The inward FDI - energy intensity nexus in OECD countries: A sectoral R&D threshold analysis

Glauco De Vita, Chengcun Li, Yun Luo

Research output: Contribution to journalArticlepeer-review

Abstract

Over recent years, concerns about the need to reduce energy intensity have intensified due to the increasing volume of greenhouse gas emissions that has amplified problems related to global climate change and environmental pollution. At the same time, foreign direct investment (FDI) has been found to have a prominent effect on energy intensity. This study empirically examines the relationship between sectoral FDI inflows and energy intensity by investigating the possibility of a threshold effect of research and development (R&D) technological absorptive capacity. Our sample covers 34 OECD countries over 1987–2013, with FDI and R&D data disaggregated at three sectoral levels (primary, secondary and tertiary sectors), an analysis that is absent in existing literature. We uncover a significant R&D input threshold in the relationship between FDI inflows to non-primary sectors and energy intensity. FDI inflows to non-primary sectors increase the level of energy intensity when the level of sectoral R&D is below the threshold, but such effect decreases when the sectoral R&D level is above the threshold point. Important implications flow from our findings with respect to the type of FDI and the level of indigenous R&D to be encouraged (or discouraged) by policymakers to effectively reduce energy intensity.
Original languageEnglish
Article number112290
JournalJournal of Environmental Management
Volume287
Early online date11 Mar 2021
DOIs
Publication statusE-pub ahead of print - 11 Mar 2021

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Environmental Management. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Environmental Management, 287, (2021)
DOI: 10.1016/j.jenvman.2021.112290

© 2021, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • FDI
  • Energy intensity
  • R&D
  • Threshold analysis
  • Economic sectors

ASJC Scopus subject areas

  • Waste Management and Disposal
  • Management, Monitoring, Policy and Law
  • Environmental Engineering

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