Taking the Bitter with the Sweet: The Paradoxical Role of Inward Foreign Direct Investments in Institutional Quality and Environmental Performance Relationship

Abstract

This study investigates the paradoxical role of inward foreign direct investment (IFDI) in the relationship between institutional quality and environmental performance in least developed countries (LDCs) and developing countries (DCs). Although strong institutional quality is typically associated with enhanced environmental outcomes through increased institutional pressures, it may simultaneously attract IFDIs that exacerbate environmentally harmful activities, particularly in regions perceived as pollution havens. Using panel regression analysis on country-level secondary data from 2013 to 2022, the findings reveal that institutional quality directly improves environmental performance, whereas IFDI negatively mediates this relationship, partially offsetting its benefits. The results suggest that while investment-related environmental risks persist, broader institutional environments continue to exert societal pressures on actors to safeguard environmental sustainability. This study contributes to the literature by providing a more integrated understanding of how institutional dynamics influence environmental outcomes through complex investment channels, particularly within vulnerable economies.

Keywords

• Institutional Quality
• Environmental Performance
• Inward FDI
• Least Developed Countries
• Developing Countries

TAKING THE BITTER WITH THE SWEET: THE PARADOXICAL ROLE OF INWARD FOREIGN DIRECT INVESTMENTS IN INSTITUTIONAL QUALITY AND ENVIRONMENTAL PERFORMANCE RELATIONSHIP

Abstract

Bu çalışma, en az gelişmiş ülkeler (LDC'ler) ve gelişmekte olan ülkelerde (DC'ler) kurumsal kalite ile çevresel performans arasındaki ilişkide içe doğru doğrudan yabancı yatırımların (DYY) paradoksal rolünü incelemektedir. Güçlü kurumsal kalite genellikle artan kurumsal baskılar yoluyla çevresel sonuçların iyileşmesiyle ilişkilendirilse de, aynı zamanda çevre açısından zararlı faaliyetleri artırabilecek DYY’leri çekebilir; özellikle bu ülkeler “kirlilik cennetleri” olarak algılandığında bu risk daha da belirginleşir. 2013–2022 yılları arasındaki ülke düzeyinde ikincil verilere dayanarak yapılan panel regresyon analizi, kurumsal kalitenin çevresel performansı doğrudan iyileştirdiğini, ancak DYY’nin bu ilişkiye olumsuz yönde aracılık ettiğini ve bu iyileştirici etkinin bir kısmını kısıtladığını ortaya koymaktadır. Sonuçlar, yatırım kaynaklı çevresel risklerin devam ettiğini ancak daha geniş kurumsal ortamların çevresel sürdürülebilirliğin korunması yönünde toplumsal baskılar oluşturmaya devam ettiğini göstermektedir. Bu çalışma, özellikle kırılgan ekonomiler bağlamında, kurumsal dinamiklerin çevresel sonuçları karmaşık yatırım kanalları aracılığıyla nasıl etkilediğine dair daha bütüncül bir anlayış sunarak literatüre katkıda bulunmaktadır

Keywords

• Kurumsal Kalite
• Çevresel Performans
• İçe Doğru Doğrudan Yabancı Yatırımlar
• Az Gelişmiş Ülkeler
• Gelişmekte Olan Ülkeler

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