Revisiting the porter hypothesis: An empirical analysis of green innovation for the Netherlands
George van Leeuwen & Pierre Mohnen
#2013-002
Almost all empirical research that has attempted to assess the validity
of the Porter hypothesis has started from reduced-form models, e.g. by
using single-equation models for estimating the contribution of
environmental regulation (ER) to productivity. This paper addresses the
Porter Hypothesis within a structural approach that allows us to test
what is known in the literature as the "weak" and the "strong" version
of the Porter hypothesis. Our "Green Innovation" model includes three
types of eco investments and non-eco R&D to explain differences in the
incidence of innovation. Besides product and process innovations we
recognize eco-innovation as a separate type of innovation output. We
explicitly model the potential synergies of introducing the three types
of innovations simultaneously and their synergy in affecting total
factor productivity (TFP) performance. Using a comprehensive panel of
firm-level data built from four surveys we aim to estimate the relative
importance of energy price incentives as a market based type of ER and
the direct effect of environmental regulation on eco investment and
firms' decisions regarding the introduction of several types of
innovations. The results of our analysis show a strong corroboration of
the weak version of the Porter hypothesis but not of the strong version
of the PH, in this case on TFP performance.
Keywords: Porter Hypothesis, green innovation, environmental regulation,
innovation complementarities, productivity
JEL codes: H23, L5, O32, O38, Q55
