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Unmasking the Porter hypothesis: Environmental innovations and firm-profitability

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  • Rexhäuser, Sascha
  • Rammer, Christian

Abstract

We examine impacts of different types of environmental innovations on firm profits. Following Porter's (1991) hypothesis that environmental regulation can improve firms' competitiveness we distinguish regulation induced and voluntary environmental innovations. We find that innovations which reduce environmental externalities reduce firms' profits, as long as they are induced by regulations. However, innovation that increases a firm's material or energy efficiency in terms of material or energy consumption has a positive impact on profitability. This positive result holds both for regulation induced and voluntary innovations, although the effect is significantly larger for regulation-driven innovation.We conclude that the Porter hypothesis does not hold in general for its 'strong' version but has to be qualified by the type of environmental innovation. Our finding rest on firm level data from the German part of the Community Innovation Survey in 2009.

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  • Rexhäuser, Sascha & Rammer, Christian, 2011. "Unmasking the Porter hypothesis: Environmental innovations and firm-profitability," ZEW Discussion Papers 11-036, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:11036
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    2. George van Leeuwen & Pierre Mohnen, 2017. "Revisiting the Porter hypothesis: an empirical analysis of Green innovation for the Netherlands," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(1-2), pages 63-77, February.
    3. Alessandra Colombelli & Jackie Krafft & Francesco Quatraro, 2015. "Eco-innovation and firm growth: Do green gazelles run faster? Microeconometric evidence from a sample of European firms," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201516, University of Turin.
    4. Thomas Cleff & Klaus Rennings, 2014. "Are There Any First And Second Mover Advantages For Eco-Pioneers? Lead Market Strategies For Environmental Innovation," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 10, pages 164-189.
    5. Horbach, Jens & Rennings, Klaus, 2012. "Environmental innovation and employment dynamics in different technology fields: An analysis based on the German community innovation survey 2009," ZEW Discussion Papers 12-006, ZEW - Leibniz Centre for European Economic Research.
    6. Aleksandra Falkowska, 2020. "The impact of environmental policy on location patterns in the waste management industry," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(1), pages 167-195, April.
    7. Alessandra Colombelli & Jackie Krafft & Francesco Quatraro, 2015. "Eco-innovation and Firm Growth: Do Green Gazelles Run Faster? Microeconometric Evidence from a Sample of European Firms. WWWforEurope Working Paper No. 88," WIFO Studies, WIFO, number 57897, Juni.
    8. Brockmann, Karl Ludwig & Heindl, Peter & Löschel, Andreas & Lutz, Benjamin & Schumacher, Jan, 2012. "KfW/ZEW CO2 Barometer 2012: Anreizwirkung des EU-Emissionshandels auf Unternehmen gering – Klimapolitische Regulierung wenig relevant für Standortentscheidungen," KfW/ZEW-CO2-Barometer, ZEW - Leibniz Centre for European Economic Research, number 109796.
    9. Sandra M. Leitner, 2018. "Eco-Innovation: Drivers, Barriers and Effects – A European Perspective," wiiw Working Papers 159, The Vienna Institute for International Economic Studies, wiiw.

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    Keywords

    Environmental innovation; environmental regulation; Porter hypothesis; competitiveness;
    All these keywords.

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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