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The effect of environmentally sustainable practices on firm R&D: International evidence

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  • Banerjee, Rajabrata
  • Gupta, Kartick

Abstract

Using a comprehensive dataset covering 42 countries spanning 2002–2013, this paper empirically examines the effect of environmentally sustainable practices (ESP) on R&D intensity in firms. We use three separate firm-level ESP scores that distinguish between the mandatory and voluntary compliance of environmental regulations mandated within an industry and a country. Our main finding is that an increase in ESP increases R&D intensity. Therefore, ESP encourages a higher number of innovations and there is a negligible trade-off between these two factors of firm performance. Further, the positive effect of ESP is stronger in countries where institutional quality and R&D infrastructure supports are superior. Our results have important policy implications for firms, investors and national governments.

Suggested Citation

  • Banerjee, Rajabrata & Gupta, Kartick, 2019. "The effect of environmentally sustainable practices on firm R&D: International evidence," Economic Modelling, Elsevier, vol. 78(C), pages 262-274.
  • Handle: RePEc:eee:ecmode:v:78:y:2019:i:c:p:262-274
    DOI: 10.1016/j.econmod.2018.09.024
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    More about this item

    Keywords

    Environment; Sustainability; R&D; Institutional quality;

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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