FDI Quality, Technology Absorption Capacity and Renewable Energy Total Factor Productivity - Mechanism Analysis Based on Quartile Regression Analysis of Belt and Road Countries

Chengjia Ning; Haslindar Ibrahim; Xiaolong Ma

doi:https://doi.org/10.64025/j.lmjim.25.101018

Abstract

Based on the renewable energy industry of the countries along the “Belt and Road”, this paper selects the panel data from 2000 to 2020 to study the mechanism of the Foreigner Direct Investment (FDI) quality on the Renewable Energy Total Factor Productivity (RTFP) of the host country through the technology absorption capacity, furthermore, takes 2015 as a node to compare the changes in the RTFP after accession to the “Belt and Road”. The finding shows that: (1) FDI quality significantly promote the RTFP in the host country, and the growth is obvious after 2015; (2) the technology absorption capacity can strengthen the spillover effect of FDI quality, the moderating effect was significant and the value is 0.032; (3) the FDI quality plays a facilitating role in RTFP through the dimensions of FDI production capacity and FDI technological contribution, but the impact of FDI localization is not significant. In addition, for countries with low RTFP, the promotional effect of technology absorption capacity is not significant, and as the RTFP continues to improve, the more significant of technology absorption capacity on FDI quality technology spillover. Therefore, Belt and Road countries should improve the quality of their FDI and increase their investment in R&D in conjunction with the upgrading of industrial to enhance their technological absorptive capacity. At the same time, by taking advantage of the member countries of the “Belt and Road” economic cooperation, realizing the development of renewable energy industry.

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* Develops the QFDI evaluation system from three dimensions: FDI localization, FDI production capacity and FDI technological contribution. * Conducts QFDI, RTFP and technology absorption capacity in a single framework and test the influence mechanism of QFDI on RTFP. * Tests the non-linear role of technology absorption capacity on the RTFP, which effect is 0.032. * The contribution of FDI production capacity is 8%, and FDI technological contribution is 5%, however, the contribution of FDI localization is not significant. * Quantile test shows that technology absorption capacity does not contribute to RTFP below 25%.

Citation

Ning, C., Ibrahim, H., & Ma, X. (2025). FDI Quality, Technology Absorption Capacity and Renewable Energy Total Factor Productivity - Mechanism Analysis Based on Quartile Regression Analysis of Belt and Road Countries. Journal of Intelligent Management, 1(1), 1-18. https://doi.org/10.64025/j.lmjim.25.101018

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1. Introduction

The development and utilization of renewable energy have become important means for many countries to improve their energy structure, cope with global warming, and achieve sustainable socio-economic development (IRENA, 2019a). According to the report of the International Energy Agency (IEA) and the International Renewable Energy Agency (IRENA), Asia, Eastern Europe, and Latin America have become active regions in the development of renewable energy. In terms of employment opportunities created by the renewable energy industry, the Asian region has consistently accounted for more than 60% of the global proportion (IRENA, 2019b), and the proportion of FDI in the field of renewable energy in this region is the second largest in the world, second only to the European region (Monitor, 2022). Compared with traditional fossil energy, renewable energy is more dependent on the natural environment, application technology, and capital, which also causes the renewable energy industry to face practical difficulties such as technology, cost, and promotion (Sekuloska, 2015), resulting in the weaker willingness of market players to independently develop relevant technologies, and thus the RTFP is relatively low. Globally, the improvement of RTFP in various countries mainly relies on the input of capital and manpower, but due to the different levels of economic development and industrialization in various countries, the strength of capital and manpower input for the renewable energy industry is heterogeneous. In order to solve the difficulties of renewable energy industry, such as lack of capital, backward infrastructure, and weak technology, countries generally choose to introduce FDI, which can generally meet the needs of host countries in terms of capital, management experience, and advanced technology for the development of the renewable energy industry, and thus improve the total factor productivity of the industry. However, the impact of FDI on RTFP has a two-way result, namely, the “pollution paradise” effect (Caetano et al., 2022) and “efficiency halo” effect (Doytch & Narayan, 2016; Sun et al., 2022): the introduction of a large number of labor-intensive FDI to a certain extent on the local ecological environment to produce more pressure, technology-intensive FDI will produce more technology spillover effect, can effectively improve the host country's renewable energy total factor productivity, but with the enhancement of technical barriers, FDI brought by the technology spillover effect has a greater weakening, the country with higher technology absorption capacity can be more fully enjoy the technology spillover brought by the FDI, and vice versa, will produce the technology crowding out effect, which requires that the countries to improve the quality of FDI. Therefore, how to improve the quality of FDI and make it promote energy efficiency in host countries has become a concerned subject for scholars. Under the background of trade globalization, in order to achieve sustainable economic growth and development, countries have formed a number of economic cooperation organizations, and member countries actively absorb high-quality FDI through deepening cooperation, joint development, expanding trade, and other ways to promote the development of their own economies. China put forward the initiative of building the “Belt and Road” economic cooperation in 2013, and now more than 150 countries and economic organizations have participated (Zhou et al., 2024). Based on the principle of “common business, common construction, common sharing," this initiative aims to promote in-depth and multidisciplinary cooperation and facilitate the flow of FDI among member countries. Against this background, this paper aims to complement the current empirical research on FDI quality and renewable energy productivity, especially after the establishment of the Belt and Road economic cooperation organization (BRI) on renewable energy productivity in member countries. The main contributions of this paper are: (1) innovating the evaluation system of FDI quality (QFDI), which is complementary and informative to the current research on QFDI; (2) taking RTFP as the research objective, placing RTFP, QFDI, and technology absorption capacity in the same theoretical framework, which innovates the perspective of research on RTFP; (3) explicitly calculating the technology absorption capacity's moderating effect; (4) innovatively researching the mechanism of QFDI's influence on RTFP; (5) illustrating the important role of technology absorption capacity on RTFP of each country through quantile regression. The remainder chapters of this paper are organized as follows: chapter 2 presents the literature review, which provides the theoretical and empirical support for this study; chapter 3 describes the econometric model and sample data; chapter 4 reports the results of the data analysis and develops the findings; chapter 5 discusses the findings and develops the conclusions of the study, as well as proposes countermeasures for countries to improve the RTFP, and finally states the research limitations and the future research plan.

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Acknowledgments

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

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FDI Quality, Technology Absorption Capacity and Renewable Energy Total Factor Productivity - Mechanism Analysis Based on Quartile Regression Analysis of Belt and Road Countries

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