Home governments facilitate cleaner operations of outward foreign direct investment: A case study of a cleaner production partnership programme

Abstract Whether foreign direct investment (FDI) damages the environment in host regions is an important question for both scholars and policy-makers. To examine the impact of FDI on a host region, Hong Kong-owned factories were selected as the providers of FDI and Guangdong was selected as the host region. The background, incentives, detailed implementation, and outcomes of the Hong Kong−Guangdong Cleaner Production Partnership Programme (CP3), a positive intervention by the home government (Hong Kong) using FDI to disseminate cleaner technologies for abating pollution in the host region (Guangdong), were comprehensively analyzed in this study. The successful implementation of the Hong Kong−Guangdong CP3 indicates that home governments can positively improve the environmental performance of FDI and make it cleaner. The spillover effects of cleaner technology dissemination from Hong Kong-owned factories benefit locally owned factories in related industries via different approaches. More importantly, the Hong Kong−Guangdong CP3 aims to achieve cleaner production in various industries, thereby creating a cleaner supply chain. Hence, a cleaner operations mechanism was gradually formed through the combined efforts of Hong Kong and Guangdong. Moreover, the reasons for the success of the Hong Kong−Guangdong CP3 were identified, and can be referred to by other regions. This study provides direct evidence to support pollution halo hypothesis that FDI from developed regions can promote cleaner development of host regions (developing regions) via a cleaner operations mechanism rather than heavily pollute host regions.