Productivity of environmental innovations under the environmental regulation of firms (D5.12)

Because of growing environmental concerns, environmental innovations (EIs) have become increasingly salient in the environmental policy and innovation strategies of firms.

The aim of this paper is to analyze whether and how the productivity effects of EIs differ depending on whether the EI is motivated by regulation or voluntary. The paper analyzes both the productivity effects of product innovations together with pollution-reducing and resource-saving EIs and with the EIs separately when EI decisions are induced by environmental regulation. It is found that environmental regulation-induced EIs enhance firm performance. Hence, the results suggest that a strategy of introducing new environmental regulations will increase innovativeness, which in turn leads to improved firm performance that can apparently cover all of the costs from regulation.

It is also found that EIs generally  require cooperation with consultants, while they are unrelated to organizational change or even negatively to organizational investment. The organizational structure within firms is less important than the ability to be connected with experts and consultants who can enable firms to fulfill the targets set by environmental regulations.

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