IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?

Listed author(s):
  • Stefan Ambec
  • Mark A. Cohen
  • Stewart Elgie
  • Paul Lanoie

Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if there are profitable opportunities to reduce pollution, profit maximizing firms would already be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (PH). Yet, even today, there is conflicting evidence, alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights on the PH to date, draw policy implications from these insights, and sketches out major research themes going forward. Il y a bientôt vingt ans, Michael Porter, économiste et professeur de stratégie de la Harvard Business School, a remis en question le paradigme généralement accepté quant à l'impact des réglementations environnementales sur la performance d'affaires, en affirmant que des politiques environnementales bien conçues pouvaient en fait améliorer la compétitivité des entreprises. Jusqu'alors, le point de vue dominant, accepté par la quasi-totalité des économistes, stipulait que d'imposer aux entreprises de réduire une externalité comme la pollution réduisait nécessairement les options à leur disposition et, par définition, leurs profits. Après tout, s'il y a des opportunités profitables de réduire la pollution, les firmes qui maximisent leurs profits auraient dû les identifier par elles-mêmes. Depuis 20 ans, beaucoup de choses ont été écrites sur ce qu'il est convenu d'appeler l'Hypothèse de Porter. Aujourd'hui, il y a diverses théories pour expliquer l'Hypothèse de Porter. Les résultats empiriques ne sont pas concluants et il subsiste une certaine confusion sur ce que dit et ne dit pas l'Hypothèse de Porter. Ce texte présente un survol des grands enjeux théoriques et empiriques entourant l'Hypothèse de Porter, en tire les grandes implications en termes de politiques publiques et propose des avenues de recherche pour le futur.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cirano.qc.ca/files/publications/2010s-29.pdf
Download Restriction: no

Paper provided by CIRANO in its series CIRANO Working Papers with number 2010s-29.

as
in new window

Length: 21 pages
Date of creation: 01 Aug 2010
Handle: RePEc:cir:cirwor:2010s-29
Contact details of provider: Postal:
1130 rue Sherbrooke Ouest, suite 1400, Montréal, Quéc, H3A 2M8

