Abstract

In this study, we examine the impacts of internationalization and home country institutional development on environmental innovation in multinational enterprises (MNEs) in the energy sector. Using a panel dataset of 1404 firm-year observations of 270 MNEs in the energy sector worldwide between 2011 and 2018, we find empirical support for a positive effect of the level and scope of internationalization on environmental innovation. Our results suggest that emerging country MNEs benefit from internationalization within their home region, yet face challenges when expanding outside of it. We also find that when operating outside their home region, MNEs from more institutionally developed countries are better able to absorb the globally acquired knowledge and to improve their environmental innovation than MNEs from countries with weaker institutions. We discuss these results in light of how emerging country MNEs can increase their environmental innovations and we provide theoretical, practical and policy implications to guide energy MNEs and policymakers to improve environmentally sustainable development.