Green Innovation and Multinational Affiliation: Evidence From the Indian Manufacturing Sector

ABSTRACT

Foreign direct investment (FDI) is widely acknowledged as a critical driver of green innovation in developing countries. Building on the natural‐resource‐based view by aligning it with FDI literature, this study examines the relationship between multinational enterprise (MNE) affiliation and green innovation in India's manufacturing sector from 2001 to 2023, particularly focusing on the extent of ownership threshold and on knowledge stock as a moderating mechanism. Applying the Poisson pseudo‐maximum likelihood regression model and validating results through robustness checks, our findings reveal that MNE affiliation negatively impacts green innovation. This negative relationship persists at lower ownership thresholds, though it becomes positive and insignificant at a higher threshold. Moreover, we find that the presence of FDI within the industry leads to increased overall green innovation. Furthermore, the results show that accumulated green technological capabilities positively boost a firm's green innovation. These findings suggest that distinguishing between MNE affiliation and spillover effects is essential and underscores the important role of knowledge stock in the development of green technology. Practical implications include the need to pair FDI promotion with strategies that build local innovation capacity and knowledge diffusion.