Racing to the bottom or seeking legitimacy? National environmental performance and the location strategies of Chinese MNEs

Andrea Ascani, Lakshmi Balachandran Nair and Simona Iammarino

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper studies the extent to which the international location patterns of Chinese MNEs privilege economies with environmentally sustainable practices. We develop a theoretical framework confronting the traditional race-to-the-bottom arguments with the Chinese MNEs' need to gain legitimacy abroad and signal their global citizenship. We also examine a set of conditioning factors pertaining to the heterogeneity of both host countries and firms, to explore potential sources of ethical pluralism in Chinese MNEs' location strategies. Empirically, we study 948 greenfield investments in manufacturing undertaken by Chinese companies in 82 countries over the 2013–2019 period. Our results suggest that Chinese MNEs may feed a downward spiral by favouring locations with fragile ecosystem vitality, that is, a weak sustainable use of natural resources with the consequent erosion of environmental quality. This result is driven by Chinese FDI in developing countries and locations with fragile institutional setting. Furthermore, the attracting force of a degraded environmental situation holds especially for Chinese MNEs operating in most polluting sectors and with private ownership.

Keywords: Chinese outward foreign direct investment (Chinese OFDI); emerging countries' multinationals (EMNEs); environment; legitimacy; location strategies (search for similar items in EconPapers)
JEL-codes: F3 G3 J50 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2023-04-01
New Economics Papers: this item is included in nep-cna, nep-des, nep-env and nep-int
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Published in Journal of International Management, 1, April, 2023, 29(2). ISSN: 1075-4253

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http://eprints.lse.ac.uk/117793/ Open access version. (application/pdf)

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Journal Article: Racing to the bottom or seeking legitimacy? National environmental performance and the location strategies of Chinese MNEs (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:117793

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