The Relationship Between Foreign Direct Investment, Green Innovation and Economic Growth: Panel Causality Analysis on OECD Countries
DOI:
https://doi.org/10.63556/tisej.2026.1903Keywords:
Economic Growth, Foreign Direct Investment, Green Innovation, OECD, Dumitrescu-Hurlin Causality AnalysisAbstract
The liberalization of trade among countries and the removal of trade barriers have not only increased the importance of foreign direct investment (FDI) but also accelerated its inflows. One of the key macroeconomic variables affected by FDI inflows is economic growth. Meanwhile, green innovation, which refers to environmentally friendly technologies, has emerged as a crucial component of sustainable development. In recent years, green innovation has gained increasing importance not only in developed countries but also in developing economies. This study aims to examine the causal relationship between economic growth, FDI, and green innovation for 34 OECD countries over the period 2002–2021. The Dumitrescu–Hurlin panel causality approach is employed for the analysis. The empirical findings indicate the existence of a unidirectional causality running from economic growth to both FDI and green innovation. These results suggest that economic growth serves as a key driving force for both FDI and green innovation in OECD countries. In this context, policies aimed at increasing FDI should be supported by strategies that promote sustainable growth. Furthermore, the unidirectional causality from economic growth to green innovation implies that green innovation, rather than being a direct driver of economic growth, emerges as an outcome of the growth process in these countries.
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