Environmental regulation and FDI attraction: a bibliometric analysis of the literature
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RESEARCH ARTICLE
Environmental regulation and FDI attraction: a bibliometric analysis of the literature Ana Santos 1 & Rosa Forte 2 Received: 6 March 2020 / Accepted: 1 October 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
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. Keywords FDI . Environmental regulation . MNEs . Pollution haven JEL classification D22 . Q58
Introduction Globalisation and its different effects have been increasingly monitored over the years. One of those effects is connected with sustainability and the protection of the environment, which has led countries to tighten their environmental regulations, considering it urgent to stop the degradation of their territory by tackling pollution. Environmental regulations may be perceived as a comparative disadvantage, and thus as a barrier to trade and foreign direct investment (Rezza 2015).
Responsible Editor: Philippe Garrigues * Rosa Forte [email protected] Ana Santos [email protected] 1
Faculdade de Economia do Porto, Universidade do Porto, Porto, Portugal
2
Faculdade de Economia do Porto, Universidade do Porto and CEF.UP., Rua Dr. Roberto Frias, 4200–464 Porto, Portugal
When analysing foreign direct investment (FDI) patterns, one tendency that is easily perceived is that investors seek developing countries, mostly in search of natural resources, and taking advantage of weak governance and ineffective regulatory regimes (Cole et al. 2017). Furthermore, although receiving high FDI flows may bring countries opportunities to grow in terms of technology and knowledge, many authors argue that it also has important social and environmental consequences (Gray 2002). The debate over the topic of environmental regulation and FDI attraction has been the focus of various theories, of which we would like to point out four. The first one argues that environmental regulation affects FDI flows, given that multinational enterprises (MNEs) perceive a competitive disadvantage associated with countries or regions where such regulations exist (Erdogan 2014). Therefore, MNEs will tend to invest in countries where the reg
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