Can environmental innovation benefit from outward foreign direct investment to developed countries? Evidence from Chinese manufacturing enterprises

Environmental innovation is an important way to low-carbon economic growth. Outward foreign direct investment (OFDI) can produce reverse technology transfer to promote innovation. This study aims to examine whether OFDI to developed countries can transfer reverse green technology and promote the environmental innovation of manufacturing enterprises in emerging economies (EEs). Based on the technology gap theory, resource bricolage theory, resource-based view, and Potter hypothesis, this study constructs a conceptual model including the direct effect of OFDI on environmental innovation and the moderating effects of the knowledge level of the host country, multinational strategy, absorptive capacity, and environmental regulation. To verify the model, we also use a panel dataset of 424 Chinese manufacturing enterprises during 2010-2017, and the results indicate that OFDI to developed countries can produce reverse green technology transfer and promote parent companies' environmental innovation. The knowledge level of the host country and multinational strategy can further improve the impacts on environmental product innovation. However, absorptive capacity and environmental regulation in EEs do not play a significant moderating role. Consequently, this study expands the application scope of existing theories and enriches the theoretical basis of the relationship between OFDI and environmental innovation.