Environmental Pressure and the Performance of Foreign Firms in an Emerging Economy
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Does environmental management help foreign firms outperform local firms in emerging economies? While existing research suggests that environmental management may or may not benefit firm performance, the question is particularly under-investigated in the emerging economy context. Using the data on foreign investment into China, this study explores whether foreign firms that are under greater environmental pressure, at home or at the host, outperform comparable local firms in an emerging host country. In making this comparison, we use propensity-score matching and a difference-in-differences approach to handle the problem of endogeneity inherent in comparing the performances of foreign versus local firms. We find empirical support that foreign firms perform better than local firms when they are under high environmental pressure in the emerging host country, and this result is driven by the foreign firms originating from countries with high environmental pressure.
KeywordsEnvironmental pressure Stakeholder theory Foreign direct investment Emerging economy Firm performance
Jon J. Moon acknowledges that this work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2013S1A5A8023591). Haitao Yin wishes to thank the financial supports from the National Natural Science Foundation of China (No. 71202071, 71322305 and 71421002).
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