The Impact of Capital Globalization on Green Innovation: A Cross-Country Empirical Analysis

Capital globalization has significantly changed the landscape of the global economy over the last few decades. As countries open their borders to foreign investment, multinational corporations are increasingly seeking out new opportunities to invest and expand their operations. This empirical study aims to investigate the impact of capital globalization on green innovation in eight countries: Australia, Canada, France, Germany, Japan, Korea, United Kingdom, and United States of America. In this research, the relationship between green innovation and capital globalization were analyzed through multiple regressions. To check the robustness of the findings, RANSAC and Quantile Regression are used. Endogeneity processing is also conducted by using the Propensity score matching and Gaussian Mixture Model. The results indicated that Foreign direct investment and outward FDI has a constructive impact on green innovation in all eight countries. Furthermore, R&D investment is found to mediate the relationship between FDI/OFDI and green patent, indicating the significance of capital globalization in promoting sustainable innovation. Based on the findings, the study suggests that governments can promote green innovation by providing incentives for firms to increase their FDI/OFDI, such as reducing corporate taxation and increasing subsidies. Additionally, governments can invest in education and human resource development and raise awareness of the importance of sustainable development and green innovation. This study concludes that promoting capital globalization is crucial in achieving the sustainable development and calls for more research in this area.