Original Research

Outward foreign direct investment and corporate green innovation: An institutional pressure perspective

Zhen Yang, Syed T. Ali, Farman Ali, Zahid Sarwar, Muhammad A. Khan
South African Journal of Business Management | Vol 51, No 1 | a1883 | DOI: https://doi.org/10.4102/sajbm.v51i1.1883 | © 2020 Zhen Yang, Syed Tauseef Ali, Farman Ali, Zahid Sarwar, Muhammad A. Khan | This work is licensed under CC Attribution 4.0
Submitted: 03 December 2019 | Published: 08 June 2020

About the author(s)

Zhen Yang, School of Business Administration, Dongbei University of Finance and Economics, Dalian, China
Syed T. Ali, School of Accounting, Dongbei University of Finance and Economics, Dalian, China
Farman Ali, School of Accounting, Dongbei University of Finance and Economics, Dalian, China
Zahid Sarwar, School of Business Administration, Dongbei University of Finance and Economics, Dalian, China
Muhammad A. Khan, School of Management, Huazhong University of Science and Technology, Wuhan, China


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Abstract

Purpose: Institutional theory is a reasonable explanation for the motives of corporate social responsibility (CSR) behaviours (e.g. corporate green innovation). The existing literature defines institutional pressure as threats for legitimacy when firms operate within a country or a region; one area that has received little attention is the situation when a firm extends its operations across borders to pursue internationalisation. The study investigates the impact of outward foreign direct investment (OFDI) on green innovation at the firm level.

Design/methodology/approach: The zero-inflated negative binomial regression models are estimated to analyse the data collected from 2065 manufacturing enterprises listed in China during 2007–2017 (n = 14 129). Green innovation is measured by the number of green patents, according to the World Intellectual Property Organization (WIPO) International Patent Classification (IPC) Green Inventory.

Findings/results: The findings show that OFDI is positively associated with green innovation for emerging market enterprises (EMEs). Furthermore, compared with investment in emerging economies, OFDI in developed economies has a stronger positive relationship with corporate green innovation. The positive effect of OFDI on corporate green innovation will be higher for EMEs located in sub-national regions (i.e., province of the home country) with lower levels of institutional development.

Practical implications: Emerging market enterprises should overcome organisational inertia and compete in a broader market to enhance their awareness and ability of green innovation.

Originality/value: This article contributes to the existing literature by exploring institutional pressure faced by EMEs when they operate overseas (e.g. OFDI) can play a significant role in influencing green innovation, and enriches our understanding of EMEs’ inclination towards CSR (e.g. green innovation) in the context of internationalisation.


Keywords

green innovation; outward foreign direct investment; institutional pressure; corporate social responsibility; green patent.

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