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Environmental Policy, Innovation and Performance : New Insights on the Porter Hypothesis

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Author Info

  • Paul Lanoie

    () (IEA, HEC Montréal)

  • Jérémy Laurent-Lucchetti
  • Nick Johnstone
  • Stefan Ambec

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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Bibliographic Info

Paper provided by HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 07-06.

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Length: 42 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:iea:carech:0706

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Keywords: Porter hypothesis; environmental policy; innovation; environmental performance; business performance.;

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References

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  1. Nick Johnstone & Julien Labonne, 2006. "Environmental policy, management and R&D," OECD Economic Studies, OECD Publishing, vol. 2006(1), pages 169-203.
  2. 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.
  3. 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.
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  5. 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.
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Citations

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Cited by:
  1. Patricia Crifo & Vanina Forget, 2012. "The Economics of Corporate Social Responsibility: A Survey," Working Papers hal-00720640, HAL.
  2. Fabio Iraldo & Francesco Testa & Vlasis Oikonomou & Michela Melis & Marco Frey & Eise Spijker, 2009. "A literature review on the links between environmental regulation and competitiveness," Working Papers 200904, Scuola Superiore Sant'Anna of Pisa, Istituto di Management.
  3. d'Agostino, Giorgio & Scarlato, Margherita, 2012. "Inclusive Institutions, Innovation and Economic Growth: Estimates for European Countries," MPRA Paper 43098, University Library of Munich, Germany.
  4. Joël Houdet & Michel Trommetter & Jacques Weber, 2009. "Changing business perceptions regarding biodiversity: from impact mitigation towards new strategies and practices," Working Papers hal-00412875, HAL.
  5. Rafael Calel & Antoine Dechezleprêtre, 2012. "Environmental policy and directed technological change: evidence from the European carbon maket," Grantham Research Institute on Climate Change and the Environment Working Papers 75, Grantham Research Institute on Climate Change and the Environment.
  6. Pelin Demirel & Effie Kesidou, 2012. "Stimulating Different Types of Eco-Innovation in the UK: Government Policies and Firm Motivations," STPS Working Papers 1203, STPS - Science and Technology Policy Studies Center, Middle East Technical University, revised May 2012.
  7. Kimitaka Nishitani & Nurul Jannah & Hardinsyah Ridwan & Shinji Kaneko, 2013. "The Influence of Voluntary and Mandatory Environmental Performance on Financial Performance: An Empirical Study of Indonesian Firms," Discussion Paper Series DP2013-01, Research Institute for Economics & Business Administration, Kobe University.
  8. Francesco Testa & Fabio Iraldo, 2008. "Is an Environmental Management System able to influence environmental and competitive performance? The case of the Eco-Management and Audit Scheme (EMAS) in the European Union," Working Papers 200704, Scuola Superiore Sant'Anna of Pisa, Istituto di Management.
  9. George van Leeuwen & Pierre Mohnen, 2013. "Revisiting the Porter Hypothesis: An Empirical Analysis of Green Innovation for the Netherlands," CIRANO Working Papers 2013s-02, CIRANO.
  10. Doran, Justin & Ryan, Geraldine, 2012. "Regulation and Firm Perception, Eco-Innovation and Firm Performance," MPRA Paper 44578, University Library of Munich, Germany.
  11. David Styles & Francesco Testa & Fabio Iraldo, 2010. "Direct regulation is an efficient approach to industrial environmental improvement: empirical evidence and perceptions from chemical manufacturers in Ireland and Italy," Working Papers 201002, Scuola Superiore Sant'Anna of Pisa, Istituto di Management.
  12. Dylan Rassier & Dietrich Earnhart, 2010. "Does the Porter Hypothesis Explain Expected Future Financial Performance? The Effect of Clean Water Regulation on Chemical Manufacturing Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(3), pages 353-377, March.

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