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

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

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.

Economic sectors, Energy intensity, FDI, R&D, Threshold analysis
0301-4797
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
Li, Chengchun
0ee7a126-be5b-4b56-81f4-5dc2d5b2b1c0
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
Li, Chengchun
0ee7a126-be5b-4b56-81f4-5dc2d5b2b1c0
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174

De Vita, Glauco, Li, Chengchun and Luo, Yun (2021) The inward FDI - energy intensity nexus in OECD countries: a sectoral R&D threshold analysis. Journal of Environmental Management, 287, [112290]. (doi:10.1016/j.jenvman.2021.112290).

Record type: Article

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.

Text
Final accepted JEMA FDI energy intensity paper - Accepted Manuscript
Restricted to Repository staff only until 11 March 2023.
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Accepted/In Press date: 26 February 2021
e-pub ahead of print date: 11 March 2021
Published date: 1 June 2021
Additional Information: Funding Information: We would like to thank Professor Zhang, Associate Editor, and five anonymous reviewers for their constructive and valuable comments and suggestions in enhancing the manuscript. Publisher Copyright: © 2021 Elsevier Ltd Copyright: Copyright 2021 Elsevier B.V., All rights reserved.
Keywords: Economic sectors, Energy intensity, FDI, R&D, Threshold analysis

Identifiers

Local EPrints ID: 447916
URI: http://eprints.soton.ac.uk/id/eprint/447916
ISSN: 0301-4797
PURE UUID: 880df481-2926-40af-b71d-f1ff2dcf7f62
ORCID for Yun Luo: ORCID iD orcid.org/0000-0001-8409-366X

Catalogue record

Date deposited: 26 Mar 2021 17:30
Last modified: 28 Apr 2022 02:29

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Contributors

Author: Glauco De Vita
Author: Chengchun Li
Author: Yun Luo ORCID iD

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