In Search of Environmental Spillovers

Abstract

There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental spillovers from foreign firms. On the basis that foreign-owned firms may encourage firms in their extended supply chain to improve their environment-related management practices, evidence for the existence of environmental spillovers should be easier to find than productivity spillovers where firms naturally attempt to minimise intra-industry knowledge leakage. In this paper we show that, first, foreign-owned firms are more likely to implement environmental management systems (EMS) and, second, that the presence of foreign-owned firms in those sectors that a firm supplies can encourage good environmental practice. This is especially true if a firm is foreign, has high absorptive capacity, and operates in the presence of formal and informal networks. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd.

Energy efficiency and exporting: Evidence from firm-level data

“…However, both studies also control for exporter status in some specifications and find exporting to be negatively related to energy intensity. Similarly, Albornoz et al (2009) and Cole et al (2006) find exporting and foreign ownership to encourage the adoption of environmental management systems among Argentinean and Japanese firms, respectively.…”

Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity

“…Albornoz, Cole, Elliot and Ercolani (2009) …nd that in Argentina foreign-owned manufacturing …rms are more likely to implement Environmental Management Systems than locally-owned producers. 1 1 These industries are capital intensive (and thus …rms bear high …xed plant costs), generally vertically integrated, produce bulk commodities with a high weight/value ratio and are thus characterized by large transportation costs (see e.g.…”

“…2 In the policy debate the key issue is the e¤ect of tight regulation on the pro…tability of domestic production, more than on national …rms'global pro…ts. 3 Reinaud (2008, p. 3) indicates that there is also a third channel (the fossil fuel price channel), but focuses on the two competitiveness-driven channels, as they can be more realistically addressed via national policies. 4 These models predict that, due to the liberalisation of trade, …rms active in pollutionintensive sectors, and operating in countries adopting more restrictive environmental policies, will transfer production abroad and will serve the domestic market from these new foreign plants.…”

“…Two main competitiveness mechanisms may drive carbon leakage: short-term impacts mainly via trade ‡ows and longterm responses involving also relocation decisions via foreign direct investment (FDI). 3 FDI represents a critical mechanism in assessing the threat of carbon and job leakage since it may lead to major discontinuous changes, implying considerable losses in domestic production and employment. When analysing the impact of unilateral climate policy, it is thus important to take into account that …rms are internationally mobile, capturing the e¤ect of the more stringent climate measures on the domestic …rms'international location choices.…”

Does FDI Bring Environmental Knowledge Spillovers to Developing Countries? The Role of the Local Industrial Structure

“…These externalities may also occur through 'demonstration effects', whereby local firms imitate or adopt technologies and operating practices successfully used by MNEs, thereby intentionally or unintentionally improving environmental aspects of their technology efficiency. Local firms could also be driven by heightened competition as a result of MNEs' entry to upgrade technologies, leading to the improvement of environmental efficiencies (Albornoz et al 2009;Huber 2008;Perkins and Neumayer 2009).…”