What Role Do Foreign Direct Investment and Technology Play in Shaping the Impact on Environmental Sustainability in Newly Industrialized Countries (NIC)?: New Evidence from Wavelet Quantile Regression

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

The study focuses on examining the role of Foreign Direct Investment (FDI) and technological innovation in influencing environmental sustainability in Newly Industrialized Countries (NICs) during the period from 1991 to 2021. The paper is promising, but here are my recommendations:

1. The objective is well identified.
2. The sample NIC (New industrialized countries) is justified in the introduction. However, some statistics are missing to quantify some of the authors' very vague statements, for example, “First, NICs represent 68 a critical stage in their economic development, where rapid industrialization and urbani-69 zation may lead to significant environmental challenges”; “Second, NICs often face limited resources and techno-73 logical capacity, which makes their ability to manage environmental issues more complex.” and “Finally, the diverse economic 77 and environmental conditions across NICs...”.
3. The time horizon also has a very vague justification, why does it start in 1990 and end in 2021?
4. The literature review effectively establishes connections between FDI, technology, and environmental outcomes, providing a solid foundation for the study's objectives.
5. The “3.2 Method” section is very poor. Many methods are presented in the results and discussion and not in the methods section.
6. Studying the countries separately (there are 10) doesn't leave much room for a more detailed analysis of the results and the specific political implications. As a result, the policy implications presented are generic and not generalized.

Overall, while the research holds promise, addressing these areas of improvement would significantly enhance its value.

Author Response

Reviewer 1
The study focuses on examining the role of Foreign Direct Investment (FDI) and technological innovation in influencing environmental sustainability in Newly Industrialized Countries (NICs) during the period from 1991 to 2021. The paper is promising, but here are my recommendations:
Thank you for your valuable feedback and for recognizing the potential of the study. We appreciate your time and constructive input. I carefully considered your recommendations to enhance the quality and rigor of the paper. Your insights are instrumental in strengthening the analysis and ensuring that the study makes a meaningful contribution to the field of environmental sustainability in newly industrialized countries.
1.    The objective is well identified.
Thank you for your positive feedback. We are glad to know that the objective of the study is clear and well articulated.

2.    The sample NIC (New industrialized countries) is justified in the introduction. However, some statistics are missing to quantify some of the authors' very vague statements, for example, “First, NICs represent a critical stage in their economic development, where rapid industrialization and urbanization may lead to significant environmental challenges”; “Second, NICs often face limited resources and technoogical capacity, which makes their ability to manage environmental issues more complex.” and “Finally, the diverse economic and environmental conditions across NICs...”. 
Thank you for your valuable feedback. I have completely revised the paragraph in the introduction to address the concerns raised. Specifically, I have added relevant statistics to support the justification for selecting NICs, including data on industrial growth rates, environmental performance indices, and FDI inflows across representative NICs. These additions aim to clarify and quantify the previously vague statements regarding their economic development stage, technological capacity, and environmental diversity. Please look at Page 2. 

3.    The time horizon also has a very vague justification. Why does it start in 1990 and end in 2021?
Thank you for your feedback. We have explained why the period starts in 1990 and ends in 2021 in the text and highlighted it in blue. Please see Page 7. We added the following statement on why we chose this period. 

“The study period of 1990 to 2021 was selected based on the consistent availability of data on technological innovation (TECH) across the NIC countries during these years. This timeframe ensures data continuity and comparability, allowing for a robust analysis of long-term trends in technological development and its interaction with FDI and environmental sustainability. Additionally, this period captures significant phases of industrial growth, globalization, and policy shifts in NICs, which are essential for understanding the dynamics under investigation.”

4.    The literature review effectively establishes connections between FDI, technology, and environmental outcomes, providing a solid foundation for the study's objectives.
Thank you for your encouraging feedback. We are pleased to hear that the literature review successfully highlights the interlinkages between FDI, technology, and environmental outcomes.

5.    The “3.2 Method” section is very poor. Many methods are presented in the results and discussion, and not in the methods section.
Thank you for your feedback. The information on the WQR approach in the method section has been expanded. Please see pages 7 and 8. 

6.    Studying the countries separately (there are 10) doesn't leave much room for a more detailed analysis of the results and the specific political implications. As a result, the policy implications presented are generic and not generalized. 
Thank you for your constructive feedback. In response to your comment regarding the limited detail in the original policy implications, we have significantly expanded this section to provide more context-sensitive and differentiated recommendations. While the study does examine ten NICs individually, we have now drawn on the observed cross-country variation in the empirical results to propose tailored strategies rather than generalized suggestions.
The revised policy recommendations now highlight:
•    Country-specific approaches to renewable energy development based on national resource endowments and infrastructure capacity;
•    Differentiated innovation policies and clean tech incentives depending on the maturity of each country’s technological ecosystem;
•    Financial sector reforms adapted to the institutional and regulatory contexts of individual NICs;
•    Environmentally conditioned FDI policies that reflect sectoral and national development priorities;
•    The a need for national monitoring and evaluation systems to adjust green policy instruments over time.
•    And mechanisms for regional knowledge-sharing to facilitate policy learning among NICs.

