Does it pay for cities to be green? An investigation of FDI inflows and environmental sustainability

Abstract

Recent years have seen growing interest in a leading role for cities in addressing major environmental sustainability challenges including cleaner air and water. While geographers have long studied urban governance responses, international business (IB) scholars have embraced city-level analyses only in the past decade, primarily to examine multinationals’ location strategies. Thus far, IB has not studied cities’ environmental sustainability in relation to foreign direct investment (FDI) inflows. Our paper does so by analyzing whether it ‘pays’ to be green for cities in attracting FDI inflows, using a comprehensive sample of Chinese cities of different sizes over a 7-year period comprising 918 city-year observations. A fixed-effects panel data estimation shows that it indeed pays for cities to be green, specifically considering air quality and waste water treatment, two key locational factors exposing different mechanisms. Implications for green urban and business policies and for IB research are discussed.

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ACKNOWLEDGEMENTS

We would like to thank the three reviewers for the feedback on our paper and the editor for the support and guidance.

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Accepted by Jeremy Clegg, Area Editor, 28 December 2018. This article has been with the authors for two revisions.

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Appendix

Appendix

See Tables 6 and 7.

Table 6 Sampled Chinese cities by region
Table 7 Robustness to dropped control variables

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Pisani, N., Kolk, A., Ocelík, V. et al. Does it pay for cities to be green? An investigation of FDI inflows and environmental sustainability. J Int Bus Policy 2, 62–85 (2019). https://doi.org/10.1057/s42214-018-00017-2

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Keywords

  • foreign direct investment
  • sustainability
  • environment
  • cities
  • urban
  • China