Environmental regulation and FDI attraction: a bibliometric analysis of the literature

Santos, Ana; Forte, Rosa

doi:10.1007/s11356-020-11091-6

Research Article
Published: 19 October 2020

Environmental regulation and FDI attraction: a bibliometric analysis of the literature

Environmental Science and Pollution Research volume 28, pages 8873–8888 (2021)Cite this article

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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.

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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).

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Faculdade de Economia do Porto, Universidade do Porto, Porto, Portugal
Ana Santos
Faculdade de Economia do Porto, Universidade do Porto and CEF.UP., Rua Dr. Roberto Frias, 4200–464, Porto, Portugal
Rosa Forte

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Ana Santos
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Rosa Forte
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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.

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Correspondence to Rosa Forte.

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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

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Received: 06 March 2020
Accepted: 01 October 2020
Published: 19 October 2020
Issue Date: February 2021
DOI: https://doi.org/10.1007/s11356-020-11091-6

Keywords

FDI
Environmental regulation
MNEs
Pollution haven

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