Urbanization decreased more CO2 emissions in the model of Paris Agreement over that of Kyoto Protocol. Trade competitiveness exhibits mixed effects on CO2 emissions. It is better to facilitate the cleaner MNCs inflow across developing countries, aiming to decrease cross‐border pollution.

Date: 2025
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