The Impact of Reverse Technology Spillover from Subsidiaries on Parent Firms’ Environmental Sustainability: Mediating Role of Research and Development Spending

Abstract

Abstract

This study examines how multinational enterprises (MNEs) seek technological capabilities (TC) through reverse technology spillover to improve their environmental performance (EP) in India, an emerging economy. MNEs utilize the technological knowledge of advanced economies by creating subsidiaries in those regions to obtain and incorporate TC in their home country. Based on previous studies, we utilized the subsidiary's patent citations as a proxy for reverse technology spillover. We suggest that a subsidiary's patent citation positively impacts the parent's EP in its home country. We find no support for a direct relationship based on the 120 MNEs panel data analysis from 2009 to 2023. We address endogeneity concerns in our primary analysis. However, the parent company's R&D spending mediates the subsidiary's patent citation and the parent’s EP relationship. Our findings offer a new perspective on the current research regarding technology transfer effects in developing economies. Moreover, our results have significant practical and policy implications. The results substantiate the notion that multinational enterprises (MNEs) might augment the innovation efficacy of their parent company by employing global growth via the creation of subsidiaries within advanced economies. The study's findings demonstrate that creating subsidiaries in developed markets is a successful way for businesses to experience reverse technology spillover as it exposes them to cutting-edge information and tools that are unavailable domestically.

   Keywords: Reverse Technology Spillover, R&D spending, environmental performance, patent citations.