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Environmental Regulations and Multinational Corporations' Foreign Market Entry Investments
Author(s) -
Rivera Jorge,
Oh Chang Hoon
Publication year - 2013
Publication title -
policy studies journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.773
H-Index - 69
eISSN - 1541-0072
pISSN - 0190-292X
DOI - 10.1111/psj.12016
Subject(s) - multinational corporation , business , environmental regulation , foreign direct investment , international trade , developing country , international economics , economics , finance , public economics , economic growth , macroeconomics
In this study, we examine how differences in environmental regulation characteristics are linked to multinational corporations' ( MNC s) foreign market entry ( FME ) investments decisions around the world. We rely on a data set with 29,303 observations from 94 E uropean F ortune G lobal 500 companies operating across 77 countries during the period 2001–2007. We found that MNCs are more likely to enter countries with more certain—i.e., clearer and more stable—environmental regulations than those of their home countries. Results also suggest that there is a higher level of MNC entry into foreign countries with environmental regulations that are more stringent than those of their home countries. This finding challenges the controversial but commonly held view that more stringent environmental regulations deter MNC s' FME investments. Notably, the magnitude of the regulatory certainty relationship with MNC s' FME investments is larger than that of regulatory stringency. Findings also indicate that the increased tendency of MNC s to enter countries with more stringent environmental regulations is higher in more democratic countries and for cleaner industry firms.