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Nexus between environment regulation, FDI, and green technology innovation in OECD countries

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Abstract

To achieve the goal of “sustainable development,” a crucial way is promoting green technology innovation. This paper examines the nexus between environment regulation, FDI, and green technology innovation in OECD countries from 1998 to 2018. The study uses a pooled mean group, random effect model, and GMM model to analyze the relationship empirically. A Dumitrescu-Hurlin panel causal test also tests the causal relationship between variables. The result indicates that environment regulation significantly relates to green technology innovation and encourages the economy to adopt green technology innovation. This result further explained FDI exerts a negative effect on green technology innovation. The findings suggest that there is a need to execute a proper effective environmental policy, especially concerning FDI, to gain the spillover effect on promoting green technology in the host country, specifically in OECD countries. This study provides policy implications to effectively formulate environmental regulation and FDI inflow to gain technology spillover to promote green technology.

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Availability of data and materials

The datasets generated and/or analyzed during the current study are available in the World Development Indicators (2019) and OECD database 2018. Links: https://databank.worldbank.org/source/world-development-indicators#

Abbreviations

FDI:

Foreign direct investment

OECD:

Organisation for Economic Co-operation and Development

GMM:

Generalized methods of moments

SDGs:

Sustainable development goals

UNCTAD:

United Nations Conference on Trade and Development

R&D:

Research and development

USD:

United States Dollar

ER:

Environment regulation

GTI:

Green technology innovation

GDP:

Gross domestic product

CD test:

Cross-section dependence test

LLC:

Levin, Lin, Chu

IPS:

Im, Pesaran-Shin

ARDL:

Autoregressive distributed lag

FMOLS:

Fully Modified Ordinary Least Square

DOLS:

Dynamic Ordinary Least Square

DH:

Dumitrescu-Hurlin

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Authors and Affiliations

  1. Department of Humanities and Social Sciences, National Institute of Technology Rourkela, Rourkela, 769008, Odisha, India

    Puspanjali Behera & Narayan Sethi

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  1. Puspanjali Behera
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  2. Narayan Sethi
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Both the authors contributed to the study conception and design. Material preparation, data collection, and analysis were performed by P.B. and N.S. The first draft of the manuscript was written by P.B. and N.S commented on previous versions of the same. All authors have read and approved the final manuscript.

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Correspondence to Narayan Sethi.

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Behera, P., Sethi, N. Nexus between environment regulation, FDI, and green technology innovation in OECD countries. Environ Sci Pollut Res 29, 52940–52953 (2022). https://doi.org/10.1007/s11356-022-19458-7

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