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Environmental policy, innovation and performance : new insights on the Porter hypothesis

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Author Info
Lanoie, P.
Laurent-Lucchetti, L.
Johnstone, N.
Ambec, S.

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Abstract

Jaffe and Palmer (1997) present three distinct variants of the so-called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards.Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance and commercial performance). The analysis is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, and qualified support for the “strong” version as well.

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Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 200706.

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Date of creation: 2007
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Handle: RePEc:gbl:wpaper:200706

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Related research
Keywords: PORTHER HYPOTHESIS; ENVIRONMENTAL POLICY; INNOVATION; ENVIRONMENTAL PERFORMANCE; BUSINESS PERFORMANCE;

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Find related papers by JEL classification:
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Social Responsibility
Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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  1. Alpay, Ebru & Buccola, Steven & Kerkvliet, Joe, 2002. " Productivity Growth and Environmental Regulation in Mexican and U.S. Food Manufacturing," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 84(4), pages 887-901, November. [Downloadable!] (restricted)
  2. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July. [Downloadable!] (restricted)
  3. Ambec, Stefan & Barla, Philippe, 2005. "Quand la réglementation environmentale profite aux pollueurs. Survol des fondements théoriques de l'hypothèse de Porter," Cahiers de recherche 0504, Université Laval - Département d'économique. [Downloadable!]
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  4. Burtraw, Dallas, 2000. "Innovation Under the Tradable Sulfur Dioxide Emission Permits Program in the U.S. Electricity Sector," Discussion Papers dp-00-38, Resources For the Future. [Downloadable!]
  5. Frondel, Manuel & Horbach, Jens & Rennings, Klaus, 2004. "End-of-Pipe or Cleaner Production? : An Empirical Comparison of Environmental Innovation Decisions Across OECD Countries," ZEW Discussion Papers 04-82, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  6. Stefan Ambec & Paul Lanoie, 2007. "When and why does it pay to be green?," Cahiers de recherche 07-04, HEC Montréal, Institut d'économie appliquée. [Downloadable!]
    Other versions:
  7. Ambec, Stefan & Barla, Philippe, 2005. "Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis," Cahiers de recherche 0505, GREEN. [Downloadable!]
    Other versions:
  8. Adam B. Jaffe & Karen Palmer, 1997. "Environmental Regulation And Innovation: A Panel Data Study," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 610-619, November. [Downloadable!] (restricted)
    Other versions:
  9. Greaker, Mads, 2003. "Strategic environmental policy; eco-dumping or a green strategy?," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 692-707, May. [Downloadable!] (restricted)
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  12. Foulon, Jerome & Lanoie, Paul & Laplante, Benoit, 2002. "Incentives for Pollution Control: Regulation or Information?," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 169-187, July. [Downloadable!] (restricted)
  13. Jerry A. Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annales d'Economie et de Statistique, ADRES, issue 34, pages 07, Avril-Jui. [Downloadable!]
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  15. Brunnermeier, Smita B. & Cohen, Mark A., 2003. "Determinants of environmental innovation in US manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 278-293, March. [Downloadable!] (restricted)
  16. Jerry A. Hausman, 1996. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Chapters, in: The Economics of New Goods, pages 207-248 National Bureau of Economic Research, Inc. [Downloadable!]
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  19. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1.
  20. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-73, May. [Downloadable!] (restricted)
  21. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
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