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When does environmental innovation crowd out process innovation? A dynamic analysis

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  • Dongdong Li
  • Chenxuan Shang

Abstract

It is known that environmental innovation may crowd out process innovation. Less known are the exact conditions under which crowding‐out effect occurs. This article fills the gap by developing a dynamic control model of environmental and process innovation. The result shows that when the depreciation rate of process innovation is sufficiently high, environmental innovation investment crowds out process innovation investment. By comparing monopolist and social planner optimum, we find that the problem of insufficient investments can happen for environmental and process innovation for a smaller emission tax.

Suggested Citation

  • Dongdong Li & Chenxuan Shang, 2022. "When does environmental innovation crowd out process innovation? A dynamic analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2275-2283, September.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:6:p:2275-2283
    DOI: 10.1002/mde.3524
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    1. Jing‐Yue Liu & Yue‐Jun Zhang & Charles H. Cho, 2023. "Corporate environmental information disclosure and green innovation: The moderating effect of CEO visibility," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3020-3042, November.

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