Do green foreign direct investments increase the innovative capability of MNE subsidiaries?

Vito Amendolagine, Ulrich Elmer Hansen, Rasmus Lema, Roberta Rabellotti and Dalila Ribaudo

World Development, 2023, vol. 170, issue C

Abstract: Technologies to mitigate climate change may diffuse from lead markets to the rest of the world through several mechanisms and make important contributions to the global green transformation. In this paper, we explore the role played by multinational enterprises (MNEs) in transferring knowledge and innovative capabilities in green technologies to their global subsidiaries. We posit that the degree of green knowledge transfer and innovative capability development in subsidiaries depend on: (i) the host country characteristics, (ii) the specific technology in question, and (iii) the mode of entry. The empirical analysis combines data on foreign direct investments with patent analysis. The results suggest that being a subsidiary of a green MNE has a positive impact on the number and quality of green patents produced locally. This green innovative advantage vis-à-vis domestic companies is larger in less developed countries and in those that are less reliant on oil rents, in particular if they already possess higher levels of relevant domestic innovative capacity. Furthermore, firm and sectoral characteristics also matter. The analysis suggests that green FDIs are more effective when technologies are characterized by low tradability and tacit knowledge. Finally, cross-border acquisitions are more efficient at strengthening green innovative capabilities than subsidiaries established with greenfield investments.

Keywords: Foreign direct investments; Green innovation; Multinational subsidiaries; Renewable energy; Green transition (search for similar items in EconPapers)
Date: 2023
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:170:y:2023:i:c:s0305750x23001602

DOI: 10.1016/j.worlddev.2023.106342

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