Please detail, look at pages 25 and 26. 

Overall, while the research holds promise, addressing these areas of improvement would significantly enhance its value.
Thank you for your thoughtful and constructive feedback. We appreciate your recognition of the study's potential and will thoroughly address the suggested areas for improvement to strengthen the research and enhance its overall contribution.

 

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

This paper uses the wavelet quantile regression method to study the impact of foreign direct investment and technology in 10 newly industrialized countries from 1990 to 2021 on environmental sustainability. The thesis has appropriate methods and solid data, but the paper is not well written:

1. The introduction of the Literature Review mentions, "the empirical literature of the study is constructed in this direction and 95 the literature is "analyzed under five headings." But in fact, the subheadings of the following content are only 2.1-2.4. The content of 2.3 consists of two parts: "Economic Growth and CO2 emissions" and "Renewable energy and CO2 emissions", but one is in the title format and the other is in the main text format. The content and structure of this part are very chaotic.
2. The paper only explains the reasons for choosing newly industrialized economies as the research object, but there are many newly industrialized economies worldwide. The author did not explain the reasons for choosing Brazil, China, India, Indonesia, Malaysia, Philippines, South Africa, Thailand, Turkey and Mexico among them.
3. The paper clearly studies the impact of five aspects of factors on environmental sustainability from Chapter Two to Chapter Four. Why does it only emphasize the impact of FDI and technology in the title and other parts?

4.The paper does not explain the connection between FDI and technology. It seems to merely isolate two factors that have an impact on Environmental Sustainability for analysis.

5.The overall argumentation process of the thesis is relatively simple.

Comments on the Quality of English Language

not well

Author Response

Reviewer 2

This paper uses the wavelet quantile regression method to study the impact of foreign direct investment and technology in 10 newly industrialized countries from 1990 to 2021 on environmental sustainability. The thesis has appropriate methods and solid data, but the paper is not well written:

Thank you for your candid feedback. We appreciate your acknowledgment of the methodology and data strength. We take your comment regarding the writing quality seriously and have revised the paper thoroughly to improve clarity, coherence, and overall presentation to ensure the findings are communicated more effectively.

1. The introduction of the Literature Review mentions, "the empirical literature of the study is constructed in this direction, and the literature is analyzed under five headings." But in fact, the subheadings of the following content are only 2.1-2.4. The content of 2.3 consists of two parts: "Economic Growth and CO2 emissions" and "Renewable energy and CO2 emissions", but one is in the title format and the other is in the main text format. The content and structure of this part are very chaotic.

Thank you for your attention. While creating the literature review section, an overlooked mistake was made in the titles. This section has been corrected according to your request.

 

1. The paper only explains the reasons for choosing newly industrialized economies as the research object, but there are many newly industrialized economies worldwide. The author did not explain the reasons for choosing Brazil, China, India, Indonesia, Malaysia, Philippines, South Africa, Thailand, Turkey, and Mexico among them.

We would like to thank you for your feedback. In 2020, the IMF categorised more than 40 countries as ‘emerging’ based on factors such as per capita income, exports, and integration into the global financial system. Most of these countries are economies with strong growth and stability, capable of producing high-value-added goods and participating in global trade and financial market integration. Newly industrialising countries occupy a special place in the international division of labour among developing countries. The term ‘newly industrialised country’ (NIC) is a socio-economic classification used by political scientists and economists to refer to about 10 of the world's developing countries. In this study, therefore, the NICs countries are treated as a group, and the reasons for their selection are clearly stated in lines 70-83.

 

1. The paper studies the impact of five aspects of factors on environmental sustainability from Chapter Two to Chapter Four. Why does it only emphasize the impact of FDI and technology in the title and other parts?

We thank you for your feedback. The main research topic of the study is designed to emphasise the impact of FDI and technology on environmental sustainability. The other variables are control variables added to the model to avoid specification errors that may arise from possible variable bias. Therefore, the study is centred on FDI and technology.

 

1. The paper does not explain the connection between FDI and technology. It seems to merely isolate two factors that have an impact on Environmental Sustainability for analysis.

Thank you for your insightful feedback. We agree that the initial version of the manuscript did not sufficiently articulate the connection between FDI and technological innovation. In response, we have revised Section 2.2 to include a new paragraph that explains how FDI can serve as a conduit for the transfer of advanced, environmentally friendly technologies, especially in developing and newly industrialized countries with limited innovation capacity. Drawing on recent empirical literature (e.g., Nguyen et al., 2022; Huang et al., 2023; Tang et al., 2021), we now clarify that the environmental impact of FDI is not only determined by the scale of investment but also by the technological quality and absorptive capacity of host countries. This expanded discussion establishes a clear conceptual link between FDI and technology, reinforcing the relevance of analyzing them jointly in the context of environmental sustainability.

