Do Developing Countries Invest Up? The Environmental Effects of Foreign Direct Investment from Less-Developed Countries

Ka Zeng and Joshua Eastin

World Development, 2012, vol. 40, issue 11, 2221-2233

Abstract: This paper examines the environmental effects of foreign direct investment (FDI) from less-developed countries (LDC). We hypothesize that rather than transferring poor home-country practices across borders, LDC FDI can increase the level of environmental stewardship of host-country firms. We contend that LDC firms find it increasing financially advantageous to signal to consumers, investors, and potential business partners their commitment to environmental protection by adopting sound environmental practices. Furthermore, this behavior can create spillover effects to other host-country firms, leading these firms to also boost their environmental credentials. Our empirical findings lend support to these conjectures.

Keywords: FDI; environment; ISO 14001; LDC (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:40:y:2012:i:11:p:2221-2233

DOI: 10.1016/j.worlddev.2012.03.008

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