The relationship between green innovation, foreign direct investment, and sustainable development in the context of geopolitical risk
0
Online Published:
09/04/2026
Section:
Economics and Economic Management
Main Article Content
Abstract
This study examines the effects of green innovation (GI), foreign direct investment (FDI), and geopolitical risk (GPR) on sustainable development (SD) in the context of increasing global uncertainty. A Bayesian regression approach is applied to panel data from 33 countries over the period 2010–2021 to better capture uncertainty and structural heterogeneity in the data. The results indicate that GI has a positive impact on sustainable development, with a posterior probability of 59.79%; however, its average effect remains unstable when GPR is not taken into account. In contrast, FDI does not demonstrate a clear role in promoting SD and tends to generate adverse effects under average conditions, lending support to the “pollution haven” hypothesis. GPR exhibits a pronounced negative effect on SD with a posterior probability of 100%. Importantly, the findings reveal a strong moderating effect of GPR: under higher GPR, the positive impact of GI on SD is significantly strengthened, indicating that GI plays a dual role as both an environmental driver and a buffer enhancing resilience to external shocks. Conversely, GPR exacerbates the negative implications of FDI for SD. These results highlight the critical role of GPR in shaping the effectiveness of GI and FDI, offering important policy insights for fostering SD in an increasingly uncertain global environment.
Keywords
FDI; Green innovation; Geopolitical risk; Sustainable development
Article Details
Field of Economic (JEL Codes)
C11 - Bayesian Analysis: General - Econometric and Statistical Methods and Methodology: General, D74 - Conflict • Conflict Resolution • Alliances • Revolutions - Analysis of Collective Decision-Making, F21 - International Investment • Long-Term Capital Movements - International Factor Movements and International Business, O31 - Innovation and Invention: Processes and Incentives - Innovation • Research and Development • Technological Change • Intellectual Property Rights, Q55 - Technological Innovation - Environmental Economics
References
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Brandão Santana, N., Rebelatto, D. A. D. N., Périco, A. E., Moralles, H. F., & Leal Filho, W. (2015). Technological innovation for sustainable development: an analysis of different types of impacts for countries in the BRICS and G7 groups. International Journal of Sustainable Development & World Ecology, 22(5), 425-436.
Briggs, W. M., & Nguyen, H. T. (2019). Clarifying ASA’s view on P-values in hypothesis testing. Asian Journal of Economics and Banking, 3(2), 1-16.
Chang, K., Liu, L., Luo, D., & Xing, K. (2023). The impact of green technology innovation on carbon dioxide emissions: The role of local environmental regulations. Journal of Environmental Management, 340, 117990.
Chen, X., & Liu, J. (2020). Fiscal decentralization and environmental pollution: a spatial analysis. Discrete Dynamics in Nature and Society, 2020, 1-10.
Cheng, P., Li, K., Choi, B., Guo, X., & Wang, M. (2024). Impact of geopolitical risk on green international technology spillovers: FDI and import channels. Heliyon, 10(17).
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Chien, F., Paramaiah, C., Pham, H. C., Phan, T. T. H., & Ngo, T. Q. (2023). The impact of eco-innovation, trade openness, financial development, green energy and government governance on sustainable development in ASEAN countries. Renewable Energy, 211, 259-268.
Copeland, B. R., & Taylor, M. S. (2004). Trade, growth, and the environment. Journal of Economic literature, 42(1), 7-71.
Dastgeer, A., Shabir, M., Usman, M., Kamal, M., & Khan, M. F. (2023). Environmental cost of natural resources, globalization, and economic policy uncertainty in the G-7 bloc: do human capital and renewable energy matter?. Environmental Science and Pollution Research 30(54), 115081-115097.
Díaz-García, C., González-Moreno, Á., & Sáez-Martínez, F. J. (2015). Eco-innovation: insights from a literature review. Innovation, 17(1), 6-23.
Dinh, L. Q., Oanh, T. T. K., & Ha, N. T. H. (2024). Financial stability and sustainable development: Perspectives from fiscal and monetary policy. International Journal of Finance & Economics, 1–18.
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Farooq, F., Tanveer, A., & Faheem, M. (2023). Analyzing the impact of geopolitical risk, and renewable energy towards sustainable development in China. iRASD Journal of Economics, 5(2), 422-440.