 

5. The overall argumentation process of the thesis is relatively simple.

Thank you for your valuable observation regarding the simplicity of the thesis's argumentation. In response, we have significantly strengthened the theoretical framing and analytical depth of the study. The revised version now presents a more comprehensive and multidimensional argument that positions newly industrialized countries (NICs) as both key drivers of global economic growth and significant contributors to environmental degradation. The thesis now emphasizes the dual role of FDI and technological innovation, highlighting how their effects on environmental sustainability are conditional on institutional, structural, and temporal contexts.

The revised argumentation provides a more nuanced, theoretically informed, and methodologically robust analysis of how NICs can reconcile economic growth with climate sustainability.

 Please review paragraphs two, three, four, and five of the introduction.

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

Dear Authors,

Thank you for the opportunity to review your manuscript entitled “What Role Do Foreign Direct Investment and Technology Play in Shaping the Impact on Environmental Sustainability in Newly Industrialized Countries (NIC)?: New Evidence from Wavelet Quantile Regression.” I appreciate the relevance of the topic and your initiative to apply a non-traditional methodology to analyze the dynamic and heterogeneous effects of FDI and technological innovation on environmental outcomes in NICs.

After a thorough and detailed review, I would like to share the following observations and suggestions for improvement:

 

1. Theoretical Framing and Conceptual Depth

The manuscript addresses a timely issue but would benefit from a stronger theoretical foundation. The current version lacks a clear conceptual model connecting FDI, technological innovation, and environmental sustainability in a way that allows readers to understand the logic behind your hypotheses and methodological choices. For example, while terms like “sustainable development” and “environmental sustainability” appear frequently, there is limited explanation of the mechanisms by which FDI or technology impact CO₂ emissions in NICs—especially under different time horizons.

 

2. Methodological Justification and Clarity

While the use of Wavelet Quantile Regression (WQR) is potentially innovative, the justification for choosing this method and its benefits over traditional alternatives (e.g., ARDL, VECM, standard quantile regression) is not sufficiently explained. In Section 3, the explanation of WQR is brief and lacks an intuitive rationale accessible to a broader readership. The connection between the decomposition of series and their quantile-specific analysis could be more transparent.

 

3. Interpretation of Results

The results section presents interesting findings, such as the time-varying influence of FDI and technological innovation. However, the interpretation is often general or speculative, without sufficient grounding in empirical literature or policy context. The statement that “FDI increases emissions at some quantiles but reduces them at others” is not unpacked in terms of real-world dynamics or country-specific patterns that could explain this heterogeneity.

 

4. Overuse of Self-Citations

The manuscript includes a large number of self-citations, which may reduce the perceived impartiality and academic breadth of the literature review.

 

5. Language and Writing Quality

The paper contains a number of grammatical issues, awkward phrasing, and structural inconsistencies that impair clarity and readability.

In the abstract, the sentence “Technological innovation exhibits a dual effect / mitigating emissions in the short term but potentially exacerbating environmental degradation in the long term” is grammatically problematic and lacks clarity. A thorough English language review is necessary, ideally by a professional editor or native speaker, to improve grammar, structure, and academic tone.

 

6. Figures

The figures included are generally informative but lack detailed captions. Several axes are missing units or labels. The figures presented in the manuscript suffer from low visual clarity, with blurred or faint color contrasts and illegible axis labels or text in some cases. To enhance the interpretability and professional quality of the manuscript, all figures should be improved in terms of resolution, font sharpness, and color differentiation.

 

7. Policy Implications

The policy section makes broad claims about promoting green investment and technology but does not connect these recommendations explicitly to your empirical findings. The suggestion to “encourage green technology transfer” lacks specificity regarding mechanisms or actors involved, particularly within the NIC context.

 

Final Comments

This study demonstrates potential through its innovative use of WQR and its focus on sustainability in NICs. However, it still requires significant improvements in theoretical framing, methodological clarity, language quality, and interpretive depth before it can be considered for publication in a high-impact journal like Sustainability.

I hope these comments are constructive and encourage you to further develop the manuscript. I appreciate your contribution to this important area of research and wish you success in the revision process.

 

Sincerely,

Author Response

Reviewer 3

Dear Authors,

Thank you for the opportunity to review your manuscript entitled “What Role Do Foreign Direct Investment and Technology Play in Shaping the Impact on Environmental Sustainability in Newly Industrialized Countries (NIC)? New Evidence from Wavelet Quantile Regression.” I appreciate the relevance of the topic and your initiative to apply a non-traditional methodology to analyze the dynamic and heterogeneous effects of FDI and technological innovation on environmental outcomes in NICs.

Thank you for taking the time to review our manuscript and for your thoughtful and constructive comments. We sincerely appreciate your recognition of the relevance of the topic and the methodological approach we adopted.