Phone: (514) 985-4000
Fax: (514) 985-4039
Web page: http://www.cirano.qc.ca/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Brännlund, Runar & Lundgren, Tommy, 2009. "Environmental policy without costs? A review of the Porter hypothesis," Umeå Economic Studies 766, Umeå University, Department of Economics.
  2. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
  3. Ambec, Stefan & Barla, Philippe, 2005. "Quand la réglementation environmentale profite aux pollueurs. Survol des fondements théoriques de l'hypothèse de Porter," Cahiers de recherche 0504, Université Laval - Département d'économique.
  4. Oecd, 2010. "Linkages between Environmental Policy and Competitiveness," OECD Environment Working Papers 13, OECD Publishing.
  5. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
  6. Brännlund, Runar & Lundgren, Tommy, 2009. "Environmental policy without costs? A review of the Porter hypothesis," Sustainable Investment and Corporate Governance Working Papers 2009/1, Sustainable Investment Research Platform.
  7. Paul Lanoie & Michel Patry & Richard Lajeunesse, 2008. "Environmental regulation and productivity: testing the porter hypothesis," Journal of Productivity Analysis, Springer, vol. 30(2), pages 121-128, October.
  8. Christos Constantatos & Markus Herrmann, 2011. "Market Inertia and the Introduction of Green Products: Can Strategic Effects Justify the Porter Hypothesis?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(2), pages 267-284, October.
  9. Xepapadeas, A. & de Zeeuw, A.J., 1998. "Environmental Policy and Competitiveness : The Porter Hypothesis and the Composition of Capital," Discussion Paper 1998-38, Tilburg University, Center for Economic Research.
  10. Popp David, 2005. "Uncertain R&D and the Porter Hypothesis," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-16, June.
  11. Ebru Alpay & Joe Kerkvliet & Steven Buccola, 2002. "Productivity Growth and Environmental Regulation in Mexican and U.S. Food Manufacturing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 887-901.
  12. Wayne B. Gray & Ronald J. Shadbegian, 2001. "Plant Vintage, Technology, and Environmental Regulation," NCEE Working Paper Series 200104, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
  13. Diane-Laure Arjaliès & Jean-Pierre Ponssard, 2010. "A Managerial Perspective on the Porter Hypothesis : The Case of CO2 Emissions," Post-Print hal-00553959, HAL.
  14. Lanjouw, Jean Olson & Mody, Ashoka, 1996. "Innovation and the international diffusion of environmentally responsive technology," Research Policy, Elsevier, vol. 25(4), pages 549-571, June.
  15. Ambec, Stefan & Barla, Philippe, 2005. "Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis," Cahiers de recherche 0505, GREEN.
  16. Feichtinger, G. & Hartl, R.F. & Kort, P.M. & Veliov, V., 2003. "Environmental Policy, the Porter Hypothesis and the Composition of Capital : Effects of Learning and Technological Progress," Discussion Paper 2003-61, Tilburg University, Center for Economic Research.
  17. Paul R. Portney, 2008. "The (Not So) New Corporate Social Responsibility: An Empirical Perspective," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 261-275, Summer.
  18. Shunsuke Managi, 2004. "Competitiveness and environmental policies for agriculture: testing the Porter hypothesis," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 3(3/4), pages 310-324.
  19. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
  20. Miguel Angel Quiroga & Martin Persson & Thomas Sterner, 2009. "Do Countries with Lax Environmental Regulations Have a Comparative Advantage in Polluting Industries?," Working Papers 03-2009, Departamento de Economía, Universidad de Concepción.
  21. Ambec, Stefan & Barla, Philippe, 2002. "A theoretical foundation of the Porter hypothesis," Economics Letters, Elsevier, vol. 75(3), pages 355-360, May.
  22. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August.
  23. Ziesemer, Thomas & Kriechel, Ben, 2007. "The Environmental Porter Hypothesis: Theory, Evidence and a Model of Timing of Adoption," MERIT Working Papers 024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  24. Mohr, Robert D., 2002. "Technical Change, External Economies, and the Porter Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 158-168, January.
  25. Paul Lanoie & Nick Johnstone & Stefan Ambec & Jérémy Laurent-Lucchetti, 2007. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," CIRANO Working Papers 2007s-19, CIRANO.
  26. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
  27. J.B. Smith & W A. Sims, 1985. "The Impact of Pollution Charges on Productivity Growth in Canadian Brewing," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 410-423, Autumn.
  28. Kennedy, Peter, 1994. "Innovation stochastique et coût de la réglementation environnementale," L'Actualité Economique, Société Canadienne de Science Economique, vol. 70(2), pages 199-209, juin.
  29. Philippe Barla & Christos Constantatos & Markus Herrmann, 2008. "Environmental Regulation as a Coordination Device for the Introduction of a Green Product: The Porter’s Hypothesis Revisited," Discussion Paper Series 2008_04, Department of Economics, University of Macedonia, revised May 2008.
  30. Virginia D. McConnell & Robert M. Schwab, 1990. "The Impact of Environmental Regulation on Industry Location Decisions: The Motor Vehicle Industry," Land Economics, University of Wisconsin Press, vol. 66(1), pages 67-81.
  31. Nelson, Randy A & Tietenberg, Tom & Donihue, Michael R, 1993. "Differential Environmental Regulation: Effects on Electric Utility Capital Turnover and Emissions," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 368-373, May.
