Internationalisation and digitalisation as drivers for eco-innovation in the European Union

Abstract

This article analyses the influence of internationalisation and digitalisation on eco-innovation. Advanced panel data estimation techniques are employed using data from the 27 EU Member States between 2013 and 2022. The dynamic behaviour of internationalisation, more specifically Foreign Direct Investment (FDI), is tested, accounting for the endogeneity between innovation and international economic competition. Results reveal that the relationship between eco-innovation and FDI changes over time. At first, FDI has a negative impact on eco-innovation, but this effect becomes positive after two years. However, when analysing the data for eco-innovation at a disaggregated level, a potential delay in the influence of internationalisation on investments related to green research capabilities and resource efficiency outcomes is revealed. Results also consistently demonstrate a positive influence of digitalisation on eco-innovation, supporting the twin transition proposition of the digital shift complementing the transition towards low-carbon practices. Recommendations for policymakers and managers are provided at the end.

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