 

After a thorough and detailed review, I would like to share the following observations and suggestions for improvement:

We incorporated your feedback and strengthened the manuscript accordingly.

 

1. Theoretical Framing and Conceptual Depth: The manuscript addresses a timely issue, but would benefit from a stronger theoretical foundation. The current version lacks a clear conceptual model connecting FDI, technological innovation, and environmental sustainability in a way that allows readers to understand the logic behind your hypotheses and methodological choices. For example, while terms like “sustainable development” and “environmental sustainability” appear frequently, there is limited explanation of the mechanisms by which FDI or technology impact CO₂ emissions in NICs, especially under different time horizons.

Thank you for your feedback. A similar comment was raised by another reviewer, prompting us to revise and strengthen the manuscript. We have updated paragraphs 2, 3, 4, and 5 of the introduction to provide clearer context and bolster the study’s argument. Additionally, we added a new paragraph in section 2.2 of the literature review to explicitly address the relationship between FDI and technology, enhancing the theoretical foundation. Please let us know if further refinements are needed.

 

2. Methodological Justification and Clarity: While the use of Wavelet Quantile Regression (WQR) is potentially innovative, the justification for choosing this method and its benefits over traditional alternatives (e.g., ARDL, VECM, standard quantile regression) is not sufficiently explained. In Section 3, the explanation of WQR is brief and lacks an intuitive rationale accessible to a broader readership. The connection between the decomposition of series and their quantile-specific analysis could be more transparent.

Thank you for your feedback. The information on the WQR approach in the method section has been expanded, and its advantages over traditional alternative models have been emphasised.

 

3. Interpretation of Results: The results section presents interesting findings, such as the time-varying influence of FDI and technological innovation. However, the interpretation is often general or speculative, without sufficient grounding in empirical literature or policy context. The statement that “FDI increases emissions at some quantiles but reduces them at others” is not unpacked in terms of real-world dynamics or country-specific patterns that could explain this heterogeneity.

 Thank you for your insightful feedback highlighting the need for deeper interpretation and contextualization of the results. In response, we have significantly revised the relevant section of the Results chapter to provide a more nuanced and empirically grounded explanation of the heterogeneous impact of FDI on CO₂ emissions across NICs.

The revised paragraph now draws on country-specific patterns and aligns them with well-established theoretical frameworks, namely the Pollution Haven Hypothesis and the Pollution Halo Hypothesis. We have incorporated recent empirical studies (e.g., Baek, 2016; Seker et al., 2015; Huang et al., 2022; Hille et al., 2019) to demonstrate how institutional quality, regulatory strength, and absorptive capacity influence the environmental outcomes of FDI over time. Furthermore, the updated discussion explains how short- versus long-term effects differ across countries such as Mexico, the Philippines, and Thailand, offering real-world dynamics to support the time-varying patterns observed in the Wavelet Quantile Regression results.

This strengthened interpretation provides a clearer policy-relevant narrative, highlighting the importance of tailoring environmental and investment policies to country-specific institutional and technological conditions.

 

4. Overuse of Self-Citations: The manuscript includes a large number of self-citations, which may reduce the perceived impartiality and academic breadth of the literature review.

Thank you for your feedback on the self-citations in the manuscript. The inclusion of our previous papers was intentional, as they represent foundational work conducted by our team in this specialized field, where we have developed significant expertise. These studies provide critical context and empirical grounding directly relevant to the current research, ensuring continuity and building on established findings. To address concerns about impartiality and broaden the literature review, we have reduced self-citations where appropriate and integrated additional works from other recognized experts to enhance diversity and academic rigor.

 

5. Language and Writing Quality: The paper contains a number of grammatical issues, awkward phrasing, and structural inconsistencies that impair clarity and readability. In the abstract, the sentence “Technological innovation exhibits a dual effect / mitigating emissions in the short term but potentially exacerbating environmental degradation in the long term” is grammatically problematic and lacks clarity. A thorough English language review is necessary, ideally by a professional editor or native speaker, to improve grammar, structure, and academic tone.

Thank you for highlighting the concerns regarding language and writing quality. We fully acknowledge the importance of clear and precise academic writing, and we appreciate your specific example from the abstract. We revised the manuscript thoroughly to address grammatical issues, improve sentence structure, and enhance overall clarity. Revised version of the sentence is here: “Technological innovation has a dual impact—contributing to emission reductions in the short term, while potentially leading to increased environmental degradation over the long term.”

 

6. Figures: The figures included are generally informative but lack detailed captions. Several axes are missing units or labels. The figures presented in the manuscript suffer from low visual clarity, with blurred or faint color contrasts and illegible axis labels or text in some cases. To enhance the interpretability and professional quality of the manuscript, all figures should be improved in terms of resolution, font sharpness, and color differentiation.

