Environmanetal regulations and innovations versus competitiveness

Environmental regulations influence the prosperity and sustainability of organisations and households. According to the traditional belief, they constitute an additional, undesired cost which lowers competitiveness of economic operators and the entire sectors, although they might be socially desirable. The issue can be, however, approached from a different perspective, namely from the viewpoint of the induced innovation theory – authored by J.R. Hicks in 1932, later developed and presented in 1991 by M. Porter, then on known as Porter hypothesis. It states that a company, affected by more stringent environmental regulations, is often forced to use simple reserves and to implement fundamental technological, organisational and product innovations, which can, all in all, offset the higher costs of adhering to the more severe environmental policy. Consequently, its competitiveness does not have to drop, sometimes it can even grow. Porter hypothesis already has strong theoretical grounds, but empirical verification of its accuracy is still an open issue. In general, today it is assumed that it is completely true (it checks out in the so-called strong version), only in some, rather restrictive conditions. This conclusion – as evidenced in the paper – is also applicable to the food sector, including agriculture.