Are regional systems greening the economy? The role of environmental innovations and agglomeration forces

The adoption and diffusion of environmental innovations (EIs) is crucial to greening the economy and achieving win-win environmental-economic gains. A large and increasing literature has focused on the levers underlying EIs that are external to the firm, such as stakeholders' pressure and policy pressure. Little attention, however, has been devoted so far to the possible role of local spatial spillovers. The latter can be very relevant since growth depends on strong idiosyncratic regional factors - such asagglomeration economies - that must be integrated with the challenges posed by global markets. To overcome this drawback of the existing literature, we analyse here a rich dataset that covers the innovative activities and economic performances of firms in the Emilia-Romagna Region in Italy, a manufacturing district-rich area. We analyse firms' performances through a two-step procedure. First, we look at the relevance of spatial levers, namely whether the agglomeration of EIs induces EIs in a given firm. Second, we test whether EIs have significantly increased firms' economic performances. As to the importance of spatial levers, the role of agglomeration turns out to be fairly local in nature:we find that spillovers are significantly inducing innovation within municipal boundaries, which is coherent with the district-based Marshallian economies of north- eastern Italy. Regarding economic performances, firms' productivity is positively related to EI adoption; in particular,firms that adopt EIs and organizational change show a better economic performance.Our findings suggest that EIscanbe a key source of growth for regional systems, particularly when spurred by local spillovers, and an important way outof the ongoing crisis.