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Exploring the Locus of Profitable Pollution Reduction

Author

Listed:
  • Andrew King

    (Stern School of Business, New York University, 40 West 4th St. Suite 717, New York, New York 10012)

  • Michael Lenox

    (Stern School of Business, New York University, 40 West 4th St. Suite 717, New York, New York 10012)

Abstract

In this paper, we explore the locus of profitable pollution reduction. We propose that managers underestimate the full value of some means of pollution reduction and so under exploit these means. Based on evidence from previous studies, we argue that waste prevention often provides unexpected innovation offsets, and that onsite waste treatment often provides unexpected cost. We use statistical methods to test the direction and significance of the relationship between the various means of pollution reduction and profitability. We find strong evidence that waste prevention leads to financial gain, but we find no evidence that firms profit from reducing pollution by other means. Indeed, we find evidence that the bene fits of waste prevention alone are responsible for the observed association between lower emissions and profitability.

Suggested Citation

  • Andrew King & Michael Lenox, 2002. "Exploring the Locus of Profitable Pollution Reduction," Management Science, INFORMS, vol. 48(2), pages 289-299, February.
    • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:2:p:289-299
    DOI: 10.1287/mnsc.48.2.289.258
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    References listed on IDEAS

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