When does environmental innovation crowd out process innovation? A dynamic analysis

Abstract

It is known that environmental innovation may crowd out process innovation. Less known are the exact conditions under which crowding‐out effect occurs. This article fills the gap by developing a dynamic control model of environmental and process innovation. The result shows that when the depreciation rate of process innovation is sufficiently high, environmental innovation investment crowds out process innovation investment. By comparing monopolist and social planner optimum, we find that the problem of insufficient investments can happen for environmental and process innovation for a smaller emission tax.

Corporate environmental information disclosure and green innovation: The moderating effect of CEO visibility

“…Corporate innovation requires a lot of human, material, and financial resources (Furman et al, 2002; Huang et al, 2019). In the case of limited resources, resources for green innovation may be diverted from other areas of innovation in the enterprise (Barbieri, 2016; Li & Shang, 2022; Popp & Newell, 2012). For example, using a dataset of Italian manufacturing enterprises, Marin (2014) finds that environmental innovation comes at the expense of non‐environmental innovation.…”

Government environmental concerns and corporate green innovation: Evidence from heavy‐polluting enterprises in China

“…Firms may shelve other innovation projects for green innovation activities because they cannot afford to invest more. Faced with pressure from external government environmental concerns, firms may not additionally invest in R&D due to resource constraints (Li & Shang, 2022). Firms reallocate resources from R&D to green technology innovation activities from other general innovation activities (Qu et al, 2023).…”

“…Firms may shelve other innovation projects for green innovation activities because they cannot afford to invest more. Faced with pressure from external government environmental concerns, firms may not additionally invest in R&D due to resource constraints (Li & Shang, 2022).…”