Thank you for your feedback. The colour qualities in the work are the colours as drafted in the written code of the work, and unfortunately, cannot be changed. As you requested, the codes were run again, but the same shapes were obtained. Since there is no external intervention to access the codes, we regret to inform you that we cannot fulfill this request. We have also tried to correct the missing units or labels.

 

7. Policy Implications: The policy section makes broad claims about promoting green investment and technology, but does not connect these recommendations explicitly to your empirical findings. The suggestion to “encourage green technology transfer” lacks specificity regarding mechanisms or actors involved, particularly within the NIC context.

Thank you for your feedback on the policy recommendations section. I have revised the "Policy Implications" to better align with the empirical findings by explicitly linking the promotion of green investment and technology to the study's results, which highlight the positive impact of targeted incentives on NICs' adoption of sustainable practices.

 

Final Comments: This study demonstrates potential through its innovative use of WQR and its focus on sustainability in NICs. However, it still requires significant improvements in theoretical framing, methodological clarity, language quality, and interpretive depth before it can be considered for publication in a high-impact journal like Sustainability.

We fully agree with your identified areas for improvement and have addressed them comprehensively in the revision.

I hope these comments are constructive and encourage you to further develop the manuscript. I appreciate your contribution to this important area of research and wish you success in the revision process.

Thank you sincerely for your thoughtful and constructive feedback, which provides invaluable guidance for strengthening this manuscript. Your generous encouragement during the revision process is deeply motivating. I hope you liked the revised version of the manuscript.

Author Response File: Author Response.pdf

Reviewer 4 Report

Comments and Suggestions for Authors

Comments on (What Role Do Foreign Direct Investment and Technology Play 2 in Shaping the Impact on Environmental Sustainability in 3 Newly Industrialized Countries (NIC)?: New Evidence from 4 Wavelet Quantile Regression)

I would like to thank the author(s) and the editorial team at the Journal of Sustainability for the opportunity to review this manuscript, which revisits the widely studied relationship between Foreign Direct Investment (FDI), technological innovation, and environmental sustainability in Newly Industrialised Countries (NICs). While the paper touches on an important topic and employs a Wavelet Quantile Regression (WQR) approach, there are substantial concerns regarding the manuscript’s novelty of idea, methodological rigour, conceptual clarity, and contribution to the literature. These concerns, as detailed below, limit the manuscript’s potential for publication in its current form.

The manuscript makes an empirical contribution using a balanced panel and a WQR technique. However, the core research question, exploring the impact of FDI and technological advancement on environmental sustainability, has already been extensively investigated. The manuscript does not adequately demonstrate how it meaningfully extends existing knowledge beyond the methodological application.

The critical concern is aside from the adoption of WQR, what is the genuine theoretical or practical contribution of this study? The paper appears preoccupied with the econometric exercise at the expense of offering a compelling narrative, grounded policy relevance, or conceptual novelty. The stated threefold contributions lack persuasive justification, and no clear attempt is made to engage with, or distinguish, counterarguments in the literature.

There are fundamental issues with the way key variables, particularly technological innovation are conceptualised and operationalised. Technological innovation is overly simplified and insufficiently defined. The manuscript relies on patent applications (resident and non-resident) as a proxy for innovation. This is problematic. Patent data, while commonly used, is a narrow and partial measure of innovation, and does not adequately capture tacit knowledge, technology transfer, or process innovation which are important to differentiate when it comes to NICs. The study also conflates technological advancement with innovation, without recognising the distinction or engaging with broader innovation literature, which includes product, process, marketing, and organisational innovation (OECD, Oslo Manual).

The use of patents as a proxy does not allow the authors to comment meaningfully on technology transfer, which is arguably more relevant in the NIC context. The authors may want to reconsider their variable or at least justify more convincingly why Non-residents and residents patent applications alone are representative.

The study treats NICs as a homogeneous block and, at times, implicitly likens them to developed countries. This is analytically unsound. For instance, Malaysia, one of the countries in question, has been described by the World Bank as being stuck in a middle-income trap, and faces specific structural and political challenges that differentiate it from more advanced economies.

The lack of country-level nuance undermines the generalisability and relevance of the findings. FDI inflows, for example, vary considerably due to political risks, global economic shocks, and shifting investment patterns post-COVID (missing from data analysis as authors also mentioned in limitation as one of their caveat). The manuscript fails to engage with these complexities, and instead presents overly simplistic claims such as: “FDI significantly boosts the economic development of NICs by channelling capital, technology, and knowledge.” This is a highly reductive statement that does not account for the volatility of global FDI flows, nor the conditional effects of FDI based on domestic absorptive capacities or regulatory frameworks. According to UNCTAD’s World Investment Reports, global FDI flows dropped sharply in 2020 due to the pandemic, rebounded in 2021, but declined again in 2022–2023 especially in emerging economies.

