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Unmasking the Porter hypothesis: Environmental innovations and firm-profitability

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  • Rexhäuser, Sascha
  • Rammer, Christian

Abstract

We examine impacts of different types of environmental innovations on firm profits. Following Porter's (1991) hypothesis that environmental regulation can improve firms' competitiveness we distinguish regulation induced and voluntary environmental innovations. We find that innovations which reduce environmental externalities reduce firms' profits, as long as they are induced by regulations. However, innovation that increases a firm's material or energy efficiency in terms of material or energy consumption has a positive impact on profitability. This positive result holds both for regulation induced and voluntary innovations, although the effect is significantly larger for regulation-driven innovation.We conclude that the Porter hypothesis does not hold in general for its 'strong' version but has to be qualified by the type of environmental innovation. Our finding rest on firm level data from the German part of the Community Innovation Survey in 2009. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-036.

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Date of creation: 2011
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Handle: RePEc:zbw:zewdip:11036

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Keywords: Environmental innovation; environmental regulation; Porter hypothesis; competitiveness;

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Cited by:
  1. Leeuwen, George van & Mohnen, Pierre, 2013. "Revisiting the porter hypothesis: An empirical analysis of green innovation for the Netherlands," MERIT Working Papers 002, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Horbach, Jens & Rennings, Klaus, 2012. "Environmental innovation and employment dynamics in different technology fields: An analysis based on the German community innovation survey 2009," ZEW Discussion Papers 12-006, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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