In Search of Environmental Spillovers

28 Pages Posted: 29 Jan 2009

See all articles by Facundo Albornoz

Facundo Albornoz

University of Birmingham

Matthew A. Cole

University of Birmingham - Department of Economics

Robert J. R. Elliott

University of Birmingham

Marco Ercolani

University of Birmingham - Department of Economics

Abstract

There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental spillovers from foreign firms. On the basis that foreign-owned firms may encourage firms in their extended supply chain to improve their environment-related management practices, evidence for the existence of environmental spillovers should be easier to find than productivity spillovers where firms naturally attempt to minimise intra-industry knowledge leakage. In this paper we show that, first, foreign-owned firms are more likely to implement environmental management systems (EMS) and, second, that the presence of foreign-owned firms in those sectors that a firm supplies can encourage good environmental practice. This is especially true if a firm is foreign, has high absorptive capacity, and operates in the presence of formal and informal networks.

Suggested Citation

Albornoz, Facundo and Cole, Matthew A. and Elliott, Robert J. R. and Ercolani, Marco, In Search of Environmental Spillovers. World Economy, Vol. 32, Issue 1, pp. 136-163, January 2009. Available at SSRN: https://ssrn.com/abstract=1334999 or http://dx.doi.org/10.1111/j.1467-9701.2009.01160.x

Facundo Albornoz (Contact Author)

University of Birmingham ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Matthew A. Cole

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Robert J. R. Elliott

University of Birmingham

Marco Ercolani

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

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