Fethi, S., & Rahuma, A. (2020). The impact of eco-innovation on CO2 emission reductions: Evidence from selected petroleum companies. Structural Change and Economic Dynamics, 53, 108-115.
Gary, K. (2003). Bayesian econometrics. England.
Grossman, G. M., Krueger, A. B. (1991). Environmental Impacts of a North American Free Trade Agreement. (NBER workingpaper, No. w3914).
Ha, L. T. (2023). An investigation of the nexus between green innovation and environmental sustainability in Vietnam: new evidence from the wavelet analysis. Environmental Science and Pollution Research, 1-15.
Hajimineh, R., & Moghani, A. M. (2023). The important factors of Saudi Arabian policy-making in renewable energy resources. Future Energy, 2(2), 29-38.
Hui, J., & Martinez-Vazquez, J. (2021). Sustainable development and the optimal level of fiscal expenditure decentralization.
Husnain, M. I. U., Syed, Q. R., Bashir, A., & Khan, M. A. (2022). Do geopolitical risk and energy consumption contribute to environmental degradation? Evidence from E7 countries. Environmental Science and Pollution Research, 29(27), 41640-41652.
Izadi, J., & Madirimov, B. (2023). Effect of foreign direct investment on sustainable development goals? Evidence from Eurasian countries. Journal of Sustainable Finance & Investment, 1-20.
Jin, H., & Jakovljevic, M. (2023). Fiscal decentralization and the human development index: a cross-border empirical study. Sustainability 15(11), 8784.
Koseoglu, A., Yucel, A. G., & Ulucak, R. (2022). Green innovation and ecological footprint relationship for a sustainable development: Evidence from top 20 green innovator countries. Sustainable development, 30(5), 976-988.
Kruschke, J. (2014). Doing Bayesian data analysis: A tutorial with R, JAGS, and Stan.
Li, J., & Xu, Y. (2023). Does fiscal decentralization support green economy development? Evidence from China. Environmental Science and Pollution Research, 30(14), 41460-41472.
Minh Phuong, N. T., Xuan Huong, N. T., Van Song, N., Huyen, V. N., Hai Yen, N. T., Giap, T. C., ... & Van Huong, N. (2023). The role of eco-innovation, eco-investing, and green bonds in achieving sustainable economic development: evidence from Vietnam. Economic research-Ekonomska istraživanja, 36(2).
Nalborczyk, L., Batailler, C., Lœvenbruck, H., Vilain, A., & Bürkner, P. C. (2019). An introduction to Bayesian multilevel models using brms: A case study of gender effects on vowel variability in standard Indonesian. Journal of Speech, Language, and Hearing Research, 62(5), 1225-1242.
Nawaz, M. Z., Guo, J., Nawaz, S., & Hussain, S. (2023). Sustainable development goals perspective: nexus between Christians’ religious tourism, geopolitical risk, and CO2 pollution in Italy. Environmental Science and Pollution Research, 30(22), 62341-62354.
Nguyen, T. H. H., Cao, T. H., & Nguyen, T. N. (2025). Fiscal Decentralization and Sustainable Development Linkage-The Role of Green Innovation. International Journal of Sustainable Development & Planning, 20(1).
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge university press.
Oanh, T. T. K. (2024). Sustainable development: Driving force from the relationship between finance inclusion, green finance and green growth. Sustainable Development, 32(3), 2811-2829.
Porter, M. E. (1985). Technology and competitive advantage. Journal of business strategy, 5(3), 60-78.
Porter, M. E., & Linde, C. V. D. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of economic perspectives, 9(4), 97-118.
Rodríguez-Chávez, C. A., Oré-Evanán, L. M., Zapata-Sánchez, G. G., Toribio-Lopez, A., & Eguiguren-Eguigurem, G. R. (2024). Foreign direct investment and sustainable development in Asia: Bibliometric analysis and systematic literature review. Sustainability, 16(23), 10718.
Romer, P. M. (1990). Endogenous technological change. Journal of political Economy, 98(5, Part 2), S71-S102.
Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94.
Sueyoshi, T., Mo, F., & Wang, D. D. (2022). Sustainable development of countries all over the world and the impact of renewable energy. Renewable Energy, 184, 320-331.
