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

Paul Lanoie, Nick Johnstone, Stefan Ambec and Jérémy Laurent-Lucchetti

CIRANO Working Papers from CIRANO

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 certain kinds of 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 is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the weak version, qualified support for the narrow version, and qualified support for the strong version as well. Jaffe et Palmer (1997) présentent trois variantes distinctes de l'hypothèse de Porter. La version « faible » de l'hypothèse suppose que la réglementation environnementale stimulera l'apparition d'innovations dans le domaine de l'environnement. La version « étroite » de l'hypothèse affirme que les réglementations environnementales flexibles donnent aux firmes une plus grande incitation pour innover que les réglementations rigides, telles que les normes prescrivant une technologie pour une industrie donnée. Enfin, la version « forte » pose qu'une réglementation correctement conçue peut induire davantage de gains en termes d'innovation que de coûts pour se conformer à la règle. Dans cet article, nous examinons la portée de ces différentes variantes de l'hypothèse de Porter en utilisant des données sur les quatre principaux éléments de la chaîne présumée de causalité (politique environnementale, recherche et développement, performance environnementale et performance commerciale). L'analyse est fondée sur une base de données unique qui inclut des observations d'approximativement 4200 établissements dans sept pays de l'OCDE. Nos résultats supportent fortement la version « faible », mais de façon plus mitigée les versions « étroite » et « forte ».

Keywords: Porter hypothesis; environmental policy; innovation; environmental performance; business performance.; hypothèse de Porter; politique environnementale; innovation; performance environnementale; performance financière. (search for similar items in EconPapers)
JEL-codes: L21 M14 Q52 Q55 Q58 (search for similar items in EconPapers)
Date: 2007-09-01
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-env, nep-ino and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Related works:
Journal Article: Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis (2011)
Working Paper: Environmental policy, innovation and performance: new insights on the Porter hypothesis (2007)
Working Paper: Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2007s-19

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