Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis

Abstract

Jaffe and Palmer (1997) present three distinct variants of the so‐called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology‐based standards. Finally, the “strong” version posits that properly designed regulation may induce cost‐saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance, and commercial performance). The analysis draws upon a database that includes observations from approximately 4,200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, but no support for the “strong” version.

Inclusive Institutions, Innovation and Economic Growth: Estimates for European Countries

“…Indirectly, this hypothesis is consistent with the Porter hypothesis, which states that properly designed environmental regulation can stimulate innovation (Lanoie et al, 2011;Porter and van der Linde, 1995). Our empirical results confirm that nations that adopt a strategy of sustainable growth, proxied by lower energy intensity variation, achieve more rapid technological change.…”

Environmental Regulation, Economic Network and Sustainable Growth of Urban Agglomerations in China

“…All the above studies extended an endogenous growth framework to analyze the effects of environmental regulation on economic growth. There was no consensus on whether environmental regulation promoted innovation and productivity [24][25][26][27][28].…”

Environmental Proactivity and Environmental and Economic Performance: Evidence from the Winery Sector

“…The relationship between environmental proactivity and economic results, on the other hand, is not so obvious. Certain authors claim that the high costs associated with the implementation of environmental practices cancel out any possible competitive advantage that might be achieved, thereby discouraging firms from implementing them, and that economic results are unaffected [13,18] or negatively affected [19,50] by environmental proactivity. Others (e.g., [21,51]) indicate that it is the sector in which the firm operates that is responsible for this lack of consensus since environment-related practices and standards vary according to economic activity and so in many cases they are not comparable.…”