The Effects of Reverse Knowledge Spillover on China’s Sustainable Development: Sustainable Development Indicators Based on Institutional Quality

Abstract

This study investigates how reverse knowledge spillover (RKS) generated through outward foreign direct investment (OFDI) promotes sustainable development in an investment home country. Economic, social, and environmental dimensions are the pillars of sustainable development and their indicators are developed upon the concept of institutional quality. To this end, we use a balanced panel of 30 Chinese Mainland provinces from 2003 to 2016 and employ a simultaneous equation model to analyze the data in order to observe the direct and indirect effects of OFDI-induced RKS on sustainable development. The current study adopts several indicators to capture the economic, social, and environmental aspects of sustainable development. Additionally, we classify RKS into two types, given the investment destinations in terms of developed economies and emerging economies. On the one hand, our findings confirm that OFDI-induced RKS from developed economies facilitates domestic innovation but negatively affects progress on social and environmental development. On the other hand, OFDI-induced RKS from emerging economies is not conducive to domestic innovation, but it directly fosters sustainable development.

The Comprehensive Impact of Outward Foreign Direct Investment on China’s Carbon Emissions

“…Similarly, Ref. [25] Dong et al (2021) proposed that multinational corporations in emerging economies cannot ignore investment in technologically underdeveloped countries, which will help transfer marginal industries in the home country and promote the upgrading of the industrial structure and sustainable development of the home country. Accordingly, we propose Hypothesis 3: H3: The upgrading of industrial structures is conducive to restraining the growth of total carbon emissions and improving the efficiency of carbon emissions.…”

Formal Institutional Distance and Innovation from OFDI: Evidence from China

“…Multiple scholars tend to analyze this question from the perspective of OFDI reverse technology spillovers. In existing research, the reverse technology spillover effect is used to describe the phenomenon that OFDI in knowledge-intensive developed markets will positively affect the technological capabilities of the parent MNEs in emerging countries [1]. The existing research on the factors contributing to the spillover effect mainly include three aspects; namely, China's absorptive capacity [2], enterprise-based activities [3], and the characteristic differences between the home country and host country [4].…”