While the use of Wavelet Quantile Regression (WQR) offers potential insights into distributional and temporal variation, the justification for using WQR over other established methods such as ARCH/GARCH or standard quantile regression is weak and underdeveloped. Moreover, the unit root test results occupy a disproportionate amount of space in the results section. These are preliminary diagnostics, and their extensive inclusion adds little to the interpretive value of the paper. The regression results are not clearly connected to the substantive argument or policy recommendations. If the authors truly aim to highlight nonlinear and quantile-specific effects, the discussion should be aligned accordingly.

A particularly troubling claim appears in the conclusion, “Technological innovation contributes to emission reductions in the short term but potentially worsens environmental degradation in the long run.”. This assertion is counterintuitive, poorly justified, and contradicts substantial literature. Technological innovation is typically associated with long-term emissions reductions, particularly as cleaner and more efficient technologies are developed and diffused (e.g., Grossman & Krueger, 1995; IEA, 2023). If the authors mean that unsustainable technologies are being scaled up or misused, this must be clearly stated and supported with appropriate theoretical and empirical references.

While the manuscript concludes with several policy suggestions (e.g., RE roadmaps, innovation funds, financial sector reforms), these are too generic and not clearly grounded in the study's own empirical findings. If WQR is used to demonstrate differentiated impacts across quantiles and time scales, policy insights should reflect those dynamics, for example, by targeting the highest-emitting sectors or regions.

In summary, while the topic is important and the use of WQR is methodologically interesting, a substantial reworking of the conceptual framework, clarification of methodological choices, and deeper engagement with empirical literature would be required before this manuscript can be considered for publication.

Author Response

Reviewer 4

I would like to thank the author(s) and the editorial team at the Journal of Sustainability for the opportunity to review this manuscript, which revisits the widely studied relationship between Foreign Direct Investment (FDI), technological innovation, and environmental sustainability in Newly Industrialised Countries (NICs). While the paper touches on an important topic and employs a Wavelet Quantile Regression (WQR) approach, there are substantial concerns regarding the manuscript’s novelty of idea, methodological rigour, conceptual clarity, and contribution to the literature. These concerns, as detailed below, limit the manuscript’s potential for publication in its current form.

Thank you for your thoughtful and constructive feedback on our manuscript. We sincerely appreciate the time and effort you and the editorial team at the Journal of Sustainability have invested in reviewing our work.

We acknowledge your concerns regarding the novelty of the idea, methodological rigour, conceptual clarity, and the manuscript’s overall contribution to the literature. These are valuable observations, and we are committed to addressing them thoroughly. In our revised submission, we enhanced the theoretical framing, strengthened the methodological justification and execution of the Wavelet Quantile Regression (WQR) approach, and clearly articulated the unique contributions our study offers in the context of Newly Industrialised Countries (NICs).

 

The manuscript makes an empirical contribution using a balanced panel and a WQR technique. However, the core research question, exploring the impact of FDI and technological advancement on environmental sustainability, has already been extensively investigated. The manuscript does not adequately demonstrate how it meaningfully extends existing knowledge beyond the methodological application.

Thank you for your feedback. While we acknowledge that the relationship between FDI, technological advancement, and environmental sustainability has been widely studied, our manuscript extends this literature by employing the Wavelet Quantile Regression (WQR) technique to capture time-varying and distributional dynamics, offering a more nuanced understanding often missed in conventional approaches. Additionally, we emphasize the conditional impacts of FDI and innovation across diverse NICs, providing new policy-relevant insights tailored to varying institutional and developmental contexts. In this context, we updated to contribution of the literature section in the introduction. Please see pages 2-3

The critical concern is aside from the adoption of WQR, what is the genuine theoretical or practical contribution of this study? The paper appears preoccupied with the econometric exercise at the expense of offering a compelling narrative, grounded policy relevance, or conceptual novelty. The stated threefold contributions lack persuasive justification, and no clear attempt is made to engage with, or distinguish, counterarguments in the literature.

Thank you for the constructive feedback. We acknowledge the need to better articulate the theoretical and practical contributions of our study beyond the econometric methodology. In response, we revised the paper to more clearly frame the WQR approach as a tool that enables us to uncover nuanced, time-varying, and distribution-sensitive effects that conventional models overlook, especially in the context of NICs undergoing structural transformation. We also strengthened the conceptual narrative by engaging more directly with alternative perspectives in the literature, particularly on the dual role of FDI and technology in environmental outcomes. Finally, we emphasized the policy relevance of our findings by highlighting how differentiated impacts across emission levels can inform more targeted and phase-specific sustainability strategies.

In response to the feedback, we have added two paragraphs to the end of the literature review to more clearly highlight the gaps in existing research and the contributions of our study. Additionally, we have revised the introduction to better define the study's theoretical and practical contributions, particularly focusing on the unique insights provided by the WQR methodology. In the conclusion, we have expanded the policy recommendations, placing greater emphasis on the importance of tailored policy interventions that account for the dynamic and heterogeneous effects of FDI and technological innovation on environmental sustainability. These revisions aim to strengthen the overall narrative and demonstrate the broader relevance of our findings.

