Abstract
Although concerns about the environment have been raised by some governments and the public in general, literature has explored the possibility that Foreign Direct Investment (FDI) may flow from countries with strict environmental regulations to countries where the regulations are less stringent—the pollution haven hypothesis (PHH). In response to that tendency, some countries may implement less stringent regulations, in order to attract FDI, resulting in the race to the bottom effect (RTB). As the number of studies on this topic has expanded dramatically in the last two decades, the present work intends to provide an updated literature review on the relationship between FDI and environmental regulations. Through a bibliometric analysis, we evaluate the relevance of existing studies and identify possible trends. Results show that there is considerable empirical evidence for the PHH, but fewer studies confirm the RTB, and that topic has been increasingly analysed.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Explore related subjects
Discover the latest articles and news from researchers in related subjects, suggested using machine learning.Data availability
The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.
Notes
Although all four theories bring an interesting perspective to the topic, the second one has a greater focus on the consequences of FDI to the host country, considering that it discusses whether FDI has a concrete influence on its environmental degradation or protection, and the fourth one deals with economic growth and income, whose consideration would demand a different approach to this work. Hence, they fall out of the main objective of this paper, which is to understand the implications environmental regulation and FDI have on each other.
As stated by Dunning and Lundan (2008), the significance and composition of the three advantages of the eclectic paradigm tend to vary according to the motivations for investing abroad. Dunning (1993) proposes four types of motivations: resource seeking, market seeking, efficiency seeking and strategic asset seeking. In the case of environmental regulation, the motivation behind MNEs’ choice to invest in a certain country relates to efficiency seeking, since its goal is to avoid environmental regulations that may increase its production costs.
Some examples of papers considered irrelevant are as follows: Dincer and Neyapti (2008), who focus on bank corruption as a result of a certain institutional environment; Dornean, Isan and Oanea (2012), who study the relationship between the global financial crisis of 2008 and FDI; Fabry and Zeghni (2002), who analyse the role played by Russia in the recent phenomenon of FDI globalisation or Heidenreich, Mohr and Puck (2015), who focus on the uncertainty of the political environment faced by foreign investors, highlighting the specific case of Ghana.
Several papers in our dataset are not country-specific. Some of them focus on the determinants of FDI and/or MNEs activity, namely in connection to environmental policies, and others focus on the PHH or RTB, explaining the theories and mentioning countries from a broader perspective.
Countries mentioned in 1 paper: Bangladesh, Chile, Colombia, Costa Rica, Croatia, Equatorial Guinea, Fiji, Iceland, India, Indonesia, Ireland, Kosovo, Laos, Nigeria, Norway, Romania, Sierra Leone, South Korea, Sudan, Switzerland, The Netherlands and Ukraine.
Countries mentioned in 2 papers: Cuba, Germany, Italy, Thailand, United Kingdom and Vietnam.
The number of papers that does not focus on a specific country is 111; however, some papers that focus on a sample of countries do not specify the level of development of the countries. For that reason, we classified those papers as not specified.
The Environment Protection Act of 2001 is an agreement under which the parts agree to integrate a control system of waste disposal, in order to mitigate pollution (Environment Protection Act 2001).
The Environmental Goods Agreement (EGA) is a work in progress between 45 World Trade Organization (WTO) members, who aim at eliminating tariffs on a set of products considered crucial for the improvement of the environment (World Trade Organization 2014).
