Investing Up: FDI and the Cross-Country Diffusion of ISO 14001 Management Systems

Prakash, Aseem; Potoski, Matthew
September 2007
International Studies Quarterly;Sep2007, Vol. 51 Issue 3, p723
Academic Journal
Competition to attract foreign direct investment (FDI) creates opportunities for multinational enterprises (MNEs) to diffuse corporate management practices from their countries-of-origin (home countries) to countries hosting their foreign operations. We examine conditions under which MNEs transfer corporate environmental practices from home countries to host countries. Our focus is on ISO 14001, the most widely adopted voluntary environmental program in the world. We examine inward FDI stocks and ISO 14001 adoption levels for a panel of 98 countries, and a subset of 74 developing countries, for the period 1996–2002. We find support for the country-of-origin argument in that inward FDI stocks are associated with higher levels of ISO 14001 adoption in host countries only when FDI originates from home countries that themselves have high levels of ISO 14001 adoption. Countries’ ISO adoption levels are associated not with how much FDI host countries receive overall but from whom they receive it. Three implications emerge from this study: (1) FDI can become an instrument to perpetuate divergence in corporate practices across the world; (2) economic integration via FDI can create incentives for firms to ratchet up their environmental practices beyond the legal requirements of their host countries; (3) instead of racing down to match the less stringent corporate practices prevalent in developing countries, developed countries can employ FDI outflows to ratchet up corporate practices abroad given that developing countries are net recipients of developed countries’ FDI outflows.


Related Articles

  • MNCs and LDCs. Frank, Isaiah // Harvard International Review;Apr1986, Vol. 8 Issue 5, p4 

    The article discusses the relationship of multinational corporations with developing countries. According to the author, developing countries have recognized the advantages brought by foreign enterprises. Their needs to attract foreign investors have been slowed down by fears of foreign control...

  • The Contractual Joint Venture. Friedmann, Wolfgang G. // Columbia Journal of World Business;Jan/Feb72, Vol. 7 Issue 1, p57 

    Joint international business ventures have long been a familiar form of association among business enterprises in the western world. Through such associations they have been able to share their resources, technical know-how, and sometimes even to prevent competition and divide markets. It is...

  • International Risk Forecast.  // Risk Management (00355593);Apr85, Vol. 32 Issue 4, p120 

    This article discusses the report by Frost & Sullivan's Political Risk Services Division on the 1985 political climate for international business, which includes a forecast of risk in several countries. According to the report, the need for foreign investment by developing countries should keep...

  • Corruption and competition for resources. Bjorvatn, Kjetil; Søreide, Tina // International Tax & Public Finance;Dec2014, Vol. 21 Issue 6, p997 

    An increasing share of world FDI is carried out by multinationals from developing countries. These investors may have objectives and constraints that differ from their developed country counterparts. In this paper we focus on differences in attitudes to corruption, and how these may shape the...

  • Thames flows back into UK equities. Stodell, Hannah // Money Marketing;2/26/2009, p36 

    The article reports on the move of Thames River Capital LLP to reduce its exposure to Great Britain's equities due to the likelihood that foreign investors will seize the country's domiciled global businesses at bargain prices. Gary Potter, multi-manager co-head of the company, relates the...

  • U.S. International Equity Investment.  // Working Papers -- U.S. Federal Reserve Board's Finance & Economi;2012, p2 

    The article focuses on the international equity investment of U.S. investors. It says that comprehensive dataset are used to analyze U.S. investment in foreign equities wherein cross-listing of foreign firms on the U.S. exchange is considered a significant determinant of U.S. investment. It...

  • Emerging Multinationals and the Role of Virtual Indirect Investors. Sass, Magdolna; Antalóczy, Katalin; Éltető, Andrea // Eastern European Economics;Mar/Apr2012, Vol. 50 Issue 2, p41 

    Hungary is a leading foreign investor among the new member states of the European Union and among the Visegrád countries. It started to invest abroad earlier than other countries of the region, and thus the stock of outward foreign direct investment (OFDI) is higher than in other countries of...

  • Foreign Investment Multinational Companies and Economic Development. Popov, Đorđe // Proceedings of Novi Sad Faculty of Law / Zbornik Radova Pravnog ;2013, Vol. 47 Issue 3, p11 

    There is no universal answer on the question whether foreign investments stimulate economic development. The positive effect of foreign direct investments will follow when the investments is carried out under normal conditions of competition. That means, above all, low barriers for foreign trade...

  • Does Location Really Matter? The Influence of the fdi Location on Enterprise Competitiveness: The Evidence from Polish Enterprises. Szałucka, Małgorzata // Managing Global Transitions: International Research Journal;Summer2015, Vol. 13 Issue 2, p125 

    A company's competitiveness depends on the linkages between its resources and capabilities and location-specific factors where the company runs its activities. Companies combine the advantages of particular geographic locations with their resources and capabilities to enhance existing and...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics