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Environmental regulation and eco-innovation: the Porter hypothesis refined

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  • Abdelfeteh Bitat

    (Université Saint-Louis Bruxelles)

Abstract

The paper analyses the relationship between environmental regulation and eco-innovation. The relationship is tested using a German firm-based panel and a dynamic count data model estimating the propensity of firms to innovate in response to five initiating factors, namely the fulfillment of existing legal requirements, expectations towards future legal requirements, financial incentives, demand for eco-innovations and self-commitment. The heterogeneity of firms is controlled for using R&D intensity, the size, the sector and the region of the company. The results answer the central question concerning the design of environmental policies in order to foster eco-innovation. Comparing a static model to a dynamic one shows that only long term objectives and market incentives are positively associated with eco-innovation. Conventional regulatory tools, namely legally binding instruments, are not effective for triggering innovative behavior at the firm level. The results do not allow to confirm the Porter hypothesis but rather offer a refined version, emphasizing the nuances that apply to the concept of “regulation”. The claim is that what matters is not the type of the policy instrument but rather the perception of the instrument by firms.

Suggested Citation

  • Abdelfeteh Bitat, 2018. "Environmental regulation and eco-innovation: the Porter hypothesis refined," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(3), pages 299-321, September.
    • Handle: RePEc:spr:eurasi:v:8:y:2018:i:3:d:10.1007_s40821-017-0084-6
    DOI: 10.1007/s40821-017-0084-6
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    4. Xuesong Gu & Xiaoran An & Andong Liu, 2022. "Environmental Regulation, Corporate Economic Performance and Spatial Technology Spillover: Evidence from China’s Heavily Polluting Listed Corporations," IJERPH, MDPI, vol. 19(3), pages 1-24, January.
    5. Nidzara Osmanagic Bedenik & Nenad Zidak, 2019. "Green Economy Supported by Green Chemistry," Eurasian Journal of Business and Management, Eurasian Publications, vol. 7(2), pages 49-57.
    6. Chen, Yang & Cheng, Liang & Lee, Chien-Chiang & Wang, Chang-song, 2021. "The impact of regional banks on environmental pollution: Evidence from China's city commercial banks," Energy Economics, Elsevier, vol. 102(C).
    7. Hongshan Ai & Shenglan Hu & Ke Li & Shuai Shao, 2020. "Environmental regulation, total factor productivity, and enterprise duration: Evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2284-2296, September.
    8. Shuai Shao & Zhigao Hu & Jianhua Cao & Lili Yang & Dabo Guan, 2020. "Environmental Regulation and Enterprise Innovation: A Review," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1465-1478, March.
    9. Lu Zhang & Renyan Mu & Shuhua Hu & Quan Zhang & Song Wang, 2021. "Impacts of Manufacturing Specialized and Diversified Agglomeration on the Eco-Innovation Efficiency—A Nonlinear Test from Dynamic Perspective," Sustainability, MDPI, vol. 13(7), pages 1-27, March.
    10. Antonella Biscione & Raul Caruso & Annunziata de Felice, 2021. "Environmental innovation in European transition countries," Applied Economics, Taylor & Francis Journals, vol. 53(5), pages 521-535, January.
    11. Meng Liu & Yun Liu & Yongliang Zhao, 2021. "Environmental Compliance and Enterprise Innovation: Empirical Evidence from Chinese Manufacturing Enterprises," IJERPH, MDPI, vol. 18(4), pages 1-18, February.
    12. 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. Working Papers 202407, University of Turin.
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