Foreign direct investment and green innovation: Regional disparities and panel quantile regression analysis from China's coastal and inland areas

Abstract

This study discusses the role of Foreign Direct Investment (FDI) in China's Green Innovation (GI) in coastal and inland areas, especially regional disparities. Quantile regression is used to study the panel data of 31 provinces (2010-2020) to explore the impact of FDI on GI at different stages of development. Key variables are FDI, financial development, industrialization, service sector growth, trade, and cultural environment. The results indicate that FDI significantly increases GI, especially in regions of inland areas with low innovation. In coastal areas, however, the effect of FDI on GI lessens as the local industries excel in green technologies. Financial development improves GI in the coastal regions; industrialization and service sector growth have mixed results. Policymakers should focus their FDI strategies on areas of lower innovation in order to enact sustainable development. Future research needs to consider the global relevance of the results by looking at countries with different economic backgrounds and examining the long-term effects of FDI, taking into account government policies and environmental regulations. This study contributes to the understanding of the dynamics of FDI and GI in China, which can provide information applicable to the development of sustainable growth policies.