Effects of Institutional Environment on Green Investment in the Automotive Sector

This empirical study investigates the influence of the institutional landscape on investments in green technology and the subsequent impact on firm-level performance. Our research centers on a comprehensive dataset of 609 firms operating within the global automobile sector across 17 countries, spanning the years 2003–2017. We consider various facets of the institutional environment, including national governance, economic growth, the stringency of environmental policy toward innovation and technology (SEP), and the quality of corporate governance. Our panel regression analysis reveals that both SEP and economic growth stand out as pivotal determinants of investments in green technology, and these findings hold steady across alternative model specifications. Furthermore, our research underscores a positive correlation between the institutional environment and firm-level performance. These insights remain robust even when we segment the sample based on national policy stringency and focus on the top innovating countries within the sector. To ensure the reliability of our results, we employed the propensity score matching technique and structural equation modeling as supplementary methods, all of which corroborate our central findings.