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Environmental innovation and firm profitability: An analysis with respect to firm size

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  • Axenbeck, Janna

Abstract

This paper investigates the effect of environmental innovations on firm profitability with respect to differences between small and medium-sized (SME) and large (LE) enterprises. Using data from the Mannheim Innovation Panel (MIP) 2015, results show that, in general, SME benefit more from environmental innovations than LE. This effect is particularly strong for resource efficiency-improving innovations induced by regulation. These environmental innovations are significantly related to an increase in profits of SME, whilst related to a decrease in profits of LE. A robustness check with data from the MIP 2009, however, does not confirm this result as the effect for LE is insignificant and differences between the two groups cannot be found in this survey wave. A reason why negative effects for LE are observed in the MIP 2015 - but not in the MIP 2009 - might be that most LE had already exploited the potentials of environmental innovations when they were surveyed in the MIP 2015. This is supported by evidence suggesting that size-related differences in the MIP 2015 are driven by a negative relationship between LE's profits and environmental innovations related to externalities that were reduced by innovations in periods before.

Suggested Citation

  • Axenbeck, Janna, 2019. "Environmental innovation and firm profitability: An analysis with respect to firm size," ZEW Discussion Papers 19-033, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:19033
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    More about this item

    Keywords

    Firm Behavior; Firm Size; Porter hypothesis; Environmental Technology Adaption; Technological Innovation; Environmental Regulation;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • 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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