Nexus of Foreign Direct Investment in Services, Digital Transformation, and Enterprise Green Total Factor Productivity: Evidence from China

Abstract

Despite the recognized importance of green total factor productivity (GTFP) in the literature, there remains a scarcity of studies examining the impact of foreign direct investment (FDI) on GTFP at the level of service enterprises, particularly regarding the role of DT in this relationship. To address this gap, we utilize data from listed service enterprises in China to examine the impact of FDI on enterprise GTFP and the role of digital transformation (DT) in this link. The results indicate that enhanced FDI significantly decreases GTFP. Moreover, the negative impact of FDI on GTFP is primarily attributable to the decline in green technological innovation. Additionally, enterprise DT alleviates the detrimental effect of FDI in services on enterprise GTFP. Furthermore, moderated mediation tests reveal that DT exerts a moderate mediating effect in the latter segment of the mediation pathway linking FDI to GTFP. These insights offer valuable guidance on harnessing FDI in services for higher enterprise GTFP, informing practical policy recommendations.