Taylor, M. S., & Brock, W. A. (2004). The green Solow model. National bureau of economic research.
Thach, N. N. (2020). How to explain when the ES is lower than one? A Bayesian nonlinear mixed-effects approach. Journal of Risk and Financial Management, 13(2), 21.
Töbelmann, D., & Wendler, T. (2020). The impact of environmental innovation on carbon dioxide emissions. Journal of Cleaner Production, 244, 118787.
Vo, D. H., & Vo, A. T. (2021). Renewable energy and population growth for sustainable development in the Southeast Asian countries. Energy, Sustainability and Society, 11(1), 30.
Voica, M. C., Panait, M., & Haralambie, G. A. (2015). The Impact of Foreign Direct Investment on Sustainable Development. Petroleum-Gas University of Ploiesti Bulletin, Technical Series, 67(3).
Wang, Q., Ren, F., & Li, R. (2024). Does geopolitical risk impact sustainable development? A perspective on linkage between geopolitical risk and sustainable development research. Journal of Cleaner Production, 451, 141980.
Williamson, O. E. (1981). The economics of organization: The transaction cost approach. American journal of sociology, 87(3), 548-577.
Yang, H. C., Cai, Y. F., & Zhang, M. Y. (2022). Political risk and green technology improvement: New insights from global evidence. Innovation and Green Development, 1(1), 100004.
Yang, Y., Tang, D., & Zhang, P. (2020). Effects of fiscal decentralization on carbon emissions in China. International Journal of Energy Sector Management, 14(1), 213-228.
Zhao, W., Zhong, R., Sohail, S., Majeed, M. T., & Ullah, S. (2021). Geopolitical risks, energy consumption, and CO 2 emissions in BRICS: an asymmetric analysis. Environmental Science and Pollution Research, 28, 39668-39679.
Zhao, W., Zhong, R., Sohail, S., Majeed, M. T., & Ullah, S. (2021). Geopolitical risks, energy consumption, and CO 2 emissions in BRICS: an asymmetric analysis. Environmental Science and Pollution Research, 28, 39668-39679.
Ahmad, M., Ahmed, Z., Alvarado, R., Hussain, N., & Khan, S. A. (2024). Financial development, resource richness, eco-innovation, and sustainable development: Does geopolitical risk matter?. Journal of Environmental Management, 351, 119824.
Anser, M. K., Syed, Q. R., Lean, H. H., Alola, A. A., & Ahmad, M. (2021). Do economic policy uncertainty and geopolitical risk lead to environmental degradation? Evidence from emerging economies. Sustainability, 13(11), 5866.
Ayamba, E. C., Haibo, C., Abdul-Rahaman, A. R., Serwaa, O. E., & Osei-Agyemang, A. (2020). The impact of foreign direct investment on sustainable development in China. Environmental Science and Pollution Research, 27(20), 25625-25637.
Bashir, M. F., Shahbaz, M., Malik, M. N., Ma, B., & Wang, J. (2023). Energy transition, natural resource consumption and environmental degradation: The role of geopolitical risk in sustainable development. Resources Policy, 85, 103985.
Bhat, M. N., Beg, A., & Ikram, F. (2025). Navigating the global knowledge economy: temporal effects of regulatory environment and FDI on sustainable development in Asia–Pacific. Journal of the Knowledge Economy, 16(2), 9972-10003.
Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic growth?. Journal of international Economics, 45(1), 115-135.
Brandão Santana, N., Rebelatto, D. A. D. N., Périco, A. E., Moralles, H. F., & Leal Filho, W. (2015). Technological innovation for sustainable development: an analysis of different types of impacts for countries in the BRICS and G7 groups. International Journal of Sustainable Development & World Ecology, 22(5), 425-436.
Briggs, W. M., & Nguyen, H. T. (2019). Clarifying ASA’s view on P-values in hypothesis testing. Asian Journal of Economics and Banking, 3(2), 1-16.
Chang, K., Liu, L., Luo, D., & Xing, K. (2023). The impact of green technology innovation on carbon dioxide emissions: The role of local environmental regulations. Journal of Environmental Management, 340, 117990.
Chen, X., & Liu, J. (2020). Fiscal decentralization and environmental pollution: a spatial analysis. Discrete Dynamics in Nature and Society, 2020, 1-10.