References
Adeel-Farooq RM, Abu Bakar NA, Raji JO (2018) Green field investment and environmental performance: a case of selected nine developing countries of Asia. Environ Prog Sustain Energy 37(3):1085–1092. https://doi.org/10.1002/ep.12740
Ali OMM (2007) Policy and institutional reforms for an effective EIA system in Sudan. J Environ Assess Policy Manag 9(1):67–82. https://doi.org/10.1142/S1464333207002664
Ben Youssef A, Hammoudeh S, Omri A (2016) Simultaneity modeling analysis of the environmental Kuznets curve hypothesis. Energy Econ 60:266–274. https://doi.org/10.1016/j.eneco.2016.10.005
Braun B (2010) Global trade and the environment: concepts, findings and problems. Geogr Rundsch 62(4):4–11
Bu M, Liu Z, Wagner M, Yu X (2013) Corporate social responsibility and the pollution haven hypothesis: Evidence from multinationals' investment decision in China. Asia-Pac J Account Econ 20(1):85–99. https://doi.org/10.1080/16081625.2013.759175
Buckley PJ (2014) Forty years of internalisation theory and the multinational enterprise. Multinatl Bus Rev 22(3):227–245. https://doi.org/10.1108/MBR-06-2014-0022
Cole MA, Elliott RJR (2005) FDI and the capital intensity of "dirty" sectors: a missing piece of the pollution haven puzzle. Rev Dev Econ 9(4):530–548. https://doi.org/10.1111/j.1467-9361.2005.00292
Cole MA, Elliott RJR, Fredriksson PG (2006) Endogenous pollution havens: does FDI influence environmental regulations? Scand J Econ 108(1):157–178. https://doi.org/10.1111/j.1467-9442.2006.00439
Cole MA, Elliott RJR, Okubo T (2010) Trade, environmental regulations and industrial mobility: an industry-level study of Japan. Ecol Econ 69(10):1995–2002. https://doi.org/10.1016/j.ecolecon.2010.05.015
Cole MA, Elliott RJR, & Zhang LY (2017) Foreign direct investment and the environment. In A. Gadgil & T. P. Tomich (Eds.), Annual Review of Environment and Resources, Vol 42 (Vol. 42, pp. 465-487).
Das M, Das SK (2009) Distribution neutral abatement policy in a model of trade and environment. Environ Dev Econ 14:457–472. https://doi.org/10.1017/s1355770x09005191
Dean JM, Lovely ME, Wang H (2009) Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China. J Dev Econ 90(1):1–13. https://doi.org/10.1016/j.jdeveco.2008.11.007
Dong B, Gong J, Zhao X (2012) FDI and environmental regulation: pollution haven or a race to the top? J Regul Econ 41(2):216–237. https://doi.org/10.1007/s11149-011-9162-3
Dowell G, Hart S, Yeung B (2000) Do corporate global environmental standards create or destroy market value? Manag Sci 46(8):1059–1074. https://doi.org/10.1287/mnsc.46.8.1059.12030
Dunning JH (1958) American investment in british manufacturing industry. Allen & Unwind, London
Dunning JH (1993) Multinational enterprises and the global economy. Addison-Wesley, Harlow
Dunning, J. H. (2003). The eclectic (OLI) paradigm of international production: past, present and future International Business and the Eclectic Paradigm: Developing the OLI Framework (pp. 21-39).
Dunning JH, Lundan SM (2008) Institutions and the OLI paradigm of the multinational enterprise. Asia Pac J Manag 25(4):573–593. https://doi.org/10.1007/s10490-007-9074-z
Dunning JH, Pak YS, Beldona S (2007) Foreign ownership strategies of UK and US international franchisors: an exploratory application of Dunning's envelope paradigm. Int Bus Rev 16(5):531–548. https://doi.org/10.1016/j.ibusrev.2007.01.005
Ellegaard O, Wallin JA (2015) The bibliometric analysis of scholarly production: How great is the impact? Scientometrics 105(3):1809–1831. https://doi.org/10.1007/s11192-015-1645-z
Elliott RJR, Zhou Y (2013) Environmental regulation induced foreign direct investment. Environ Resour Econ 55(1):141–158. https://doi.org/10.1007/s10640-012-9620-0
Environment Protection Act (2001) Sudan, Ministry of Justice.
