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Revisiting the Porter Hypothesis: An Empirical Analysis of Green Innovation for the Netherlands

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  • George van Leeuwen
  • Pierre Mohnen

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Abstract

Almost all empirical research that has attempted to assess the validity of the Porter Hypothesis has started from reduced-form models, e.g. by using single-equation models for estimating the contribution of environmental regulation (ER) to productivity. This paper addresses the Porter Hypothesis within a structural approach that allows us to test what is known in the literature as the “weak” and the “strong” version of the Porter hypothesis. Our “Green Innovation” model includes three types of eco investments and non-eco R&D to explain differences in the incidence of innovation. Besides product and process innovations we recognize eco-innovation as a separate type of innovation output. We explicitly model the potential synergies of introducing the three types of innovations simultaneously and their synergy in affecting total factor productivity (TFP) performance. Using a comprehensive panel of firm-level data built from four surveys we aim to estimate the relative importance of energy price incentives as a market based type of ER and the direct effect of environmental regulation on eco investment and firms’ decisions regarding the introduction of several types of innovations. The results of our analysis show a strong corroboration of the weak version of the Porter hypothesis but not of the strong version of the PH, in this case on TFP performance. Presque toutes les études empiriques qui se sont penchées sur l’hypothèse de Porter ont utilisé un modèle à forme réduite, en d’autres termes un modèle qui régresse la productivité sur la réglementation environnementale. Notre étude utilise un modèle à forme structurelle qui permet de tester les versions faible et forte de l’hypothèse de Porter. Notre modèle d’innovation verte comporte trois types d’investissement environnementaux en plus de la R-D non-environnementale, qui ensemble expliquent l’occurrence d’innovations, qui sont au nombre de trois : innovation de produit, de procédé et éco-innovation. Nous testons la présence de synergie dans l’introduction de ces trois types d’innovation et dans leurs effets sur la productivité totale des facteurs. À l’aide de données de firmes en panel provenant de quatre enquêtes différentes, nous estimons l’importance des prix de l’énergie et des réglementations environnementales sur les investissements verts et les différents types d’innovation. Nos résultats corroborant la version faible mais pas la version forte de l’hypothèse de Porter.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2013s-02.

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Date of creation: 01 Jan 2013
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Handle: RePEc:cir:cirwor:2013s-02

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Keywords: Porter Hypothesis; green innovation; environmental regulation; innovation complementarities; productivity;

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Cited by:
  1. Marius Ley & Tobias Stucki & Martin Wörter, 2013. "The Impact of Energy Prices on Green Innovation," KOF Working papers 13-340, KOF Swiss Economic Institute, ETH Zurich.
  2. Marianna Gilli & Susanna Mancinelli & Massimiliano Mazzanti, 2013. "Innovation Complementarity and Environmental Productivity Effects: Reality or Delusion? Evidence from the EU," Working Papers 2013.88, Fondazione Eni Enrico Mattei.

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