Digital society and green foreign direct investment in Europe

Abstract

This study examines the impact of various dimensions of the digital economy and society (DESI) on green foreign direct investment (GFDI) inflows within the European Union over the period 2017–2023. The findings reveal that the effects of digitalization on GFDI are heterogeneous across different components of DESI. In particular, the results indicate that advancements in research and development related to digital transformation facilitate European countries’ transition toward attracting GFDI. To better understand the relationship between digitalization and GFDI, the study distinguishes between the short-term and long-term effects of digitalization on GFDI. It further compares the relative influence of societal digital engagement and the internet industry on GFDI across various sub-indices of digitalization. Overall, the evidence suggests a long-run relationship between the DESI and GFDI inflows. Moreover, increased investment in most aspects of digitalization is likely to enhance the performance of GFDI across EU member states.