The Impact of Foreign Direct Investment on Green Innovation: Taking Urbanization Level as The Threshold

Abstract

At present, China's manufacturing industry is in a critical period of industrial upgrading, but it also needs to maintain a good ecological environment during industrial upgrading. In the context of China's proposal to achieve "carbon peak" in 2030 and "carbon neutrality" in 2060, it is necessary to study whether the knowledge spillover of foreign direct investment can have a positive impact on China's green innovation level, so as to make more efficient policy countermeasures for high-quality development. This paper uses China's provincial panel data from 2007 to 2021 and uses a double fixed effect model to explore the impact of foreign direct investment on China's green innovation. The results verify that foreign direct investment has a negative impact on China's green innovation. Further, taking the urbanization level as the threshold variable, it is concluded that there is a nonlinear relationship between foreign direct investment and the level of green innovation, and at a certain critical point, FDI can have the smallest negative impact on green innovation. The inspiration from the experimental results is to be vigilant about the low-end technology transfer of foreign-funded enterprises and their technological dependence. Developing countries, as host countries, need to establish a more comprehensive innovation incentive system and improve sustainable industrial chain clusters. At the same time, they should adhere to sustainable development, continue to pay attention to environmental protection, and set up environmental regulations for foreign investment entry.