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The innovation and performance effects of well-designed environmental regulation: evidence from Sweden

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  • Jan F. Weiss
  • Tatiana Anisimova

Abstract

This paper provides novel empirical insights into the Porter hypothesis (PH) and its dynamic nature. The PH posits that well-designed environmental regulations induce eco-innovations at polluting firms that improve both their environmental and business performance via ‘innovation offsets.’ We conduct an econometric test of this proposition, using Swedish pulp and paper plants as empirical application. Swedish environmental regulation of polluting industries provides an interesting case because it has been praised, due to containing elements of ‘well-designed’ regulations, for being conducive to accomplishing the ‘win-win’ situation of mutual environmental and economic benefits. The empirical results indicate that flexible and dynamic command-and-control regulation and economic incentive instruments have induced innovation offsets through improved energy efficiency. Our study bears important implications: empirical tests of the PH that do not account for its dynamic nature, and that do not measure ‘well-designed’ regulations, might provide misleading conclusions as to its validity.

Suggested Citation

  • Jan F. Weiss & Tatiana Anisimova, 2019. "The innovation and performance effects of well-designed environmental regulation: evidence from Sweden," Industry and Innovation, Taylor & Francis Journals, vol. 26(5), pages 534-567, May.
    • Handle: RePEc:taf:indinn:v:26:y:2019:i:5:p:534-567
    DOI: 10.1080/13662716.2018.1468240
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    Cited by:

    1. Huayun Zhai & Danlan Liu & Kam C. Chan, 2019. "The Impact of Environmental Regulation on Firm Export: Evidence from China’s Ecological Protection Red Line Policy?," Sustainability, MDPI, vol. 11(19), pages 1-13, October.
    2. Zhuanlan Sun & Demi Zhu, 2023. "Investigating environmental regulation effects on technological innovation: A meta-regression analysis," Energy & Environment, , vol. 34(3), pages 463-492, May.
    3. Taohong Wang & Zhe Song & Jing Zhou & Huaping Sun & Fengqin Liu, 2022. "Low-Carbon Transition and Green Innovation: Evidence from Pilot Cities in China," Sustainability, MDPI, vol. 14(12), pages 1-21, June.
    4. Liang Ding & Yingna Wu & Yuetong Ma & Li Zhang, 2022. "Environmental Regulation and the Innovation Performance of Chinese Export Firms: A Quasi-Natural Experiment based on the Law of Promoting Cleaner Production," SAGE Open, , vol. 12(4), pages 21582440221, October.
    5. Grafström, Jonas & Sandström, Christian, 2021. "Ratio Working Paper No. 352: More from less? Economic growth and sustainability in Sweden," Ratio Working Papers 352, The Ratio Institute.
    6. Hana Nielsen & Astrid Kander, 2020. "Trade in the Carbon-Constrained Future: Exploiting the Comparative Carbon Advantage of Swedish Trade," Energies, MDPI, vol. 13(14), pages 1-25, July.

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