Cheng, P., Li, K., Choi, B., Guo, X., & Wang, M. (2024). Impact of geopolitical risk on green international technology spillovers: FDI and import channels. Heliyon, 10(17).
Chien, F. (2023). The impact of green investment, eco-innovation, and financial inclusion on sustainable development: evidence from China. Engineering Economics, 34(1), 17-31.
Chien, F., Paramaiah, C., Pham, H. C., Phan, T. T. H., & Ngo, T. Q. (2023). The impact of eco-innovation, trade openness, financial development, green energy and government governance on sustainable development in ASEAN countries. Renewable Energy, 211, 259-268.
Copeland, B. R., & Taylor, M. S. (2004). Trade, growth, and the environment. Journal of Economic literature, 42(1), 7-71.
Dastgeer, A., Shabir, M., Usman, M., Kamal, M., & Khan, M. F. (2023). Environmental cost of natural resources, globalization, and economic policy uncertainty in the G-7 bloc: do human capital and renewable energy matter?. Environmental Science and Pollution Research 30(54), 115081-115097.
Díaz-García, C., González-Moreno, Á., & Sáez-Martínez, F. J. (2015). Eco-innovation: insights from a literature review. Innovation, 17(1), 6-23.
Dinh, L. Q., Oanh, T. T. K., & Ha, N. T. H. (2024). Financial stability and sustainable development: Perspectives from fiscal and monetary policy. International Journal of Finance & Economics, 1–18.
Dixit, A. K. (1994). Investment under uncertainty. Princeton University.
Du, K., & Li, J. (2019). Towards a green world: How do green technology innovations affect total-factor carbon productivity. Energy Policy, 131, 240-250.
Farooq, F., Tanveer, A., & Faheem, M. (2023). Analyzing the impact of geopolitical risk, and renewable energy towards sustainable development in China. iRASD Journal of Economics, 5(2), 422-440.
Fethi, S., & Rahuma, A. (2020). The impact of eco-innovation on CO2 emission reductions: Evidence from selected petroleum companies. Structural Change and Economic Dynamics, 53, 108-115.
Gary, K. (2003). Bayesian econometrics. England.
Grossman, G. M., Krueger, A. B. (1991). Environmental Impacts of a North American Free Trade Agreement. (NBER workingpaper, No. w3914).
Ha, L. T. (2023). An investigation of the nexus between green innovation and environmental sustainability in Vietnam: new evidence from the wavelet analysis. Environmental Science and Pollution Research, 1-15.
Hajimineh, R., & Moghani, A. M. (2023). The important factors of Saudi Arabian policy-making in renewable energy resources. Future Energy, 2(2), 29-38.
Hui, J., & Martinez-Vazquez, J. (2021). Sustainable development and the optimal level of fiscal expenditure decentralization.
Husnain, M. I. U., Syed, Q. R., Bashir, A., & Khan, M. A. (2022). Do geopolitical risk and energy consumption contribute to environmental degradation? Evidence from E7 countries. Environmental Science and Pollution Research, 29(27), 41640-41652.
Izadi, J., & Madirimov, B. (2023). Effect of foreign direct investment on sustainable development goals? Evidence from Eurasian countries. Journal of Sustainable Finance & Investment, 1-20.
Jin, H., & Jakovljevic, M. (2023). Fiscal decentralization and the human development index: a cross-border empirical study. Sustainability 15(11), 8784.
Koseoglu, A., Yucel, A. G., & Ulucak, R. (2022). Green innovation and ecological footprint relationship for a sustainable development: Evidence from top 20 green innovator countries. Sustainable development, 30(5), 976-988.
Kruschke, J. (2014). Doing Bayesian data analysis: A tutorial with R, JAGS, and Stan.
Li, J., & Xu, Y. (2023). Does fiscal decentralization support green economy development? Evidence from China. Environmental Science and Pollution Research, 30(14), 41460-41472.
Minh Phuong, N. T., Xuan Huong, N. T., Van Song, N., Huyen, V. N., Hai Yen, N. T., Giap, T. C., ... & Van Huong, N. (2023). The role of eco-innovation, eco-investing, and green bonds in achieving sustainable economic development: evidence from Vietnam. Economic research-Ekonomska istraživanja, 36(2).
