The Relationship Between Business Enterprise Investment and Environmental Sustainability in the European Union: Evidence From the Novel Fourier Asymmetric <scp>CS</scp> ‐ <scp>ARDL</scp>

ABSTRACT In recent years, private sector activities have become a serious concern for environmental sustainability. A growing body of literature has emerged, providing analyses of the factors driving environmental degradation across various countries, especially developed ones. However, no consensus has yet been reached, and researchers continue to examine the issue from different perspectives. This paper makes a novel contribution to the literature by investigating the impact of business enterprise research and development investment (BERD) on environmental sustainability, along with determinants such as economic growth, clean energy use, and globalization. The study focuses on five European Union countries (Spain, Italy, the Netherlands, Germany, and France) (EU‐5) using panel data from 1981 to 2022. To uncover the asymmetric effects of BERD on the ecological environment in both the short and long term, and to account for structural breaks, the paper employs a newly developed estimator, the Fourier Asymmetric CS‐ARDL approach. The empirical results reveal that negative shocks in BERD significantly influence the ENS of the EU‐5, both in the short and long term. Conversely, positive shocks play a considerable role in improving environmental quality. Moreover, while economic growth has been shown to worsen the ecological environment, the use of clean energy and globalization have been identified as factors that safeguard the environmental health of the countries involved. Consequently, it can be concluded that BERD, which promotes green technological innovation, energy efficiency, and the transition to a low‐carbon economy, is a valuable policy tool for EU countries aiming to achieve their net‐zero carbon targets. It is therefore essential for policymakers to support and expand such initiatives.