Do foreign direct investment and environmental regulation improve green technology innovation? An empirical analysis based on panel data from the Chinese manufacturing industry

The environmental regulation and foreign direct investment (FDI) inflow have an important impact on the progress of green technology. This study analyzes the impacts of environmental regulation and FDI on green technology innovation (GTI) based on the panel data of 13 Chinese manufacturing sectors. The results of static panel regression show that the environmental regulation has a positive impact on GTI, while the FDI has a negative impact. The results of the panel threshold model reveal that the effect of environmental regulation on GTI presents a nonlinear shape. The negative effect of FDI on GTI is strengthened when the environmental regulation exceeds its threshold. Increasing FDI inflow can inhibit the effect of environmental regulation. Meanwhile, a strict environmental regulation can enhance the inhibiting effect of FDI on GTI. The FDI inflow into high-tech manufacturing sectors has a less negative impact on GTI than the FDI inflow into low-tech sectors in the case of the enhancement of environmental regulation. This study provides some implications for the formulation of environmental regulation and the FDI inflow into China to improve the GTI.

Automated summary

The study shows that environmental regulation has a positive impact on green technology innovation, while foreign direct investment has a negative impact. The effects of environmental regulation and FDI on GTI are nonlinear, with FDI having a stronger negative effect when the environmental regulation exceeds a certain threshold.