Environmental standards and the location choices of U.S. Multinational Enterprises

This study explores the effect of differences in environmental stringency on the location choices of U.S. multinational enterprises. It seeks to contribute to the literature in the following ways. First, the “knowledge-capital model” by Carr et al. (2001) is extended by including a measure of differences in environmental stringency. Second, new data which allows for distinguishing between horizontal -and vertical multinational activity is used. The effect of an environmental stringency gap on horizontal multinational activity is as expected statistically not significant. After some adjustments are made, the effect of an environmental stringency gap on vertical multinational activity has the expected sign but is statistically not significant.