MNCs' industrial linkages and environmental spillovers in emerging economies: The case of China

Most studies investigating the mechanisms through which companies can reduce their environmental footprint have been conducted in the context of developed economies. However, corporate environmentalism in emerging economies is also an important and timely topic. Emerging economies will soon account for more than half of the global emissions and possess specific market conditions that require particular attention from scholars. Building on the international business and knowledge spillover literature, we examine in the context of emerging economies the channels through which environmental spillovers can take place from manufacturing Multinational Corporations (MNCs) to local companies in the host country. We used data from 24 manufacturing industries in China over the period 2005-2010 to test our contention. Our findings indicate that horizontal (with competitors), backward and forward vertical linkages (with supply chain actors) all had a positive effect on the overall environmental performance of an industry. Moreover, we found that backward industrial linkages (with suppliers) have stronger environmental spillovers than forward (with distributors) and horizontal industrial linkages. Our research contributes to the literature at the intersection of international business and sustainability by unraveling the mechanisms of environmental spillovers in host countries, from the perspective of an emerging economy.