The article uses firm-level data to test the hypothesis that the opening of central and east European economies to international trade and capital provides an impetus for environmental improvements in industrial enterprises. The analysis reveals that although export-oriented firms adopt clean technologies faster, foreign investment is not necessarily associated with higher rates of clean-technology adoption. Moreover, even the significance of trade in promoting cleaner technology can be overshadowed by domestic factors such as regulatory enforcement. Multinational enterprises introduce more readily formal environmental management practices that respond to public pressures. These findings challenge claims that international capital and trade are likely to be the leading stimulus for clean-technology diffusion in transition countries. The analysis contributes to the political economy literature by testing the linkage between openness and firm-level environmental strategies and specifying conditions for a positive relationship between markets and environmental performance.
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