Nalborczyk, L., Batailler, C., Lœvenbruck, H., Vilain, A., & Bürkner, P. C. (2019). An introduction to Bayesian multilevel models using brms: A case study of gender effects on vowel variability in standard Indonesian. Journal of Speech, Language, and Hearing Research, 62(5), 1225-1242.
Nawaz, M. Z., Guo, J., Nawaz, S., & Hussain, S. (2023). Sustainable development goals perspective: nexus between Christians’ religious tourism, geopolitical risk, and CO2 pollution in Italy. Environmental Science and Pollution Research, 30(22), 62341-62354.
Nguyen, T. H. H., Cao, T. H., & Nguyen, T. N. (2025). Fiscal Decentralization and Sustainable Development Linkage-The Role of Green Innovation. International Journal of Sustainable Development & Planning, 20(1).
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge university press.
Oanh, T. T. K. (2024). Sustainable development: Driving force from the relationship between finance inclusion, green finance and green growth. Sustainable Development, 32(3), 2811-2829.
Porter, M. E. (1985). Technology and competitive advantage. Journal of business strategy, 5(3), 60-78.
Porter, M. E., & Linde, C. V. D. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of economic perspectives, 9(4), 97-118.
Rodríguez-Chávez, C. A., Oré-Evanán, L. M., Zapata-Sánchez, G. G., Toribio-Lopez, A., & Eguiguren-Eguigurem, G. R. (2024). Foreign direct investment and sustainable development in Asia: Bibliometric analysis and systematic literature review. Sustainability, 16(23), 10718.
Romer, P. M. (1990). Endogenous technological change. Journal of political Economy, 98(5, Part 2), S71-S102.
Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94.
Sueyoshi, T., Mo, F., & Wang, D. D. (2022). Sustainable development of countries all over the world and the impact of renewable energy. Renewable Energy, 184, 320-331.
Taylor, M. S., & Brock, W. A. (2004). The green Solow model. National bureau of economic research.
Thach, N. N. (2020). How to explain when the ES is lower than one? A Bayesian nonlinear mixed-effects approach. Journal of Risk and Financial Management, 13(2), 21.
Töbelmann, D., & Wendler, T. (2020). The impact of environmental innovation on carbon dioxide emissions. Journal of Cleaner Production, 244, 118787.
Vo, D. H., & Vo, A. T. (2021). Renewable energy and population growth for sustainable development in the Southeast Asian countries. Energy, Sustainability and Society, 11(1), 30.
Voica, M. C., Panait, M., & Haralambie, G. A. (2015). The Impact of Foreign Direct Investment on Sustainable Development. Petroleum-Gas University of Ploiesti Bulletin, Technical Series, 67(3).
Wang, Q., Ren, F., & Li, R. (2024). Does geopolitical risk impact sustainable development? A perspective on linkage between geopolitical risk and sustainable development research. Journal of Cleaner Production, 451, 141980.
Williamson, O. E. (1981). The economics of organization: The transaction cost approach. American journal of sociology, 87(3), 548-577.
Yang, H. C., Cai, Y. F., & Zhang, M. Y. (2022). Political risk and green technology improvement: New insights from global evidence. Innovation and Green Development, 1(1), 100004.
Yang, Y., Tang, D., & Zhang, P. (2020). Effects of fiscal decentralization on carbon emissions in China. International Journal of Energy Sector Management, 14(1), 213-228.
Zhao, W., Zhong, R., Sohail, S., Majeed, M. T., & Ullah, S. (2021). Geopolitical risks, energy consumption, and CO 2 emissions in BRICS: an asymmetric analysis. Environmental Science and Pollution Research, 28, 39668-39679.
Zhao, W., Zhong, R., Sohail, S., Majeed, M. T., & Ullah, S. (2021). Geopolitical risks, energy consumption, and CO 2 emissions in BRICS: an asymmetric analysis. Environmental Science and Pollution Research, 28, 39668-39679.
How to Cite
Tran , T. D., Nguyen , V. H., Tran, T. K. O., Nguyen , T. L., & Wong, W.-K. (2026). The relationship between green innovation, foreign direct investment, and sustainable development in the context of geopolitical risk. Journal of Finance - Marketing Research, 1(1enes). https://doi.org/10.52932/jfmr.v1i1enes.1238