Does economic growth the cause of climate change or the cure? A spatial mediation-moderation model of foreign investment and eco-innovation orientation

Abstract

Abstract Economic growth is frequently held responsible for environmental problems. Some believe the relationship between ecological damage and economic growth is more complicated than others. Some even contend that economic growth might help the environment. Therefore, moving toward a greener economy depends heavily on environmental advancements. However, despite increased eco-innovation activities and attracting foreign investments, the ecological situation is not improving. In this respect, re-evaluating the problem from a different perspective is critical. Can the mediation-moderation effect of foreign investment and eco-innovation orientation develop and support economic growth to cure the environment? Therefore, this paper first uses the geographic Durbin model to examine the effects of economic growth on carbon emissions for nine countries in the MENA region for 20 years. Second, the present research investigates the mediation effect of eco-innovation. Third, this article uses the spatial stepwise regression model to explore the moderating function of FDI on the mediation model. The outcomes of this research are that: (i) Economic growth positively impacts carbon emissions. (ii) Eco-innovation mediates the relationship between economic growth and carbon emissions. (iii) FDI has a dual moderating effect on the mediation model. This paper depicts an indispensable move towards grasping the current climate change risk and supporting the sustainability transition. Finally, several policy implications were presented based on this study's research findings.