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Public Green Demand and Green Innovation: Evidence from US Firms

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Achieving net-zero emissions alongside sustained economic growth necessitates unprecedented innovation efforts. Demand serves as a pivotal driver in this endeavor. This paper presents novel evidence concerning the relationship between public procurement for green products and services (GPP) and firm innovation. GPP widens market niches for new green goods and accelerates the adaptation of conventional goods to meet more rigorous environmental standards. This, in turn, fosters the creative response of the firm, stimulating innovation in both new green products and new green processes. The empirical analysis focuses on US publicly listed innovative companies from 2004 to 2016. The results demonstrate that increases in GPP stimulate green innovation overall, particularly process-related. Moreover, we observe that this is more pronounced in large and incumbent firms, as well as in firms with substantial knowledge and organizational capital. These results provide valuable insights for designing effective policy frameworks to expedite the green transition while ensuring continued economic growth.

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  • Fusillo, Fabrizio & Orsatti, Gianluca & Scandura, Alessandra, 2024. "Public Green Demand and Green Innovation: Evidence from US Firms," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 202401, University of Turin.
    • Handle: RePEc:uto:labeco:202401
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