Erdogan AM (2014) Foreign direct investment and environmental regulations: a survey. J Econ Surv 28(5):943–955. https://doi.org/10.1111/joes.12047
FakhrEldin H, Elsawy Y (2018) Examining the relationship between environmental regulations and foreign direct investment level: evidence from China. Int J Business Global 20(4):519–536. https://doi.org/10.1504/IJBG.2018.093593
Falagas ME, Kouranos VD, Arencibia-Jorge R, Karageorgopoulos DE (2008) Comparison of SCImago journal rank indicator with journal impact factor. FASEB J 22(8):2623–2628
Fredriksson PG, List JA, Millimet DL (2003) Bureaucratic corruption, environmental policy and inbound US FDI: theory and evidence. J Public Econ 87(7-8):1407–1430. https://doi.org/10.1016/S0047-2727(02)00016-6
Gamso J (2017) Trade partnerships and environmental performance in developing countries. J Environ Dev 26(4):375–399. https://doi.org/10.1177/1070496517729727
González-Pereira B, Guerrero-Bote VP, Moya-Anegón F (2010) A new approach to the metric of journals scientific prestige: the SJR indicator. J Inf Secur 4(3):379–391. https://doi.org/10.1016/j.joi.2010.03.002
Gray KR (2002) Foreign direct investment and environmental impacts - is the debate over? Rev Eur Commun Int Environ Law 11(3):306–313. https://doi.org/10.1111/1467-9388.00329
He J (2006) Pollution haven hypothesis and environmental impacts of foreign direct investment: the case of industrial emission of sulfur dioxide (SO <inf>2</inf> ) in Chinese provinces. Ecol Econ 60(1):228–245. https://doi.org/10.1016/j.ecolecon.2005.12.008
Hille E (2018) Pollution havens: international empirical evidence using a shadow price measure of climate policy stringency. Empir Econ 54(3):1137–1171. https://doi.org/10.1007/s00181-017-1244-3
Ietto-Gillies G (2007) Theories of international production: a critical perspective. Crit Perspect Int Bus 3(3):196–210. https://doi.org/10.1108/17422040710774987
Javorcik BS, Wei SJ (2004) Pollution havens and foreign direct investment: Dirty secret or popular myth? Contributions Econ Anal Policy 3(2)
Johanson J, Vahlne JE (2009) The Uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership. J Int Bus Stud 40(9):1411–1431. https://doi.org/10.1057/jibs.2009.24
Kellenberg DK (2009) An empirical investigation of the pollution haven effect with strategic environment and trade policy. J Int Econ 78(2):242–255. https://doi.org/10.1016/j.jinteco.2009.04.004
Kettunen E (2014) China's policy environment toward foreign companies: implications to high-tech sectors. AI & Soc 29(3):403–413. https://doi.org/10.1007/s00146-013-0466-y
Kim Y, Rhee D (2019) Do stringent environmental regulations attract foreign direct investment in developing countries? Evidence on the “Race to the Top” from cross-country panel data. Emerging Markets Finance and Trade 55(12):2796–2808. https://doi.org/10.1080/1540496X.2018.1531240
Kirkpatrick C, Shimamoto K (2008) The effect of environmental regulation on the locational choice of Japanese foreign direct investment. Appl Econ 40(11):1399–1409. https://doi.org/10.1080/00036840600794330
Kok R, Ersoy BA (2009) Analyses of FDI determinants in developing countries. Int J Soc Econ 36(1-2):105–123. https://doi.org/10.1108/03068290910921226
List JA, Co CY (2000) The effects of environmental regulations on foreign direct investment. J Environ Econ Manag 40(1):1–20. https://doi.org/10.1006/jeem.1999.1095
Luxmore SR, Hull CE, Tang Z (2018) Institutional determinants of environmental corporate social responsibility: are multinational entities taking advantage of weak environmental enforcement in lower-income nations? Bus Soc Rev 123(1):151–179. https://doi.org/10.1111/basr.12138
MacDermott R (2006) Trade agreements and the environment: an industry level study for NAFTA. Glob Econ J 6(3):1850090. https://doi.org/10.2202/1524-5861.1128
Madsen PM (2009) Does corporate investment drive a "race to the bottom" in environmental protection? A reexamination of the effect of environmental regulation on investment. Acad Manag J 52(6):1297–1318. https://doi.org/10.5465/amj.2009.47085173
Mathews JA (2015) Trade policy, climate change and the greening of business. Aust J Int Aff 69(5):610–624. https://doi.org/10.1080/10357718.2015.1048782
Padrós-Cuxart R, Riera-Quintero C, & March-Mir F (2016) Bibliometrics: a publication analysis tool.
