Introduction: This study examines the role of greenfield foreign direct investment in Iran, focusing on the pollution haven hypothesis. According to this hypothesis, the inflow of capital along with polluting technologies can erode the entrepreneurial ecosystem by degrading environmental quality and weakening the health and productivity of the workforce. In contrast to this view, the technological halo hypothesis believes that these investments can help foster innovation. Accordingly, the main objective of the study is to measure the direct and indirect effect of greenfield investment on entrepreneurship, with a special emphasis on the mediating role of pollution. This analysis seeks to fill a gap in which previous studies have mainly focused on the quantity of investment and have ignored the key role of pollution. Finally, the study attempts to determine which of these two narratives is more consistent with the economic realities of Iran in the period 2008-2023.
Materials and Methods: In order to separate direct and indirect effects, a two-equation analytical framework was designed. The first equation measures the direct effect of greenfield investment and pollution on the entrepreneurial activity index and includes variables such as economic growth, fear of failure, and entrepreneurial intention to control for macro and behavioral factors in the model. The second equation specifically dissects the pollution channel and estimates the effect of greenfield investment on per capita carbon dioxide emissions by controlling for variables such as energy intensity and institutional quality. Given the limitations of time series data and the inherent ambiguity in economic variables, fuzzy regression was used instead of classical methods. This approach, by estimating coefficients as an interval, takes into account uncertainty in the results and provides a more reliable analysis in conditions of limited data.
Results: The results of the fuzzy regression analysis depict a clear and alarming narrative. The findings showed that Greenfield foreign direct investment had a significant and negative direct impact on entrepreneurial activity in Iran (fuzzy coefficient: -1.0566). At the same time, the analyses also revealed an indirect and destructive channel: this type of investment has led to a significant increase in the level of environmental pollution (fuzzy coefficient: +0.0636). This increasing pollution, in turn, has a negative and inhibitory effect on entrepreneurship (fuzzy coefficient: -0.6184). As a result, the negative direct effect of investment is reinforced by a negative indirect effect (with an approximate product of 0.039) that passes through the pollution path. Overall, the dominant pattern in the period under study has been that the entry of Greenfield capital has not only not helped entrepreneurship flourish, but has also contributed to its further weakening by intensifying pollution.
Discussion: The evidence from this study strongly suggests that the pattern of foreign investment in Iran during the study period is more consistent with the pollution haven hypothesis. The combination of low technological quality of incoming projects and weak regulatory institutions to enforce environmental standards seems to have prevented the realization of positive technological spillovers. By highlighting the role of investment quality over quantity, this study provides a clear policy message: it is time for policymakers to move from an unconditional capital absorption approach to a smart and selective absorption strategy. Measures such as establishing a technological screening system for projects, making incentives conditional on environmental performance, and strengthening transparency and monitoring of pollutant emissions are essential steps to manage this negative channel. Only then can foreign investment be transformed from a threat to a real driving force for the growth of the knowledge-based economy and innovative entrepreneurship in Iran.