Unleashing the spillover potential: Exploring the role of technology-seeking investment in driving green innovation of host countries

The integration of green development and innovation has become a critical strategy for transforming China's energy-intensive economic growth model. This study investigates the heterogeneous impact of technology-seeking outward foreign direct investment (TSOFDI) for promoting green innovation development (GID) by examining Chinese provinces as the empirical units. Our study extends the measurement models of GID by considering both productivity and output, proposing a novel method for selecting TSOFDI projects. The empirical findings indicate significant regional disparities in the GID, with the eastern region leading in both green productivity and green output. Significantly, our study establishes a non-linear correlation between TSOFDI and GID, suggesting that the green spillover effect is contingent on the level of fiscal autonomy and environmental regulation. In conclusion, it is necessary to increase TSOFDI projects and improve investment quality. The government should guide the innovative achievements and high-quality talents from the eastern regions to flow into the central and western regions. Additionally, governments at all levels should dynamically adjust revenue and expenditure, maintaining a reasonable fiscal autonomy and a stringent environmental regulation to fully unleash the promoting role of outward investment in green innovation.