 

There are fundamental issues with the way key variables, particularly technological innovation are conceptualised and operationalised. Technological innovation is overly simplified and insufficiently defined. The manuscript relies on patent applications (resident and non-resident) as a proxy for innovation. This is problematic. Patent data, while commonly used, is a narrow and partial measure of innovation, and does not adequately capture tacit knowledge, technology transfer, or process innovation which are important to differentiate when it comes to NICs. The study also conflates technological advancement with innovation, without recognising the distinction or engaging with broader innovation literature, which includes product, process, marketing, and organisational innovation (OECD, Oslo Manual).

Thank you for your insightful comment regarding the use of nonresidents’ and residents patent applications as a proxy for technological innovation (TECH). We acknowledge the limitation of using patent applications to fully capture technology transfer, which is indeed relevant in the context of Newly Industrialized Countries (NICs). To address this, we have revised the manuscript to provide a more robust justification for selecting patent applications as the TECH variable. Specifically, nonresidents and residents patent applications are chosen due to their consistent availability across the 10 NICs from 1990 to 2021, as sourced from reliable databases, enabling a standardized measure of technological innovation. Patents reflect both domestic innovation (residents) and foreign technological contributions (nonresidents), partially capturing technology transfer through foreign-driven patenting activity within NICs. While this proxy does not fully encompass all aspects of technology transfer, such as tacit knowledge or non-patented innovations, it provides a quantifiable indicator of technological activity that aligns with the study’s focus on innovation’s impact on CO2 emissions. We have clarified this rationale in the manuscript and added a discussion in the limitations section, noting that future research could incorporate additional proxies, such as licensing agreements or R&D collaboration metrics, to better capture technology transfer in NICs. Please see page 25.

 

The use of patents as a proxy does not allow the authors to comment meaningfully on technology transfer, which is arguably more relevant in the NIC context. The authors may want to reconsider their variable or at least justify more convincingly why Non-residents and residents patent applications alone are representative.

Thank you for your feedback on the conceptualization and operationalization of technological innovation (TECH). As addressed in response to a similar comment, we have revised the manuscript to justify the use of nonresidents and residents patent applications as a proxy for TECH, acknowledging its limitations in capturing tacit knowledge, technology transfer, and broader innovation types (e.g., process, product, marketing, and organizational innovation as per the OECD Oslo Manual), and we propose future research to incorporate complementary proxies like R&D collaboration or licensing data to better reflect these dynamics in NICs.

 

The study treats NICs as a homogeneous block and, at times, implicitly likens them to developed countries. This is analytically unsound. For instance, Malaysia, one of the countries in question, has been described by the World Bank as being stuck in a middle-income trap, and faces specific structural and political challenges that differentiate it from more advanced economies.

Thank you for your valuable feedback highlighting the need for greater differentiation among Newly Industrialized Countries (NICs) and the risk of treating them as a homogeneous group or likening them to developed economies. We acknowledge that NICs, such as Malaysia, face unique structural and political challenges, including Malaysia’s middle-income trap as noted by the World Bank, which distinguish them from both advanced economies and other NICs. Due to the scope of this study and data constraints, it was not feasible to fully incorporate these country-specific structural and political complexities. However, we have revised the manuscript to explicitly recognize the heterogeneity among NICs, emphasizing that their diverse economic, institutional, and political contexts shape the study’s findings. We have also clarified that comparisons to developed economies are not intended, and we propose future research to explore country-specific structural and political challenges in greater depth to enhance the analytical precision of the findings. For update please se page 8.

 

The lack of country-level nuance undermines the generalisability and relevance of the findings. FDI inflows, for example, vary considerably due to political risks, global economic shocks, and shifting investment patterns post-COVID (missing from data analysis as authors also mentioned in limitation as one of their caveat). The manuscript fails to engage with these complexities, and instead presents overly simplistic claims such as: “FDI significantly boosts the economic development of NICs by channelling capital, technology, and knowledge.” This is a highly reductive statement that does not account for the volatility of global FDI flows, nor the conditional effects of FDI based on domestic absorptive capacities or regulatory frameworks. According to UNCTAD’s World Investment Reports, global FDI flows dropped sharply in 2020 due to the pandemic, rebounded in 2021, but declined again in 2022–2023 especially in emerging economies.

Thank you for your feedback. Claims about FDI’s role are now nuanced, emphasizing country-specific factors and regulatory frameworks. Given the temporary nature of the COVID period, we propose extending the analysis beyond 2021 as future work to capture longer-term trends.

