Foreign investment, innovation capacity and environmental efficiency in China

Abstract Traditional research discusses the impact of foreign investment on the technology diffusion effect or environment individually. In fact, foreign capital can promote environmental efficiency of the funded region by improving the local innovation capacity through technology diffusion. This article analyzes the path relationship between foreign investment, innovation capacity and environmental efficiency by using structural equation models, the results of which show that, on the one hand, foreign investment can directly promote local environmental efficiency; on the other hand, it is also effective in enhancing local innovation capacity, which is conducive to the improvement in local environmental efficiency. Finally, corresponding countermeasures are put forward in line with the above results.

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