Pato ML, Teixeira AA (2016) Twenty Years of rural entrepreneurship: a bibliometric survey. Sociol Rural 56(1):3–28. https://doi.org/10.1111/soru.12058
Pearson CS (1987) Multinational corporations, environmental, and the third world: business matters. Duke University Press, Durham, NC
Poelhekke S, van der Ploeg F (2015) Green havens and pollution havens. World Econ 38(7):1159–1178. https://doi.org/10.1111/twec.12219
Porter G (1999) Trade competition and pollution standards: 'race to the bottom' or 'stuck at the bottom'? J Environ Dev 8(2):133–151. https://doi.org/10.1177/107049659900800203
Prakash A, Potoski M (2007) Investing up: FDI and the cross-country diffusion of ISO 14001 management systems. Int Stud Q 51(3):723–744. https://doi.org/10.1111/j.1468-2478.2007.00471
Rezza AA (2015) A meta-analysis of FDI and environmental regulations. Environ Dev Econ 20(2):185–208. https://doi.org/10.1017/s1355770x14000114
Saikawa E, Urpelainen J (2014) Environmental standards as a strategy of international technology transfer. Environ Sci Pol 38:192–206. https://doi.org/10.1016/j.envsci.2013.11.010
Shen J, Wei YD, Yang Z (2017) The impact of environmental regulations on the location of pollution-intensive industries in China. J Clean Prod 148:785–794. https://doi.org/10.1016/j.jclepro.2017.02.050
Taylor J (1999) Japan's global environmentalism: rhetoric and reality. Polit Geogr 18(5):535–562. https://doi.org/10.1016/S0962-6298(98)00112-7
Teixeira AAC (2014) Evolution, roots and influence of the literature on National Systems of Innovation: a bibliometric account. Camb J Econ 38(1):181–214. https://doi.org/10.1093/cje/bet022
Thelwall M (2008) Bibliometrics to webometrics. J Inf Sci 34(4):605–621. https://doi.org/10.1177/0165551507087238
UN (2007), Security council holds first-ever debate on impact of climate change on peace, security, hearing over 50 speakers. Retrieved from https://www.un.org/press/en /2007/sc9000.doc.htm, accessed in 20-03-2019.
UNFCC (2019) What is the Kyoto protocol? Retrieved from https://unfccc.int/ process-and-meetings/the-kyoto-protocol/what-is-the-kyoto-protocol/what-is-the-kyot o-protocol, accessed in 20-03-2019.
Wagner UJ, Timmins CD (2009) Agglomeration effects in foreign direct investment and the pollution haven hypothesis. Environ Resour Econ 43(2):231–256. https://doi.org/10.1007/s10640-008-9236-6
Wang J, Wei W, Deng HH, Yu YH (2017) Will fiscal decentralization influence FDI inflows? A spatial study of Chinese cities. Emerg Mark Financ Trade 53(9):1988–2000. https://doi.org/10.1080/1540496x.2016.1266249
Weingart P (2005) Impact of bibliometrics upon the science system: inadvertent consequences? Scientometrics 62(1):117–131. https://doi.org/10.1007/s11192-005-0007-7
WORLD TRADE ORGANIZATION (2014) Environmental Goods Agreement (EGA). Retrieved from https://www.wto.org/english/tratop_e/envir_e/ega_e.htm, accessed in 26-04-2019).
Xing Y, Kolstad CD (2002) Do lax environmental regulations attract foreign investment? Environ Resour Econ 21(1):1–22. https://doi.org/10.1023/A:1014537013353.
Yabuta M, Nakamura K (2003) Empirical analysis of environmental Kuznets curve hypothesis in Asian countries. Stud Regional Sci 34(1):361–375. https://doi.org/10.2457/srs.34.361
You HB (2013) Inward FDI's Impact on the environment and the counter-measures in Jiangsu. In: Qi E, Shen J, Dou R (eds) The 19th International Conference on Industrial Engineering and Engineering Management. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-38427-1_17
Zhang N, Wan S, Wang P, Zhang P, Wu Q (2018) A bibliometric analysis of highly cited papers in the field of economics and business based on the essential science indicators database. Scientometrics 116:1039–1053. https://doi.org/10.1007/s11192-018-2786-7
Zugravu-Soilita N (2017) How does foreign direct investment affect pollution? Toward a better understanding of the direct and conditional effects. Environ Resour Econ 66(2):293–338. https://doi.org/10.1007/s10640-015-9950-9
Author information
Authors and Affiliations
Contributions
RF contributed to the study conception and design. Data collection were performed by AS. Data analysis was performed by AS and RF. The first draft of the manuscript was written by AS. RF revised the work critically. All authors read and approved the final manuscript.
Corresponding author
Ethics declarations
Competing interests
The authors declare that they have no competing interests.
Ethical approval
Not applicable.
Consent to participate
Not applicable.
Consent to publish
Not applicable.
Additional information
Responsible Editor: Philippe Garrigues
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Santos, A., Forte, R. Environmental regulation and FDI attraction: a bibliometric analysis of the literature. Environ Sci Pollut Res 28, 8873–8888 (2021). https://doi.org/10.1007/s11356-020-11091-6
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-020-11091-6