Edited by Kevin P. Gallagher
Chapter 11: Foreign Direct Investment and Clean Technology Leapfrogging in China
Kelly Sims Gallagher It has often been assumed that foreign direct investment (FDI) in developing countries brings with it more advanced technologies from the home country. Embedded in this assumption is the notion that foreign investors also bring cleaner technologies with them, thereby allowing the developing countries to ‘leapfrog’ to the most advanced environmental technologies available. Contrary to this notion is the pollution haven hypothesis, wherein large multinational companies move to developing countries because of their weaker environmental standards. Some scholars and policy-makers have taken the wrong lesson from the empirical evidence regarding the pollution-haven hypothesis. As the chapter by Copeland in this volume (Chapter 4) demonstrates, most multinational companies do not move to developing countries because of their weaker environmental standards. Some policy-makers have interpreted these ﬁndings to mean that one not need formulate policies to address the environmental impact of foreign investment. From a scholarly perspective, though, the pollution-haven hypothesis is strictly a ‘ﬁrm location’ theory, and makes no pretense about explaining the behavior of foreign ﬁrms once they have already invested in or moved to a developing country. This chapter looks mainly at the environmental behavior of multinational corporations investing in China, speciﬁcally taking the case of the US automotive ﬁrms as they formed joint ventures with Chinese counterparts. The US Big Three automakers clearly did not move to China in order to exploit its weaker environmental laws but instead they invested in order to serve China’s exploding domestic automobile market. They saw China as the...
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