 

While the use of Wavelet Quantile Regression (WQR) offers potential insights into distributional and temporal variation, the justification for using WQR over other established methods, such as ARCH/GARCH or standard quantile regression is weak and underdeveloped. Moreover, the unit root test results occupy a disproportionate amount of space in the results section. These are preliminary diagnostics, and their extensive inclusion adds little to the interpretive value of the paper. The regression results are not connected to the substantive argument or policy recommendations. If the authors truly aim to highlight nonlinear and quantile-specific effects, the discussion should be aligned accordingly.

Thank you for your valuable feedback. We have addressed your concerns as follows:

1. The justification for using Wavelet Quantile Regression (WQR) has been strengthened in the revised manuscript, with a clearer explanation of its advantages over ARCH/GARCH and standard quantile regression in capturing distributional and temporal dynamics. Please see pages 8 and 9.
2. The unit root test results have been moved to the appendix to streamline the results section, focusing on preliminary diagnostics without detracting from the main findings.
3. The regression results are now better integrated with the substantive argument and policy recommendations, emphasizing nonlinear and quantile-specific effects to align the discussion with the study's objectives.

These revisions, along with feedback from another reviewer, have enhanced the manuscript's clarity and interpretive value.

A particularly troubling claim appears in the conclusion, “Technological innovation contributes to emission reductions in the short term but potentially worsens environmental degradation in the long run.”. This assertion is counterintuitive, poorly justified, and contradicts substantial literature. Technological innovation is typically associated with long-term emissions reductions, particularly as cleaner and more efficient technologies are developed and diffused (e.g., Grossman & Krueger, 1995; IEA, 2023). If the authors mean that unsustainable technologies are being scaled up or misused, this must be clearly stated and supported with appropriate theoretical and empirical references.

Thank you for your insightful comment. We appreciate your concern regarding the claim that technological innovation potentially worsens environmental degradation in the long run. To address this, we have revised the text to clarify that while technological innovation typically drives long-term emission reductions, the adoption of unsustainable technologies or the misapplication of existing technologies could have adverse environmental effects. We now emphasize that the short-term reductions in emissions are possible when cleaner and more efficient technologies are implemented, but there is a need to be cautious about how certain technologies might be scaled or misused in a way that could undermine sustainability objectives. We have also supported this revision with more specific theoretical and empirical references, acknowledging the complexity of technological diffusion and its varying impacts based on context.

While the manuscript concludes with several policy suggestions (e.g., RE roadmaps, innovation funds, financial sector reforms), these are too generic and not grounded in the study's own empirical findings. If WQR is used to demonstrate differentiated impacts across quantiles and time scales, policy insights should reflect those dynamics, for example, by targeting the highest-emitting sectors or regions.

Thank you for your feedback. Another reviewer provided similar comments, and the policy suggestions section has been expanded to better align with the study's empirical findings. Specifically, we have refined the recommendations to target high-emitting sectors and regions, leveraging the differentiated impacts identified through WQR across quantiles and time scales.

In summary, while the topic is important and the use of WQR is methodologically interesting, a substantial reworking of the conceptual framework, clarification of methodological choices, and deeper engagement with empirical literature would be required before this manuscript can be considered for publication.

We revised the study accordingly.

Author Response File: Author Response.pdf

Reviewer 5 Report

Comments and Suggestions for Authors

Line 73-80: Some citations would be appreciated. Even if these are the authors' opinions or findings, they must be grounded in existent literature.

Table 2: Since the table goes over multiple pages, it would be useful to repeat the headers for ease or reading. Same comment applies to tables spanning multiple pages.

Fig 3 to 6 quality may be improved.

All the results are provided for short, medium, and long term perspectives. What are the cut-off or time frame for defining short, medium, and long.

 

 

Author Response

1. Line 73-80: Some citations would be appreciated. Even if these are the authors' opinions or findings, they must be grounded in existing literature.

Thank you for your advice. The places you have pointed out have been supported with literature and the citations have been coloured in blue and added to the work file.

 

2. Table 2: Since the table goes over multiple pages, it would be useful to repeat the headers for ease of reading. The same comment applies to tables spanning multiple pages.

We thank you for your feedback. The Tables have been organised as you requested and highlighted in blue in the text.

 

3. Fig 3 to 6 quality may be improved.

Thank you for your feedback. The colour qualities in the work are the colours as drafted in the written code of the work, and unfortunately, cannot be changed. As you requested, the codes were run again, but the same shapes were obtained. Since there is no external intervention to access the codes, we regret to inform you that we cannot fulfill this request.

 

4. All the results are provided for short, medium, and long-term perspectives. What are the cut-off or time frame for defining short, medium, and long?

Thank you for your feedback. The time series of the response variable Yt and the factor variable Xt are decomposed using the maximum overlapping discrete wavelet transform (MODWT), closely following the work of Kumar and Padakandla (2022) (Percival and Walden, 2000). In this framework, those less than 8 years are considered as short term, those between 8-16 years as medium term, and those more than 16 years as long term.

 

Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

Comments and Suggestions for Authors

The paper has been improved greatly