Curvilinear Relationship between Corporate Innovation and Environmental Sustainability

Jegoo Lee and Sang-Joon Kim
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Jegoo Lee: Meehan School of Business, Stonehill College, Easton, MA 02357, USA
Sang-Joon Kim: Ewha School of Business, Ewha Womans University, Seoul 03760, Korea

Sustainability, 2017, vol. 9, issue 7, 1-15

Abstract: This paper proposes and tests the impacts of firms’ innovation activities, such as patents, on their involvement in environmental sustainability, such as environmental performance. Combining resource allocation and eco-innovation perspectives assuming constant levels of trade-off costs, this study proposes diminishing trade-off costs between corporate innovation and environmental sustainability. Specifically, this research hypothesizes a U-shaped relationship, suggesting that a firm will suffer trade-off costs between innovation and environment-oriented activities up to a certain level, and that once a firm accumulates an adequate level of innovation, it may reduce trade-off costs, caring more for environmental issues. A proposed hypothesis is supported by empirical testing of a sample of 11,657 firm-year observations with 1564 firms, spanning from 1991 to 2010. We also found that corporate patenting activities are relevant to undesirable impacts on environmental performance overall, instead of satisfying outcomes. We suggest that firms and managers should care for environmental sustainability issues once they accumulate an adequate level of innovation assets through patenting activities.

Keywords: innovation; environmental sustainability; patent; environmental performance; trade-off cost; curvilinear relationship (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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