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March 10, 2026Sustainable Development2 citations

The Sustainability Paradox: How Economic Ecosystems and Institutional Quality Shape Innovation Pathways to Environmental Sustainability

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KGKaren GirgisDYDina Yousri

Key Points

  • This research aims to explore how various economic and institutional factors influence CO2 emissions in emerging economies.
  • Analyzed a panel of 20 emerging economies over a specific period.
  • Employed generalized additive models to assess nonlinear relationships.
  • Investigated the roles of R&D, FDI, trade openness, financial development, and governance.
  • Revealed nonlinear effects of R&D with an inverted-U relationship to emissions.
  • Identified a U-shaped profile for foreign direct investment and its effects.
  • Found largely emission-increasing effects of trade interactions.
  • Highlighted the critical role of institutional quality in influencing these relationships.

Abstract

ABSTRACT Joint levers for green growth in emerging economies, specifically innovation, finance, institutional quality, and openness are widely emphasized, yet their combined environmental consequences remain insufficiently understood, particularly when potential nonlinear dynamics are taken into account. This study examines how research and development, foreign direct investment, trade openness, financial development, gross capital formation, and institutional quality shape CO 2 emissions in a panel of 20 emerging economies using generalized additive models that flexibly recover smooth marginal and interaction effects. The results reveal strongly nonlinear and regime‐dependent relationships, including an innovation‐based inverted‐U for R its climate impact depends on the surrounding financial, institutional, and openness architecture.

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Cite This Study

Girgis et al. (2026) studied this question.

synapsesocial.com/papers/69af95ee70916d39fea4e004https://doi.org/10.1002/sd.70890
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  1. 1Opening the Black Box of Financial Innovation and Sustainability Transitions: Unveiling the Roles of Green Entrepreneurship and Carbon Finance in <scp>G20</scp> Countries2025
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