Diffusion of environmentally friendly technologies by multinational corporations in developing countries

Multinational corporations (MNCs) can be an important source of environmentally friendly technologies for developing countries since their affiliates are often more advanced than local firms in the adoption of modern environmental technologies and management practices. This does not mean, however, that MNC affiliates in developing countries invariably employ the same standards, technologies and management approaches adopted by their parent companies or by affiliates operating in developed countries. The contribution of MNC affiliates to sustainable development depends on the quality of their operation and the characteristics of the host countries where they operate. The former is conditioned by such factors as the nature of the sectors where MNCs direct their investments, the kind of assets brought by MNCs, and the role played by the affiliates within the MNC global network. The latter is mainly about the availability of skills, the state of domestic technological infrastructure, the competitiveness of local suppliers, the nature of national environmental regulations and the extent to which these regulations are enforced. The paper notes the need for more robust empirical studies on the environmental role of MNCs to guide policy aimed at enhancing the effectiveness of foreign direct investment (FDI) initiatives in promoting sustainable development.