  32. Daniel C. Esty, 2001. "Bridging the Trade-Environment Divide," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 113-130, Summer.
  33. Brannlund, Runar & Lundgren, Tommy, 2009. "Environmental Policy Without Costs? A Review of the Porter Hypothesis," International Review of Environmental and Resource Economics, now publishers, vol. 3(2), pages 75-117, September.
  34. Esty, Daniel C. & Porter, Michael E., 2005. "National environmental performance: an empirical analysis of policy results and determinants," Environment and Development Economics, Cambridge University Press, vol. 10(04), pages 381-389, August.
  35. Adam B. Jaffe & Karen Palmer, 1996. "Environmental Regulation and Innovation: A Panel Data Study," NBER Working Papers 5545, National Bureau of Economic Research, Inc.
  36. Nick Johnstone & Ivan Haščič & David Popp, 2010. "Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(1), pages 133-155, January.
  37. Andr, Francisco J. & Gonzlez, Paula & Porteiro, Nicols, 2009. "Strategic quality competition and the Porter Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 57(2), pages 182-194, March.
  38. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
  39. repec:dgr:umamer:2005008 is not listed on IDEAS
  40. Wayne B Gray & Ronald J Shadbegian, 1997. "Environmental Regulation, Investment Timing, and Technology Choice," Working Papers 97-9, Center for Economic Studies, U.S. Census Bureau.
  41. Dylan G. Rassier & Dietrich Earnhart, 2010. "The Effect of Clean Water Regulation on Profitability: Testing the Porter Hypothesis," Land Economics, University of Wisconsin Press, vol. 86(2), pages 329-344.
  42. Forest L. Reinhardt & Robert N. Stavins & Richard H. K. Vietor, 2008. "Corporate Social Responsibility Through an Economic Lens," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 219-239, Summer.
  43. Mari Rege, 2000. "Strategic Policy and Environmental Quality: Helping the Domestic Industry to Provide Credible Information," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(3), pages 279-296, March.
  44. Ambec, Stefan & Barla, Philippe, 2007. "Survol des fondements théoriques de l’hypothèse de Porter," L'Actualité Economique, Société Canadienne de Science Economique, vol. 83(3), pages 399-413, septembre.
  45. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1997. "Corporate governance, competition policy and industrial policy," ULB Institutional Repository 2013/9613, ULB -- Universite Libre de Bruxelles.
  46. Keith Maskus, 2010. "Differentiated Intellectual Property Regimes for Environmental and Climate Technologies," OECD Environment Working Papers 17, OECD Publishing.
  47. Lee, Jaegul & Veloso, Francisco M. & Hounshell, David A., 2011. "Linking induced technological change, and environmental regulation: Evidence from patenting in the U.S. auto industry," Research Policy, Elsevier, vol. 40(9), pages 1240-1252.
  48. Paul Lanoie & Alexandra Rochon-Fabien, 2011. "Promoting Pollution Prevention in Small Businesses: Costs and Benefits of the Enviroclub Initiative," CIRANO Working Papers 2011s-28, CIRANO.
  49. Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
  50. repec:dgr:umamer:2003011 is not listed on IDEAS
  51. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
  52. Paul Lanoie & Alexandra Rochon-Fabien, 2011. "Promoting Pollution Prevention in Small Businesses: Costs and Benefits of the “Enviroclub” Initiative," Cahiers de recherche 11-02, HEC Montréal, Institut d'économie appliquée.
  53. Popp, David, 2006. "International innovation and diffusion of air pollution control technologies: the effects of NOX and SO2 regulation in the US, Japan, and Germany," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 46-71, January.
  54. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
  55. Robert D. Mohr & Shrawantee Saha, 2008. "Distribution of Environmental Costs and Benefits, Additional Distortions, and the Porter Hypothesis," Land Economics, University of Wisconsin Press, vol. 84(4), pages 689-700.
  56. repec:ner:maastr:urn:nbn:nl:ui:27-19334 is not listed on IDEAS
  57. Barbera, Anthony J. & McConnell, Virginia D., 1990. "The impact of environmental regulations on industry productivity: Direct and indirect effects," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 50-65, January.
  58. Esty, Daniel C. & Porter, Michael E., 2005. "National environmental performance: an empirical analysis of policy results and determinants," Environment and Development Economics, Cambridge University Press, vol. 10(04), pages 391-434, August.
  59. repec:dgr:unumer:2007024 is not listed on IDEAS
  60. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-674, August.
  61. David Popp, 2003. "Pollution control innovations and the Clean Air Act of 1990," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(4), pages 641-660.
  62. Prabal Roy Chowdhury, 2011. "The Porter hypothesis and hyperbolic discounting," Economics Bulletin, AccessEcon, vol. 31(1), pages 167-176.
  63. Isaksson, Lena Hoglund, 2005. "Abatement costs in response to the Swedish charge on nitrogen oxide emissions," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 102-120, July.
  64. Greaker, Mads, 2003. "Strategic environmental policy; eco-dumping or a green strategy?," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 692-707, May.
  65. Brunnermeier, Smita B. & Cohen, Mark A., 2003. "Determinants of environmental innovation in US manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 278-293, March.
  66. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2010s-29. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.